## Baronsmead Venture Trust plc ## Annual Report and Audited Financial ## Statements for the year ended ## 30September 2023 Company number 03504214 ## About Baronsmead Venture Trust plc 1 Our investment objective Dividend policy Baronsmead Venture Trust plc (the “Company”) is a tax  The Board will, wherever possible, seek to pay two ecient listed company which aims to achieve long‑term dividends to shareholders in each calendar year, typically positive investment returns for private investors, including an interim in September and a nal dividend following tax‑free dividends. 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 Investment policy cent of the opening net asset value of that nancial year.  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 1. This is a summary of the Company's Dividend Policy that is set enhance their value. out on page 36. ### Key elements of the business model Access to an attractive, diverse portfolio The Manager as an inuential shareholder The Company gives shareholders access to a diverse The Manager is an engaged and supportive shareholder (on portfolio of growth businesses. behalf of the Company) in both unquoted and signicant quoted investments. The Company will make investments in growth businesses, whether unquoted or traded on AIM, which For unquoted investments, representatives of the Manager are substantially based in the UK in accordance with often join the investee board. the prevailing VCT legislation. Investments are made The role of the Manager with investees is to ensure that selectively across a range of sectors. strategy is clear, the business plan can be implemented and the management resources are in place to deliver protable growth. The intention is to build on the The Manager’s approach to investing business model and grow the company into an attractive The Manager endeavours to select the best opportunities target which can be sold or potentially oated in and applies a distinctive selection criteria based on: the medium term.  Primarily investing in parts of the economy which are experiencing long term structural growth.  Businesses that demonstrate, or have the potential for, market leadership in their niche.  Management teams that can develop and deliver protable 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 signicant proactive marketing to target companies in preferred sectors. This approach generates a network of potentially suitable businesses A more detailed explanation of how the business model is applied is with which the Manager maintains a relationship ahead of provided in the Other Matters section of the Strategic Report on pages possible investment opportunities. 32 to 36. The full investment policy can be found on page 99. ## Contents 01 ### Example investments Strategic report Financial hi ghlights 3 Performance summary 4 Chair’s statement 5 Manager’s review 9 Investments in the year 15 Airnity (unquoted) Realisations in the year 16 Airnity tracks, predicts and simulates population level Ten largest investments 17 disease outcomes in real time to inform decisions that can Principal risks and uncertainties 22 increase the global life span. Sustainable investment 24 Other matters 32 Directors’ duties 37 02 Directors’ report Board of Directors 43 Inspired (quoted) Directors’ report 45 | Corporate governance 48 | Inspired is a leading technology‑enabled provider of | | --- | --- | | Audit Committee report 55 | energy and sustainable solutions that allow UK and Irish | | Nomination Committee report 58 | businesses to transition to net‑zero carbon and manage | | Directors’ remuneration report 61 | their response to climate change. | Statement of Directors’ responsibilities 66 Independent auditor’s report 67 03 Financial statements Income statement 77 Statement of changes in equity 78 Connect Earth (unquoted) Balance sheet 79 Connect Earth supports businesses in offering their Statement of cash ows 80 customers transparent insight into the climate impact Notes to the nancial statements 81 oftheir spending decisions. 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 since launch 103 Full investment portfolio 104 | Glossary 107 | Tan Delta Systems (quoted) | | --- | --- | | 05 | Tan Delta Systems develops advanced real time oil | | Information | analysis and analytic technologies and products that | enable equipment operators to signicantly reduce costs, Shareholder information and contact d etails 111 improve eciencies and reduce carbon foot‑print. Corporate information 114 If you have sold or otherwise transferred all of your shares in Baronsmead 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. Annual Report and Audited Financial Statements 2023 1 ## Strategic ## report ## 01 01 Strategic report ## Financial highlights | | | 1 | | | | | | 1,2 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Net asset value total return | | | | | Change in net asset value per share | | | | | (as at 30 September 2023) | | | | | (12 months to 30 September 2023) | | | | | | Sep 21 | | | | | Sep 21 | | | | | | | | 496.2p | | | | 78.9p | | | Sep 22 | | | | | Sep 22 | | | | 395.6p | | | 405.2p | | -2.3% | | 58.5p | | | | Sep 23 | | | | | Sep 23* | | | | | | | 395.6p | | | | 52.9p | 4.25p | NAV per share (p) Dividends* * Includes proposed nal dividend of 2.5p Net Asset Value (“NAV”) total return to shareholders NAV per share decreased 2.3 per cent to 57.2p, for every 100.0p invested at launch (April 1998). before the deduction of dividends, for the nancial year ended 30September 2023. | | | 1 | | | 3 | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Annual tax free dividend yield | | | | New investments | | | | | | | (12 months to 30 September 2023) | | | | (12 months to 30 September 2023) | | | | | | | | Sep 21 | | | | | Sep 21 | | | | | | | | 9.6% | | | | | £15.4mn | | | | Sep 22 | | | | | Sep 22 | | | | | 7.3% | | 7.3% | | £10.4mn | | | | | £21.5mn | | | Sep 23* | | | | | Sep 23 | | | | | | | 7.3% | | | | | £10.4mn | | | * Includes proposed nal dividend of 2.5p Unquoted: £7.3mn Quoted: £3.1mn Annual tax free dividend yield based on 4.25p dividends paid (including proposed nal Investments made into six new and eight dividend of 2.5p) and opening NAV of 58.5p. follow-on opportunities during the year. 1. Alternative Performance Measures (“APM”)/Key Performance Indicators (“KPIs”) – please refer to glossary on page 107 for denitions. 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 denitions Annual Report and Audited Financial Statements 2023 3 01 Strategic report ## Performance summary ### Ten-year performance record 250 222.9 193.8 194.9 200 175.5 164.8 150 159.0 150.6** 151.1 85.1 100 83.1 50 100 | 0 | | | | | | | 0 | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | 2022 | 202320212020201920182017201620152014 | | | | Net asset value | Share price (mid) | Net asset value total return | Total net assets (£mn) | | | | | | per share (pence) | (pence) | per share (pence)* | | | | | * Net asset value total return (gross dividends reinvested) rebased to 100p. Source: Gresham House Asset Management Ltd ** Net asset value increase following the merger of Baronsmead VCT plc and Baronsmead VCT2 plc in February 2016. ### Cash returned to shareholders by date of investment The chart below shows cash returned to shareholders based on the subscription price and the income tax reclaimed on subscription. 1998 (Apr) Ord 1999 (May) Ord 2000 (Feb) Ord 2000 (Mar) Ord 2009 (Apr) Ord 2012 (Dec) Ord 2014 (Mar) Ord 2016 (Feb) Ord 2017 (Oct) Ord 2019 (Feb) Ord 2019 (Nov) Ord 2020 (Jan) Ord 2004 (Oct) C shares 2020 (Feb) Ord 2020 (Mar) Ord Pence 2020 (Nov) Ord £mn 2020 (Dec) Ord 600 2021 (Jan) Ord 2021 (Feb) Ord 2021 (Mar) Ord 500 2021 (Dec) Ord 2022 (Jan) Ord 400 2022 (Mar) Ord 2023 (Jan) Ord** 2023 (Mar) Ord** 300 2023 (Apr) Ord** 020406080 100 120 140 160 180 200 220 200 Cash invested (p) Income tax reclaim (p) Cumulative dividends (p)* * Includes proposed nal dividend of 2.5p. ** Average effective offer 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. Annual Report and Audited Financial Statements 20234 01 Strategic report ## Chair's statement The economic environment over the 12 months to 30 September 2023 remained challenging. Consumer and business confidence continued to be affected by persistently high inflation and rising interest rates. During the year, the Net Asset Value per share decreased by 1.3p per share (2.3 per cent) from 58.5p to 57.2p before the payment of 4.25p dividends per share. In the short term, the weight of economic opinion suggests that UK inflation, and therefore interest rates, may have peaked. The Manager is therefore hopeful that the economic uncertainty of the last few years will start to diminish from early 2024, although any improvement in the external environment may take some time to feed through to businesses more generally. The approach of the Manager is to invest into its chosen sectors throughout the economic cycle into both unquoted and AIM-listed companies, avoiding making large macro-economic predictions and rather focusing on the quality of the underlying businesses and their management teams. Your Board believes this strategy can provide greater consistency of investment returns over the medium to long term. ## Results | | Pence per ordinary share | | --- | --- | | NAV as at 1 October 2022 (after final dividend) | 58.54 | | Valuation decrease (-2.3 per cent) | (1.35) | | NAV as at 30 September 2023 before dividends | 57.19 | | Less: | | | Interim dividend paid on 8 September 2023 | (1.75) | | Proposed final dividend of 2.5p payable, after shareholder approval, on 8 March 2024 | (2.50) | | Illustrative NAV as at 30 September 2023 after proposed dividend | 52.94 | ### Fiona Miller Smith Chair ![img-0.jpeg](img-0.jpeg) ## Portfolio Review At 30 September 2023, the Company's investment portfolio was valued at £107 million and comprised 84 direct investments, of which 37 are in unquoted companies and 47 are in quoted companies. The Company's investments in three Gresham House Equity Funds$^{1}$ were valued at £68 million at 30 September. These investments provide investment exposure to an additional 75 AIM-traded and fully listed companies spreading investment risk across a highly diversified portfolio of 159 companies. The value of the Company's unquoted investments decreased by 14 per cent during the year. This is clearly very disappointing and stems from weaker trading conditions and lower valuations based on the market valuation of comparable companies. On the other hand, the Company's portfolio of AIM-listed and other quoted investments was more resilient and increased by 3 per cent during the year. To put this in context, the FTSE AIM All Share Index decreased by 9.9 per cent over the same period. 1. WS Gresham House UK Micro Cap Fund ('Micro Cap'), WS Gresham House UK Multi Cap Income Fund ('Multi Cap') and WS Gresham House UK Smaller Companies Fund ('Small Cap'). Annual Report and Audited Financial Statements 2023 5 01 Strategic report - Chair's statement ## Investments and Divestments Against this backdrop, your Board is once again pleased to report that the Manager continues to see attractive opportunities for investment. During the year, the Company deployed a total of £10.4 million in 14 companies in both new and follow-on investments. Further details of these investments are included in the Manager's review on pages 9 to 14. As we have communicated 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 new portfolio develops and grows. The priority for portfolio companies is to face any difficult trading conditions in a controlled way and focus on their investment fundamentals. The Manager has the experience in portfolio and talent management to assist portfolio companies and actively engages with portfolio companies to achieve this. There was one full realisation in the unquoted portfolio during the year with proceeds of £0.7 million 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 £0.3 million and a gross money multiple of 3.2x cost along with deferred earn-out consideration of £1.1 million from the sale of Pho for a gross money multiple of 3.1x cost. In the listed portfolio, the Manager has also continued its approach of profitable partial realisations of Cerillion during the year, resulting in the receipt of proceeds of £0.5 million at an aggregate of 15.8x original invested cost in this listed company. ## Dividends The Board is pleased to declare a final dividend of 2.5p per share for the year to 30 September 2023, payable on 8 March 2024. This is in addition to the 1.75p interim dividend paid in September and means that the total dividends for the year are 4.25p. This is a 7.3 per cent yield based on the opening NAV of 58.5p and meets the target policy of 7 per cent of the NAV at the start of the year. Including the proposed final dividend of 2.5p per share, tax free dividends paid since launch in 1998 now total 183.9p per share, 81.0p of which has been paid over the past 10 years. ## Unclaimed Dividends The Company's Registrar was holding £1.1 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. ## VCT Regulations – Retirement Date of the UK Government's Venture Capital Schemes When EU State Aid approval of the UK's VCT and EIS schemes was given in 2015, a 'retirement date' 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. 6 Annual Report and Audited Financial Statements 2023 01 Strategic report - Chair's statement In November 2023, in the Autumn Statement, the Government announced that legislation will be introduced as part of the Finance Act 2023 to move the retirement date to 6 April 2035. This is very welcome news. Your Board would like to thank the Treasury Select Committee for their thorough and interesting report on the Venture Capital Market published in July 2023. This report was broadly positive about VCTs and urged the government to act to remove the uncertainty being caused by the imminence of the original retirement date of April 2025. We would like to thank the Manager for their representations made through the VCTA, and the AIC for the representations they made to government and officials concerning the retirement date. We believe VCTs have provided and will continue to provide valuable investments in early stage, high growth UK companies that would not otherwise be made, while providing the UK taxpayer with good value for money with the various tax benefits VCTs provide to their investors. ## Acquisition of the Investment Manager, Gresham House Further to the announcement on 17 July 2023 about 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 FCA's Consumer Duty came into force on 31 July 2023 and, in summary, requires firms to which this applies to act to deliver good outcomes for their retail customers. The Consumer Duty regulations apply to the regulated and ancillary activities of all FCA authorised firms under the Financial Services and Markets Act 2000, the Payment Services Regulations 2017 and the Electronic Money Regulations 2011. The Company is not a FCA authorised firm and accordingly does not fall within scope of these regulations. However, the Company's Manager, Gresham House, being an FCA authorised firm, is covered by the regulations and the Board is cognisant of the Manager's obligations to comply with the Consumer Duty. The Board receives regular updates from the Manager on the delivery of its obligations under the Consumer Duty. ## Succession planning During the year, the Board began the process of implementing its succession plan with Isabel Dolan joining the Board. Isabel has over 25 years' experience working with growth companies as a corporate financier, equity investor, lender and Finance Director and I am very much looking forward to working with her. Our current Audit Chair, Les Gabb, will be retiring with effect from 31 December 2023. Les has served as a director of Baronsmead VCT plc from May 2014 and then continued as a director of Baronsmead Venture Trust plc after the merger in 2016. I would like to thank Les for his dedication and hard work during this time and wish him all the best in his future endeavours. ## Fundraising 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, with the additional funds raised being 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 1.30 pm on 5 March 2024. The Manager will deliver a presentation at 11.30am followed by some light refreshments at 12.30pm. Shareholders are invited to attend an introductory presentation by the Company Chair, Ms Fiona Miller Smith, followed by a Q&A session from 1.00pm. The formal business of the AGM will then start at 1.30pm. 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 Venture Trust website. Annual Report and Audited Financial Statements 2023 7 01 Strategic report - Chair’s statement The portfolio remains highly diversied and the Board ### Outlook continues to believe it is a good time to be investing The geopolitical and economic outlook is likely to remain in earlier stage, innovative and high growth potential challenging and any recovery in the next year is likely businesses. The Manager is actively seeking to complete to be slow and fragile. Ination in the UK remained high new investments, believing that this is a propitious time throughout the year under review although the reduction in the economic cycle ahead of the typical up swing that in the headline rate of ination post period end is welcome follows the uncertain times of the past few years. We and hopefully this will lead in turn to a reduction in remain condent that the Manager is suitably positioned interest rates and a return of more benign and less volatile to provide the necessary levels of support to the economic conditions. portfolio companies and remains focussed on retaining, recovering and helping to grow value in existing and future investee companies. Fiona Miller Smith Chair 21 December 2023 8 Annual Report and Audited Financial Statements 2023 01 Strategic report ## Manager’s review ### Clive Austin Ken Wotton Managing Director, Managing Director, VCT Portfolio Public Equity ### Tania Hayes Trevor Hope Chief Operating Ocer, Chief Investment Ocer, Strategic Equity VCTs ### Ed Wass Tom Makey Director of VCT Portfolio Investment Director 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 diversied, with exposure to 159 quoted and unquoted companies, has delivered a decrease in net asset value per share of 2.3 per cent over the year. ### Portfolio review Overview The closing net assets of £195 million were invested as follows: NAV % of Number of % return in Asset class (£mn) NAV* investees** the year*** Unquoted 46 24 37 (14) AIM‑traded companies 61 31 47 3 WS Gresham House UK Micro Cap Fund 28 15 45 5 WS Gresham House UK Multi Cap Income Fund 16 8 42 7 WS Gresham House UK Smaller Companies Fund 24 12 40 2 # Liquid assets 20 10 N/A 4 Totals 195 100 211 (2) * By value as at 30 September 2023. ** Includes investee companies held in more than one fund. Total number of individual companies held is 159. *** 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. Annual Report and Audited Financial Statements 2023 9 01 Strategic report - Manager’s review ### Investment Activity – Unquoted Portfolio ### Unquoted and Quoted Performance The Company’s investment strategy is primarily focused on companies operating in parts of the economy that The unquoted portfolio decreased in value by 14 per we believe are beneting from long‑term structural cent during the year. The macroeconomic environment growth trends and in sectors where we have deep remained challenging for the Company's portfolio expertise and networks. companies although some stability has been seen in market multiples in more recent months. UK businesses During the year, £10.4 million was invested into 14 companies have seen both demand and operating margins come including six new additions to the portfolio and eight follow‑ under pressure due to marked increases in ination and on investments. interest rates. Such macro‑economic conditions have Five new unquoted investments totalling £3.4 million were not been faced by management teams in a generation, completed during the year into Branchspace, Cognassist, however Gresham House’s experienced non‑executive Connect Earth, Dayrize B.V. and Mable Therapy. directors and portfolio consultants continue to support the portfolio’s companies during these turbulent times. Below are descriptions of the new investments made; Orri and SecureCloud+ were the two investments that  Branchspace is a provider of software and consulting made the biggest positive contribution in the year. Orri, services to airlines/carriers to enhance their digital and a provider of intensive out‑patient care for adults with ecommerce offerings. eating disorders, delivered year on year revenue growth,  Cognassist is a provider of neurodiversity assessment in excess of 20per cent. The company opened a new site and support software. and drew down a further VCT loan in the period which is expected to support continuing growth in the coming  Connect Earth is a provider of a proprietary year. SecureCloud+ is a specialist IT managed services environmental database that estimates company specically serving the Ministry of Defence carbon emissions. and related contractors. The company delivered both  Dayrize is a provider of a rapid product‑level revenue and prot growth in the period, growing EBITDA, sustainability impact assessment software tool for in particular by over 40per cent. A focus on maintaining retailers and Consumer Packaged Goods companies. margins for new contract wins in a growing market helped  Mable Therapy is a digital platform offering mental SecureCloud+ deliver a very encouraging performance. It health counselling and speech and language is now well set to continue on its positive trajectory. Overall therapy to children. performance was also positively impacted by the receipt of the maximum deferred consideration relating to the One new AIM quoted of £0.9 million was made earnout arrangements on Pho, a divestment completed in during the year: a previous period. In line with our valuation policy, this was  Tan Delta Systems is a manufacturer of oil condition only recognised on receipt. analysis sensors that detect and measure wear and The largest detractors from performance were in the contamination in industrial applications. healthcare and B2C ecommerce sectors. Panthera Biopartners, an independent site management The Company made follow‑on investments totalling organisation which provides patient recruitment services £6.0 million into eight existing portfolio companies, to clinical research organisations, pharma and biotech three quoted and ve unquoted, during the year. This is companies, struggled to scale its operations and deliver consistent with the investment strategy of continuing to a growing number of contracts as protably as it had back the Company's high potential assets with further previously. This resulted in a signicantly loss‑making capital to support future growth. We anticipate the level of year and the requirement for further funding. Since then follow‑on investment will continue to grow as the capital the company has started to deliver protable revenue hungry earlier stage portfolio continues to mature. 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 sucient lifetime value to support a protable business once signicant 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. 10 Annual Report and Audited Financial Statements 2023 01 Strategic report - Manager’s review As Investment Manager we remain highly engaged with the ### Quoted Portfolio (AIM-traded investments) 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 Performance continued to invest in our portfolio and in‑house talent teams, alongside our extensive network of earlier stage, The quoted portfolio delivered positive absolute high growth company experts. This will ensure we are performance of 3per cent during the year, despite the well positioned to help the companies that the Company signicant geopolitical and macroeconomic uncertainty invests in to navigate the challenges they face whilst also in the markets. For reference the AIM market in the UK fell continuing to develop and scale. 10per cent over the same period. Despite the adverse share price performances from many of the portfolio companies, the majority of the AIM portfolio remains in good nancial Divestments health and is exposed to structural growth areas providing some insulation from the deteriorating economic conditions. There was one full realisation in the unquoted portfolio during the year with proceeds of £0.7 million received The best performing investments sit within the software from the realisation of Evotix, for a gross multiple of sector with Cerillion, a provider of billing and charging 0.7x cost. In addition to this, the Key Travel Loan Notes software to the telecoms industry continuing to deliver matured for £0.3 million taking the gross money multiple strong revenue and prot growth with the release of their to 3.2x cost along with deferred earn‑out consideration interim results stating +20per cent organic growth with of £1.1 million from the sale of Pho for a gross money record margins and strong Free Cash Flow generation. In multiple of 3.1x cost. 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 diversication at 30 September 2023 by value Sector* Total assets Length of time investments held* 6% 10% 4% 9% 35% 24% 32% 22% 53% 63% 11% 31% | Technology | Collective investment vehicles | Greater than 5 years | | --- | --- | --- | | Healthcare & education | AIM | Between 3 and 5 years | | Business services | Unquoted | Between 1 and 3 years | | Consumer markets | Cash liquidity funds | Less than 1 year | *Direct investments only, not held by the Micro Cap, Multi Cap or Small Cap funds'. Annual Report and Audited Financial Statements 2023 11 01 Strategic report - Manager’s review The largest detractors from performance were both in the Micro Cap and Multi Cap continue to be both highly rated healthcare and education sector with Aptamer, a developer by independent ratings agencies. Micro Cap’s cumulative of a platform technology with applications in the therapeutic performance is currently top quartile within the IA UK and diagnostic areas of healthcare, experiencing share price Smaller Companies sector and is the fth best performing weakness after the release of a trading update indicating a fund over the past 10 years. Multi Cap’s cumulative signicant downgrade to full year revenue expectations. The performance has remained the best performer within the company consequently considered funding options and the IA UK Equity Income sector since launch in June 2017 and CEO resigned. Anpario, an international manufacturer and is the second best performer over ve years. Small Cap distributor of natural animal feed additives for animal health, has also achieved top quartile cumulative performance nutrition and biosecurity, also suffered share price weakness since launch in 2019 and is the fth best performing fund following a prot warning indicating a signicant reduction in over the past three years. full year EBITDA due to raw material costs, Covid in China and delays in shipment. Liquid assets (cash and near cash) We closely monitor the AIM portfolio with a rolling programme of independent reviews of top AIM holdings The Company held cash and liquidity OEICs of and broadly continue to be positive on the long‑term approximately £21 million at the year‑end. This asset class investment prospects of these companies. Many of the is conservatively managed to take minimal or no capital larger quoted investments have been long‑term holdings. risk. The average 7 day yield on the liquidity OEICs was These companies are typically protable, cash generative 5.17per cent at the end of the year. businesses with low levels of nancial gearing and continue to have attractive long‑term growth prospects. ESG Highlights Following the year end, we commenced our latest ESG Divestments survey of our unquoted portfolio companies, to identify The opportunity to crystallise further gains was taken how these companies think about ESG and which ESG data for Cerillion; over the course of the year proceeds of is already being reported and monitored. Further details on £0.5million were realised at 15.8x cost. our ESG approach and policies can be found on page28 in the strategic report. Seven companies which were impacted by dicult trading conditions entered into administration during the year and have subsequently been recognised as realised losses. In Third party independent valuations aggregate, the impact on NAV per share for the year was a decrease of 0.7per cent, with the majority of the losses During the year, the Company engaged the services of recognised in prior years. 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 Collective Investment Vehicles the valuation of one or more of the material VCT portfolio assets. It was agreed that valuation responsibility The Company’s investments in Micro Cap, Multi Cap and is, and will remain, with the Investment Manager and Small Cap remain a core component of the Company’s that this does not constitute outsourcing of any part portfolio construction for funds awaiting investment in of the valuation. The Investment Manager uses these VCT qualifying companies. These investments provide independent valuations in conjunction with their own shareholders with additional diversication through valuations to provide independent assurance and exposure to an additional 75 underlying companies, as well risk mitigation to the Board and the Board continues as access to the potential returns available from a larger to support this. and more established group of companies that fall within the Manager’s core area of expertise. Over the year Micro Cap delivered a positive return of 5 per cent, Multi Cap delivered a positive return of 7 per cent and the Small Cap fund delivered a positive return of 2 per cent. 12 Annual Report and Audited Financial Statements 2023 01 Strategic report - Manager’s review 1 Levelling up Chart 2 – Portfolio company board composition On 18 July 2023, the House of Commons Treasury Committee published its report (the “Report”) on Venture 15% 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. 85% The Company and the Investment Manager have long supported the creation of opportunities for everyone across the UK through its investment portfolio. Male The investment due diligence process for any proposed new investment includes a consideration of the board Female structure and composition as part of the Manager’s governance considerations within the ESG Decision Tool. Chart 2 above shows that board composition within the We have considered the ndings of the Report and set portfolio was similarly predominantly male, with 15per out for the rst time the relevant metrics pertaining to cent of board members being female, after excluding the Company’s portfolio of unquoted investments as at representatives of Gresham House. 30September 2023, Gresham House plc and the Gresham House Strategic Equity division, responsible for managing 2 Chart 3 – Allocation of capital by region 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 35% founders, with 14per cent being founded by all females or groups of mixed male and female founders. Chart 1 – Portfolio company founders 65% 14% London and South East Other regions Chart 3 above shows the regions of the UK where the 86% 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 All male of signing up to the Investing in Women Code. This is a commitment to support the advancement of female Female/mixed gender entrepreneurship in the United Kingdom by improving female entrepreneurs’ access to tools, resources and nance from the nancial services sector. 1. Excluding Gresham House representatives. 2. Based on cost of investment. Annual Report and Audited Financial Statements 2023 13 01 Strategic report - Manager’s review In September 2023, the Manager hosted its rst female‑led Gresham House released their Diversity, Equity & Inclusion event bringing together innovators, investors, and advisers (“DEI”) strategy at the start of 2022 to help understand to foster relationships and share learnings. the changing landscape of DEI. Included within the strategy are initiatives to improve DEI such as carrying Chart 4 below shows the gender diversity within Gresham out unconscious bias training for all employees; evolving House as at 30 September 2023. Human Resources systems to include DEI data which is now shared quarterly with our Group Management 1 Chart 4 – Gresham House gender diversity 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 38% 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 62% of its investment teams, the management teams of the investee companies that they support and increasing the amount & number of investments across the UK. Male ### Outlook Female The UK economic outlook remains uncertain but the investment portfolio is well diversied and the opportunity Chart 5 – Gresham House strategic equity division to invest and support growth in entrepreneurial earlier‑ 2 gender diversity 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 30% 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 70% 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 Male the medium term. Female Gresham House Asset Management Ltd Chart 5 above shows the gender diversity within the Investment Manager Strategic Equity division of Gresham House, responsible for managing the Company’s portfolio. 21 December 2023 1. As at 30 September 2023. 2. As at 30 September 2023. 14 Annual Report and Audited Financial Statements 2023 01 Strategic report ## Investments in the year Book cost Company Location Sector Activity £’000 Unquoted investments New | Cognassist UK Ltd Newcastle upon | | Healthcare & education A platform for supporting those with | | 896 | | --- | --- | --- | --- | --- | | | Tyne | | learning needs | | | Dayrize B.V. Amsterdam Technology | | | A rapid product‑level sustainability | 757 | impact assessment software tool for retailers and Consumer Packaged Goods ("CPG") companies Mable Therapy Ltd Leeds Healthcare & education Digital health platform for speech 670 therapy & counselling for children and young adults Branchspace Ltd London Technology Specialist digital retailing consultancy 659 and software provider to the aviation and travel industry Connect Earth Ltd London Business services Helps businesses track their carbon 447 emissions Follow-on Patchworks Integration Ltd London Technology A platform for connecting businesses’ 1,920 applications TravelLocal Ltd London Consumer markets Online travel agent specialising in 634 tailor‑made holidays Airnity Ltd London Healthcare & education Provides real time life science 624 intelligence as a subscription service Panthera Biopartners Ltd Lancashire Healthcare & education Recruitment services for clinical trials 443 Orri Ltd London Healthcare & education Provider of intensive day care 227 treatments for eating disorders Total unquoted investments 7,277 AIM-traded investments New Tan Delta Systems plc South Yorkshire Business services Supplier of real‑time oil condition 918 monitoring sensors Follow-on Crossword Cybersecurity plc* London Technology Commercialisation of university 960 research‑based cyber security software and consulting Oberon Investments Group plc London Business services Wealth advisory service for individuals 609 and businesses SEEEN plc London Technology A video technology business 609 Total AIM-traded investments 3,096 # Total investments in the year 10,373 * 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 | | | First | | Original | | | | | | Overall | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | # | | | ‡ | | | | investment | | book cost | | | | Proceeds | | | multiple | | Company | | date | | | £’000 | | | £’000 | | return | Unquoted realisations Evotix Ltd Full trade sale Jul 21 375 702 0.7* Key Travel Ltd Escrow loan note Jun 13 209 313 3.2** maturity Glisser Ltd Written off Nov 19 1,585 – – Rezatec Ltd Written off Jan 20 1,380 – – Vinoteca Ltd Written off Sep 19 934 – – CMME Group Ltd Written off Apr 15 931 – – Your Welcome Ltd Written off Aug 18 914 – – Total unquoted realisations 6,328 1,015 AIM-traded and LSE listed realisations Cerillion plc Market sale Nov 15 34 541 15.8 MXC Capital Ltd Tender offer May 15 24 15 0.6 Hawkwing plc Written off Nov 11 1,466 – – InterQuest Group plc Written off Feb 07 620 – – Total AIM-traded and LSE listed realisations 2,144 555 Total realisations in the year 8,472 1,570 Earn out proceeds of £1.1mn 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 £1.0 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 ## Ten largest investments 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 monthly management accounts and has access to draft but unpublished annual audited accounts. In addition, pre‑tax prot in statutory accounts is often not a representative indicator of underlying protability 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. | | | Cerillion plc | | | Netcall plc | | --- | --- | --- | --- | --- | --- | | London | 1 | | Bedfordshire | 2 | | | Quoted | | | Quoted | | | | www.cerillion.com | | | www.netcall.com | | | Cerillion provides billing, charging and CRM software Netcall is a provider of intelligent automation and solutions, predominantly to the telecommunications customer engagement software, helping organisations sector but also to other sectors, including nance to become more customer-centric. Solutions are and utilities. Cerillion has more than 80 customer focused on enabling customer contact across multiple installations in over 45 countries, delivering a broad channels and improving customer satisfaction whilst range of cloud solutions, managed services and on- driving operational eciency through increased process premise enterprise software. automation. Netcall has over 700 customers, spanning enterprise, healthcare and government sectors. | All funds managed by Gresham House | | | | | All funds managed by Gresham House | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | First investment: July 2015 | | | | | First investment: July 2010 | | | | | | Total original cost: £2,664,000 | | | | | Total original cost: £4,354,000* | | | | | | Total equity held: 11.9% | | | | | Total equity held: 25.1% | | | | | | Baronsmead Venture Trust only | | | | | Baronsmead Venture Trust only | | | | | | Original cost: £1,197,000 | | | | | Original cost: £1,738,000 | | | | | | Valuation: £20,657,000 | | | | | Valuation: £8,319,000 | | | | | | Valuation basis: Bid price | | | | | Valuation basis: Bid price | | | | | | Income recognised in the year: £157,000 | | | | | Income recognised in the year: £53,000 | | | | | | % of equity held: 5.3% | | | | | % of equity held: 6.2% | | | | | | Voting rights: 5.3% | | | | | Voting rights: 6.2% | | | | | | Year ended 30September | | | | | Year ended 30June | | | | | | | | 2023 | | 2022 | | | 2023 | | 2022 | | | £million | | £million | | | £million | | £million | | | Sales: 39.2 32.7 | | | | | Sales: 36.0 30.5 | | | | | | Pre-tax prots: 16.1 10.9 | | | | | Pre-tax prots: 4.0 2.3 | | | | | | Net assets: 36.9 26.7 | | | | | Net assets: 35.4 27.4 | | | | | | No. of employees: 324 295 | | | | | No. of employees: 270 252 | | | | | | Source: Cerillion plc, Annual Report and Financial Statements, | | | | | Source: Netcall plc, Annual Report and Accounts, 30 June 2023 | | | | | | 30 September 2023 | | | | | *Includes Baronsmead VCTs only | | | | | 17Annual Report and Audited Financial Statements 2023 01 Strategic report - Ten largest investments | | | Patchworks Integration Ltd | | | eConsult Health Ltd | | --- | --- | --- | --- | --- | --- | | London | 3 | | London | 4 | | | Unquoted | | | Unquoted | | | | www.wearepatchworks.com | | | www.econsult.net | | | Patchworks provides the software to integrate eConsult provides a clinically led online consultation an ecommerce customer’s front and back oce service to digitally triage patients, reducing the operational systems, managing the ow of data number of face-to-face consultations required. across their entire business and providing data and This builds on the structural imbalance of a growing analytics to power decision-making. Founded in 2014, and ageing population and an increasing scarcity the Baronsmead VCTs originally invested in July 2021 in healthcare professionals. The Baronsmead VCTs and since then the business has more than doubled investment of £7.5 million has enabled the business to its recurring revenues through expansion sales and develop its product offering for the secondary market, onboarding new customers predominantly in the UK. in addition to supporting sales and marketing activity. | All funds managed by Gresham House | | | | | All funds managed by Gresham House | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | First investment: July 2021 | | | | | First investment: October 2020 | | | | | | Total original cost: £ 8,800,000 | | | | | Total original cost: £7,500,000 | | | | | | Total equity held: 23.8% | | | | | Total equity held: 11.4% | | | | | | Baronsmead Venture Trust only | | | | | Baronsmead Venture Trust only | | | | | | Original cost: £4,223,000 | | | | | Original cost: £3,600,000 | | | | | | Valuation: £5,567,000 | | | | | Valuation: £4,916,000 | | | | | | Valuation basis: Earnings multiple | | | | | Valuation basis: Earnings multiple | | | | | | Income recognised in the year: £152,000 | | | | | Income recognised in the year: £3,000 | | | | | | % of equity held: 10.0% | | | | | % of equity held: 4.8% | | | | | | Voting rights: 12.1% | | | | | Voting rights: 4.8% | | | | | | Year ended 30June | | | | | Year ended 31March | | | | | | | | 2022 | | 2021 | | | 2023 | | 2022 | | | £million | | £million | | | £million | | £million | | | Net assets: 2.7 0.1 | | | | | Sales: 7.3 7.3 | | | | | Pre-tax prots: (3.4) (5.3) A full set of accounts is not publicly available. Source: Patchworks Integration Ltd, Unaudited Financial Statements, Net assets: 3.0 5.9 30 June 2022 No. of employees: 91 104 Source: eConsult Health Ltd, Annual Report and Financial Statements, 31 March 2023 18 Annual Report and Audited Financial Statements 2023 01 Strategic report - Ten largest investments Airnity Ltd IDOX plc ## London 5 Surrey ## 6 Unquoted Quoted www.airnity.com www.idoxgroup.com Airnity is a science information data analytics IDOX provides legislative compliance and document platform which provides deep information by process management software, in a variety of cloud therapeutic area on a real time basis to the life and on-premise applications, for local governments sciences industry and public entities including and the NHS. Additionally, IDOX delivers document governments, NGOs and healthcare authorities. It was collaboration software for the oil & gas, energy, and founded in 2015 and grew rapidly during the pandemic infrastructure sectors, enabling accurate record on the back of its COVID-19 health analytics and keeping for project management. IDOX’s solutions intelligence platform. The Baronsmead VCTs initially seek to deliver process automation to support invested £5.0 million in 2021 and have since provided enhanced citizen and customer experience, improved follow-on funding which is being used to support operational eciency and reduced overheads. ongoing development of the platform, sales and marketing efforts and to build out the team. | All funds managed by Gresham House | | | | | All funds managed by Gresham House | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | First investment: July 2021 | | | | | First investment: May 2002 | | | | | | Total original cost: £6,905,000 | | | | | Total original cost: £1,642,000* | | | | | | Total equity held: 20.1% | | | | | Total equity held: 4.7% | | | | | | Baronsmead Venture Trust only | | | | | Baronsmead Venture Trust only | | | | | | Original cost: £3,311,000 | | | | | Original cost: £614,000 | | | | | | Valuation: £4,357,000 | | | | | Valuation: £4,073,000 | | | | | | Valuation basis: Earnings multiple | | | | | Valuation basis: Bid price | | | | | | Income recognised in the year: £32,000 | | | | | Income recognised in the year: £32,000 | | | | | | % of equity held: 8.6% | | | | | % of equity held: 1.4% | | | | | | Voting rights: 8.6% | | | | | Voting rights: 1.4% | | | | | | Year ended 31 December | | | | | Year ended 31October | | | | | | | | 2022 | | 2021 | | | 2022 | | 2021 | | | £million | | £million | | | £million | | £million | | | Sales: 5.4 2.4 | | | | | Sales: 66.2 62.2 | | | | | | Pre-tax prots: (3.5) (1.9) | | | | | Pre-tax prots: 6.6 7.3 | | | | | | Net assets: 2.6 3.2 | | | | | Net assets: 67.4 60.8 | | | | | | No. of employees 83 57 | | | | | No. of employees: 578 567 | | | | | | Source: Airnity Ltd, Annual Report and Financial Statements, | | | | | Source: Idox plc, Annual Report & Accounts, 31 October 2022 | | | | | | 31 December 2022 | | | | | *Includes Baronsmead VCTs only | | | | | Annual Report and Audited Financial Statements 2023 19 01 Strategic report - Ten largest investments | | | Bioventix plc | | | Popsa Holdings Ltd | | --- | --- | --- | --- | --- | --- | | Surrey | 7 | | Surrey | 8 | | | Quoted | | | Unquoted | | | | www.bioventix.com | | | www.popsa.com | | | Bioventix manufactures and supplies high Popsa is a photobook app that uses proprietary anity sheep monoclonal antibodies for use in machine learning algorithms to reduce the average immunodiagnostics. Focusing on clinical diagnostics, time it takes for customers to produce photobooks the company’s strategy is to identify new assays from two hours to just ve minutes. Popsa was for which there is a need for improved antibodies. founded in 2017 with the aim to disrupt an industry Since the Baronsmead VCTs rst invested in that has not innovated with consumer habits, in 2013, the company has more than quadrupled its particular the shift to mobile as the key photo revenues and prots. 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 | | | | | All funds managed by Gresham House | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | First investment: June 2013 | | | | | First investment: December 2021 | | | | | | Total original cost: £562,000* | | | | | Total original cost: £6,500,000 | | | | | | Total equity held: 9.6% | | | | | Total equity held: 8.1% | | | | | | Baronsmead Venture Trust only | | | | | Baronsmead Venture Trust only | | | | | | Original cost: £253,000 | | | | | Original cost: £3,120,000 | | | | | | Valuation: £3,662,000 | | | | | Valuation: £3,120,000 | | | | | | Valuation basis: Bid price | | | | | Valuation basis: Earnings multiple | | | | | | Income recognised in the year: £156,000 | | | | | Income recognised in the year: £nil | | | | | | % of equity held: 1.8% | | | | | % of equity held: 3.4% | | | | | | Voting rights: 1.8% | | | | | Voting rights: 3.5% | | | | | | Year ended 30June | | | | | Year ended 31December | | | | | | | | 2023 | | 2022 | | | 2022 | | 2021 | | | £million | | £million | | | £million | | £million | | | Sales: 12.8 11.7 | | | | | Sales: 26.7 25.3 | | | | | | Pre-tax prots: 10.1 9.3 | | | | | Pre-tax prots: (2.1) (3.7) | | | | | | Net assets: 12.1 11.8 | | | | | Net assets: 11.3 12.0 | | | | | | No. of employees: 16 16 | | | | | No. of employees: 58 50 | | | | | | Source: Bioventix plc, Annual Report and Financial | | | | | Source: Popsa Holdings Ltd, Group Strategic Report, Report of the | | | | | | Statements, 30 June 2023 | | | | | Directors and Consolidated Financial Statements, 31 December 2022 | | | | | *Includes Baronsmead VCTs only 20 Annual Report and Audited Financial Statements 2023 01 Strategic report - Ten largest investments | | | Clarilis Ltd | | Scurri Web Services Ltd | | --- | --- | --- | --- | --- | | Warwickshire | 9 | | Ireland 10 | | | Unquoted | | | Unquoted | | | www.clarilis.com | | | www.scurri.com | | Clarilis is a legal document automation software Scurri is a UK and Ireland multi-carrier management and services provider, enabling both legal rms and SaaS platform based in Ireland which connects online in-house legal teams to automate legal contract retailers with a wide range of delivery partners, production. The Baronsmead VCTs invested enabling them to route parcels to the most effective £3.5m for 16.7per cent of the equity in July 2020. carrier based on a range of criteria. The Baronsmead This has enabled the business to scale, as well as VCTs investment will enable the business to focus on optimise their pricing structure. 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 | | | | | All funds managed by Gresham House | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | First investment: July 2020 | | | | | First investment: June 2021 | | | | | | Total original cost: £3,500,000 | | | | | Total original cost: £4,326,000 | | | | | | Total equity held: 16.7% | | | | | Total equity held: 14.7% | | | | | | Baronsmead Venture Trust only | | | | | Baronsmead Venture Trust only | | | | | | Original cost: £1,679,000 | | | | | Original cost: £2,033,000 | | | | | | Valuation: £2,514,000 | | | | | Valuation: £2,411,000 | | | | | | Valuation basis: Earnings multiple | | | | | Valuation basis: Earnings multiple | | | | | | Income recognised in the year: £nil | | | | | Income recognised in the year: £nil | | | | | | % of equity held: 7.0% | | | | | % of equity held: 6.1% | | | | | | Voting rights: 6.1% | | | | | Voting rights: 8.2% | | | | | | Year ended 31December | | | | | Year ended 31December | | | | | | | | 2022 | | 2021 | | | 2022 | | 2021 | | | £million | | £million | | | €million | | €million | | | Net assets: 1.7 3.4 | | | | | Net assets: 5.4 6.3 | | | | | | No. of employees: 57 55 | | | | | No. of employees: 41 34 | | | | | | A full set of accounts is not publicly available. | | | | | A full set of accounts is not publicly available. | | | | | | Source: Clarilis Ltd, Unaudited Financial Statements, | | | | | Source: Scurri Web Services Limited, Abridged Annual Report and | | | | | | 31 December 2022 | | | | | Financial Statements, 31 December 2022 | | | | | Annual Report and Audited Financial Statements 2023 21 01 Strategic report ## Principal risks and uncertainties The Board has carried out a robust assessment of the principal and emerging risks and uncertainties facing the Company The Company is facing the key emerging risks of climate change and ESG, given the regulatory, operational and and has assessed the appropriate measures to be taken in order to mitigate these risks as far as practicable. There is an potentially reputational implications if not appropriately addressed. In order to address these emerging risks, when ongoing process for identifying, evaluating and managing these risks which is part of the governance framework detailed looking to make a new investment, the Manager uses an ESG Decision Tool to identify any material ESG risks that need to further in the Corporate Governance section of this report. be managed and mitigated. For further detail, see pages24 to 31. Principal risk Context Specic risks we face Possible impact Mitigation Loss of approval The Company must comply with section 274 of the Income Breach of any of the rules enabling the Company The loss of VCT status would result in The Board maintains a safety margin on all VCT tests to ensure that breaches are unlikely asa Venture Tax Act 2007 which enables its investors to take advantage of to hold VCT status could result in the loss of shareholders who have not held their to be caused by unforeseen events or shocks. The Investment Manager monitors all of the CapitalTrust tax relief on their investment and on future returns. thatstatus. shares for the designated holding period VCT tests on an ongoing basis and the Board reviews the status of these tests on a quarterly having to repay the income tax relief they basis. Specialist advisors review the tests on a bi‑annual basis and report to the Audit had already obtained and future dividends Committee on their ndings. and gains would be subject to income tax and capital gains tax Legislative VCTs were established in 1995 to encourage private A change in government policy regarding the The Company might not be able to The Board and the Investment Manager engage on a regular basis with HMT and industry individuals to invest in early stage companies that are funding of small companies or changes made maintain its asset base leading to its representative bodies to demonstrate the cost benet of VCTs to the economy in terms of considered to be risky and therefore have limited funding to VCT regulations to comply with EU State Aid gradual decline and potentially an inability employment generation and taxation revenue. In addition, the Board and the Investment options. In return the state provides these investors with tax rules could result in a cessation of the tax reliefs to maintain either its buy back or dividend Manager have considered the options available to the Company in the event of the loss of reliefs which fall under the denition of state aid. for VCT investors or changes to the reliefs that policies. tax reliefs to ensure that it can continue to provide a strong investment proposition for its | | | would make them less attractive to investors. | | shareholders despite the loss of tax reliefs. | | --- | --- | --- | --- | --- | | Investment | The Company invests in small, mainly UK based companies, | Investment in poor quality companies with | Reduction in both the capital value of | The Company has a diverse portfolio where the cost of any one investment is typically | | performance | both unquoted and quoted. Smaller companies often have | the resultant risk of a high level of failure in | investors' shareholdings and in the level of | less than 5 per cent of NAV thereby limiting the impact of any one failed investment. The | | | limited product lines, markets or nancial resources and | theportfolio. | income distributed. | Investment Management team has a strong and consistent track record over a long period. | may be dependent for their management on a smaller The Investment Manager undertakes extensive due diligence procedures on every new number of key individuals and hence tend to be riskier than investment and reviews the portfolio composition maintaining a wide spread of holdings in largerbusinesses. terms of nancing stage and industry sector. Economic, political Whilst the Company invests in predominantly UK businesses, Events such as scal policy changes, aftermath Reduction in the value of the Company’s The Company invests in a diversied portfolio of companies across a number of industry and other external the UK economy relies heavily on Europe as one of its of Brexit, economic recession, movement in assets with a corresponding impact on sectors, which provides protection against shocks as the impact on individual sectors can factors largest trading partners. This, together with the increase interest or currency rates, civil unrest, war or its share price may result in the loss of vary depending upon the circumstances. In addition, the Manager uses a limited amount of in globalisation, means that economic unrest and shocks political uncertainty or pandemics can adversely investors through buy backs and may limit bank gearing in its investments which enables its investments to continue trading through in other jurisdictions, as well as in the UK, can impact on affect the trading environment for underlying its ability to pay dividends. dicult economic conditions. The Board monitors and reviews the position of the Company, UK companies, particularly smaller ones that are more investments and impact on their results and ensuring that adequate cash balances exist to allow exibility. The Board reviews the vulnerable to changes in trading conditions. valuations. make up and progress of the portfolio each quarter to ensure that it remains appropriately diversied and funded. Regulatory and The Company is authorised as a self managed Alternative Failure of the Company to comply with any of The Company’s performance could be The Board and the Investment Manager employ the services of leading regulatory lawyers, compliance Investment Fund Manager (“AIFM”) under the Alternative its regulatory or legal obligations could result in impacted severely by nancial penalties and sponsors, auditors and other advisers to ensure the Company complies with all of its Investment Fund Managers Directive (“AIFMD”) and is also the suspension of its listing by the UKLA and/or a loss of reputation resulting in the alienation regulatory obligations. The Board has strong systems in place to ensure that the Company subject to the Prospectus and Transparency Directives. It nancial penalties and sanction by the regulator of shareholders, a signicant demand to complies with all of its regulatory responsibilities. The Investment Manager has a strong is required to comply with the Companies Act 2006 and the or a qualied audit report. buy back shares and an inability to attract compliance culture and employs dedicated compliance specialists within its team who UKLA Listing Rules. future investment. The suspension of its support the Board in ensuring that the Company is compliant. shares would result in the loss of its VCT taxation status and most likely the ultimate liquidation of the Company. Operational The Company relies on a number of third parties, in particular The risk of failure of the systems and controls Errors in shareholders’ records or The Board has appointed an Audit Committee who reviews the internal control (“ISAE3402”) the Investment Manager, to provide it with the necessary of any of the Company’s advisers including a shareholdings, incorrect marketing and/or internal audit reports from all signicant third party service providers, including services such as registrar, sponsor, custodian, receiving cyber attack leading to an inability to service literature, non compliance with listing the Investment Manager, on a bi‑annual basis to ensure that they have strong systems and agent, lawyers and tax advisers. shareholder needs adequately, to provide rules, loss of assets, breach of legal duties controls in place including Business Continuity Plans and matters relating to cyber security. accurate reporting and accounting and to ensure and inability to provide accurate reporting The Board regularly reviews the performance of its service providers to ensure that they adherence to all VCT legislation rules. and accounting all leading to reputational continue to have the necessary expertise and resources to provide a high class service and risk and the potential for litigation. A cyber always where there has been any changes in key personnel or ownership. attack or data breach could lead to loss of The operational requirements of the Company, including from its service providers, have been sensitive shareholder data resulting in a subject to rigorous testing (including remote working and virtual meetings) as to their application breach and liability under GDPR. since the COVID‑19 pandemic, where increased use of out of oce 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 - Principal risks and uncertainties The Board has carried out a robust assessment of the principal and emerging risks and uncertainties facing the Company The Company is facing the key emerging risks of climate change and ESG, given the regulatory, operational and and has assessed the appropriate measures to be taken in order to mitigate these risks as far as practicable. There is an potentially reputational implications if not appropriately addressed. In order to address these emerging risks, when ongoing process for identifying, evaluating and managing these risks which is part of the governance framework detailed looking to make a new investment, the Manager uses an ESG Decision Tool to identify any material ESG risks that need to further in the Corporate Governance section of this report. be managed and mitigated. For further detail, see pages24 to 31. Principal risk Context Specic risks we face Possible impact Mitigation Loss of approval The Company must comply with section 274 of the Income Breach of any of the rules enabling the Company The loss of VCT status would result in The Board maintains a safety margin on all VCT tests to ensure that breaches are unlikely asa Venture Tax Act 2007 which enables its investors to take advantage of to hold VCT status could result in the loss of shareholders who have not held their to be caused by unforeseen events or shocks. The Investment Manager monitors all of the CapitalTrust tax relief on their investment and on future returns. thatstatus. shares for the designated holding period VCT tests on an ongoing basis and the Board reviews the status of these tests on a quarterly having to repay the income tax relief they basis. Specialist advisors review the tests on a bi‑annual basis and report to the Audit had already obtained and future dividends Committee on their ndings. and gains would be subject to income tax and capital gains tax Legislative VCTs were established in 1995 to encourage private A change in government policy regarding the The Company might not be able to The Board and the Investment Manager engage on a regular basis with HMT and industry individuals to invest in early stage companies that are funding of small companies or changes made maintain its asset base leading to its representative bodies to demonstrate the cost benet of VCTs to the economy in terms of considered to be risky and therefore have limited funding to VCT regulations to comply with EU State Aid gradual decline and potentially an inability employment generation and taxation revenue. In addition, the Board and the Investment options. In return the state provides these investors with tax rules could result in a cessation of the tax reliefs to maintain either its buy back or dividend Manager have considered the options available to the Company in the event of the loss of reliefs which fall under the denition of state aid. for VCT investors or changes to the reliefs that policies. tax reliefs to ensure that it can continue to provide a strong investment proposition for its | | | would make them less attractive to investors. | | shareholders despite the loss of tax reliefs. | | --- | --- | --- | --- | --- | | Investment | The Company invests in small, mainly UK based companies, | Investment in poor quality companies with | Reduction in both the capital value of | The Company has a diverse portfolio where the cost of any one investment is typically | | performance | both unquoted and quoted. Smaller companies often have | the resultant risk of a high level of failure in | investors' shareholdings and in the level of | less than 5 per cent of NAV thereby limiting the impact of any one failed investment. The | | | limited product lines, markets or nancial resources and | theportfolio. | income distributed. | Investment Management team has a strong and consistent track record over a long period. | may be dependent for their management on a smaller The Investment Manager undertakes extensive due diligence procedures on every new number of key individuals and hence tend to be riskier than investment and reviews the portfolio composition maintaining a wide spread of holdings in largerbusinesses. terms of nancing stage and industry sector. Economic, political Whilst the Company invests in predominantly UK businesses, Events such as scal policy changes, aftermath Reduction in the value of the Company’s The Company invests in a diversied portfolio of companies across a number of industry and other external the UK economy relies heavily on Europe as one of its of Brexit, economic recession, movement in assets with a corresponding impact on sectors, which provides protection against shocks as the impact on individual sectors can factors largest trading partners. This, together with the increase interest or currency rates, civil unrest, war or its share price may result in the loss of vary depending upon the circumstances. In addition, the Manager uses a limited amount of in globalisation, means that economic unrest and shocks political uncertainty or pandemics can adversely investors through buy backs and may limit bank gearing in its investments which enables its investments to continue trading through in other jurisdictions, as well as in the UK, can impact on affect the trading environment for underlying its ability to pay dividends. dicult economic conditions. The Board monitors and reviews the position of the Company, UK companies, particularly smaller ones that are more investments and impact on their results and ensuring that adequate cash balances exist to allow exibility. The Board reviews the vulnerable to changes in trading conditions. valuations. make up and progress of the portfolio each quarter to ensure that it remains appropriately diversied and funded. Regulatory and The Company is authorised as a self managed Alternative Failure of the Company to comply with any of The Company’s performance could be The Board and the Investment Manager employ the services of leading regulatory lawyers, compliance Investment Fund Manager (“AIFM”) under the Alternative its regulatory or legal obligations could result in impacted severely by nancial penalties and sponsors, auditors and other advisers to ensure the Company complies with all of its Investment Fund Managers Directive (“AIFMD”) and is also the suspension of its listing by the UKLA and/or a loss of reputation resulting in the alienation regulatory obligations. The Board has strong systems in place to ensure that the Company subject to the Prospectus and Transparency Directives. It nancial penalties and sanction by the regulator of shareholders, a signicant demand to complies with all of its regulatory responsibilities. The Investment Manager has a strong is required to comply with the Companies Act 2006 and the or a qualied audit report. buy back shares and an inability to attract compliance culture and employs dedicated compliance specialists within its team who UKLA Listing Rules. future investment. The suspension of its support the Board in ensuring that the Company is compliant. shares would result in the loss of its VCT taxation status and most likely the ultimate liquidation of the Company. Operational The Company relies on a number of third parties, in particular The risk of failure of the systems and controls Errors in shareholders’ records or The Board has appointed an Audit Committee who reviews the internal control (“ISAE3402”) the Investment Manager, to provide it with the necessary of any of the Company’s advisers including a shareholdings, incorrect marketing and/or internal audit reports from all signicant third party service providers, including services such as registrar, sponsor, custodian, receiving cyber attack leading to an inability to service literature, non compliance with listing the Investment Manager, on a bi‑annual basis to ensure that they have strong systems and agent, lawyers and tax advisers. shareholder needs adequately, to provide rules, loss of assets, breach of legal duties controls in place including Business Continuity Plans and matters relating to cyber security. accurate reporting and accounting and to ensure and inability to provide accurate reporting The Board regularly reviews the performance of its service providers to ensure that they adherence to all VCT legislation rules. and accounting all leading to reputational continue to have the necessary expertise and resources to provide a high class service and risk and the potential for litigation. A cyber always where there has been any changes in key personnel or ownership. attack or data breach could lead to loss of The operational requirements of the Company, including from its service providers, have been sensitive shareholder data resulting in a subject to rigorous testing (including remote working and virtual meetings) as to their application breach and liability under GDPR. since the COVID‑19 pandemic, where increased use of out of oce working and online communication has been required. To date the operational arrangements have proven robust. Annual Report and Audited Financial Statements 2023 23 01 Strategic report ## Sustainable investment ### The Company is required, under the Companies Environmental, Social and Governance ### Act 2006, to provide details of environmental ### (ESG) update from the Manager ### (including the impact of the Company’s The Manager is committed to sustainable investment ### business on the environment), employee, as an integral part of its business strategy. During 2023, ### human rights, social and community issues; the Manager has taken further steps in advancing its approach to sustainability to ensure environmental, ### including information about any policies it has in social and governance (“ESG”) factors and stewardship ### relation to these matters and the effectiveness responsibilities are built into asset management across all ### of these policies. Since the Company does not funds and strategies, including venture capital trusts. ### have any employees and it has no direct impact The Manager’s sustainable investment policies and ### on the community or the environment due to its beliefs can be found on its website and in its Sustainable Investment Report. ### status as a VCT, the Company does not maintain ### specic 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 Investing Manager believe that sustainable investment involves the ## to support a integration of ESG factors within the investment process and that these factors should be considered alongside ## changing world nancial and strategic issues. The Company therefore complies with current reporting and other ESG standards for investment companies, through its monitoring of the Sustainable Investment Report | April 2023 ESG impact of its investee companies. The Company will continue to evolve its processes and reporting as The Manager incorporates ESG considerations throughout ESG requirements change. More broadly, the Company the investment lifecycle including the valuation complies with the AIC Code of Corporate Governance. process and this is communicated with the Board on a The FCA reporting requirements consistent with the Task quarterly basis. Force on Climate‑related Financial Disclosures (“TCFD”), The Manager believes in playing an industry leadership role which commenced on 1 January 2021 do not currently in supporting and promoting sustainable investment. It is apply to the Company but are kept under review, the a signatory to the UN‑supported Principles of Responsible Board being mindful of any recommended changes. The Investment and was awarded four or ve stars, out of a Board is aware of the FCA's new Sustainability Disclosure maximum of ve stars, for all modules submitted in its PRI Requirements (“SDR”) and investment labels (together Report 2021. It is also a signatory of the UK Stewardship the “rules”) to be phased‑in across the next 3 years. As Code; in August 2023, it was announced that Gresham the Company is classied as a Collective Investment House had met the expected standard of reporting for Undertaking, the scope of the rules capture such UK‑ 2022 and will remain a signatory to the Code. domiciled unauthorised funds, however given that the shares in the Company (the “product”) do not have a sustainable investment objective, the rules only apply Sustainability governance structure on a very limited basis (through the Manager) in relation to the Company. 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 - Sustainable investment ### Gresham House Sustainability Governance Structure Board Oversees our business strategy and management, including sustainability matters. Group Management Committee Sustainability Committee The delivery of the business strategy has been delegated to the Group Oversees and reviews the Corporate Management Committee who regularly review performance against Sustainability Strategy, including our strategic targets, including our approach and implementation of sustainable investment. sustainable investment practices. Remuneration Committee Oversees our business strategy Conicts Committee Sustainability and management, including Executive Committee sustainability matters. Consider conicts arising in relation (Sustainability ExCo) to investment activities for clients Audit Committee and the exercise of voting rights. Drives sustainability‑related deliverables to ensure the Responsible for identication and business, its staff and the Risk Committee monitoring of business risks, including investments made demonstrate ESG and climate change. ESG risks are included in our risk best practice and leadership. Also register and divisions are required owns delivery and oversight of the to report on ESG‑related risks to Corporate Sustainability Strategy. this Committee each quarter. 25Annual Report and Audited Financial Statements 2023 01 Strategic report - Sustainable investment Embedding ESG analysis The Tool will not tell the Manager whether to invest or not, instead it aims to provide a rational and replicable A framework based on ten key ESG themes is used to assessment of key ESG risks which should be considered structure analysis, monitor and report on ESG risks and prior to investment, and to help rank the signicance of opportunities across the lifecycle of investments. each risk. It is up to the Manager to decide whether it is suciently comfortable with these risks to proceed with The ten themes are the basis of the ESG Decision Tool an investment. 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. ### Sustainable Investment Framework Natural capital Climate change Waste management ### and pollution Environmental Commitment Marketplace to sustainability responsibility Supply chain ### SocialGovernance sustainability Risk and compliance Employment, health, safety and wellbeing Governance and ethics Community care and engagement The Manager believes the “G” (Governance) of ESG is the The “E” and “S” (Environmental and Social) are assessed as most important factor in its investment processes for risk factors during due diligence to eliminate companies public and private equity. Board composition, governance, that face environmental and social risks that cannot be control, company culture, alignment of interests, mitigated through engagement and governance changes. shareholder ownership structure, remuneration policy etc. are important elements that will feed into the Manager’s analysis and the company valuation. 26 Annual Report and Audited Financial Statements 2023 01 Strategic report - Sustainable investment 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 benet considerations into the selection, evaluation, governance and engagement processes across the lifecycle of each investment.  Ensuring its team understands the imperative for effective ESG management and is equipped to carry this out through management support and training.  Conduct regular monitoring of ESG risks, opportunities and performance in its investments.  Incorporate ESG into its stewardship and monitoring processes. ESG considerations are integrated into the lifecycle of each investment as follows: 01 Initial appraisal 04 Holding period Identify material ESG matters requiring further A 100‑day post‑investment plan will be developed investigation during the due diligence stage. If to address shorter term risks uncovered in our due certain risks are unlikely to be suciently managed diligence stage. The Manager then uses its position or mitigated, then the Manager may choose not to as a board member and active investor to inuence proceed at this stage. management to proactively address longer term risks and opportunities. 02 Due diligence Where material ESG risks are identied, these are reviewed by the Manager and a decision on how to proceed The ESG Decision Tool and, where possible, meetings is documented. The Manager will then proactively follow with management are used to assess material ESG up with the investee company management team and risks that need to be mitigated and ESG opportunities ensure appropriate corrective and preventative action is that could drive value. Specialised consultants may be taken and any material issues or incidents are recorded Private Equity used to provide additional information. Sustainable Investment Policy by the Manager. 03 Investment appraisal Meeting our Sustainable Investment  During our stewardship and monitoring phase, our periodic engagement with the management teams of our commitments within our Private investments includes discussion of ESG performance Equity strategy and progress with the aim of identifying key concerns and/or oppor tunities for value enhancement and Gresham House has a clear commitment to sustainable A summary of the ESG analysis is included in every to give us a clearer view of ESG management investment as an integral part of its business mission. within our por tfolio. The purpose of this document is to set out the manner in which the commitments we have made at a group level to Investment Committee submission. Appropriate  We drive rigour and consistency by applying our integrate ESG considerations throughout our business will be Sustainable Investment Framework and system, including implemented within our Private Equity investment strategy. clearly dened processes and expert tools and methods.  We take steps to consult and understand the views, risk mitigation approaches will be referenced and – Our ESG integration processes are structured around concerns and ambitions of our stakeholders in seeking our sustainable investment framework (see page 3). sustainable outcomes from the investments we – Materiality and stakeholder assessment are core to both are involved in. assurance that the business is open to making our investment selection process and ESG stewardship and we have adopted tools and methods, such as an ESG – We actively monitor our clients’ interests in Decision Tool, to assist us in focusing on what matters making investments that take appropriate heed of improvements is sought. most in any investment and the externalities and other sustainability factors. factors that may change over time. – 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 benet considerations into our selection, evaluation, governance and engagement processes across the lifecycle of each investment.  Our investment selection process goes through two stages of proling 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 suciently managed or mitigated, given what we know about the company and its management team, or where the business or its sector presents signicant 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 Annual Report and Audited Financial Statements 2023 27 the future. This includes the identication of ESG issues to engage on during the investment period to enhance value, or particular areas of risk to be closely monitored. 01 Strategic report - Sustainable investment ## Case Study: investment into climate impact data business Connect Earth ![img-1.jpeg](img-1.jpeg) In March 2023 Gresham House Ventures invested into climate impact data business Connect Earth. Connect Earth is an Application Programming Interface-first environmental data company that works with banks and fintech firms 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 financial 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 influence those factors. The Manager surveys its investee businesses for the following reasons: - It helps to identify an understanding of how portfolio companies think about ESG, and which ESG data is already being reported on and monitored. It provides a simple way for the Manager to communicate with companies as to how they compare against their peer group. - Repeating the survey annually allows companies to demonstrate progression against material ESG issues and forms the basis of meaningful ESG engagements between Gresham House Ventures and its unquoted portfolio companies. - The survey demonstrates the Manager's commitment to being responsible active owners and to use that position of ownership to influence the behaviour of investee companies for the better. Highlights from the survey include: - The overall ESG score for the unquoted portfolio increased from 40 per cent in 2021 to 47 per 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 ![img-2.jpeg](img-2.jpeg) 28 Annual Report and Audited Financial Statements 2023 01 Strategic report - Sustainable investment ESG Webinar Series Outline of 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 Education their knowledge of material ESG issues. The webinar series aims to provide a toolkit for investee Materiality businesses to better integrate ESG and sustainability into their businesses, and covers: Governance  Education & materiality  Governance Strategy  Strategy  Risk management 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: Metrics ESGwebinar series – Gresham House Ventures. and Targets  Scope 3 emissions are indirect emissions associated ### Climate-related Financial Disclosures with its upstream and downstream value chain. In 2022 the Manager continued to measure its nanced At portfolio level, carbon emissions are aggregated emissions, i.e., the greenhouse gas emissions associated to represent the Company’s share of emissions with its investments. This exercise included a calculation proportional to the size of its exposure to each investee by an external carbon consultant of the carbon emissions company total value. 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 1 companies, as per PCAF guidance . Greenhouse gas emissions associated with the Company’s holdings are measured in carbon dioxide equivalent (CO e). 2 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. 1. PCAF: The Global GHG Accounting & Reporting Standard for the Financial Industry (Nov,2020). Annual Report and Audited Financial Statements 2023 29 01 Strategic report - Sustainable investment | | | | | | | FTSE | | S&P Europe | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | BVT | BVT | All Share | | | Small Cap | | | | | 1 | | | | | 5 | | 6 | | 2022 Portfolio-level Data | | | (2022) | (2021) | (Aug 2023) | | | (Sep 2023) | | | Scope 1+2 tCO | 2 e 1,668 5,061 – – | | | | | | | | | | Scope 3 tCO | 2 e 3,118 2,577 – – | | | | | | | | | 2 Weighted average carbon intensity (tCO 2 e/£m revenue) 44.2 94.9 115 206 3 Carbon Emissions per £m Invested (tCO 2 e/£m invested) 15.7 38.2 130 209 4 PCAF Score (Scope 1+2) 3.8 3.8 – – 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 e/£m revenue. 2 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 e/£m invested. 2 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 36per The Manager has published its Engagement and Voting cent versus 2021. Total scope 1 and 2 emissions for the Policy on its website, which sets out its approach and Baronsmead portfolio fell by 66per cent, driven in part by explains how integrated these activities are to its business the sale of our stake in Carousel Logistics in January 2022 practices and investment processes. (2021: 6,353 tCO e). Scope 3 emissions increased by 20per 2 cent; the biggest contributors to the scope 3 emissions gure were Anpario and Netcall which accounted for Engagement 21per cent of Baronsmead’s scope 3 emissions. Given the The Manager’s investment philosophy means that it is an relatively concentrated nature of the portfolio, volatility in actively engaged shareholder. The Manager’s assessments carbon emissions gures is expected. of management, board and governance form a critical The Management Team will monitor carbon emissions part of the investment case, which necessitates that it associated with its investments over time and may use works with companies on strategy, M&A, remuneration this data to drive ESG‑focused engagement activities. and related matters, from the outset of the holding period Currently, the Company has no requirements or targets onwards. The Manager encourages an open and honest relating to carbon emissions of its portfolio or investee dialogue with the companies as this is an essential part of companies. However, Gresham House has a GH25 effective stewardship. strategic objective to make a commitment to achieving The Manager will meet face‑to‑face with the management net zero emissions in its operations and its investments team of a publicly listed company at least twice a year, and intends to provide an update on this in due course. and more frequently when it owns a material stake of a More information on Gresham House’s approach to company. The Manager will generally work more closely climate‑related risks and opportunities can be found in with the management teams of private equity investments its Taskforce on Climate‑Related Financial Disclosures and meet on a more frequent basis. These meetings (TCFD) Report here. form the basis for the ongoing monitoring of a company’s strategy, nancial performance and ESG considerations. ### Stewardship Responsibilities Dening engagement objectives As an active investor, the Manager acts as a long‑term steward of the assets in which it invests. Active ownership The Manager will usually identify and agree strategic responsibilities include engagement and voting, which milestones that it expects a company to deliver on over the are used to protect and create value. The Manager will holding period. The Manager will typically identify three almost always take a board seat or become a board or four key strategic milestones that are bespoke to the observer for its unquoted investments, which ensures organisation and its business development, aiming to keep suciently frequent levels of communication with the the directors focused and ensure continued progress. management team. 30 Annual Report and Audited Financial Statements 2023 01 Strategic report - Sustainable investment Objectives may change over time depending on several 3 Authorise company to purchase own shares – policy to factors, including business priorities, market forces and vote against anything over 10 per cent. stakeholder considerations. Example of engagement 4 Political donations – policy to vote against all objectives include: political donations.  Board composition  Improvements to governance arrangements Proxy voting providers  Improvements identied by the annual ESG survey (e.g. carbon emissions measurement and management, The Manager does not use any proxy voting advisory sustainable product sourcing, human capital policies) services, but will usually use proxy voting services to deliver voting decisions to the companies it invests in.  Product or geographic expansion or variance, including those due to ESG related market forces  Staff retention and reduction of absence rates Voting against management  Implementing compliance programmes with If the Manager plans to vote against the company decision, forthcoming ESG legislation it will engage with the company in advance, explain the  Improvements to reporting, including ESG factors reasons for voting against management and look for ways to avoid that if possible. If a satisfactory outcome is not The identied objectives provide a framework which forms reached through this active dialogue with the company, the basis of the Manager’s discussions with companies the Manager will typically tell the company in advance of during regularly scheduled engagements. its intention to abstain or vote against management and clarify the reasons grounding such intention. 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 96.0per cent of resolutions, against on 2.5per cent and abstained on 1.5per cent. Of the 39 votes against, the majority were because the resolutions conicted with the Manager’s house policy, notably to vote against political donations. Voting decisions The Manager does not have a set policy dening how voting decisions should be made on specic 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. Annual Report and Audited Financial Statements 2023 31 01 Strategic report ## Other matters Risk is spread by investing in a number of different ### Applying the business model businesses within different qualifying industry sectors This section of the Strategic Report sets out the practical using a mixture of securities. The maximum the Company steps that the Board has taken in order to apply the will invest in a single company (including a collective business model, achieve the investment objective, and investment vehicle) is 15 per cent of the value of its adhere to the investment policy. The investment policy, investments calculated in accordance with Section 278 of which is set out in full on page99, is designed to ensure the Income Tax Act 2007 (as amended) (“VCT Value”). The that the Company continues to qualify, and is approved, as value of an individual investment is expected to increase a VCT by HM Revenue and Customs. 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, ### Investing in the right companies but not limited to, ordinary and preference shares, loan stocks, convertible securities and permitted non qualifying Investments are primarily made in companies which are investments as well as cash. Unquoted investments are substantially based in the UK, although many of these usually structured as a combination of ordinary shares investees may have some trade overseas. Investments are and loan stocks or preference shares, while AIM‑traded selected in the expectation that the application of private investments are primarily held in ordinary shares. equity disciplines, including an active management style Pending investment in VCT qualifying investments, the for unquoted companies, will enhance value and enable Company’s cash and liquid funds are held in permitted non‑ prots to be realised from planned exits. qualifying investments. The Board has delegated the management of the investment portfolio to Gresham House. The Manager has adopted a ‘top‑down, macro economic and sector‑ ### VCT status driven’ approach to identifying and evaluating potential investment opportunities, by assessing a forward view of Compliance with the required VCT rules and regulations rstly the broader business environment, then the sector is considered when all investment decisions are made. and nally the specic potential investment opportunity. Internally, this is monitored on a continuous basis and it is also reviewed by PricewaterhouseCooper LLP (“PwC”) Based on its research, the Manager has selected a number every six months to ensure ongoing compliance. PwC have of sectors that it believes will offer attractive growth been appointed by the Company to advise on compliance prospects and investment opportunities. Diversication is with VCT requirements, including evaluation of investment also achieved by spreading investments across different opportunities as well as appropriate and regular review asset classes and making investments for a variety of of the portfolio. Although PwC works closely with the different periods. Manager, it reports directly to the Board. The Company’s policy is not to invest in any of the following The principal tests are summarised overleaf. Throughout areas: human cloning; arms/munitions; or adult content. the year ended 30September 2023, and at the date of this report, the Company continued to meet these tests. The Manager’s Review on pages9 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. 32 Annual Report and Audited Financial Statements 2023 01 Strategic report - Other matters Continuing appointment of the Manager ### VCT status tests The Board keeps the performance of the Manager under 1 To ensure that the VCT’s income in the period has continual review. The Management Engagement and been derived wholly or mainly (70 per cent plus) from Remuneration Committee, comprising all Directors, shares or securities; conducts an annual review of the Manager’s performance 2 To ensure that the VCT has not retained more than and makes a recommendation to the Board about its 15per cent of its income from shares and securities; continuing appointment. 3 To ensure that the VCT has not made a prohibited It is considered that the Manager has executed the payment to shareholders derived from an issue of Company’s investment strategy according to the Board’s shares since 6April 2014; expectations. Accordingly, the Directors believe that 4 To ensure that at least 80 per cent by value of the the continuing appointment of Gresham House Asset VCT’s investments has been represented throughout Management Limited as the Manager of the Company, on the period by shares or securities comprised in the terms agreed, is in the best interests of the Company qualifying holdings of the VCT; and its shareholders as a whole. 5 To ensure that at least 70 per cent by value of the VCT’s qualifying holdings has been represented The management agreement throughout the period by holdings of eligible shares; 6 To ensure that no investment in any company has Under the management agreement, the Manager receives represented more than 15 per cent by value of the a fee of 2.0 per cent per annum of the net assets of the VCT’s investments at the time of investment; Company. In addition, the Manager is responsible for providing all secretarial, administrative and accounting 7 To ensure that the VCT’s ordinary capital has services to the Company for an additional fee. The Manager throughout the period been listed on a regulated has appointed Link Alternative Fund Administrators Ltd European market; to provide these services to the Company on its behalf. 8 To ensure that the VCT has not made an investment in The Company is responsible for paying the fee charged by a company which causes it to receive more than the Link Alternative Fund Administrators Ltd to the Manager in permitted investment from State Aid sources; relation to the performance of these services. 9 To ensure that since 17November 2015, the VCT has Annual running costs are capped at 3.5 per cent of the net not made an investment in a company which exceeds assets of the Company (excluding any performance fee the maximum permitted age requirement; payable to the Manager and irrecoverable VAT), any excess 10 To ensure that since 17November 2015, funds being refunded by the Manager by way of an adjustment to invested by the VCT in another company have not its management fee. The running cost as at 30September been used to make a prohibited acquisition; and 2023 was 2.1 per cent. 11 To ensure that since 6April 2016, the VCT has not The management agreement may be terminated at made a prohibited non‑qualifying investment. 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. ### Appointment of the Manager The Board expects the Manager to deliver a performance Performance fees which meets the objective of achieving positive long‑ A performance fee will be payable to the Manager once term investment returns, including tax free dividends. the total return on shareholders’ funds exceeds an annual A review of the Company’s performance during the threshold of the higher of 4 per cent or base rate plus 2 nancial year, the position of the Company at the year per cent calculated on a compound basis. To the extent end and the outlook for the coming year is contained that the total return exceeds the threshold over the within the Chair’s Statement on pages5 to 8. The Board relevant period then a performance fee of 10 per cent assesses the performance of the Manager in meeting of the excess will be paid to the Manager. The amount the Company’s objective against the KPIs highlighted on of any performance fee which is paid in an accounting page3 of the report. period shall be capped at 5 per cent of shareholders’ funds for that period. Nil performance fee is payable for the year to 30 September 2023 (2022: £nil). Annual Report and Audited Financial Statements 2023 33 01 Strategic report – Other matters ## 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 financial 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 profits accrue to the VCT incentive scheme. Prior to January 2017, executives participating in the VCT incentive scheme subscribed jointly for a proportion (12 per cent) of the ordinary shares (but not the prior ranking financial instruments) available to the Baronsmead VCTs in each eligible unquoted investment. With effect from January 2017, an additional limb was added to the VCT incentive scheme to accommodate the increasing number of "permanent equity" investments being made by the Baronsmead VCTs. "Permanent equity" investments are those in which the Baronsmead VCTs hold a relatively lower proportion of prior ranking instruments (if any at all) and a higher proportion of permanent equity or ordinary shares. This means that there are fewer prior ranking instruments yielding a priority return for the Baronsmead VCTs before any gain accrues to the ordinary shares, hence this additional limb to create a hurdle described below. The cut off to define a "permanent equity" investment is one where permanent equity is greater 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 sufficient number of prior ranking financial instruments (a "Traditional Structure"), the terms are identical to those set out above. However, in circumstances where the Baronsmead VCTs make a "permanent equity" investment, the executives participating in the incentive scheme are required to co-invest pari passu alongside the Baronsmead VCTs for a proportion (currently 0.75 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 Venture Trust, the average money multiple on these 51 realisations was 1.8x times cost. Had the VCT incentive scheme shares been held instead by the Baronsmead VCTs, the extra return to shareholders would have been the equivalent of 3.0p a share over 19 years (based on the current number of shares in issue). The Board considers this small cost to retain quality people to be in the best interests of shareholders. ## Advisory and Directors' fees During the year, Gresham House Asset Management Ltd received £185,000 (2022: £283,000) advisory fees, £369,000 (2022: £462,000) directors' fees for services provided to companies in the investment portfolio and incurred abort costs of £5,000 (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 AIFM under the AIFMD. 34 Annual Report and Audited Financial Statements 2023 01 Strategic report - Other matters Viability statement The Board has considered the ability of the Company to raise nance and deploy capital. The Board’s assessment In accordance with principle 21 of the Association of took account of the availability and likely effectiveness Investment Companies Code of Corporate Governance of the mitigating actions that could be taken to avoid or (“AIC Code”), the Directors have assessed the prospects reduce the impact of the underlying risks, and the large of the Company over the three‑year period to listed portfolio that could be liquidated if necessary. 30September 2026. The Company’s portfolio currently includes a large position This period is used by the Board during the strategic in cash or liquid money market funds. Over the last ve planning process and is considered reasonable for years, cash and liquid money market funds have averaged a business of our nature and size. The three‑year c.19 per cent of the NAV and comprised 11 per cent of the period is considered the most appropriate given the 30September 2023 NAV. Cash balances can uctuate over forecasts that the Board require from the Manager time due to changes in market conditions, but positive and the estimated timeline for nding, assessing and cash levels are expected to be maintained over the period. completing investments. The Company has no debt, and it is expected that the In making this three‑year assessment, the Board has taken Company will remain ungeared for the foreseeable future. the following factors into consideration: The Board has also considered the Company’s income  The nature of the Company’s portfolio and expenditure projections and nd these to be realistic  The Company’s investment strategy and sensible. The Board has assessed the Company’s ability to cover its annual running costs under several  The potential impact of the principal risks liquidity scenarios in which the value of liquid assets and uncertainties (including AIM‑traded investments and OEICs) has been  Share buy‑backs subject to sensitivity analysis. The Directors noted that  The liquidity of the Company’s portfolio under none of these scenarios was the Company unable to cover its costs.  Market falls and gains  Maintaining VCT approval status Based on the Company’s processes for monitoring costs, share price discount, the Manager’s compliance with the The Board has carried out a robust assessment of the investment objective, policies and business model, asset above factors, as they have the potential to threaten the allocation and the portfolio risk prole, the Directors have Company’s business model, future performance, solvency, concluded that there is a reasonable expectation that the or liquidity. This review has considered the principal risks Company will be able to continue in operation and meet as outlined on pages22 and 23. its liabilities as they fall due over the three‑year period to 30September 2026. The Board has also evaluated the ability of third party suppliers to continue to deliver services to the Company. Annual Report and Audited Financial Statements 2023 35 01 Strategic report - Other matters  Dividend Reinvestment Plan | The Company offers a ### Returns to investors Dividend Reinvestment Plan which enables shareholders to purchase additional shares through the market in lieu of cash dividends. Approximately 2,469,000 shares were Dividend policy bought in this way during the year to 30September 2023. The Board will decide the annual dividends each year  Buy back of shares | From time to time, the Company and the level of the dividends will depend on investment buys its own shares through the market in accordance performance, the level of realised returns and available with its share price discount policy. Subject to the liquidity. The dividend policy guidelines below are not likely impact on shareholders as a whole, the funding binding and the Board retains the ability to pay higher requirements of the Company and market conditions or lower dividends relevant to prevailing circumstances at the time, the Company seeks to maintain a mid and actual realisations. However, the Board conrms the share price discount of approximately 5 per cent to following two guidelines that shape its dividend policy: net asset value where possible. However shareholders  The Board will, wherever possible, seek to pay two should note this discount may widen during periods of dividends to shareholders in each calendar year, typically market volatility. an interim in September and a nal dividend following  Secondary market | The Company’s shares are listed on the AGM in February/March; and the London Stock Exchange and can be bought using  The Board will use, as a guide, when setting the dividends a stockbroker or authorised share dealing service in for a nancial year, a sum representing 7 per cent of the the same way as shares of any other listed company. opening NAV of that nancial year. Approximately 1,971,000 shares were bought by investors in the Company’s existing shares in the year to 30September 2023. 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. 36 Annual Report and Audited Financial Statements 2023 01 Strategic report ## Directors’ duties The Audit Committee has responsibility for the ongoing ### Overview review of the Company’s risk management and internal Section 172 of the Companies Act 2006 (the “Act”) requires controls. To the extent that they are applicable, risks the Directors to act in good faith and in a way that is most related to the matters set out in Section 172 are included likely to promote the success of the Company for the within the Company’s Risk Register and are subject to benet of its shareholders. regular review and monitoring. Directors must consider the long‑term consequences of any decision they make. They must also consider the ### Decision making interests of the various stakeholders of the Company, the impact the Company has on the environment and The importance of stakeholder considerations, in the community, and operate in a manner which maintains their context of decision making, is taken into account at reputation for having high standards of business conduct every Board meeting. All discussions involve careful and fair treatment between shareholders. consideration of the longer‑term consequences of any decisions and their implications for stakeholders. Further Fullling this duty naturally supports the Company in its information on the role of the Board in safeguarding investment objective of achieving long‑term investment stakeholder interests and monitoring ongoing investment returns for private investors and helps ensure that all activity can be found on pages38 to 41. 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 ### Stakeholder engagement have individually and collectively discharged their duties under Section 172. Following a comprehensive review by the Board, which regularly keeps stakeholder engagement mechanisms To ensure they are aware of and understand their duties, under review, it was agreed that, as the Company is an Directors are provided with a detailed induction outlining externally managed Venture Capital Trust and does not their legal and regulatory duties as a Director of a UK public have any employees or customers, the Company’s key limited company upon appointment. They also receive stakeholders are: regular regulatory updates and training as appropriate. A  The Company’s shareholders Company Secretarial report is included within the papers of every Board meeting, which reminds the Directors of  The Manager their duties and emphasises the importance of stakeholder  The portfolio of investee companies, and the wider consideration during decision making. Directors also communities in which they operate receive technical updates from the Company’s advisers  HMRC and the Company’s governing bodies and from the Manager on a regular basis. including the FCA The Directors have access to the advice and services of  The AIC the Company Secretary, and a range of other reputable  A range of reputable external service providers 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. Annual Report and Audited Financial Statements 2023 37 01 Strategic report - Directors’ duties 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 The Board is committed to maintaining open channels of support is critical to communication with shareholders and during the year has the sustainability of the developed various meaningful ways of engaging with shareholders Company and delivery of to understand their views. These include: the long‑term strategy  Annual General Meeting (“AGM”) – The Company welcomes and of the business. encourages attendance and participation from shareholders at the AGM and values any feedback and questions it may receive. The Company held its AGM on 1 February 2023. Shareholders were invited to raise questions in advance of, during and after the AGM and the Company was delighted to answer those questions received. The Chair presented on the Company’s performance during the nancial year and its outlook for 2023 and a joint investment management presentation to shareholders of the Company and Baronsmead Second 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 watch the AGM live 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 page7 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 when requested. 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 oce. Susannah Nicklin, 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 The Board invites the Manager to attend Valuation Forums, Board performance is critical meetings and Committee meetings to update Directors on the for the Company to performance of the portfolio and execution of the investment successfully deliver its strategy. The Board holds detailed discussions with the Manager investment strategy on all key strategic and operational topics on an ongoing basis. In and meet its objective addition, the Chair regularly meets with the Manager to ensure a to achieve long‑term close dialogue is maintained. In line with the Company’s culture, investment returns for the Board recognises the importance of working together with the private investors, including Manager in such a way that: tax‑free dividends.  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 conicts of interest are avoided or managed effectively. The portfolio of The Company invests Day‑to‑day engagement with the portfolio of investee companies investee companies in growth businesses, is undertaken by the Manager, so a transparent and objective whether unquoted or relationship between the Board and the Manager is vital. For traded on AIM, which unquoted and larger AIM holdings, the Manager is an inuential are primarily based in and engaged shareholder (on behalf of the Company) and Manager the UK. Investments are representatives often join the boards of these companies. made selectively across At each scheduled Valuation Forum, the Board receives detailed a range of sectors to updates from the Manager covering the portfolio construction and meet the Company’s performance, progress and trading within the underlying portfolio investment objectives companies and valuation recommendations. The Board is also and in accordance with provided with investment pipeline reports, covering both new VCT legislation. deals and potential follow‑on investments at Board meetings. External To function as a VCT with The Board maintains regular contact with its external providers service providers a premium listing on the and receives reports from them at Board and Committee London Stock Exchange, meetings, as well as outside of the regular meeting cycle. the Company relies on a Their advice, as well as their needs and views are routinely diverse range of highly considered. During the period, the Management Engagement and regarded advisors for Remuneration Committee formally assessed the external service support in meeting all providers’ performance, fees and continuing appointment to relevant obligations. ensure that they continue to function at an acceptable level and are appropriately remunerated to deliver the expected level of service. The Audit Committee reviews and evaluates the control environments in place at each service provider as appropriate. Annual Report and Audited Financial Statements 2023 39 01 Strategic report - Directors’ duties Stakeholder Group Importance Board Engagement HMRC and The Company must comply The Board regularly considers how it meets regulatory and governing bodies with HMRC VCT rules and statutory obligations and follows voluntary and best‑practice must comply or explain its guidance, including how any governance decisions it makes adherence to the AIC Code. impacts the Company’s stakeholders, both in the shorter and HMRC and the AIC have a in the longer‑term. In particular, the Audit Committee receives legitimate interest in how conrmation from its VCT status adviser regarding compliance the Company operates with HMRC’s VCT rules and at every board meeting the Board in the market and treats is presented with a Company Secretarial Report outlining the its shareholders. 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 fullled 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 Establishing and During the reporting period, the Board considered the Company’s Company’s culture, maintaining a healthy culture, purpose and values. purpose and values corporate culture The Company seeks to invest in innovative, high growth quoted within the Company and unquoted companies, providing capital and expertise at a will aid delivery of its critical stage of their development. The Company believes that long‑term strategy. 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 in supporting our 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 beneting from long‑term structural growth trends, whilst recognising the risk management benets of diversication in portfolio construction. The Company has several policies in place to maintain a culture of good governance including those relating to Directors’ conicts 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 The Board recognises The Board has continued its focus on responsible business on the Manager’s that sound ESG policies, practices and the impact of ESG matters. The Board notes ESG impact when embedded with that the Manager has added to resources in this area and has appropriate governance signicantly developed its ESG policy, its ESG investment tool and and responsible processes. The Board has received a detailed presentation from business practices, help the Manager’s sustainable investment director on its responsible generate long‑term business practices and the methods used to evaluate ESG risks as nancial performance part of its investment processes. and contribute to the The Board acknowledges and supports the increased focus by wider community. 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 Effective succession The Board has approved and adopted a Tenure and Reappointment planning planning, leading to Policy, noting that the Board will seek to recruit a new Director on the refreshment of the average every 3‑4 years so as to regularly bring the challenge of Board and its diversity fresh thinking into the Board’s discussions. is necessary for the Since the year‑end, the Board approved the appointment of long‑term success Ms Dolan as a Director of the Company and Chair of the Audit of the Company. Committee following notication of Mr Gabb's intention to retire from the Board. Further details can be found on page 60. Approval of Providing shareholders In deciding to launch a fundraising during the reporting period, the fundraising and potential new Board considered: investors the opportunity  the ability to adhere to the Company’s dividend policy; to subscribe for shares in  the effect on the NAV and the ability of the Company to be able BVT, which in turn provides to meet HMRC’s VCT investment rules and timelines; opportunities for Company growth and increased  the new investment pipeline; investor engagement.  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 Fiona Miller Smith Chair 21December 2023 Annual Report and Audited Financial Statements 2023 41 ## Directors’ ## report ## The Corporate Governance statement on pages 48 ## to 54 forms part of the Directors’ report. ## 02 02 Directors' report ## Board of Directors ![img-3.jpeg](img-3.jpeg) ### Fiona Miller Smith Chair Appointed: 1 September 2021 Fiona is the CEO of Barts Charity a health foundation with a £550 million financial investment and commercial property portfolio. Barts Charity funds transformational medical research and innovation in healthcare delivery and technology. Over the last five years, Barts has also allocated 25 per cent of its portfolio to private equity and venture funds including early stage venture and life sciences funds. Fiona brings to Baronsmead a wealth of experience, spanning over 25 years, in investing in and leading growth companies. Her early career was in finance and private equity at Goldman Sachs and Murray Johnson Private Equity, and she then had a successful entrepreneurial career prior to joining Barts Charity in 2016 including five years at Social Finance UK, a leading impact investing and advisory firm. Fiona is Trustee of John Lyons, Chair of Lifting Limits and sits on the Barts Life Sciences Advisory Board. Fiona has an MBA from INSEAD. **Beneficial Shareholding:** 8,094 ordinary shares ![img-4.jpeg](img-4.jpeg) ### Les Gabb Non-Executive Director and Audit Committee Chair Appointed: 8 February 2016 Les served as a Director of Baronsmead VCT plc from May 2014 until the merger on 8 February 2016. For ten years from 1990 Les was the Managing Director of the London subsidiary of the Bank of Bermuda with responsibility for the finance function of the Bank's European group. From 2015 to 2022 Les was Finance Partner at Felix Capital Partners, a venture capital manager specialising in digital technology, and previously from 2000 held a similar role at Advent Venture Partners. Les is an ACA and an Associate of the Institute of Taxation, and a previous member of the BVCA Legal and Technical committee and the EVCA Venture Capital Council. **Beneficial Shareholding:** 167,509 ordinary shares ![img-5.jpeg](img-5.jpeg) ### Susannah Nicklin Senior Independent Director and Nomination Committee Chair Appointed: 21 February 2018 Susannah is an experienced non-executive director and financial services professional with 25 years of experience in executive roles in investment banking, equity research and wealth management at Goldman Sachs and Alliance Bernstein in the US, Australia and the UK. She is Independent Chair of Schroder BSC Social Impact Trust plc and a Non-Executive Director of The North American Income Trust plc, Frog Capital Limited, and Ecofin Global Utilities and Infrastructure Trust plc. She was previously a Non-Executive Director and Senior Independent Director of Pantheon International plc and a Non-Executive Director of Baronsmead VCT plc, Amati AIM VCT plc, and City of London Investment Group plc. She is a CFA charterholder. **Beneficial Shareholding:** 56,804 ordinary shares* *Including shares of Persons Closely Associated to Ms Nicklin ![img-6.jpeg](img-6.jpeg) ### Michael Probin Non-Executive Director and Management Engagement and Remuneration Committee Chair Appointed: 14 June 2021 Michael has over 30 years' experience in executive roles within the tax efficient investment industry. He worked on Business Expansion Scheme products at AXA Sun Life Group for ten years before joining the management team at Livingbridge LLP, where he gained extensive knowledge of the VCT industry. Before retiring from his role at Livingbridge LLP in 2018, he worked extensively with the VCT industry trade and representative bodies and stakeholders of all forms. Michael has a BSc (Econ) and M.Sc (Econ)(Urban and Regional Planning) from the London School of Economics and EMBA from London Business School. **Beneficial Shareholding:** 59,311 ordinary shares Annual Report and Audited Financial Statements 2023 43 02 Directors’ report - Board of Directors ### Isabel Dolan Non‑Executive Director Appointed: 1 November 2023 Isabel will become Chair of the Audit Committee on the retirement of Les Gabb. Isabel has over 25 years’ experience working with growth companies as a corporate nancier, equity investor, lender and as a Finance Director. Her previous roles include her working with RBS and 3i, and, until 2013, as Operations Partner for Albion Capital, specialising in the nance, operations and administration of venture capital trusts. She has been a Non‑Executive Director and Chair of the Audit Committee for a NHS Trust and was the Chair of StAlbans Community Bank. Benecial Shareholding: 20,181 ordinary shares 44 Annual Report and Audited Financial Statements 2023 02 Directors' report # Directors' report The Directors of Baronsmead Venture Trust plc (the Company) (registered number 03504214) present their twenty-fifth Annual Report and Audited Financial Statements of the Company for the year ended 30 September 2023. ## Shares and shareholders ### Share capital Pursuant to the prospectus published by the Company on 16 December 2022 in conjunction with Baronsmead Second 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 39,575,616 ordinary shares during 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 17,137,001 ordinary shares under the first allotment at an average price of 64.25p per share. The shares were admitted to trading on 3 February 2023. - On 13 March 2023, the Company issued 19,602,030 ordinary shares under the second allotment at an average price of 62.25p per share. The shares were admitted to trading on 17 March 2023. - On 3 April 2023, the Company issued 2,836,585 ordinary shares under the third allotment at an average price of 60.26p per share. The shares 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 47,190,192 ordinary shares. During the year, the Company bought back a total of 5,196,571 ordinary shares to be held in Treasury, representing 1.36 per cent of the issued share capital as at 30 September 2023, with an aggregate nominal value of £519,657. The total amount paid for these shares was £2,962,525. Since 30 September 2023, 1,809,333 shares have been bought back by the Company. The Company has remaining authority to buy back 41,880,767 shares under the resolution approved at the AGM in 2023. During the year, the Company sold 937,296 ordinary shares from Treasury. The total amount received by the Company for these shares was £523,233. 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 | 381,621,257 | 100 | £38,162,125.70 | | Held in Treasury | 30,086,750 | 7.88 | £3,008,675.00 | | In circulation | 351,534,507 | 92.12 | £35,153,450.70 | The total voting rights as at 30 September 2023 were 351,534,507. Since then, the Company has bought back 1,809,333 shares, resulting in the total voting rights being 349,725,174 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 profits of the Company, to receive a copy of the Annual Report and Financial Statements and to participate in a final distribution upon the winding up of the Company. There are no restrictions on voting rights, no securities carry special rights and the Company is not aware of any agreement between holders of securities that result in restrictions on the transfer of securities or on voting rights. There are no agreements to which the Company is party that may affect its control following a takeover bid. Annual Report and Audited Financial Statements 2023 45 02 Directors’ report - Directors’ report In addition to the powers provided to the Directors Directors’ indemnity under UK company law and the Company’s Articles of Association, at each AGM the shareholders are asked to Directors’ and ocers’ liability insurance cover is in place authorise certain powers in relation to the issuing and in respect of the Directors and was in place throughout the purchasing of the Company’s own shares. Details of the year under review. The Company’s Articles of Association powers granted at the AGM held in 2023, all of which provide, subject to the provisions of UK legislation, an remain valid, can be found in the last notice of AGM. indemnity for Directors in respect of costs which they may incur relating to the defence of any proceedings brought The Company is not, and has not been throughout the year, against them arising out of their positions as Directors, aware of any benecial interests exceeding 3 per cent of in which they are acquitted or judgement is given in their the total voting rights. favour by the Court. Save for such indemnity provisions in the Company’s Tax free dividends Articles of Association and in the Directors’ letters of appointment, there are no qualifying third party indemnity The Company has paid or declared the following dividends provisions in force. for the year ended 30September 2023: | Dividends £’000 | | Conicts of interest | | --- | --- | --- | | Interim dividend of 1.75p per ordinary share | 6,154 | The Directors declare all actual or potential conict of | | paid on 8September 2023 | | interest to the Board, which has the authority to approve | such situations. The Company Secretary maintains the Final dividend of 2.5p per ordinary share to 8,788 Register of Directors’ Conicts of Interests which is be paid on 8 March 2024* reviewed quarterly by the Board. Directors advise the Total dividends paid for the year 14,942 Company Secretary and the Board as soon as they become aware of any conicts of interest and do not take part in * Calculated on shares in circulation as at 30September 2023. discussions which relate to any of their conicts. Subject to shareholder approval at the AGM, a nal dividend of 2.5p per share will be paid on 8March 2024 Financial instruments to shareholders on the register at 9 February 2024. The ex‑dividend date will be 8 February 2024. The Company’s nancial instruments comprise equity and xed interest investments, cash balances and liquid resources including debtors and creditors that arise Annual General Meeting directly from its operations such as sales and purchases awaiting settlement and accrued income. The nancial The AGM will be held on 5March 2024. A separate Notice risk management objectives and policies arising from its convening the AGM will be posted to shareholders and nancial instruments and the exposure of the Company to will be separate to the Annual Report. The Notice will risk are disclosed in note 3.3 of the accounts. include an explanation of the items to be considered at the AGM and will be uploaded to the Company’s website in due course. ### Responsibility for accounts The Directors who held oce at the date of approval of ### Directors this Directors’ Report conrm 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 Appointments all the steps that they ought to have taken as a Director to The rules concerning the appointment and replacement make themselves aware of any relevant audit information of Directors are contained in the Company’s Articles of and to establish that the Company’s Auditor is aware of Association and the Companies Act 2006. Further details that information. in relation to the appointed Directors and the governance arrangements of the Board can be found on pages43 and 44 and in the Corporate Governance Statement. Directors are entitled to a payment in lieu of three‑month notice by the Company for loss of oce in the event of a takeover bid. 46 Annual Report and Audited Financial Statements 2023 02 Directors’ report - Directors’ report ### Going concern Listing rule disclosure After making enquiries and bearing in mind the nature of The Company conrms that there are no items which the Company’s business and assets, the Directors consider require disclosure under Listing Rule 9.8.4R in respect of that the Company has adequate resources to continue the year ended 30September 2023. in operational existence for the foreseeable future. The going concern assumption assumes that the Company will maintain its VCT status with HMRC. ### Streamlined energy and The Directors acknowledge the uncertainty in the ### carbon reporting macroeconomic and equity market. The Board nevertheless considers the Company to be well placed to The Company has no greenhouse gas emissions to continue to operate for at least 12 months from the date of report from its operations nor does it have responsibility this report, as the Company has sucient liquidity to pay for any other emissions producing sources under the its liabilities as and when they fall due and also to invest in Companies Act 2006 (Strategic Report and Directors’ new opportunities as they arise. Report) Regulations 2013. Consequently, the Company consumed less than 40,000 kWh of energy during the year The Directors have considered the liquidity of the Company in respect of which the Directors’ Report is prepared and and its ability to meet obligations as they fall due for a therefore is exempt from the disclosures required under period of at least 12 months from the date that these the Streamlined Energy and Carbon Reporting criteria. nancial statements are approved. As at 30September 2023, the Company held cash balances and investments Further information in relation to the Investment in readily realisable securities with a value of £21million, Manager’s integration of ESG factors in management of representing 11per cent of the Company’s NAV. the Company’s portfolio is set out on pages24 to 31 of the Strategic Report. The Company has no debt, and it is expected that the Company will remain ungeared for the foreseeable future. Under Listing Rule 15.4.29(R), the Company, as a closed‑ ended investment fund, is exempt from complying with the The Directors have assessed the Company’s ability to Task Force on Climate‑related Financial Disclosures. 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 ### Post balance sheet events to sensitivity analysis. The Directors noted that under none of these scenarios was the Company unable to Post balance sheet events are disclosed in note 3.6 cover its costs. of the accounts. 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 sucient funds to meet both its contracted By Order of the Board expenditure and its discretionary cash outows in the form Gresham House Asset Management Ltd of the share buyback programme and dividend policy. Company Secretary 5 New Street Square, London EC4A 3TW 21 December 2023 ### Future developments The outlook for the Company is set out in the Chair’s Statement on page8. 47Annual Report and Audited Financial Statements 2023 02 Directors’ report ## Corporate governance ### This Corporate Governance statement forms The principles of the AIC code ### part of the Directors’ report. The AIC Code is comprised of ve sections:  Board leadership and purpose  Division of responsibilities ### Background  Composition, succession and evaluation Under the UK Listing Rules, listed companies are required  Audit, risk and internal control; and to disclose how they have applied the principles and  Remuneration. complied with the provisions of the corporate governance code to which they are subject. The provisions of the UK The Board’s Corporate Governance statement sets out Corporate Governance Code (“UK Code”), as issued by how the Company complies with each of the provisions the Financial Reporting Council (“FRC”) in July 2018, are of the AIC Code. 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 conrmed that AIC member companies, such as Baronsmead 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 the AIC Code adapts the principles and provisions set out in the UK Code to make them relevant for investment companies. ### Compliance Throughout the year ended 30September 2023, the Company complied with the principles and provisions of the AIC Code which incorporates the UK Code. The Board attaches great importance to the matters set out in the Code and strives to observe its principles. The table on the following pagesreports on the Company’s compliance with the AIC Code and provides explanation where the Company has not complied. It should be noted that as an externally managed VCT, all the Directors are non‑executive and therefore provisions of the AIC Code related to the Chief Executive Ocer 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 condence that an internal audit function is not necessary. The Company has therefore not reported further in respect of these provisions. 48 Annual Report and Audited Financial Statements 2023 02 Directors’ report - Corporate governance AIC Code Principle Compliance Statement BOARD LEADERSHIP AND PURPOSE A. A successful company Directors are fully engaged and committed to using their collective, extensive is led by an effective experience to foster healthy debate and drive business strategy for the long‑ board, whose role is to term, sustainable success of the Company. promote the long-term The Company’s investment objective is to achieve long‑term investment returns sustainable success of for private investors within a tax ecient structure and the Board ensures that the company, generating all decisions are made responsibly. The Board and the Manager are committed to value for shareholders managing the business and its investment strategy in a sustainable manner and and contributing the Board emphasises the importance of ESG in its investment decisions and to wider society. 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 purpose of the Company is also its investment objective which is to the company’s purpose, achieve long‑term investment returns for private investors, within a tax values and strategy, and ecient structure. It does this by investing primarily in a diverse portfolio of UK satisfy itself that these growth businesses whether unquoted or traded on AIM. Investments are made and its culture are aligned. selectively across a range of sectors in companies that have the potential to Alldirectors must act grow and enhance their value. with integrity, lead by The Directors agree that establishing and maintaining an open and inclusive example and promote the culture among the Board and in its interaction with the Manager, shareholders desired culture. and other stakeholders, will support the delivery of its purpose, values and strategy. The Board has discussed the culture of the Board during the year under review and have acknowledged the importance of enhancing its integrity, adaptability and vigorous intellect. 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 The Board and Audit Committee regularly review the performance of the that the necessary Company and the performance and resources of the Manager and service resources are in place providers to ensure the Company can meet its objectives. for the company to At each quarterly meeting, the Board receives a report on Company meet its objectives and performance, the performance of its investments and the VCT sector measure performance (including its competitors) and any industry issues. The report outlines the against them. The board Company’s adherence to VCT compliance tests and includes forecasts for should also establish a future periods, highlighting investment opportunities, operational matters and framework of prudent regulatory developments. and effective controls, which enable risk to be The Board has agreed with the Manager specic KPIs that enable both parties assessed and managed. to monitor compliance with the agreed investment policy and risk management framework. Directors regularly seek additional information from the Manager to supplement these reports and formally review the performance measures and KPIs at their annual strategy meeting. 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, systems and controls employed by them. Annual Report and Audited Financial Statements 2023 49 02 Directors’ report - Corporate governance AIC Code Principle Compliance Statement D. In order for the company The Board understands its responsibility to shareholders and stakeholders and to meet its responsibilities considers the opinions of all such parties when making any decision. The Board to shareholders and considers that, other than its shareholders, its stakeholders are the Manager, the stakeholders, the board portfolio of investee companies, HMRC and the Company’s governing bodies, the should ensure effective AIC and its range of reputable advisors and service providers. The Board always engagement with, and considers the impact that any decision will have on any relevant stakeholder. encourage participation The Directors place considerable importance on shareholder engagement and from, these parties. 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 Oce. 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 There is a clear division of responsibility between the Chair, the Directors, the and is responsible for its Manager, and the Company’s other third‑party service providers. In addition, overall effectiveness in the Board has approved a policy which sets out the responsibilities of the Chair directing the company. and Senior Independent Director which is available on the Company’s website. They should demonstrate The Chair is responsible for leading the Board and is responsible for its overall objective judgement effectiveness in directing the affairs of the Company. The Chair ensures that throughout their tenure all Directors receive accurate, timely and clear information and helps promote and promote a culture a culture of openness and debate in Board meetings by encouraging and of openness and debate. facilitating the effective contribution of other Directors towards a consensus In addition, the Chair view. The Chair also takes a leading role in ensuring effective communications facilitates constructive with shareholders and other stakeholders. Further details on the Company’s board relations and the engagement with shareholders and other stakeholders can be found in the effective contribution of all Section 172 Statement on pages37 to 41. non-executive directors, The Board meets regularly throughout the year and representatives and ensures that directors of the Manager are in attendance, when appropriate, at Board and/or receive accurate, timely Committee meetings. and clear information. 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 Annual Report and Audited Financial Statements 2023 02 Directors’ report - Corporate governance AIC Code Principle Compliance Statement G. The board should consist of The Board comprised four Non‑Executive Directors as at 30September an appropriate combination 2023. Ms Susannah Nicklin is the Senior Independent Director and serves as of directors (and, in an intermediary for the other Non‑Executive Directors and the Company's particular, independent shareholders. As at the date of this report, the Board comprises of three female non-executive directors) and two male Non‑Executive Directors. such that no one individual The AIC Code provides that cross‑directorships may be an indication that or small group of individuals Directors are not independent. dominates the board’s decision making. Having also considered the performance and independence of each remaining Director, the Board has determined that they are also 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. Additionally, 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 As part of the Board evaluation process, the contributions of each Director, and should have sucient the time commitment made by each Director, are considered. Directors’ other time to meet their commitments are regularly reviewed, and any new appointments are considered board responsibilities. by the other Directors to ensure there is no conict of interest. They should provide As a result of the Board evaluation, it was concluded that each Director provided constructive challenge, appropriate levels of commitment and challenge to the Board and provided the strategic guidance, offer Company and service providers with guidance and advice when required. specialist advice and hold third-party service providers to account. I. The board, supported by The Directors have access to the advice and services of the Company Secretary the company secretary, who is responsible to the Board for ensuring that Board procedures are in place should ensure that it has and followed and that applicable rules and regulations are complied with. The the policies, processes, Company Secretary is also responsible for ensuring good information ows information, time and between all parties. The Directors also have access to independent professional resources it needs in order advice at the Company’s expense where they judge it necessary to discharge to function effectively their responsibilities properly. and eciently. Annual Report and Audited Financial Statements 2023 51 02 Directors’ report - Corporate governance AIC Code Principle Compliance Statement COMPOSITION, SUCCESSION AND EVALUATION J. Appointments to the The Board has established a Nomination Committee, which leads the board should be subject appointment process of new Directors as and when vacancies arise and as part to a formal, rigorous and of the Directors’ ongoing succession planning. transparent procedure, and The Board believes that diversity of experience and approach, including gender an effective succession diversity, social and ethnic backgrounds, cognitive and personal strengths plan should be maintained. amongst board members is of great importance and the Nomination Committee Both appointments and and Board consider issues of Board balance and diversity when making succession plans should new appointments. be based on merit and objective criteria and, As a result of the Board evaluation held during the year, Directors emphasised within this context, should the continued focus on diversity when considering future appointments to the promote diversity of Board. The Board ensures that all appointments are made on merit and the gender, social and ethnic Board is committed to ensuring that any Board vacancies are lled by the most backgrounds, cognitive and qualied candidates and therefore no formal diversity policy is in place. personal strengths. Further details regarding the outcomes of the Company’s Board evaluation can be found on page58. K. The board and its The Directors’ biographical details are set out on pages43 and 44. These committees should have demonstrate the wide range of skills and experience that each Director a combination of skills, brings to the Board. experience, and knowledge. The Board has approved a tenure policy, which encompasses the whole Board Consideration should and Chair, to ensure that the Board continues to have the right balance of skills be given to the length of and experience. service of the board as a whole and membership The Board recognises the value of the regular refreshing of its composition and regularly refreshed. 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 ensures that the Board’s membership includes longer‑serving directors who provide a balance of knowledge and experience that is not present in the absence of executive directors. 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 Annual Report and Audited Financial Statements 2023 02 Directors’ report - Corporate governance AIC Code Principle Compliance Statement L. Annual evaluation of the The Board evaluates its own performance and that of its Committees and the board should consider its Chair on an annual basis. For the period under review, this was carried out by way composition, diversity of a questionnaire and subsequent discussions. and how effectively The Chair led the evaluation, which covered the functioning of the Board as a members work together whole, composition and diversity of the Board, the effectiveness of the Board to achieve objectives. Committees and the independence and contribution made by each Director. Individual evaluation should demonstrate whether Each Director also completed a self‑evaluation questionnaire reecting on each director continues to their personal contribution and commitment as a Director during the period and contribute effectively. 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 The Audit Committee has put in place a non‑audit services policy which ensures formal and transparent that any work outside the scope of the standard audit work requires prior policies and procedures to approval by the Audit Committee or the Board. This enables the Audit Committee ensure the independence to ensure that the external auditor remains fully independent. and effectiveness of The Committee considers that the implementation of this policy has ensured external audit functions that division is maintained going forward. No non‑audit services have been and satisfy itself on the provided by BDO LLP during the nancial year, therefore the Committee integrity of nancial and continues to believe that BDO LLP remains independent. narrative statements. Further information regarding the work of the Audit Committee can be found on pages55 to 57. N. The board should present The Audit Committee has considered the Audited Annual Report and Financial a fair, balanced and Statements as a whole and agreed that it presents a fair, balanced, and understandable assessment understandable assessment of the Company’s position and prospects. of the company’s position and prospects. O. The board should establish Risks faced by the business are considered, monitored and assessed on procedures to manage risk, a regular basis. For details in respect to the Company’s principal risks and oversee the internal control uncertainties and the appropriate measures taken to mitigate each risk can be framework and determine found on pages22and 23. the nature and extent of the The Audit Committee receives service provider internal control reports principal risks the company which are collated by the Manager. The performance of all third party service is willing to take in order providers are reviewed at least annually by the Management Engagement and to achieve its long-term Remuneration Committee. Further details can be found on page61. strategic objectives. Annual Report and Audited Financial Statements 2023 53 02 Directors’ report - Corporate governance AIC Code Principle Compliance Statement REMUNERATION P. Remuneration policies In respect to Directors’ remuneration, the Company follows the recommendation and practices should of the AIC Code that Non‑Executive Directors’ remuneration should reect be designed to support the time commitment and responsibilities of the role. As stated in the strategy and promote long- Remuneration Report on page62, the Company’s policy is that remuneration term sustainable success. of Non‑Executive Directors should reect 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 The Board’s Management Engagement and Remuneration Committee procedure for developing considers at least annually the level of the Board’s fees, in accordance with policy remuneration the Remuneration Policy approved by shareholders at the AGM held in 2023. should be established. No Further details on the Directors’ remuneration is contained in the Directors’ director should be involved Remuneration Report on pages61 to 65. in deciding their own remuneration outcome. R. Directors should exercise All Directors of the Company are independent Non‑Executive Directors, and independent judgement and all Directors are members of the Management Engagement and Remuneration discretion when authorising Committee. Any decision about remuneration is taken after considering the remuneration outcomes, performance of the Company and the current market conditions. taking account of company and individual performance, and wider circumstances. 54 Annual Report and Audited Financial Statements 2023 02 Directors’ report ### The Board’s Committees The Board has delegated certain responsibilities to its Audit, Management Engagement and 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 Committee report | Chair: Mr Les Gabb | Matters considered during the year | | --- | --- | | I am pleased to present the Audit Committee report for the | The Audit Committee met three times during the year. At | | year ended 30September 2023. | those meetings, the Audit Committee has: |  Reviewed the Company’s nancial statements for the half year and year end and made Membership recommendations to the Board; As reported above, given the size and nature of the Board,  Reviewed the Company’s going concern and it is felt appropriate that all Directors are members of the viability statements; Audit Committee. This includes the Chair, Fiona Miller  Reviewed the Company’s risk register reecting the Smith. All Audit Committee members consider that, current and emerging risks faced by the Company; individually and collectively, they are each appropriately  Reviewed the internal controls and cyber security of experienced to fulll their role on the Audit Committee. the Company and its third‑party service providers, with Each member contributes recent nancial experience particular emphasis on the ESG risks and mitigation of gained from senior positions in the venture capital and/ the associated risks; or nancial services sector. The Audit Committee Chair, MrLes Gabb, is a qualied Chartered Accountant.  Agreed the audit plan for the year ended 30September 2023 and audit fees with BDO LLP; and Key responsibilities:  Reviewed its own performance as a Committee and its Terms of Reference. 1 Reviewing the content and integrity of the Annual and Half‑Yearly Financial Statements; The signicant issues considered by the Committee during the year ended 30September 2023 were: 2 Reviewing the Company’s internal control and risk management systems; 3 Reviewing the remuneration and terms of appointment Valuation of investments of the external auditor; Discussions have been held with the Manager about the 4 Reviewing the effectiveness of the external audit Company’s valuation process, its ownership of assets process in accordance with regulatory requirements; and the systems in place at Gresham House to ensure the 5 Ensuring auditor objectivity and independence is accuracy of the valuation of the Company’s portfolio. The always safeguarded, but particularly in the provision of Manager also uses independent valuations in conjunction non‑audit services; and with their own to provide third‑party assurance and risk 6 Providing a forum through which the auditor may mitigation to the Committee. report to the Board. 55Annual Report and Audited Financial Statements 2023 02 Directors’ report - Audit Committee report Review of Annual and Half-Yearly Financial Cyber security Statements The Manager has reviewed the cyber security procedures The Audit Committee reviewed the Annual Financial and controls of its service providers to mitigate cyber Statements and the Half‑Yearly Financial Statements risk and the Manager’s Compliance Ocer has presented during the period. A signicant area of focus during these their cyber security procedures to the Audit Committee. reviews was the valuation of the unquoted investments. The Audit Committee will continue to receive updates The Manager conrmed to the Audit Committee that all from, and to work with, the Manager to ensure that the valuations had been made in accordance with published procedures in place are robust and enable continuous industry guidelines and had taken account of the latest compliance with the General Data Protection Regulation. available information about the investee companies and Following formal review of the risk prole of the Company, current market data. The Board met quarterly to assess the Audit Committee concluded that the effectiveness of the appropriateness of the estimates and judgements the risk management and internal control systems during made by the Manager during the valuation process and was the year remain appropriate. satised with the approach taken and the supporting data used to nalise valuations across the portfolio. Internal controls and risk management systems Other areas of focus considered by the Audit The Company is exposed to a variety of risks and Committee were: uncertainties. The Board, through delegation to the Audit Committee, has undertaken a robust assessment and review of the principal risks facing the Company, together Compliance with the VCT tests with a review of any emerging risks that may have arisen during the year to 30September 2023, including those that The Company engages PwC as its VCT Status Adviser to would threaten its business model, future performance, advise on its compliance with the legislative requirements solvency or liquidity. A statement of the principal risks relating to VCTs. PwC provides each Audit Committee and uncertainties faced by the Company can be found on meeting a VCT status monitoring report which details pages22 and 23. the Company’s position against each of the VCT qualication tests. The Audit Committee oversees the operation of the Company’s risk management and internal control systems Looking ahead to the next nancial year, the Audit through which procedures have been designed to identify Committee undertakes to continue to work with the and manage, rather than eliminate, risk. This involves the Company’s advisors to ensure that the Company has the maintenance of a Risk Register which records the risks to correct policies in place to provide necessary comfort and which the Company is exposed, including, among others, uphold full compliance with the VCT rules. 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 Going concern and long-term viability the mitigating factors and, where necessary, corrective action is taken. The Committee considered the Company’s long‑term nancial requirements and viability for the forthcoming The Audit Committee receives service provider internal year and the longer period of three years. This assessment control reports which are collated by the Manager at each included the review of possible declines in investment meeting, which provide an overview of the main risks valuations and the impact of rising interest rates, identied by the Company’s third‑party service providers inationary pressures, energy price rises and the and the mitigating actions put in place for these. During cost‑of‑living crisis in the UK on nancial statements the year ended 30September 2023, the Manager assessed disclosures including those relating to principal risks. As and continued to report to the Audit Committee on the a result of this assessment, the Committee concluded operational risk of service providers. The Audit Committee that the Company had adequate resources to continue in was satised that each service provider had the ability to operation and meet its liabilities as they fall due both for continue to deliver their service effectively. the forthcoming year and until 2025. Related long‑term viability and going concern statements are included on pages35 and 47 respectively. 56 Annual Report and Audited Financial Statements 2023 02 Directors' report - Audit Committee report ## 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 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 Committee on an annual basis. ## External Auditor In early 2021, the Company completed an audit tender process. Three firms were invited and the Board appointed BDO as external auditor to the Company with effect from 28 May 2021. As part of the audit strategy presentation, BDO provided a clear description of the work to be undertaken for the audit process for the year ended 30 September 2023. The Company anticipates repeating an audit tender in 2028 in respect of the year ended 30 September 2029. This is in line with latest Corporate Governance provisions. In accordance with professional guidelines, the senior audit partner is rotated after five years (at most). The current senior audit partner started working with the Company in 2021 and will therefore change in 2026. A resolution to re-appoint BDO as the Company's auditors will be proposed at the 2024 AGM. An audit fee of £51,000 (exclusive of VAT) has been agreed in respect of the year ended 30 September 2023. ## Review of effectiveness of external audit The Audit Committee meets at least twice a year with the Auditor. The Auditor provides a planning report in advance of the annual audit and a report on the annual report and financial statements. The Audit 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 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 Committee reviews the audit process and considers its effectiveness. ## Non-audit services Following the implementation of the EU Audit Directive and in accordance with the FRC's Guidance on Audit Committees, the Audit Committee approved a non-audit services policy in May 2017 to ensure that the auditor's independence and objectivity was 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 BDO. Accordingly, the Audit Committee was satisfied that BDO was considered independent. **Les Gabb** Audit Committee Chair 21 December 2023 Annual Report and Audited Financial Statements 2023 57 02 Directors’ report ## Nomination Committee report Chair: Ms Susannah Nicklin Succession planning and diversity The Nomination Committee reviews the size and structure Key responsibilities: of the Board annually and succession planning remains a key area of focus for the Board for the year ending 1 Lead the process for the appointments of additional 30September 2024. The Nomination Committee is also Directors to the Board as and when appropriate; responsible for assessing the time commitment required 2 Consider the resolutions relating to the election and re‑ for each Board appointment and ensuring that the present election of Directors; and incumbents have sucient time to undertake them. 3 Consider the orderly succession planning of the Board The Nomination Committee aims to attract directors and the need to have a balance of skills, experience, with diverse skills and experience and recommends knowledge, and diversity amongst Directors. appointments to the Board, based on merit, to ensure vacancies are fullled by the most qualied candidates. Candidates who complement the balance of skills, Board Composition knowledge and experience needed to align with the The Nomination Committee considered the composition Company’s strategic aims are always considered. When of the Board and concluded that, collectively, the considering future appointments, the Nomination Directors held the skills, experience and knowledge Committee promotes diversity of gender, social and ethnic that are essential to effectively exercise its duties and backgrounds as well as cognitive and personal strengths responsibilities. There were no changes to the composition to aid effective decision making. The Committee will of the Board during the year. consider the use of external consultants when shortlisting candidates, if required. Board evaluation The Board notes the FCA rules on diversity and inclusion on company boards, namely, that from accounting periods In order to review the effectiveness of the Board as a starting on or after 1April 2022: whole, its Committees, the individual Directors (including the independence of each Director) and the Chair, the a) At least 40per cent of individuals on the Board to Company undertakes a thorough evaluation process be women; by way of an extensive and tailored board evaluation b) At least one senior Board position to be held by a questionnaire, meetings between Board members and the woman (such as Chair, /SID, Chief Executive Ocer Chair and completion of self‑evaluation questionnaires, (“CEO”) or Chief Financial Ocer (“CFO”); and condentially shared between Directors and the Chair. This thorough evaluation process enables each Director c) At least one individual on the Board to be from a to evaluate, assess and reect on the Board’s operations, minority ethnic background. individual Director contributions and the Company’s leadership with a view to identify any shortcomings and address any areas requiring improvement. All evaluation processes are completed annually. The results of the evaluation process indicate that the Board continues to function well and there are no signicant concerns raised regarding the effectiveness of the Board, its Committees and that of individual Directors and the Chair. Accordingly, the Nomination Committee remains satised with the performance of the Board, its Committees and that of individual Directors and the Chair. The Board is keen to keep Board succession planning as a key area of focus for the next nancial year and have identied key strategic developments to achieve during the year ending 30September 2024. 58 Annual Report and Audited Financial Statements 2023 02 Directors’ report - Nomination Committee 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. Number of senior positions on the Board Number (CEO, CFO, of Board Percentage SID and Gender identity or sex members of the Board Chair)* Men 2 40% – Women 3 60% 2 Not specied/ prefer not to say – – Number of senior positions on the Board Number (CEO, CFO. of Board Percentage SID and Ethnic background members of the Board Chair) * White British or other White (including minority White groups) 5 100% 2 Mixed/Multiple Ethnic Groups – – Asian/Asian British – – Black/African/Caribbean/Black British – – Other ethnic group, including Arab – – Not specied/prefer not to say – – * The company is externally managed and does not have executive management functions, specically 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 As the Company is an externally managed investment members. The gender breakdown is as follows: 2 (50per Company, it has no executive staff and therefore does cent female); 2 (50per cent male). All four Board members not have a CEO or a CFO, both roles are deemed as identify as White British or other White (including minority senior board positions by the FCA. The Chair and Senior White groups). Independent Director are also considered senior Board positions by the FCA, both of which are held by females The Board is pleased to have met the recommendations (Chair and SID). a) At least 40per cent of individuals on the Board to be women and b) At least one senior Board position to Further explanation of the Board’s succession planning be held by a woman. Whilst the Board ensures that all and approach to diversity can be found on page 58. appointments are made on merit and that any Board vacancies are lled by the most qualied 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. 59Annual Report and Audited Financial Statements 2023 02 Directors’ report - Nomination Committee report Directorate changes Tenure policy Since year end and following notication of Mr Gabb's In November 2019, the Board adopted a Tenure and intention to retire from the Board before the end of the Reappointment Policy (the “Policy”). In accordance with the calendar year, the Nomination Committee reviewed the Policy, the Board will seek to recruit a Director on average composition of the Board and its Committees. every 3‑4 years which will result in an average Director tenure of seven years or less. The Nomination Committee considered the structure, size and composition of the Board as well as the requisite The Policy includes the Chair within its consideration of skills and experience from prospective candidates. each Director’s tenure. The Board intends to maintain In conjunction with the Manager's talent team, an a range of experience from Directors who have served extensive list of potential candidates for Chair of the on the Board for varying periods. This approach aims to Audit Committee, with relevant and diverse backgrounds, reserve the cumulative experience and understanding of was assembled from which the Nomination Committee the Company, its commitments and investment portfolio selected four candidates to interview. Following a amongst Directors, while beneting from fresh thinking thorough interview process, Ms Dolan was deemed and promoting diversity. the most suitable candidate to replace Mr Gabb and However, in accordance with the AIC Code, all Directors, the Committee recommended her appointment as an apart from Mr Gabb, will stand for election/re‑election at Independent Non‑Executive Director, with effect from the Company’s forthcoming AGM. Ms Dolan will be standing 1November 2023, to the Board. for election following her appointment by the Board on Subsequently, it was agreed that Mr Gabb would step down 1November 2023. Further details can be found on page44. from his role as Independent Non‑Executive Director Accordingly, resolutions to elect/re‑elect all Directors are and Chair of the Audit Committee on 31 December 2023. contained within the Notice of AGM. Following his departure the Board resolved that Ms Dolan be appointed as the Chair of the Audit Committee. Directors’ meeting attendance The table below sets out the Directors’ attendance at scheduled, quarterly meetings held during the year, as well as scheduled Committee meetings held during the year, against the number of meetings each Director was entitled to attend. Management Engagement and Remuneration Nomination Board of Directors Audit Committee Committee Committee Eligible Attended Eligible Attended Eligible Attended Eligible Attended Les Gabb 4 4 3 3 2 2 1 1 Susannah Nicklin 4 4 3 3 2 2 1 1 Michael Probin 4 4 3 3 2 2 1 1 Fiona Miller Smith 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, the Company’s fundraising offer to shareholders for subscription, the resignation of Directors and changes to the Board composition. Susannah Nicklin Nomination Committee Chair 21December 2023 60 Annual Report and Audited Financial Statements 2023 02 Directors’ report ## Directors’ remuneration report ### The Board has prepared this report in Manager duties ### accordance with the requirements of The Board delegates the execution of the Company’s ### the Large and Medium Sized Companies investment strategy and the management of assets ### and Groups (Accounts and Reports) to the Manager, by way of a Management Agreement, subject to the Board being kept informed of all material ### (Amendment) Regulations 2013. developments (including proposed acquisitions or divestment of investments) in the Company’s portfolio. The The law requires the Company’s auditor, BDO, to audit Board believes that the Manager’s operations in the VCT certain of the disclosures provided. Where disclosures sector are outstanding and that its ability to continue to have been audited, they are indicated as such. The achieve results by adapting to an ever‑changing regulatory auditor’s opinion is included in the Independent Auditor’s environment has been impressive. The Board continues Report on pages67 to 74. to work with the Manager to develop operational policies as and where relevant and notes that Gresham House An ordinary resolution to approve the Directors’ supports the UK Stewardship Code and complies with its Remuneration Report will be proposed at the forthcoming guidelines regarding proxy voting and engagement. AGM on 5 March 2024. ### Relationship with the Manager ### Annual Statement from the Chair of ### the Management Engagement and The Management Engagement and Remuneration Committee keeps the performance of the Manager ### Remuneration Committee under continual review. In addition, in accordance with the requirements of the AIC Code the Management The Management Engagement and Remuneration Engagement and Remuneration Committee reviews the Committee is chaired by Michael Probin and comprises all performance of the Manager’s obligations under the the Directors of the Company, whose names are set out on Management Agreement and considers the need for any pages43 and 44 of the Directors’ Report. variation to the terms of the Management Agreement on As explained in the Corporate Governance Statement on an annual basis. pages48 and 54, given the size and nature of the Company The Management Engagement and Remuneration it is felt appropriate that all Directors are members of the Committee then makes a recommendation to the Board Management Engagement and Remuneration Committee. about the continuing appointment of the Manager. The The Company has no executive directors and considers all Management Engagement and Remuneration Committee the Non‑Executive Directors to be independent. also reviews annually the performance of all other service The AIC Code provides that cross‑directorships may be an providers to the Company and any matters concerning indication that Directors are not independent. their respective agreements. The Management Engagement and Remuneration Committee’s key responsibilities are: ### Remuneration 1 Determining and agreeing with the Board the Each year, the Committee reviews the Directors’ fees remuneration policy for the Board and the fees for the to ensure they are comparative with others in the VCT Company’s Chair and Non‑Executive Directors, within industry relative to the NAV of the VCT, so that the the limits set in the Company’s Articles of Association; Board can attract suitably qualied candidates to the 2 Reviewing the appropriateness of the Manager’s Board. In addition, the Board has regard to the workload appointment (including key executives thereof) together that individual Directors and the Chair undertake as with the terms and conditions of the appointment; and members of the Board, feedback from shareholders, the 3 Reviewing (at least annually), the contractual relationship performance of the Company’s portfolio and the prevailing with the Manager and scrutinising and holding them to rate of Consumer Price Index ("CPI") at the time. account for their performance. 61Annual Report and Audited Financial Statements 2023 02 Directors' report - Directors' remuneration report In recent years, the Board has seen a significant 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 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 pages 48 and 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. 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 CPI at the time, any feedback received from shareholders and the performance of the Company's portfolio. 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 ended 30 September 2023 and agreed that Director fees would be increased by 5 per cent to reflect inflationary pressures. Accordingly, the Directors' fees were increased from £28,250 to £29,662 and the Chair's fee was increased from £30,300 to £31,815. In September 2023, the Management Engagement and Remuneration Committee met to review the level of Directors' fees. The Committee agreed to increase the Chair's fee to £35,000 with effective from 1 October 2023. A further review was also undertaken in December 2023 where it was proposed, and subsequently approved by the Board, that all Directors' fees be increased by 6.7 per cent for CPI as at 30 September 2023, effective 1 October 2023. The Directors consider that fees may be further adjusted during the financial year to reflect market trends and to ensure the Company can attract the calibre of non-executive director required. No person provided advice or services in respect of their consideration of Directors' remuneration. ## Directors' remuneration policy The Board's policy is that the remuneration of Non-Executive Directors should reflect the experience of the Board as a whole, be fair and comparable to that of other relevant venture capital trusts that are similar in size and have similar investment objectives and structures. Furthermore, the level of remuneration should be sufficient to attract and retain the Directors needed to oversee properly the Company and to reflect the specific circumstances of the Company, the duties and responsibilities of the Directors and the value and amount of time committed to the Company's affairs. The remuneration policy, as set out in the box above, was last 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 office. Fees for any new Non-Executive Director who is appointed to the Board will be set in accordance with the Company's Remuneration Policy. The Directors are not eligible to receive pension entitlements or bonuses, and no other benefits are provided. They are not entitled to participate in any long-term incentive plan or share option schemes. Fees are paid to the Directors on a monthly basis and are not performance related. The Directors do not have service contracts with the Company; however, their appointment letters do include a three-month notice period. As a result, the Company's policy on termination payments is for a payment of 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 office of the Company. No person provided advice or services in respect of their consideration of Directors' remuneration. 62 Annual Report and Audited Financial Statements 2023 02 Directors' report - Directors' remuneration report ## 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 by proxy were as follows: ### Remuneration report (2023 AGM voting ☐gures) | | Number of votes | Percentage of votes cast | | --- | --- | --- | | For | 11,925,679 | 88.34% | | Against | 1,574,376 | 11.66% | | Votes withheld | 772,407 | | ### Remuneration policy (2023 AGM voting ☐gures) | | Number of votes | Percentage of votes cast | | --- | --- | --- | | For | 11,953,443 | 88.67% | | Against | 1,527,884 | 11.33% | | Votes withheld | 824,519 | | ## Annual remuneration report ### Scheme interests awarded during the financial 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 years ended 30 September 2023, the percentage change over each period in the share price total return (assuming all dividends are reinvested) to shareholders compared to the share price total return of approximately 40 generalist VCTs (source: FE Analytics), which the Board considers to be the most appropriate benchmark for investment performance measurement purposes. An explanation of the performance of the Company is given in the Chair's Statement and Manager's Review on pages 5 to 8 and 9 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 review 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. ### BVT Share Price and the VCT Generalist Share Price Total Return Performance Graph ![img-7.jpeg](img-7.jpeg) Annual Report and Audited Financial Statements 2023 63 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 30September Percentage change from | | | | | | | | | 2022 to | | | 2021 to | | 2020 to | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2023 | | 2022 | | 2021 | | 2020 | | | 2023 | | 2022 | | | 2021 | | | | £ | | £ | | £ | | £ | | | % | | % | | | % | Peter Lawrence* N/A 15,150 29,400 29,200 N/A (48.5) 0.7 Les Gabb 29,662 28,250 27,400 27,200 5.0 3.1 0.7 Valerie Marshall** N/A 2,283 27,400 27,200 N/A (91.7) 0.7 Susannah Nicklin 29,662 28,250 27,400 27,200 5.0 3.1 0.7 Michael Probin*** 29,662 28,250 8,199 N/A 5.0 244.6 N/A Fiona Miller Smith**** 31,815 29,275 2,283 N/A 8.7 1,182.3 N/A Total 120,801 131,458 122,082 110,800 * Peter Lawrence retired as Non‑Executive Director and Chair of the Company on 31March 2022. ** Valerie Marshall retired as Non‑Executive Director of the Company on 31October 2021. *** Michael Probin was appointed as Non‑Executive Director of the Company on 14June 2021. **** Fiona Miller Smith was appointed as Non‑Executive Director on 1September 2021 and appointed Chair of the Company on 31March 2022. There are no further fees to disclose as the Company has no employees, chief executive or executive directors. The gures detailed in the Directors’ Remuneration Report disclose remuneration only. ### 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  a fundraising which was conducted between January and April 2023. | | Year to | | | Year to | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | 30September | | | 30September | | | | | | | 2023 | | | 2022 | | Percentage | | | | | £ | | | £ | | change | Total Directors’ fees 120,801 131,458 (8.1) Shares repurchased 2,962,000 2,206,000 34.3 Dividends 15,275,000 20,217,000 (24.4) NAV 194,892,000 193,825,000 0.6 The Directors’ fees as a percentage of NAV for the year to 30September 2023 were 0.062 per cent and for the year to 30September 2022 were 0.068 per cent. 64 Annual Report and Audited Financial Statements 2023 02 Directors’ report - Directors’ remuneration report There have been no changes to these holdings between ### Directors’ interests (audited) 30September 2023 and the date of this report. There is no requirement under the Company’s Articles Approved by the Board of Directors and signed by 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 Michael Probin were as follows: Chair of the Management Engagement and Remuneration Committee 30September 30September 21December 2023 | | 2023 | | 2022 | | --- | --- | --- | --- | | Ordinary | | Ordinary | | | 10p shares | | 10p shares | | Les Gabb 167,509 136,209 Susannah Nicklin* 56,804 48,939 Michael Probin 59,311 40,531 Fiona Miller Smith** 8,094 nil Total 291,718 225,679 * and persons closely associated. ** Fiona Miller Smith was appointed as a Non‑Executive Director on 1September 2021 and appointed Chair of the Company on 31March 2022. 65Annual Report and Audited Financial Statements 2023 02 Directors’ report ## Statement of Directors’ responsibilities Under applicable law and regulations, the Directors ### Statement of Directors’ responsibilities are also responsible for preparing a Strategic Report, ### in respect of the 2023 Annual Report Directors’ Report, Directors’ Remuneration Report and Corporate Governance Statement that complies with that ### and Financial Statements law and those regulations. The Directors are responsible for preparing the Annual The Directors are responsible for ensuring the Annual Report and the nancial statements in accordance with Report and the nancial statements are made available applicable law and regulations. on a website. Financial statements are published on Company law requires the Directors to prepare nancial the Company’s website in accordance with legislation statements for each nancial year. Under that law, they in the United Kingdom governing the preparation and have elected to prepare the nancial statements in dissemination of nancial statements, which may vary accordance with UK Accounting Standards, including FRS from legislation in other jurisdictions. The maintenance 102 The Financial Reporting Standard applicable in the UK and integrity of the Company’s website is the responsibility and Republic of Ireland. of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the nancial statements Under company law, the Directors must not approve contained therein. the nancial statements unless they are satised that they give a true and fair view of the state of affairs of the Company and of the prot or loss of the Company for ### Responsibility statement of the that period. In preparing these nancial statements, the ### Directors are required to: Directors in respect of the annual  select suitable accounting policies and then apply ### nancial report them consistently; We conrm that to the best of our knowledge:  make judgements and estimates that are reasonable and prudent;  the nancial statements, prepared in accordance with the applicable set of accounting standards, give a true  state whether applicable UK Accounting Standards and fair view of the assets, liabilities, nancial position have been followed, subject to any material departures and prot or loss of the Company taken as a whole; and disclosed and explained in the nancial statements;  the Annual Report includes a fair review of the  assess the Company’s ability to continue as a going development and performance of the business and the concern, disclosing, as applicable, matters related to position of the Company, together with a description of going concern; and the principal risks and uncertainties that it faces.  use the going concern basis of accounting unless they either intend to liquidate the Company or to cease We consider the Annual Report and Financial Statements, operations or have no realistic alternative but to do so. taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to The Directors are responsible for keeping adequate assess the Company’s position and performance, business accounting records that are sucient to show and explain model and strategy. the Company’s transactions and disclose with reasonable accuracy at any time the nancial position of the Company On behalf of the Board 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 Fiona Miller Smith to enable the preparation of nancial statements that are Chair free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps 21 December 2023 as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. 66 Annual Report and Audited Financial Statements 2023 02 Directors’ report ## Independent auditor’s report ### to the members of Baronsmead Venture Trust plc Independence ### Opinion on the nancial statements Following the recommendation of the audit committee, In our opinion the nancial statements: we were appointed by the Board of Directors on 28 May  give a true and fair view of the state of the Company’s 2021 to audit the nancial statements for the year ending affairs as at 30 September 2023 and of its loss for the 30 September 2021 and subsequent nancial periods. The year then ended; period of total uninterrupted engagement including retenders  have been properly prepared in accordance with United and reappointments is 3 years, covering the years ending Kingdom Generally Accepted Accounting Practice; and 30 September 2021 to 30 September 2023. We remain independent of the Company in accordance with the ethical  have been prepared in accordance with the requirements requirements that are relevant to our audit of the nancial of the Companies Act 2006. statements in the UK, including the FRC’s Ethical Standard as We have audited the nancial statements of Baronsmead applied to listed public interest entities, and we have fullled Venture Trust Plc (the ‘Company’) for the year ended our other ethical responsibilities in accordance with these 30September 2023 which comprise the income statement, requirements. The non‑audit services prohibited by that the balance sheet, the statement of changes in equity, standard were not provided to the Company. the statement of cash ows and notes to the nancial statements, including a summary of signicant accounting policies. The nancial reporting framework that has been ### Conclusions relating to going concern applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial In auditing the nancial statements, we have concluded Reporting Standard 102 The Financial Reporting Standard that the Directors’ use of the going concern basis of applicable in the UK and Republic of Ireland (United accounting in the preparation of the nancial statements Kingdom Generally Accepted Accounting Practice). is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included: ### Basis for opinion  Obtaining the VCT compliance reports prepared by management’s expert during the year and as at year end and We conducted our audit in accordance with International reviewing their calculations to check that the Company was Standards on Auditing (UK) (ISAs (UK)) and applicable law. meeting its requirements to retain VCT status. Our responsibilities under those standards are further  Consideration of the Company’s expected future described in the Auditor’s responsibilities for the audit of compliance with VCT legislation, the absence of bank the nancial statements section of our report. We believe debt, contingencies and commitments and any market or that the audit evidence we have obtained is sucient and reputational risks; appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the  Reviewing the forecasted cash ows that support the audit committee. 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 ination. Based on the work we have performed, we have not identied any material uncertainties relating to events or conditions that, individually or collectively, may cast signicant 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. 67Annual Report and Audited Financial Statements 2023 02 Directors’ report - Independent auditor’s report In relation to the Company’s reporting on how it has applied Our responsibilities and the responsibilities of the Directors the UK Corporate Governance Code, we have nothing with respect to going concern are described in the relevant material to add or draw attention to in relation to the sections of this report. Directors’ statement in the nancial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. ### Overview 2023 2022 Key audit matters Valuation of unquoted investments 4 4 Materiality Company nancial statements as a whole £3.39m (2022: £2.39m) based on 2% (2022: 1.5% of gross investments) of net assets adjusted for signicant 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 signicance in our audit of the nancial statements of the current period and include the most signicant assessed risks of material misstatement (whether or not due to fraud) that we identied, 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 We consider the valuation of Our unquoted equity investments valuation testing was risk investments investments to be the most based according to our preliminary analytical procedures, signicant audit area as there having regard to the subjectivity of the inputs to the (Notes 2.3, 3.3 of the is a high level of estimation valuations, the value of individual investments, the nature of nancial statements) uncertainty involved in the investment and the extent of the fair value movement. determining the unquoted investment valuations. For the unquoted portfolio we:  Considered whether the valuation methodology was There is an inherent risk of the most appropriate in the circumstances under the management override arising International Private Equity and Venture Capital Valuation from the unquoted investment (“IPEV”) Guidelines. Where there was a change in valuation valuations being prepared by methodology from prior year, we assessed whether the the Investment Manager, who change was appropriate; is remunerated based on the value of the net assets of the  Considered the change in market multiples and discount VCT, as shown in note 2.6. applied from prior year and if they were supported by the performance of the underlying investment; For these reasons we  Checked that the valuation was based on recent nancial treated the valuation of information and reviewed the arithmetic accuracy unquoted investments as a of the valuation. key audit matter. 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 Further, for the unquoted investments samples selected for investments detailed testing we: (continued)  Re‑performed the calculation of the investment valuation; (Notes 2.3, 3.3 of the  Challenged and corroborated the inputs to the valuation nancial statements) 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. Annual Report and Audited Financial Statements 2023 69 02 Directors’ report - Independent auditor’s report ### 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 inuence 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 identied 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 £3,390,000 £2,390,000 Basis for determining materiality 2% of net assets adjusted for 1.5% of gross investments signicant fundraising in the year. | Rationale for the benchmarkapplied In setting materiality, we have had | | In setting materiality, we have | | --- | --- | --- | | | regard to the nature and disposition | had regard to the nature and | | | of the investment portfolio. Given | disposition of the investment | | | that the VCT’s portfolio is highly | portfolio. Given that the VCT’s | | | weighted in listed equities and also | portfolio is comprised of unquoted | | | comprising unquoted investments | investments which would typically | | | which would typically have a wider | have a wider spread of reasonable | | | spread of reasonable alternative | alternative possible valuations, we | | | possible valuations, we have | have applied a percentage of 1.5% of | | | applied a percentage of 2% of net | gross investments. | assets adjusted for signicant 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. Performance materiality £2,540,000 £1,790,000 Basis for determining 75% of materiality performance materiality Rationale for the percentage The level of performance materiality applied was set after having considered applied for performance a number of factors including the expected total value of known and likely materiality 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 ### Other information We determined that for Revenue return before tax, a The directors are responsible for the other information. misstatement of less than materiality for the nancial The other information comprises the information included statements as a whole, could inuence users of the in the annual report and nancial statements other than nancial statements as it is a measure of the Company’s the nancial statements and our auditor’s report thereon. performance of income generated from its investments Our opinion on the nancial statements does not cover after expenses. As a result, we determined a lower testing the other information and, except to the extent otherwise threshold for those items impacting revenue return explicitly stated in our report, we do not express any form of of £210,000 (2022: £220,000) based on 5% of gross assurance conclusion thereon. Our responsibility is to read expenditure (2022: 5%). 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 Reporting threshold course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies We agreed with the Audit Committee that we would or apparent material misstatements, we are required report to them all individual audit differences in excess to determine whether this gives rise to a material of £210,000 (2022: £110,000). We also agreed to report misstatement in the nancial statements themselves. If, differences below this threshold that, in our view, based on the work we have performed, we conclude that warranted reporting on qualitative grounds. 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 specied 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  The Directors’ statement with regards to the appropriateness of adopting the longer-term viability going concern basis of accounting and any material uncertainties identied set out on page 47; 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 conrmation 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 71Annual Report and Audited Financial Statements 2023 02 Directors’ report - Independent auditor’s report ### Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report and In our opinion, based on the work undertaken in the course of the audit: Directors’ report  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 identied 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 have nothing to report in respect of the following matters in relation to which the we are required to Companies Act 2006 requires us to report to you if, in our opinion: report by exception  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 specied by law are not made; or  we have not received all the information and explanations we require for our audit. ### Responsibilities of Directors Auditor’s responsibilities for the audit ### of the nancial statements As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the Our objectives are to obtain reasonable assurance about preparation of the nancial statements and for being whether the nancial statements as a whole are free from satised that they give a true and fair view, and for such material misstatement, whether due to fraud or error, internal control as the Directors determine is necessary to and to issue an auditor’s report that includes our opinion. enable the preparation of nancial statements that are free Reasonable assurance is a high level of assurance, but is from material misstatement, whether due to fraud or error. not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement In preparing the nancial statements, the Directors are when it exists. Misstatements can arise from fraud or responsible for assessing the Company’s ability to continue error and are considered material if, individually or in the as a going concern, disclosing, as applicable, matters aggregate, they could reasonably be expected to inuence related to going concern and using the going concern basis the economic decisions of users taken on the basis of these of accounting unless the Directors either intend to liquidate nancial statements. the Company or to cease operations, or have no realistic alternative but to do so. 72 Annual Report and Audited Financial Statements 2023 02 Directors’ report - Independent auditor’s report Extent to which the audit was capable of Fraud detecting irregularities, including fraud We assessed the susceptibility of the nancial statement to Irregularities, including fraud, are instances of non‑ material misstatement including fraud. compliance with laws and regulations. We design Our risk assessment procedures included: procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of  Enquiry with management and those charged with irregularities, including fraud. The extent to which our governance and the Audit Committee regarding any procedures are capable of detecting irregularities, including known or suspected instances of fraud; fraud is detailed below:  Obtaining an understanding of the VCT policies and procedures relating to: Non-compliance with laws and regulations – Detecting and responding to the risks of fraud; and – Internal controls established to mitigate risks Based on: related to fraud.  Our understanding of the Company and the industry in which it operates;  Review of minutes of meeting of those charged with governance for any known or suspected  Discussion with management, those charged with instances of fraud; governance and the Audit Committee; and  Discussion amongst the engagement team as to how and  Obtaining and understanding of the Company’s policies where fraud might occur in the nancial statements; and and procedures regarding compliance with laws and regulations,  Considering performance incentive schemes and performance targets and the related nancial statement we considered the signicant laws and regulations to be areas impacted by these. the Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, industry Based on our risk assessment, we considered the areas practice represented by the SORP and updated in 2022 with most susceptible to fraud to be the valuation of unquoted consequential amendments and the applicable nancial investments, management override of controls and reporting framework. We also considered the Company’s misappropriation & completeness of cash. qualication as a VCT under UK tax legislation. Our procedures in respect of the above included: Our procedures in respect of the above included:  The procedures set out in the Key Audit  Agreement of the nancial statement disclosures to Matters section above; underlying supporting documentation;  Obtaining independent evidence to support the  Enquiries of management and those charged with ownership of investments; governance relating to the existence of any non‑  Recalculating investment management fees in total; compliance with laws and regulations;  Obtaining third party conrmations of all bank balances  Obtaining the VCT compliance reports prepared by and review other matters on conrmation letters management’s expert during the year and as at year such as security held, derivative nancial instruments end and reviewing their calculations to check that and facilities renewal and consider implications on the Company was meeting its requirements to retain audit approach; VCT status; and  Reviewing bank statements for one month before and  Reviewing minutes of meeting of those charged with after year end and identifying transactions greater governance throughout the period for instances of non‑ than 20% of performance materiality and obtaining compliance with laws and regulations. an understanding of the business rationale for these transactions. Agreeing transactions to supporting documentation; 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. 73Annual Report and Audited Financial Statements 2023 02 Directors’ report - Independent auditor’s report We also communicated relevant identied laws and ### Use of our report regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate This report is made solely to the Company’s members, competence and capabilities and remained alert to any as a body, in accordance with Chapter 3 of Part 16 of the indications of fraud or non‑compliance with laws and Companies Act 2006. Our audit work has been undertaken regulations throughout the audit. so that we might state to the Company’s members those matters we are required to state to them in an auditor’s Our audit procedures were designed to respond to risks report and for no other purpose. To the fullest extent of material misstatement in the nancial statements, permitted by law, we do not accept or assume responsibility recognising that the risk of not detecting a material to anyone other than the Company and the Company’s misstatement due to fraud is higher than the risk of members as a body, for our audit work, for this report, or for not detecting one resulting from error, as fraud may the opinions we have formed. 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 Vanessa Bradley regulations is from the events and transactions reected (Senior Statutory Auditor) in the nancial statements, the less likely we are to For and on behalf of BDO LLP, Statutory Auditor become aware of it. London, UK A further description of our responsibilities is available on 21 December 2023 the Financial Reporting Council’s website at: www.frc.org. BDO LLP is a limited liability partnership registered in uk/auditorsresponsibilities. This description forms part of England and Wales (with registered number OC305127). our auditor’s report. 74 Annual Report and Audited Financial Statements 2023 02 Directors’ report - Independent auditor’s report 75Annual Report and Audited Financial Statements 2023 ## Financial ## statements ## 03 03 Financial statements ## Income statement For the year ended 30September 2023 | | | | | Year ended | | | | | | Year ended | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 30September 2023 | | | | | | 30September 2022 | | | | | | Revenue | | | | Capital | Total | Revenue | | | | Capital | Total | | Notes | | £’000 | | | £’000 | £’000 | | £’000 | | | £’000 | £’000 | Losses on investments 2.3 – (3,428) (3,428) – (43,626) (43,626) Income 2.5 2,486 – 2,486 3,949 – 3,949 Investment management fee and performance fee 2.6 (885) (2,657) (3,542) (967) (2,903) (3,870) Other expenses 2.6 (659) – (659) (652) – (652) Prot/(loss) before taxation 942 (6,085) (5,143) 2,330 (46,529) (44,199) Taxation 2.9 – – – (229) 229 – Prot/(loss) for the year, being total comprehensive income for the year 942 (6,085) (5,143) 2,101 (46,300) (44,199) Return per ordinary share: Basic and diluted 2.2 0.28p (1.80p) (1.52p) 0.69p (15.25p) (14.56p) 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 prot 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. Annual Report and Audited Financial Statements 2023 77 03 Financial statements ## Statement of changes in equity For the year ended 30September 2023 Non-distributable reserves Distributable reserves Called-up | | share | | Share | Revaluation | | Capital | Revenue | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | capital | premium | | | reserve | reserve | reserve | | Total | | Notes | £’000 | | £’000 | | £’000 | £’000 | | £’000 | £’000 | At 1 October 2022 34,205 108,435 16,912 31,786 2,487 193,825 (Loss)/prot after taxation – – 3,445 (9,530) 942 (5,143) Net proceeds of share issues, share buybacks & sale of shares from treasury 3,957 20,346 – (2,801) – 21,502 Dividends paid 2.4 – – – (14,260) (1,015) (15,275) Cancellation of Share Premium – (128,781) – 128,781 – – Share premium cancellationcosts – – – (17) – (17) At 30 September 2023 38,162 – 20,357 133,959 2,414 194,892 For the year ended 30September 2022 Non‑distributable reserves Distributable reserves Called‑up | | share | | Share | Revaluation | | Capital | Revenue | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | capital | premium | | | reserve | reserve | reserve | | Total | | Notes | £’000 | | £’000 | | £’000 | £’000 | | £’000 | £’000 | At 1 October 2021 29,501 76,711 68,763 46,248 1,640 222,863 (Loss)/prot after taxation – – (51,851) 5,551 2,101 (44,199) Net proceeds of share issues, share buybacks & sale of shares from treasury 4,704 31,724 – (1,050) – 35,378 Dividends paid 2.4 – – – (18,963) (1,254) (20,217) At 30 September 2022 34,205 108,435 16,912 31,786 2,487 193,825 The notes on pages 81 to 97 form part of these nancial statements. 78 Annual Report and Audited Financial Statements 2023 03 Financial statements ## Balance sheet As at 30September 2023 Company Number: 03504214 | | | As at | | As at | | --- | --- | --- | --- | --- | | | 30September | | 30September | | | | | 2023 | | 2022 | | Notes | | £’000 | | £’000 | Fixed assets Investments 2.3 195,159 159,767 Current assets Debtors 2.7 208 131 Cash at bank and on deposit 680 35,051 888 35,182 Creditors (amounts falling due within one year) 2.8 (1,155) (1,124) Net current (liabilities)/assets (267) 34,058 Net assets 194,892 193,825 Capital and reserves Called‑up share capital 3.1 38,162 34,205 Share premium 3.2 – 108,435 Capital reserve 3.2 133,959 31,786 Revaluation reserve 3.2 20,357 16,912 Revenue reserve 3.2 2,414 2,487 Equity shareholders’ funds 194,892 193,825 Net asset value per share – Basic and diluted 2.1 55.44p 61.29p 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 Venture Trust plc on 21December 2023 and were signed on its behalf by: Fiona Miller Smith Chair Annual Report and Audited Financial Statements 2023 79 03 Financial statements ## Statement of cash ows For the year ended 30September 2023 | | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | --- | | 30September | | | 30September | | | | | | 2023 | | | 2022 | | | | £’000 | | | £’000 | Cash ows from operating activities Investment income received 1,760 3,604 Deposit interest received 86 17 Investment management fees paid (3,537) (5,967) Other cash payments (661) (635) Net cash outow from operating activities (2,352) (2,981) Cash ows from investing activities Purchases of investments (94,084) (32,128) Disposals of investments 55,827 37,841 Net cash (outow)/inow from investing activities (38,257) 5,713 Financing activities Gross proceeds of share issues 25,038 38,115 Gross proceeds from sale of shares from treasury 523 1,167 Gross cost of share buybacks (2,951) (2,500) Costs of share issues (1,083) (1,688) Costs of share buybacks (14) (11) Equity dividends paid (15,275) (20,217) Net cash inow from nancing activities 6,238 14,866 (Decrease)/increase in cash (34,371) 17,598 Reconciliation of net cash ow to movement in net cash (Decrease)/increase in cash (34,371) 17,598 Opening cash at bank and on deposit 35,051 17,453 Closing cash at bank and on deposit 680 35,051 Reconciliation of prot before taxation to net cash outow from operating activities Loss before taxation (5,143) (44,199) Losses on investments 3,428 43,626 Income reinvested (563) (290) Increase in debtors (77) (40) Increase/(decrease) in creditors 3 (2,078) Net cash outow from operating activities (2,352) (2,981) The notes on pages 81 to 97 form part of these nancial statements. 80 Annual Report and Audited Financial Statements 2023 03 Financial statements ## Notes to the nancial statements For the year ended 30September 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 it is reasonable to expect 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 sucient liquidity to meet both its contracted expenditure and its discretionary cash outows, including to invest in new opportunities as they arise. The Directors note that the Company’s third‑party suppliers are not experiencing any signicant operational diculties 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. Annual Report and Audited Financial Statements 2023 81 03 Financial statements - Notes to the nancial statements ### 2 Investments, performance and shareholder returns 2.1 Net asset value per share | | | Number of | | | | | Net asset value per | | | | | Net asset value | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | ordinary shares | | | | | | share attributable | | | | | attributable | | | | 30September | | | 30September | | | 30September | | | 30September | | 30September | | 30September | | | | | 2023 | | | 2022 | | | 2023 | | 2022 | | 2023 | | 2022 | | | number | | | number | | | | pence | | pence | | £’000 | | £’000 | Ordinary shares (basic) 351,534,507 316,218,166 55.44 61.29 194,892 193,825 2.2 Return per share | | Weighted average number | | | | | | | | Return per | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | of ordinary shares | | | | | | ordinary share Net prot after taxation | | | | | | | | | 30September | | | | 30September | | | 30September | | | 30September | | 30September | | 30September | | | | | | 2023 | | | 2022 | | | 2023 | | 2022 | | 2023 | | 2022 | | | | number | | | number | | | pence | | | pence | | £’000 | | £’000 | Revenue 337,263,955 303,530,368 0.28 0.69 942 2,101 Capital 337,263,955 303,530,368 (1.80) (15.25) (6,085) (46,300) Total (1.52) (14.56) (5,143) (44,199) 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 prot 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 guidelines (“IPEV Guidelines”). Judgements The key judgements in the fair valuation process are: i) The Manager’s determination of the appropriate application of the 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 signicant 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 signicantly 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 inuence 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 prot 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 classied 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. Annual Report and Audited Financial Statements 2023 83 03 Financial statements - Notes to the nancial statements | | As at | | As at | | --- | --- | --- | --- | | 30September | | 30September | | | | 2023 | | 2022 | | | £’000 | | £’000 | Level 1 Investments traded on AIM 60,384 56,819 Level 2 Collective investment vehicles 87,969 54,740 Investments listed on LSE – 24 Level 3 Unquoted investments 46,806 48,184 195,159 159,767 For the year ended 30September 2023 Level 1 Level 2 Level 3 Collective | Traded | Listed on | | investment | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | on AIM | | LSE | | vehicles | | Unquoted | | Total | | £’000 | | £’000 | | | £’000 | | £’000 | £’000 | Opening book cost 48,212 2,315 42,931 49,397 142,855 Opening unrealised appreciation/(depreciation) 8,607 (2,291) 11,809 (1,213) 16,912 Opening fair value 56,819 24 54,740 48,184 159,767 Movement in the year: Transfer between levels (1,410) – – 1,410 – Purchases at cost 2,136 – 84,204 8,307 94,647 Sale – proceeds (541) – (53,240) (2,046) (55,827) Sale – realised gains/(losses) on sales 123 (24) – 95 194 Unrealised gains/(losses) realised during the year 384 (2,291) – (5,160) (7,067) Increase/(decrease) in unrealised appreciation 2,873 2,291 2,265 (3,984) 3,445 Closing fair Value 60,384 – 87,969 46,806 195,159 Closing book cost 48,904 – 73,895 52,003 174,802 Closing unrealised appreciation/(depreciation) 11,480 – 14,074 (5,197) 20,357 Closing fair Value 60,384 – 87,969 46,806 195,159 Equity shares 60,384 – – 6,834 67,218 Preference shares – – – 29,975 29,975 Loan notes – – – 9,997 9,997 Collective investment vehicles – – 87,969 – 87,969 Closing fair Value 60,384 – 87,969 46,806 195,159 84 Annual Report and Audited Financial Statements 2023 03 Financial statements - Notes to the nancial statements For the year ended 30September 2022 Level 1 Level 2 Level 3 Collective | Traded | Listed on | | investment | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | on AIM | | LSE | | vehicles | | Unquoted | | Total | | £’000 | | £’000 | | | £’000 | | £’000 | £’000 | Opening book cost 47,079 2,315 51,111 39,548 140,053 Opening unrealised appreciation/(depreciation) 30,301 (2,291) 28,289 12,464 68,763 Opening fair value 77,380 24 79,400 52,012 208,816 Movement in the year: Purchases at cost 4,577 – 10,940 16,901 32,418 Sale – proceeds (11,235) – (19,120) (7,486) (37,841) Sale – realised gains/(losses) on sales 1,964 – – (4,839) (2,875) Unrealised gains realised during the year 5,827 – – 5,273 11,100 Decrease in unrealised appreciation (21,694) – (16,480) (13,677) (51,851) Closing fair value 56,819 24 54,740 48,184 159,767 Closing book cost 48,212 2,315 42,931 49,397 142,855 Closing unrealised appreciation/(depreciation) 8,607 (2,291) 11,809 (1,213) 16,912 Closing fair value 56,819 24 54,740 48,184 159,767 Equity shares 56,819 24 – 26,514 83,357 Preference shares – – – 15,393 15,393 Loan notes – – – 6,277 6,277 Collective investment vehicles – – 54,740 – 54,740 Closing fair value 56,819 24 54,740 48,184 159,767 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 £2.6million (2022: £18.7million) from investments sold in the year, excluding liquidity funds redeemed of £53.2million (2022: £19.1million). The book cost of these investments when they were purchased was £9.5million (2022: £10.5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 | | | | | | Year ended | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 30September 2023 | | | | | | 30September 2022 | | | | | Revenue | | | | Capital | Total | Revenue | | | | Capital | Total | | | £’000 | | | £’000 | £’000 | | £’000 | | | £’000 | £’000 | Amounts recognised in the year: For the year ended 30 September 2023 Interim dividend of 1.75p per ordinary share paid on 8 September 2023 352 5,802 6,154 – – – For the year ended 30 September 2022 Final dividend of 2.75p per ordinary share paid on 3 March 2023 663 8,458 9,121 – – – Interim dividend of 3.0p per ordinary share paid on 9 September 2022 – – – 947 8,528 9,475 For the year ended 30 September 2021 Final dividend of 3.5p per ordinary share paid on 4 March 2022 – – – 307 10,435 10,742 1,015 14,260 15,275 1,254 18,963 20,217 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 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 reect 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 for 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 | | | | | | Year ended | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 30September 2023 | | | | | | 30September 2022 | | | | | | Quoted | | Unquoted | | | | Quoted | | Unquoted | | | | securities | | | securities | | Total | securities | | | securities | | Total | | | £’000 | | | £’000 | £’000 | | £’000 | | | £’000 | £’000 | Income from investments Dividend income 1,276 – 1,276 951 173 1,124 Interest income 741 382 1,123 70 2,729 2,799 2,017 382 2,399 1,021 2,902 3,923 Other income Deposit interest 87 26 Total income 2,486 3,949 All investments have been included at fair value through prot or loss on initial recognition, therefore all investment income arises on investments at fair value through prot 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 capital. | | | | Year ended | | | | | | Year ended | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 30September 2023 | | | | | | 30September 2022 | | | | | Revenue | | | | Capital | Total | Revenue | | | | Capital | Total | | | £’000 | | | £’000 | £’000 | | £’000 | | | £’000 | £’000 | Investment management fee 885 2,657 3,542 967 2,903 3,870 Performance fee – – – – – – 885 2,657 3,542 967 2,903 3,870 The management agreement may be terminated by either party giving 12 months’ notice of termination. The Manager, Gresham House Asset Management Ltd, receives a fee of 2 per cent per annum of the net assets of the Company, calculated and payable on a quarterly basis. The collective investment vehicles, Micro Cap, Multi Cap 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 if at the end of any calculation period, the total return on shareholders’ funds exceeds the threshold of the higher of 4 per cent or base rate plus 2 per cent on shareholders’ funds (calculated on a compound 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 shareholders’ funds at the end of the period. Amounts payable to the Manager at the year end are disclosed in note 2.8. Annual Report and Audited Financial Statements 2023 87 03 Financial statements - Notes to the nancial statements Other expenses | | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | --- | | 30September | | | 30September | | | | | | 2023 | | | 2022 | | | | £’000 | | | £’000 | Directors’ fees 121 131 Secretarial and accounting fees paid to the Manager 155 136 Remuneration of the auditors and their associates 61 53 Other 322 332 659 652 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 | | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | --- | | 30 September | | | 30 September | | | | | | 2023 | | | 2022 | | | | £’000 | | | £’000 | Prepayments and accrued income 208 131 208 131 2.8 Creditors (amounts falling due within one year) | | Year ended | | | Year ended | | | --- | --- | --- | --- | --- | --- | | 30 September | | | 30 September | | | | | | 2023 | | | 2022 | | | | £’000 | | | £’000 | Management, secretarial and accounting fees due 1,019 1,009 Share premium cancellation costs 17 – Amounts due to brokers 11 1 Other creditors 108 114 1,155 1,124 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 prots 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 prots from which the future reversal of the underlying timing differences can be deducted. A reconciliation of the tax (credit)/charge to the prot before taxation is shown below: | | | | Year ended | | | | | | Year ended | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 30September 2023 | | | | | | 30September 2022 | | | | | Revenue | | | | Capital | Total | Revenue | | | | Capital | Total | | | £’000 | | | £’000 | £’000 | | £’000 | | | £’000 | £’000 | Prot/(loss) before taxation 942 (6,085) (5,143) 2,330 (46,529) (44,199) Corporation tax at a rate of 22.0 per cent (2022: 19.0 per cent) 207 (1,338) (1,131) 443 (8,841) (8,398) Effect of: Non‑taxable losses – 754 754 – 8,289 8,289 Non‑taxable dividend income (281) – (281) (158) – (158) Losses carried forward 74 584 658 (56) 323 267 Tax charge/(credit) for the year – – – 229 (229) – At 30September 2023, the Company had tax losses of £21,849,853 (2022: £18,860,366). A deferred tax asset of £5,462,463 (2022: £4,715,100) has not been recognised because the Company is not expected to generate taxable income in a future period in excess of the deductible expenses of that future period. 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. Annual Report and Audited Financial Statements 2023 89 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 30 September 2023 £’000 342,045,641 ordinary shares of 10p each listed at 30 September 2022 34,205 39,575,616 ordinary shares of 10p each issued during the year 3,957 381,621,257 ordinary shares of 10p each listed at 30 September 2023 38,162 25,827,475 ordinary shares of 10p each held in treasury at 30 September 2022 (2,583) 5,196,571 ordinary shares of 10p each repurchased during the year and held in treasury (520) 937,296 ordinary shares of 10p each sold from treasury during the year 94 30,086,750 ordinary shares of 10p each held in treasury at 30 September 2023 (3,009) 351,534,507 ordinary shares of 10p each in circulation* at 30 September 2023 35,153 For the year ended 30September 2022 £’000 295,007,034 ordinary shares of 10p each listed at 30September 2021 29,501 47,038,607 ordinary shares of 10p each issued during the year 4,704 342,045,641 ordinary shares of 10p each listed at 30September 2022 34,205 24,548,754 ordinary shares of 10p each held in treasury at 30September 2021 (2,455) 3,074,721 ordinary shares of 10p each repurchased during the year and held in treasury (307) 1,796,000 ordinary shares of 10p each sold from treasury during the year 179 25,827,475 ordinary shares of 10p each held in treasury at 30September 2022 (2,583) 316,218,166 ordinary shares of 10p each in circulation* at 30September 2022 31,622 * Carrying one vote each. The 39,575,616 (2022: 47,038,607) ordinary shares were issued at an average price of 63.268p (2022: 71.030p). During the year, the Company bought back 5,196,571 (2022: 3,074,721) ordinary shares and sold from treasury 937,296 (2022: 1,796,000) shares, representing 1.3 (2022: 0.5) per cent of the ordinary shares in circulation at the beginning of the nancial year. Treasury shares When the Company reacquires its own shares, they are held as treasury shares and not cancelled. Shareholders have authorised the Board to sell 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 30September 2023 Distributable reserves Non-distributable reserves | Capital | Revenue | | | | Share | Revaluation | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | reserve | reserve | | Total | premium | | | reserve* | Total | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | £’000 | At 1 October 2022 31,786 2,487 34,273 108,435 16,912 125,347 Gross proceeds of share issues – – – 21,081 – 21,081 Cancellation of Share Premium 128,781 – 128,781 (128,781) – (128,781) Purchase of shares for treasury (2,962) – (2,962) – – – Sale of shares from treasury 523 – 523 – – – Expenses of share issues and buybacks (362) – (362) (735) – (735) Share premium cancellation costs (17) – (17) – – – Reallocation of prior year unrealised losses/gains (7,067) – (7,067) – 7,067 7,067 # Realised gain on disposal ofinvestments 194 – 194 – – – # Net decrease in value ofinvestments – – – – (3,622) (3,622) # Management fee charged to capital (2,657) – (2,657) – – – # Taxation relief from capital expenses – – – – – – # Prot after taxation – 942 942 – – – Dividends paid in the year (14,260) (1,015) (15,275) – – – At 30 September 2023 133,959 2,414 136,373 – 20,357 20,357 Annual Report and Audited Financial Statements 2023 91 03 Financial statements - Notes to the nancial statements For the year ended 30September 2022 Distributable reserves Non‑distributable reserves | Capital | Revenue | | | | Share | Revaluation | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | reserve | reserve | | Total | premium | | | reserve* | Total | | £’000 | | £’000 | £’000 | | £’000 | | £’000 | £’000 | At 1 October 2021 46,248 1,640 47,888 76,711 68,763 145,474 Gross proceeds of share issues – – – 33,412 – 33,412 Purchase of shares for treasury (2,206) – (2,206) – – – Sale of shares from treasury 1,167 – 1,167 – – – Expenses of share issues and buybacks (11) – (11) (1,688) – (1,688) Reallocation of prior year unrealised gains/losses 11,100 – 11,100 – (11,100) (11,100) Realised losses on disposal of # investments (2,875) – (2,875) – – – # Net decrease in value of investments – – – – (40,751) (40,751) # Management fee charged to capital (2,903) – (2,903) – – – # Taxation relief from capital expenses 229 – 229 – – – # Prot after taxation – 2,101 2,101 – – – Dividends paid in the year (18,963) (1,254) (20,217) – – – At 30 September 2022 31,786 2,487 34,273 108,435 16,912 125,347 * Changes in fair value of investments are dealt with in this reserve. # The total of these items is £5,143k (2022: £44,199k), 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 Audited Annual Report and Financial Statements of the Strategic Report. 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 inuenced by the estimates, assumptions and judgements made in the fair valuation process (see 2.3 above). Price risk sensitivity The fair valuation of unquoted investments is inuenced by the estimates, assumptions and judgements made in the fair valuation process (see note 2.3 on pages 82 and 85). 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. Annual Report and Audited Financial Statements 2023 93 03 Financial statements - Notes to the nancial statements As at 30September 2023 | | | Fair | | | | Impact | | --- | --- | --- | --- | --- | --- | --- | | | | Value | Sensitivity | | Impact | % of net | | Security Valuation basis Key variable inputs | £’000s | | | % | £’000s | assets | Rebased cost Latest funding round price 3,438 +/–10% 344 +/–0.2 Earnings multiple Estimated sustainable earnings Selection of comparable companies Unquoted Application of illiquidity discount Probability estimation of 42,397 +/–20% 8,479 +/–4.4 Liquidation event* Offer less 10% Current offer price received for sale – +/–10% – – Discount applied to offer * A liquidation event is typically a company sale or initial public offering (IPO). A sensitivity has also 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 £60.4million (2022: £56.8million), reecting the level of volatility in nancial markets in 2023 and 2022. A movement of +/–20 per cent would cause an increase or decrease of £12.1million to the fair value of the quoted AIM investments (2022: £11.4million). A sensitivity has also been performed for the Company’s investments into the Micro Cap, Multi Cap and Small Cap funds, which are valued at the latest share price set by the market. A sensitivity of +/– 20 per cent has been applied to the fair value of £67.9million (2022: £48.7million), reecting the level of volatility in nancial markets in 2023 and 2022. A movement of +/– 20 per cent would cause an increase or decrease of £13.6million to the fair value of these investments (2022: £9.7million). As at 30September 2022 | | | Fair | | | | Impact | | --- | --- | --- | --- | --- | --- | --- | | | | Value | Sensitivity | | Impact | % of net | | Security Valuation basis Key variable inputs | £’000s | | | % | £’000s | assets | Rebased cost Latest funding round price 4,245 +/–10% 425 +/–0.2 Earnings multiple Estimated sustainable earnings Selection of comparable companies Unquoted Application of illiquidity discount Probability estimation of 43,939 +/–20% 8,788 +/–4.5 Liquidation event* Offer less 10% Current offer price received for sale – +/–10% – – Discount applied to offer * 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 protable 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, reecting 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. Annual Report and Audited Financial Statements 2023 95 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 30September 2023 As at 30September 2022 | | | | | Weighted | | | | | | Weighted | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Weighted | | | average | | | Weighted | | | average | | | | average | | | time for | | | average | | | time for | | | Total | interest | | which rate | | | Total | interest | | which rate | | | investment | | | rate | | is xed | investment | | | rate | | is xed | | | £’000 | | % | | Years | | £’000 | | % | | Years | Fixed rate loan note securities 9,997 10.85 4.58 6,277 8.76 4.16 Floating rate sterling liquidity funds 20,031 – – 6,060 – – Cash at bank and on deposit 680 – – 35,051 – – 30,708 47,388 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 signicantly affect net assets attributable to the Company’s shareholders and total prots, due to 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 | | As at | | --- | --- | --- | --- | | 30September | | 30September | | | | 2023 | | 2022 | | | £’000 | | £’000 | Cash at bank and on deposit 680 35,051 Interest, dividends and other receivables 208 131 888 35,182 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 signicantly the Manager will seek to move the cash holdings to another bank. There were no signicant concentrations of credit risk to counterparties at 30September 2023 or 30September 2022. No individual investment exceeded 10.6 per cent of the net assets attributable to the Company’s shareholders at 30September 2023 (2022: 7.8 per cent). 96 Annual Report and Audited Financial Statements 2023 03 Financial statements - Notes to the Financial statements ## Liquidity risk The Company's financial instruments include investments in unquoted companies which are not traded in an organised public market, all of which generally may be illiquid. AIM traded equity investments also carry a degree of liquidity risk. As a result, the Company may not be able to liquidate quickly some of its investments in these instruments at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer. The Company's liquidity risk is managed on an ongoing basis by the Manager. The Company's overall liquidity risks are monitored on a quarterly basis by the Board. The Company is a closed-end fund, assets do not need to be liquidated to meet redemptions, and sufficient liquidity is maintained to meet obligations as they fall due. At the year end the Company had financial liabilities of £1,155,000 (2022: £1,124,000). All financial liabilities were due within three months and were undiscounted (2022: same). The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. At 30 September 2023, these investments were valued at £20,711,000 (2022: £41,111,000). ## 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 £185,000 (2022: £283,000) of advisory fees, £369,000 (2022: £462,000) of directors' fees for services provided to companies in the investment portfolio and incurred abort costs of £5,000 (2022: £7,000) with respect to investments attributable to BVT. 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 financial statements: - The 31 October 2023 NAV of 53.3p was announced on 6 November 2023 and the 30 November 2023 NAV of 55.0p 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 significantly 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 1.8 million Ordinary Shares of 10.0p on 12 December 2023 at a price of 52.3p 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 £2.3 million. - One new investment, into Ozone API, completed in December 2023, totalling £1.9 million. - Realised Gresham House plc ordinary shares in December 2023, receiving proceeds of £0.4 million and making a return of 3.9x cost. Annual Report and Audited Financial Statements 2023 97 ## Appendices ## 04 04 Appendices ## Investment policy ### The Company’s investment policy is to invest Co-investment ### primarily in a diverse portfolio of UK growth The Company typically invests alongside Baronsmead ### businesses, whether unquoted or traded on Second Venture Trust plc in unquoted and quoted ### AIM, which are substantially based in the UK, companies sourced by the Manager. Following the Manager’s acquisition of the Mobeus VCTs in September ### although many of these investees may have 2021, the Company now also co‑invests alongside ### some trade overseas. the Mobeus VCTs in new unquoted VCT qualifying investments. All new qualifying AIM dealow will continue Investments are made selectively across a range of to be exclusively allocated between the Company and sectors in companies that have the potential to grow and Baronsmead Second Venture Trust plc. enhance their value and which will diversify the portfolio. The Manager’s staff invest in unquoted investments The Company will make investments in accordance with alongside the Company. This arrangement is in line with the prevailing VCT legislation which places restrictions, current practice of private equity houses and its objective inter alia, on the type and age of investee companies as is to attract, recruit, retain and incentivise the Manager’s well as the maximum amount of investment that such team and is made on terms which align the interests of investee companies may receive. shareholders and the Manager. ### Investment securities Borrowing powers The Company invests in a range of securities including, but Should it be required, the Company’s policy is to use not limited to, ordinary and preference shares, loan stocks, borrowing for short term liquidity purposes only up to a convertible securities, and permitted non qualifying maximum of 25 per cent of the Company’s gross assets, as investments as well as cash. Unquoted investments are permitted by the Company’s Articles of Association. 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 prots to be realised on the sale of investments. Annual Report and Audited Financial Statements 2023 99 04 Appendices ## Dividend history in last ten years 20 18 16 14 12 10 8 6 4 2 0 30/09/14 30/09/15 30/09/2230/09/2130/09/2030/09/1930/09/1830/09/1730/09/16 30/09/23* Dividend history per ordinary share (p) *Includes proposed nal dividend of 2.5p Source: Gresham House Asset Management Ltd Pence 100 Annual Report and Audited Financial Statements 2023 04 Appendices ## Dividends paid since launch | Year ended | Ordinary share | | | | | | --- | --- | --- | --- | --- | --- | | | Revenue (p) | Capital (p) | Dividend history per ordinary share (p) | Cumulative dividends (p) | Average total dividend per ordinary share (p) | | 6mths to 30/09/1998 | 1.00 | 0.00 | 1.00 | 1.00 | 0.50 | | 30/09/99 | 3.80 | 0.00 | 3.80 | 4.80 | 3.20 | | 30/09/00 | 3.60 | 0.00 | 3.60 | 8.40 | 3.36 | | 30/09/01 | 3.50 | 0.00 | 3.50 | 11.90 | 3.40 | | 30/09/02 | 2.50 | 0.00 | 2.50 | 14.40 | 3.20 | | 30/09/03 | 1.70 | 10.20 | 11.90 | 26.30 | 4.78 | | 30/09/04 | 1.40 | 3.50 | 4.90 | 31.20 | 4.80 | | 30/09/05 | 2.50 | 7.70 | 10.20 | 41.40 | 5.52 | | 30/09/06 | 1.80 | 9.20 | 11.00 | 52.40 | 6.16 | | 30/09/07 | 2.10 | 6.40 | 8.50 | 60.90 | 6.41 | | 30/09/08 | 2.80 | 4.20 | 7.00 | 67.90 | 6.47 | | 30/09/09 | 0.70 | 4.80 | 5.50 | 73.40 | 6.38 | | 30/09/10 | 1.50 | 4.00 | 5.50 | 78.90 | 6.31 | | 30/09/11 | 2.65 | 4.35 | 7.00 | 85.90 | 6.36 | | 30/09/12 | 0.50 | 7.00 | 7.50 | 93.40 | 6.44 | | 30/09/13 | 2.85 | 6.65 | 9.50 | 102.90 | 6.64 | | 30/09/14 | 1.40 | 11.10 | 12.50 | 115.40 | 6.99 | | 30/09/15 | 1.30 | 5.20 | 6.50 | 121.90 | 6.97 | | 30/09/16 | 0.27 | 18.23 | 18.50 | 140.40 | 7.59 | | 30/09/17 | 0.68 | 5.82 | 6.50 | 146.90 | 7.53 | | 30/09/18 | 0.15 | 7.35 | 7.50 | 154.40 | 7.53 | | 30/09/19 | 0.75 | 5.75 | 6.50 | 160.90 | 7.48 | | 30/09/20 | 0.70 | 5.80 | 6.50 | 167.40 | 7.44 | | 30/09/21 | 0.40 | 6.10 | 6.50 | 173.90 | 7.40 | | 30/09/22 | 0.50 | 5.25 | 5.75 | 179.65 | 7.33 | | **30/09/2023*** | **0.20** | **4.05** | **4.25** | **183.90** | **7.21** | \* Includes proposed final dividend of 2.5p. Estimated revenue and capital split based on the number of shares at 30 September 2023. Annual Report and Audited Financial Statements 2023 101 04 Appendices ## Performance record since launch | Year end | Total net assets (£mn) | Ordinary share | | | | | --- | --- | --- | --- | --- | --- | | | | NAV per share (p) | Mid share price (p) | NAV TR* per share (p) | Ongoing charges (%)^{1} | | 31/03/99 | 9.50 | 95.65 | 85.00 | 104.44 | 2.90 | | 31/03/00 | 31.00 | 119.59 | 125.00 | 134.62 | 3.40 | | 31/03/01 | 45.00 | 112.30 | 125.00 | 130.66 | 3.10 | | 31/03/02 | 41.20 | 100.54 | 92.50 | 120.15 | 2.70 | | 31/03/03 | 36.70 | 89.65 | 80.00 | 115.49 | 2.70 | | 31/03/04 | 41.10 | 100.63 | 90.00 | 141.80 | 2.70 | | 31/03/05 | 69.60 | 116.92 | 100.50 | 168.70 | 2.70 | | 31/03/06 | 69.60 | 114.62 | 100.50 | 190.51 | 2.90 | | 30/09/07 | 68.70 | 112.19 | 101.00 | 209.62 | 3.00 | | 30/09/08 | 54.80 | 91.68 | 84.50 | 184.02 | 2.85 | | 30/09/09 | 61.22 | 89.06 | 77.50 | 183.81 | 2.66 | | 30/09/10 | 63.67 | 94.79 | 81.25 | 208.25 | 2.58 | | 30/09/11 | 65.00 | 95.15 | 86.25 | 231.26 | 2.44 | | 30/09/12 | 72.43 | 101.10 | 90.00 | 252.04 | 2.49 | | 30/09/13 | 75.79 | 100.63 | 94.25 | 288.19 | 2.49 | | 30/09/14 | 83.10 | 98.62 | 93.25 | 318.80 | 2.39 | | 30/09/15 | 85.10 | 102.56 | 95.38 | 353.05 | 2.46 | | 30/09/16 | 150.60 | 87.09 | 82.38 | 363.36 | 2.30 | | 30/09/17 | 159.01 | 91.90 | 87.00 | 396.46 | 2.28 | | 30/09/18 | 175.55 | 91.47 | 86.75 | 423.65 | 2.20 | | 30/09/19 | 151.07 | 75.05 | 72.50 | 382.41 | 2.21 | | 30/09/20 | 164.83 | 71.35 | 67.50 | 396.69 | 2.20 | | 30/09/21 | 222.86 | 82.40 | 79.50 | 496.19 | 2.20 | | 30/09/22 | 193.83 | 61.29 | 61.50 | 405.23 | 2.06 | | **30/09/23** | **194.89** | **55.44** | **52.50** | **395.63** | **2.09** | \* Net asset value total return (Gross dividends reinvested) rebased to 100p. Source: Gresham House Asset Management Ltd. $^{1}$ Figures from 30 September 2012 onwards are based on the AIC guidelines for that calculation of ongoing charges. 102 Annual Report and Audited Financial Statements 2023 04 Appendices ## Cash returned to shareholders since launch 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 (%) | | --- | --- | --- | --- | --- | --- | | 1998 (Apr) | 100.00 | 20.00 | 80.00 | 183.90 | 203.9 | | 1999 (May) | 102.00 | 20.40 | 81.60 | 180.40 | 196.9 | | 2000 (Feb) | 137.00 | 27.40 | 109.60 | 177.20 | 149.3 | | 2000 (Mar) | 130.00 | 26.00 | 104.00 | 177.20 | 156.3 | | 2004 (Oct) – C Shares^{1} | 100.00 | 40.00 | 60.00 | 132.55 | 172.4 | | 2009 (Apr) | 91.60 | 27.48 | 64.12 | 116.00 | 156.6 | | 2012 (Dec) | 111.80 | 33.54 | 78.26 | 90.50 | 110.9 | | 2014 (Mar) | 103.80 | 31.14 | 72.66 | 73.00 | 100.3 | | 2016 (Feb) | 102.80 | 30.84 | 71.96 | 58.50 | 86.9 | | 2017 (Oct) | 94.76 | 28.43 | 66.33 | 40.50 | 72.7 | | 2019 (Feb) | 84.20 | 25.26 | 58.94 | 34.00 | 70.4 | | 2019 (Nov) | 76.80 | 23.04 | 53.76 | 26.50 | 64.5 | | 2020 (Jan) | 82.40 | 24.72 | 57.68 | 26.50 | 62.2 | | 2020 (Feb) | 80.10 | 24.03 | 56.07 | 23.00 | 58.7 | | 2020 (Mar) | 63.80 | 19.14 | 44.66 | 23.00 | 66.1 | | 2020 (Nov) | 75.20 | 22.56 | 52.64 | 20.00 | 56.6 | | 2020 (Dec) | 78.00 | 23.40 | 54.60 | 20.00 | 55.6 | | 2021 (Jan) | 81.30 | 24.39 | 56.91 | 20.00 | 54.6 | | 2021 (Feb) | 78.80 | 23.64 | 55.16 | 16.50 | 50.9 | | 2021 (Mar) | 80.90 | 24.27 | 56.63 | 16.50 | 50.4 | | 2021 (Dec) | 83.10 | 24.93 | 58.17 | 13.50 | 46.2 | | 2022 (Jan) | 82.40 | 24.72 | 57.68 | 13.50 | 46.4 | | 2022 (Mar) | 72.60 | 21.78 | 50.82 | 10.00 | 43.8 | | 2023 (Jan)* | 64.25^{1} | 19.28 | 44.97 | 7.00 | 40.9 | | 2023 (Mar)* | 62.64^{2} | 18.79 | 43.85 | 4.25 | 36.8 | | 2023 (Apr)* | 60.26^{3} | 18.08 | 42.18 | 4.25 | 37.1 | * Includes proposed final dividend of 2.5p. $^{1}$ C Share dividend calculated using conversion ratio of 0.9657 which is the rate the C shares were converted into ordinary shares. * 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 63.8p and 67.2p. 2. Average effective offer price based on allotment prices between 61.5p and 64.5p. 3. Average effective offer price based on allotment prices between 58.9p and 61.8p. Annual Report and Audited Financial Statements 2023 103 04 Appendices ## Full investment portfolio % of equity | | | | | 30September | | | 30September | | | | | held by | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Original | Accounting | | | | 2023 | | | 2022 | | Baronsmead | | % of equity | | | | | book cost | † book cost | | † | fair value | | | fair value | | % of net | | Venture | | held by | | | Company Sector | £’000 | | £’000 | | | £’000 | | | £’000 | assets | | Trust plc | all funds | | # | Unquoted Patchworks Integration Ltd Technology 4,223 4,223 5,567 3,442 2.9 10.0 23.8 eConsult Health Ltd Healthcare & education 3,600 3,600 4,916 4,797 2.5 4.8 11.4 Airnity Ltd Healthcare & education 3,311 3,311 4,357 3,698 2.2 8.6 20.1 Popsa Holdings Ltd Technology 3,120 3,120 3,120 3,120 1.6 3.4 8.1 Clarilis Ltd Technology 1,679 1,679 2,514 2,514 1.3 7.0 16.7 Scurri Web Services Ltd Technology 2,033 2,033 2,411 2,275 1.2 6.1 14.7 Revlifter Ltd Technology 1,438 1,438 1,899 1,725 1.0 5.7 13.5 TravelLocal Ltd Consumer markets 1,879 1,879 1,879 919 1.0 4.7 10.9 Fu3e Ltd Technology 1,680 1,680 1,847 1,713 0.9 12.5 29.7 SecureCloud+ Ltd Technology 700 700 1,688 1,314 0.9 7.8 16.6 Panthera Biopartners Ltd Healthcare & education 3,081 3,081 1,644 2,746 0.8 11.3 26.7 Orri Ltd Healthcare & education 1,019 1,019 1,410 792 0.7 5.7 28.4 IWP Holdings Ltd Business services 1,407 1,407 1,339 2,724 0.7 3.5 8.5 Metrion Bioscience Ltd Healthcare & education 1,057 1,057 1,283 2,088 0.7 11.3 27.4 Proximity Insight Holdings Ltd Technology 1,148 1,148 1,148 1,148 0.6 4.1 20.4 Pointr Ltd Technology 466 466 1,001 1,054 0.5 2.4 5.1 Bidnamic Technology 949 949 944 944 0.5 1.9 9.1 Counting Ltd Business services 940 940 936 936 0.5 2.2 5.3 Cognassist UK Ltd Healthcare & education 896 896 933 – 0.5 4.4 22.2 Focal Point Positioning Ltd Technology 905 905 905 905 0.5 1.0 4.9 Dayrize B.V. Technology 757 757 757 – 0.4 5.9 31.3 Mable Therapy Ltd Healthcare & education 670 670 670 – 0.3 6.6 34.3 Branchspace Ltd Technology 659 659 659 – 0.3 4.9 25.5 Tribe Digital Holdings Ltd Technology 1,198 1,198 495 640 0.2 5.4 11.5 CISIV Ltd Technology 700 700 475 879 0.2 7.2 15.3 Connect Earth Ltd Business services 447 447 447 – 0.2 2.9 14.6 SilkFred Ltd Consumer markets 790 790 324 771 0.2 2.3 5.1 Rocksh Group Ltd Consumer markets 700 700 166 329 0.1 5.8 12.5 Yappy Ltd Consumer markets 1,786 1,786 102 2,307 0.1 13.2 31.9 Armstrong Craven Ltd Business services 543 922 – 1,485 0.0 8.4 18.7 Custom Materials Ltd Technology 2,530 2,530 – 530 0.0 12.4 27.6 Equipsme (Holdings) Ltd Business services 842 842 – – 0.0 5.7 12.1 Funding Xchange Ltd Business services 705 705 – – 0.0 1.8 4.4 Munnypot Ltd Technology 460 460 – 460 0.0 1.2 2.7 Samuel Knight International Ltd Business services 705 705 – – 0.0 9.8 23.8 49,023 49,402 45,836 23.5 104 Annual Report and Audited Financial Statements 2023 04 Appendices - Full investment portfolio % of equity | | | | | 30September | | | 30September | | | | | held by | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Original | Accounting | | | | 2023 | | | 2022 | | Baronsmead | | % of equity | | | | | book cost | † book cost | | † | fair value | | | fair value | | % of net | | Venture | | held by | | | Company Sector | £’000 | | £’000 | | | £’000 | | | £’000 | assets | | Trust plc | all funds | | # | Delisted (previously AIM) Deepverge plc Healthcare & education 1,410 1,410 – 376 0.0 0.6 1.3 MXC Capital Ltd Business services 197 231 – – 0.0 0.3 0.6 1,607 1,641 – – – – – Total unquoted 50,630 51,043 45,836 23.5 AIM Cerillion plc Technology 1,198 1,198 20,657 15,083 10.6 5.3 11.9 Netcall plc Technology 1,738 3,246 8,319 7,130 4.3 6.2 25.1 IDOX plc Technology 614 614 4,073 4,137 2.1 1.4 4.7 Bioventix plc Healthcare & education 253 669 3,662 3,180 1.9 1.8 9.6 Diaceutics plc Healthcare & education 1,410 1,410 1,911 1,484 1.0 2.2 12.8 Property Franchise Group plc Consumer markets 686 806 1,852 1,887 1.0 2.1 14.5 ‡ Crossword Cybersecurity plc Technology 3,104 3,104 1,723 1,674 0.9 8.9 18.6 PCI–PAL plc Technology 1,101 1,101 1,802 1,480 0.9 4.9 10.9 Belvoir Group plc Consumer markets 752 671 1,335 1,304 0.7 1.7 13.6 Inspired plc Business services 574 1,542 1,296 2,007 0.7 1.8 29.8 Begbies Traynor Group plc Business services 433 474 1,215 1,516 0.6 0.7 3.9 hVIVO plc Healthcare & education 1,180 1,245 1,166 589 0.6 0.9 1.9 Anpario plc Healthcare & education 304 768 1,144 1,804 0.6 2.2 7.0 Oberon Investments Group plc Business services 1,267 1,267 848 406 0.4 4.7 9.9 Tan Delta Systems plc Business services 918 918 848 – 0.4 4.8 9.8 Access Intelligence plc Business services 586 586 834 1,381 0.4 1.1 7.3 Vianet Group plc Business services 1,292 1,144 777 528 0.4 3.5 17.2 SEEEN plc Technology 2,019 2,019 730 219 0.4 14.2 29.8 SysGroup plc Technology 1,292 1,310 621 394 0.3 4.2 26.6 Beeks Financial Cloud Group plc Technology 337 337 594 925 0.3 1.0 2.3 One Media iP Group plc Technology 825 778 593 754 0.3 4.8 10.8 Eden Research plc Business services 1,125 1,125 564 589 0.3 3.1 6.9 Driver Group plc Business services 1,126 1,306 546 655 0.3 4.2 20.2 Merit Group plc Technology 2,022 2,546 487 321 0.3 4.1 10.2 Everyman Media Group plc Consumer markets 782 825 472 896 0.2 1.0 9.6 IXICO plc Healthcare & education 675 675 434 795 0.2 5.0 11.1 Gresham House plc* Business services 112 116 420 278 0.2 0.1 0.2 Skillcast Group plc Healthcare & education 754 754 387 408 0.2 2.3 4.7 Crimson Tide plc Technology 592 592 355 355 0.2 3.0 6.4 TPXimpact Holdings plc Technology 585 585 308 276 0.2 0.9 1.8 Scholium Group plc Consumer markets 900 626 288 360 0.2 6.6 14.7 Gama Aviation plc Business services 776 1,002 232 250 0.1 0.7 1.7 Staine Group plc Business s ervices 174 4,614 179 249 0.1 0.4 11.1 KRM22 plc Technology 450 450 158 239 0.1 1.3 2.8 Poolbeg Pharma PLC Healthcare & education 44 44 138 85 0.1 0.4 0.9 Annual Report and Audited Financial Statements 2023 105 04 Appendices - Full investment portfolio % of equity | | | | | 30September | | | 30September | | | | | held by | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Original | Accounting | | | | 2023 | | | 2022 | | Baronsmead | | % of equity | | | | | book cost | † book cost | | † | fair value | | | fair value | | % of net | | Venture | | held by | | | Company Sector | £’000 | | £’000 | | | £’000 | | | £’000 | assets | | Trust plc | all funds | | # | AIM (continued) Rosslyn Data Technologies plc Technology 1,151 1,151 96 408 0.0 2.7 10.7 Science In Sport plc Consumer markets 288 263 58 78 0.0 0.3 0.6 Zoo Digital Group plc Technology 788 442 40 130 0.0 0.1 0.2 Fusion Antibodies plc Healthcare & education 540 540 36 311 0.0 1.1 2.4 Tasty plc Consumer markets 1,188 2,832 35 94 0.0 1.8 13.7 I–nexus Global plc Technology 563 562 28 25 0.0 2.4 5.4 Totally plc Healthcare & education 70 170 28 123 0.0 0.2 0.5 Aptamer Group plc Healthcare & education 2,206 2,206 25 1,546 0.0 0.4 0.8 CloudCoco Group plc Technology 438 338 25 24 0.0 0.4 0.8 LoopUp Group plc Technology 504 504 11 24 0.0 0.3 0.6 RUA Life Sciences plc Healthcare & education 509 289 4 12 0.0 0.1 0.1 Fulcrum Utility Services Ltd Business services 102 100 – 30 0.0 0.1 1.0 Total AIM 40,347 49,864 61,354 31.5 Collective investment vehicle WS Gresham House UK Micro Cap Fund 7,050 12,450 28,186 26,877 14.5 WS Gresham House UK Smaller Companies Fund 26,000 26,000 23,791 13,533 12.2 WS Gresham House UK Multi Cap Income Fund 15,414 15,414 15,961 8,270 8.2 BlackRock Sterling Liquidity Fund 6,677 6,677 6,677 3,030 3.4 Goldman Sachs Sterling Liquidity Fund 6,677 6,677 6,677 – 3.4 JPMorgan Sterling Liquidity Fund 6,677 6,677 6,677 3,030 3.4 Total collective investment vehicle 68,495 73,895 87,969 45.1 Total investments 159,472 174,802 195,159 100.1 Net current assets (267) (0.1) Net assets 194,892 100 † The original book cost column provides the combined cost of investments made by BVCT & BVCT2 prior to the merger of the two VCTs to become BVT. 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 were acquired by BVCT2 the accounting book cost is the sum of the original cost of the investment held in BVCT2 and the market value of the investment in BVCT at the date of the merger. # All funds managed by Gresham House Asset Management Ltd. * Acquired November 2014, pre change of Investment Manager on 30 November 2018. ‡ Includes unquoted convertible loan note; Cost £960,000, Fair Value £970,000. 106 Annual Report and Audited Financial Statements 2023 04 Appendices ## 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 ratio of dividend paid/declared for nancial year divided by opening net asset value per share. BVT Baronsmead 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 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 prots. IFA Independent Financial Advisors, 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. Annual Report and Audited Financial Statements 2023 107 04 Appendices | NAV total return reconciliation | 01 | 02 | 03 | 04 | | --- | --- | --- | --- | --- | | Opening NAV total return (p) | 405.2 | 410.9 | 400.9 | 403.3 | | NAV movement (p) | 1.4 | (6.8) | 0.6 | (4.9) | | Dividend (p) | 0.0 | 4.4 | 0.0 | 3.0 | | Total return (p) | 1.4 | (2.4) | 0.6 | (1.9) | | Change in NAV total return (p) | 5.7 | (10.0) | 2.4 | (7.7) | | Closing NAV total return (p) | 410.9 | 400.9 | 403.3 | 395.6 | 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 | 1.75p | 3.00p | 3.00p | | Recommended final dividend | 2.50p | 2.75p | 3.50p | | Total dividend | 4.25p | 5.75p | 6.50p | | Opening NAV (after final dividend) | 58.54p | 78.90p | 67.85p | | Dividend yield | 7.3% | 7.3% | 9.6% | 108 Annual Report and Audited Financial Statements 2023 04 Appendices 109Annual Report and Audited Financial Statements 2023 ## Information ## 05 05 Information ## 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 ocial 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 certicates: 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! 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 03001232040 or use the ActionFraud (https://www.actionfraudalert.co.uk/) Online Reporting Tool. More detailed information on this or similar activity can be found on the FCA web site. Annual Report and Audited Financial Statements 2023 111 05 Information - Shareholder information and contact details ## Shareholder account queries The Registrar for **Baronsmead Venture Trust plc** is The City Partnership (UK) Limited ("City"). The Registrar 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 certificates (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 certificate and dividend tax vouchers from City and which you should always keep confidential for security reasons. Should you not be able to locate this, City may provide it over the telephone following completion of a series of security questions. | | **Email:** | registrars@city.uk.com | | | **Post:** | The City Partnership (UK) Limited Mending Rooms, Park Valley Mills, Meltham Road, Huddersfield HD4 7BH | | ## Share price The Company's ordinary shares are listed on the London Stock Exchange. Share price information can be obtained from the link on the Company's website and many financial 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 and posting of final results for year to 30 September 2024. | 112 Annual Report and Audited Financial Statements 2023 05 Information - Shareholder information and contact details ### 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 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 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 through a stockbroker. The market makers in the shares of Baronsmead Venture Trust plc are: Panmure Gordon 020 7886 2500 Winterood 020 3100 0000 Qualifying investors* who invest in the existing shares of the Company can benet 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. Annual Report and Audited Financial Statements 2023 113 05 Information ## Corporate information | Directors | Brokers | | --- | --- | | Fiona Miller Smith (Chair) | Panmure Gordon & Co | | Les Gabb* | 40 Gracechurch Street | †∆ Susannah Nicklin London EC3V 0BT †† Michael Probin Tel: 020 7886 2500 Isabel Dolan ### Auditor ### Secretary BDO LLP Gresham House Asset Management Ltd 55 Baker Street London W1U 7EU ### Registered Oce ### Solicitors 5 New Street Square London EC4A 3TW Dickson Minto W.S. Broadgate Tower 20 Primrose Street London EC2A 2EW ### Investment Manager (From 26 Septemeber 2023) Gresham House Asset Management Limited Howard Kennedy LLP 5 New Street Square 1 London Bridge London EC4A 3TW London SE1 9BG ### Registered Number ### VCT Status Adviser 03504214 PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH ### Registrars and Transfer Oce Computershare Investor Services plc ### Website The Pavilions Bridgwater Road www.baronsmeadvcts.co.uk Bristol BS99 6ZZ Tel: 0800 923 1533 (From 9 October 2023) The City Partnership (UK) Ltd The Mending Rooms Park Valley Mills Meltham Road Hudderseld HD4 7BH Tel: 01484 240 910 * Chair of the Audit Committee † Chair of the Nomination Committee †† Chair of the Management Engagement and Remuneration Committee ∆ Senior Independent Director 114 Annual Report and Audited Financial Statements 2023