Investment Policy

The Baronsmead VCTs have established portfolios of unquoted, AIM-traded and other companies.

The Investment Policies of the Baronsmead VCTs

Each of the Baronsmead VCTs seeks to invest primarily in a diverse portfolio of unquoted companies or companies whose shares are traded on AIM. Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value.

The Baronsmead VCTs have a policy of co-investing with each other, enabling them to invest into larger transactions and often into more established companies than other VCTs.

Each VCTs investment policy is set out below.

There is no guarantee that each individual Baronsemead VCT will be able to implement its investment policy. Investment in AIM-traded, PLUS Markets-traded and unquoted companies by its nature, involves a high degree of risk than investment in companies by its nature, involves a higher degree of risk than investment in companies traded on the main market for listed securities of the London Stock Exchange. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. In addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock. Full information for determining their value or the risks to which they are exposed may also not be available.

Baronsmead VCT

Investment securities
The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stocks, convertible securities, and interest bearing securities as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stocks, while AIM investments are primarily held in ordinary shares. Pending investment in unquoted and AIM-traded securities, cash is primarily held in an interest bearing money market open ended investment company (“OEIC”), UK gilts and treasury bills.

UK companies
Investments are primarily made in companies which are substantially based in the UK, although many of these investees will trade overseas. The companies in which investments are made must have no more than £15 million of gross assets at the time of investment (or £7 million if the funds being invested were raised after 5 April 2006) to be classed as a VCT qualifying holding.

VCT regulation
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs. Amongst other conditions, the Company may not invest more than 15 per cent of its investments in a single company and must have at least 70 per cent by value of its investments throughout the period in shares or securities comprised in qualifying holdings, of which 30 per cent by value must be ordinary shares which carry no preferential rights. In addition, it must have at least 10 per cent by value of its total investments in any qualifying company in ordinary shares which carry no preferential rights.

Asset mix
The Company aims to be at least 90 per cent invested in growth businesses subject always to the quality of investment opportunities and the timing of realisations. Any un-invested funds are held in cash and interest bearing securities. It is intended that at least 75 per cent of any funds raised by the Company will be invested in VCT qualifying investments.

Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within different qualifying industry sectors using a mixture of securities. The maximum qualifying amount invested in any one company is limited to £1 million in a fi scal year and generally no more than £2.5 million, at cost, is invested in the same company. The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale.

Investment style
Investments are selected in the expectation that the application of private equity disciplines including an active management style for unquoted companies will enhance value and enable profi ts to be realised from planned exits.

Co-investment
The Company aims to invest in larger more mature unquoted and AIM companies and to achieve this it invests alongside the other Baronsmead VCTs. Currently ISIS EP LLP (“the Manager”) and its executive members are mandated to invest in unquoteds alongside the Company on terms which align the interests of shareholders and the Manager.

Borrowing powers
The Company’s Articles permit borrowing to give a degree of investment fl exibility. The Company’s policy is to use borrowing for short term liquidity purposes only.

Baronsmead VCT 2

Borrowing powers
The Company’s Articles permit borrowing to give a degree of investment fl exibility. The Company’s policy is to use borrowing for short term liquidity purposes only.

Baronsmead VCT 3

Investment securities
The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stocks, convertible securities, and fi xed-interest securities as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stocks, while AIM investments are primarily held in ordinary shares. Pending investment in unquoted and AIM-traded securities, cash is primarily held in an interest bearing money market open ended investment company (OEIC), UK gilts and Treasury Bills.

VCT regulation
The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue and Customs.Amongst other conditions, the Company may not invest more than 15 per cent of its investments in a single company and must have at least 70 per cent by value of its investments throughout the period in shares or securities comprised in qualifying holdings, of which 30 per cent by value must be ordinary shares which carry no preferential rights. In addition, it must have at least 10 per cent by value of its total investments in any qualifying company in ordinary shares which carry no preferential rights.

Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within different industry sectors using a mixture of securities. The maximum qualifying amount invested in any one company is limited to £1 million in a fi scal year and generally no more than £2.5 million, at cost, is invested in the same company. The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale.

Co-investment
The Company aims to invest in larger more mature unquoted and AIM companies and to achieve this it invests alongside the other Baronsmead VCTs. Currently ISIS EP LLP (‘the Manager’) and its executive members are mandated to invest in unquoteds alongside the Company on terms which align the interests of shareholders and the Manager.

Borrowing powers
The Company’s Articles permit borrowing to give a degree of investment fl exibility. The Company’s policy is to use borrowing for short term liquidity purposes only. The Company’s borrowings are restricted to 25 per cent of the value of the gross assets of that company. The Company currently has no borrowings.

Baronsmead VCT 4

Investment securities
The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stock, convertible securities and fi xed-interest securities, as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stock, while AIM investments are primarily held in ordinary shares. Pending investment in unquoted and AIM traded securities, cash is held in UK gilts or government securities and may be invested in interest bearing money market open ended investment companies.

UK companies
Investments are primarily made in companies which are substantially based in the UK, although many of these investees may trade overseas. Under current legislation, the companies in which investments are made must have no more than £15 million of gross assets at the time of investment (or £7 million if the funds being invested were raised after 5 April 2006) to be classed as a VCT qualifying holding. For funds raised after 5 April 2007, in order to be classed as Qualifying Holdings,companies in which investments are made must have fewer than 50 employees and must not have raised more than £2 million via venture capital schemes in the 12 months ending on the date of the relevant investment.

VCT regulation
The investment policy is designed to ensure that each Company continues to qualify and is approved as a VCT by HM Revenue and Customs. Amongst other conditions, the Company may not invest more than 15 per cent of its investments in a single company and must have at least 70 per cent by value of its investments throughout the period in shares or securities comprised in Qualifying Holdings, of which 30 per cent by value must be ordinary shares which carry no preferential rights. In addition, each Company must have at least 10 per cent by value of its total investments in any Qualifying Company in ordinary shares which carry no preferential rights.

Asset mix
The Company aims to be at least 90 per cent invested in growth businesses, subject always to the quality of investment opportunities and the timing of realisations. Any un-invested funds are held in cash and interest bearing securities. It is intended that at least 75 per cent of funds raised by the Company will be invested in VCT qualifying investments.

Risk diversification and maximum exposures
Risk is spread by investing in a number of different businesses within selected industry sectors using a mixture of securities. The maximum qualifying amount invested in any one company is limited to £1 million in a fi scal year and, generally, no more than £2.5 million, at cost, is invested in the same company. The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale.

Investment style
Investments are selected in the expectation that the application of private equity disciplines, including an active management style for unquoted companies, will enhance value and enable profits to be realised from planned exits.

Baronsmead VCT 5

Investment securities
The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stocks, convertible securities and interest bearing securities as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stocks, while AIM traded investments are primarily held in ordinary shares. Pending investment in unquoted and AIM traded securities, cash is primarily held in interest bearing accounts, money market open ended investment companies (“OEICs”), UK gilts and treasury bills.

UK companies
Investments are primarily made in companies which are substantially based in the UK, although many of these investees may have some trade overseas. The companies in which investments are made must have no more than £15 million of gross assets at the time of investment (or £7 million if the funds being invested were raised after 5 April 2006) to be classed as a VCT qualifying holding.

Co-investment with other Baronsmead VCTs
The Company aims to invest in larger more mature unquoted and AIM traded companies alongside the other Baronsmead VCTs.