TIDMFTN
FORESIGHT 2 VCT PLC
Summary Financial Highlights
-- Net asset value per Ordinary Share at 30 September 2014 was 59.4p (30
September 2013: 75.3p).
-- Net asset value per Planned Exit Share at 30 September 2014 was 73.7p
after payment of a 5.0p per share dividend (30 September 2013: 94.6p).
-- Net asset value per Infrastructure Share at 30 September 2014 was 91.4p
after payment of a 2.5p per share dividend (30 September 2013: 93.0p).
Ordinary Shares fund
-- The Ordinary Shares fund received GBP0.2 million in loan repayments from
three portfolio companies.
-- The Manager agreed to delay the payment of management fees from the
Ordinary Shares fund until the cash position had improved.
-- A provision of GBP5,198,404 has been made against the value of the
Ordinary Shares fund investment in Closed Loop Recycling.
Planned Exit Shares fund
-- The Planned Exit Shares fund provided follow-on funding totalling GBP0.05
million to two portfolio companies.
-- The Planned Exit Shares fund received GBP0.1 million in loan repayments
from two portfolio companies.
-- An interim dividend of 5.0p per Planned Exit Share was paid on 25 October
2013. The dividend had a record date of 11 October 2013 and an
ex-dividend date of 9 October 2013. A further dividend of 7.5p per
Planned Exit Share was paid on 12 January 2015. The shares were quoted
ex-dividend on 29 December 2014 and the record date for payment was 30
December 2014.
-- A provision of GBP507,650 has been made against the value of the Planned
Exit Shares fund investment in Closed Loop Recycling.
Infrastructure Shares fund
-- The Infrastructure Shares fund made six new investments totalling GBP7.2
million and seven follow-on investments totalling GBP1.7 million.
-- The Infrastructure Shares fund realised in whole or in part a number of
investments as part of restructuring the portfolio from PFI to Solar
assets.
-- An interim dividend of 2.5p per Infrastructure Share was paid on 20
December 2013. The dividend had a record date of 13 December 2013 and an
ex-dividend date of 11 December 2013. A further dividend of 2.5p per
Infrastructure Share was paid on 3 October 2014. The shares were quoted
ex-dividend on 24 September 2014 and the record date for payment was 26
September 2014.
-- The Manager agreed that the Infrastructure Share fund's management fee
would be reduced from 1.75% to 1.0% from 1 January 2015.
Chairman's Statement
Performance
I am disappointed to have to report a further 14.4% reduction in the net
asset value of the Ordinary Shares fund during the second half of the
year. This brought the total reduction during the year ended 30
September 2014 to 21.1% per Ordinary share from 75.3p per share at 30
September 2013 to 59.4p per share at 30 September 2014.
The largest reduction was in the valuation of Closed Loop Recycling, our
largest single investment, which suffered from continued trading
difficulties. Whilst the business has made real progress and now
processes nearly 1,000 tonnes of used plastic per week it has so far
failed to achieve the commercial results forecasted. This has led to a
need for further funding which we have not been able to support because
of the limited amount of cash available in the fund. The fund's loan and
equity interests have therefore been deferred and diluted to the point
where the board has had no alternative but to reduce the valuation to 5%
of cost. We still hope that the company may realise its potential and
justify an upward revaluation in due course.
Provisions were also needed in the second half of the year against the
valuations of Trilogy Communications where trading conditions have
continued to be challenging, Datapath resulting from a small drop in
comparative multiples, and Autologic where trading in the USA was behind
budget although the business as a whole continues to do well. Set
against this there was an uplift in the valuation of TFC Europe, which
has been making solid progress and ICA, which completed a refinancing in
December 2014 releasing a GBP600,000 loan repayment for the Ordinary
Shares fund. The Bunker Secure Hosting is also maintaining its
satisfactory progress.
The net asset value of the Planned Exit Shares fund decreased to 73.7p
(after the payment of a 5.0p per share dividend) at 30 September 2014
from 94.6p per share at 30 September 2013, which represents a 16.8%
reduction after adding back the interim dividend of 5.0p per share paid
in October 2013. The Planned Exit Shares fund suffered from the poor
performance of three investments during the year: Industrial Engineering
Plastics, which recorded reduced sales and profits during its 18 month
period ended 31 May 2014, although there is some optimism that it will
recover during the current financial year; Closed Loop Recycling
reflecting poor performance as outlined above; and also Trilogy
Communications.
The net asset value of the Infrastructure Shares fund was 91.4p (after
the payment of a 2.5p per share dividend) at 30 September 2014 compared
to 93.0p per share at 30 September 2013, an increase of 1.0% after
adding back the interim dividend of 2.5p per share paid in December
2013. The fund is now fully invested, as anticipated at the time of the
release of the interim management statement in September 2014, and is
earning a market rate of return on its infrastructure investments.
However, the initial delays in identifying suitable investments for the
fund have impacted the net yield that can be achieved, reducing the
likely annual dividend from 5.0p per share to 4.0p. This decrease arose
partly as a result of the minimal income that could be generated on cash
deposits while awaiting investment and partly because the yields
available from infrastructure investments reduced during the investment
period. In the light of this the Board has agreed with the Manager that
in order to mitigate the impact of these reductions the investment
management fee charged to the fund will drop from 1.75% per annum to
1.0% with effect from 1 January 2015.
For a detailed review of the Company's investments I refer you to the
Manager's Report that starts on page 10.
Dividends
Ordinary Shares
It continues to be the Company's policy to provide a flow of tax-free
dividends, generated from income and from capital profits realised on
the sale of investments. Distributions will, however, inevitably be
dependent on cash being received in the form of interest and dividends
from portfolio investments and successful realisations. In view of the
current limited cash available the Board is unable to recommend any
dividend for the year ended 30 September 2014.
Planned Exit Shares
An interim dividend of 5.0p per Planned Exit share was paid on 25
October 2013 in respect of the year ended 30 September 2014. The shares
were quoted ex dividend on 9 October 2013 and the record date for
payment was 11 October 2013.
The Board is pleased to have declared an interim dividend of 7.5p per
Planned Exit Share which was paid on 12 January 2015 in respect of the
year ending 30 September 2015. The shares were quoted ex dividend on 29
December 2014 and the record date for payment was 30 December 2014.
Infrastructure Shares
An interim dividend of 2.5p per Infrastructure share was paid on 20
December 2013 in respect of the year ended 30 September 2014. The shares
were quoted ex dividend on 11 December 2013 and the record date for
payment was 13 December 2013.
An interim dividend of 2.5p per Infrastructure Share was paid on 3
October 2014 for the year ending 30 September 2015. The shares were
quoted ex dividend on 24 September 2014 and the record date for payment
was 26 September 2014.
Share Issues and Share Buy-backs
The Company did not issue any new shares during the year. A total of
41,483 Planned Exit Shares and 57,300 Infrastructure Shares were
repurchased for cancellation at a cost of GBP35,000 and GBP52,000
respectively.
Alternative Investment Fund Management Registration
As reported at the interim stage, following the introduction of the new
EU rules governing Alternative Investment Fund Managers ('AIFM'), the
Board decided that the Company would register as a 'small registered UK
AIFM' directly with the Financial Conduct Authority as permitted by the
rules. The Company's application was completed in June 2014 and approval
was confirmed in early August 2014. This will not affect the current
arrangements with the Manager which will continue to report to the Board
and manage the Company's investments on a discretionary basis.
Valuation Policy
Investments held by the Company have been valued in accordance with the
International Private Equity and Venture Capital Valuation ("IPEVCV")
guidelines (December 2012) developed by the British Venture Capital
Association and other organisations. Through these guidelines,
investments are valued as defined at 'fair value'. Ordinarily, unquoted
investments will be valued at cost for a limited period following the
date of acquisition, being the most suitable approximation of fair value
unless there is an impairment or significant increase in value during
the period. Quoted investments and investments traded on AIM are valued
at the bid price as at 30 September 2014. The portfolio valuations are
prepared by Foresight Group, reviewed and approved by the Board
quarterly and subject to review by the auditors annually.
Annual General Meeting
The Company's Annual General Meeting will take place on 17 February 2015
at 1.00pm. I look forward to welcoming you to the Meeting, which will be
held at the offices of SGH Martineau in London. Details can be found in
the notice of meeting on page 68.
Outlook
Although there is still considerable uncertainty in continental Europe
as a result of the stresses within the Euro area and in the UK because
of the forthcoming General Election, it is apparent that the underlying
UK economy is in reasonable health and many businesses are making steady
progress. Although the immediate impact of the sharp reduction in oil
prices has caused market volatility and a fall in share prices, we
believe that we have some well managed competitive companies in our
portfolio that should make good progress in coming periods.
The investment phase of the Infrastructure Shares fund and the
transition of part of the fund from non-qualifying PFI investments into
VCT qualifying Solar Infrastructure has now been completed. Both the
Board and the Manager are optimistic that the portfolio will now produce
a steady income flow as originally planned.
The Ordinary Shares and Planned Exit Shares funds are fully invested and
new investment opportunities are not being considered at present. The
Manager continues to concentrate on improving the performance of these
funds. Any available cash in the Ordinary Shares fund is being used to
support the existing portfolio and pay expenses. All reasonable
opportunities to realise gains from the disposal of successful
investments will be actively pursued. The Planned Exit Shares fund has
an objective to realise investments and return capital to investors
during the twelve months after June 2015 and the task of finding buyers
for this fund's underlying investments will gain momentum in the coming
months. The sale of Channel Technical Services Limited, completed in
October 2014, is part of this process and enabled the Board to declare a
7.5p per Planned Exit Share dividend, which was paid on 12 January 2015.
The Manager remains focussed on achieving realisations in both the
Ordinary and Planned Exit Shares funds. In the case of the Ordinary
Shares fund, this would enable the Company to resume the payment of
dividends and to make new investments. This in turn should improve the
liquidity of the Ordinary Shares and reduce the discount to net asset
value. Despite the substantial provisions that have been required, the
Board still believes that this discount is higher than justified by the
prospects of the underlying investments.
Jocelin Harris
Chairman
20 January 2015
Strategic Report
Introduction
This Strategic Report, on pages 4 to 9, has been prepared in accordance
with the requirements of Section 414 of the Companies Act 2006 and best
practice. Its purpose is to inform the members of the Company and help
them to assess how the Directors have performed their duty to promote
the success of the Company, in accordance with Section 172 of the
Companies Act 2006.
Foresight 2 VCT plc Ordinary Shares fund
Foresight 2 VCT plc originally raised GBP20 million through an Ordinary
Share issue in the 2004/2005 tax year. This fund is currently fully
invested and the Manager (Foresight Group) is working on achieving
realisations from the portfolio.
The number of Ordinary Shares in issue at 30 September 2014 was
46,457,032 (2013: 46,457,032).
Foresight 2 VCT plc C Shares fund - the Environmental VCT
The Foresight 2 VCT plc C Shares fund class was the first VCT to target
investing in a diversified range of environmental investment
opportunities. The fund originally raised GBP14 million in 2006/2007.
In March 2013, the Foresight 2 VCT plc C Share fund was merged with the
Ordinary Shares fund.
Foresight 2 VCT plc Planned Exit Shares fund
In the 2009/10 tax year, GBP12 million was raised through a linked offer
for the Planned Exit Shares fund, the proceeds of which were divided
equally between Foresight 2 VCT plc and Foresight VCT plc. These funds
comprise separate share classes within Foresight 2 VCT plc and Foresight
VCT plc with their own investments and income streams.
The number of Planned Exit shares in the Company in issue at 30
September 2014 was 6,104,028 (2013: 6,145,511).
Foresight 2 VCT plc Infrastructure Shares fund
In the 2011/2012 tax year, GBP33 million was raised through a linked
offer for the Infrastructure Shares fund, the proceeds of which were
divided equally between Foresight 2 VCT plc and Foresight VCT plc. These
funds comprise separate share classes within Foresight 2 VCT plc and
Foresight VCT plc with their own investments and income streams.
The number of Infrastructure Shares in the Company in issue at 30
September 2014 was 16,590,558 (2013: 16,647,858).
Summary Investment Policy
The Manager will target UK unquoted companies which it believes will
achieve the objective of producing attractive returns for shareholders.
Investment Objectives
Ordinary Shares fund
To provide private investors with attractive returns from a portfolio of
investments in fast-growing unquoted companies in the United Kingdom. It
is the intention to maximise tax-free income available to investors from
a combination of dividends and interest received on investments and the
distribution of capital gains arising from trade sales or flotations.
Planned Exit Shares fund
To combine greater security of capital than is normal within a VCT with
the enhancement of investor returns created by the VCT tax benefits. The
key objective of the Planned Exit Shares fund is to distribute a minimum
of 110p per Share through a combination of tax-free income, buybacks and
tender offers before the sixth anniversary of the closing date of the
Offer on 30 June 2016.
Infrastructure Shares fund
To invest in companies which own and operate essential assets and
services which enjoy long-term contracts with strong counterparties or
government concessions. To ensure VCT qualification, Foresight Group
will focus on companies where the provision of services is the primary
activity and which generate long-term contracted revenues, thereby
facilitating the payment of regular and predictable dividends to
investors.
Performance and key performance indicators (KPIs)
The Board expects the Manager to deliver a performance which meets the
objectives of the three classes of shares. The KPIs covering these
objectives are net asset value performance and dividends paid, which,
when combined, give net asset value total return. Additional key
performance indicators reviewed by the Board include total expenses as a
proportion of shareholders' funds.
A record of some of these indicators is contained on the following page.
The combined total expense ratio in the period was 3.0%, which is
considered acceptable when compared with the wider VCT marketplace based
on independently published information.
A review of the Company's performance during the financial period, the
position of the Company at the period end and the outlook for the coming
year is contained within the Manager's Report. The Board assesses the
performance of the Manager in meeting the Company's objectives against
the primary KPIs highlighted.
Clearly, in the Ordinary Shares fund some investments in unquoted
companies at an early stage of their development are likely to
disappoint, but investing the funds raised in high growth companies
creates an opportunity for enhanced returns to shareholders. The growth
of some of these companies is, however, largely dependent on the
continuing level of expenditure on relevant products and services by
larger corporations.
30 30
September September
2014 2013
Planned Planned
Ordinary Exit Infrastructure Ordinary Exit Infrastructure
Shares Shares Shares Shares Shares Shares
Net 59.4p 73.7p 91.4p 75.3p 94.6p 93.0p
asset
value
per
share
Net 72.0p 86.7p 93.9p 87.9p 102.6p 93.0p
asset
value
total
return
30 September 30
2014 September
2013
Planned Planned
Ordinary Exit Infrastructure Ordinary Exit Infrastructure
Shares Shares Shares Shares Shares Shares
Share 38.1p 86.0p 88.5p 47.3p 92.0p 100.0p
price
Share 50.7p 99.0p 91.0p 59.9p 100.0p 100.0p
price
total
return
30
30 September September
2014 2013
Planned Planned
Ordinary Exit Infrastructure Ordinary Exit Infrastructure
Shares Shares Shares Shares Shares Shares
Dividends
paid* 12.6p 13.0p 2.5p 12.6p 8.0p 0.0p
Dividends
paid in
the year - 5.0p 2.5p 3.0p - -
Dividend
yield % - 5.8 2.8 6.3 - -
* From inception to 30 September 2014
Ordinary Shares fund
Discount to NAV at 30 September 2014 35.8%
Average discount on buybacks -
Shares bought back during the year under review -
Decrease in net asset value during year 21.1%
Ongoing charges ratio 3.4%
Planned Exit Shares fund
Premium to NAV at 30 September 2014 16.7%
Average discount on buybacks 0.8%
Shares bought back during the year under review 41,483
Decrease in net asset value during year (excluding
dividends paid) 22.1%
Ongoing charges ratio 2.2%
Infrastructure Shares fund
Discount to NAV at 30 September 2014 3.1%
Average discount on buybacks 0.9%
Shares bought back during the year under review 57,300
Decrease in net asset value during year (excluding
dividends paid) 1.7%
Ongoing charges ratio 2.5%
Strategies for achieving objectives
Investment Policy
The Manager (Foresight Group) will target UK unquoted companies which it
believes will achieve the objective of producing attractive returns for
shareholders.
Investment securities
The Company invests in a range of securities including, but not limited
to, ordinary and preference shares, loan stock, convertible securities,
and fixed-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 listed securities, cash is primarily held
in interest bearing money market open ended investment companies (OEICs)
as well as in a range of non-qualifying companies. Non-qualifying
Investments may include holdings in money-market instruments,
short-dated bonds, unit trusts, OEICs, structured products and other
assets where Foresight Group believes that the risk/return profile is
consistent with the overall investment objectives of the portfolio.
UK companies
Investments are primarily made in companies which are based in the UK,
although many will trade overseas. The companies in which investments
are made must have no more than GBP15 million of gross assets at the
time of investment (or GBP7 million depending on when the funds being
invested were raised) to be classed as a VCT qualifying holding.
Asset mix
The Company aims to be significantly invested in growth businesses
subject always to the quality of investment opportunities and the timing
of realisations. Any uninvested funds are held in cash, interest bearing
securities and a range of non-qualifying investments. It is intended
that the significant majority 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 industry sectors using a mixture of securities. The maximum
amount invested in any one company is generally limited to GBP1 million
in a fiscal year or, if lower, 15% of the net assets at the time of
investment and generally no more than GBP2.5 million over time (at cost)
is invested in the same company.
Investment style
Investments are selected by the Manager in the expectation that the
application of private equity disciplines, including an active
management style for unquoted companies through the appointment of an
Investor Director to investee company boards, will enhance value.
Borrowing powers
The Company's Articles of Association permit gearing to give a degree of
investment flexibility. The Board's current policy is not to use
gearing.
Co-investment
The Company aims to invest in larger, more mature, unquoted and AIM
companies and, in order to achieve this, often invests alongside the
other Foresight funds. Consequently, at the time of initial investment,
the combined investment can currently total up to a maximum of GBP5.0
million per annum for unquoted and for AIM investments.
VCT regulation
The investment policy is designed to ensure that the Company continues
to qualify and is approved as a VCT by HM Revenue & Customs. Amongst
other conditions, the Company may not invest in a single company more
than 15% of its gross assets at the time of making any investment and
must have at least 70% by value of its investments throughout the period
in shares or securities in qualifying holdings, of which 30% by value in
aggregate must be in ordinary shares which carry no preferential rights
(although only 10% of any individual investment needs to be in the
ordinary shares of that Company).
Management
The Board has engaged Foresight Group as discretionary investment
manager. Foresight Group also provides or procures the provision of
company secretarial, administration and custodian services to the
Company. Foresight Group prefers to take a lead role in the companies in
which it invests. Larger investments may be syndicated with other
investing institutions, or strategic partners with similar investment
criteria. In considering a prospective investment in a company,
particular regard will be paid to:
Ordinary Shares fund
-- Evidence of high-margin products or services capable of addressing
fast-growing markets;
-- The company's ability to sustain a competitive advantage;
-- The strength of the management team;
-- The existence of proprietary technology;
-- The company's prospects of being sold or achieving a flotation within
3-5 years.
Planned Exit Shares fund
-- Security of income and capital;
-- Asset backing;
-- The company's ability to provide an attractive yield to the fund;
-- The prospects of achieving an exit within five years;
-- The strength of the management team.
Infrastructure Shares fund
-- Long-term contracts with Governmental or strong counter-parties;
-- Protection from competition;
-- Inflation-linked revenues over 10-50 year contract durations.
Environmental, Human Rights, Employee, Social and Community Issues
Investments have been made in clean energy and environmental and solar
infrastructure projects which have clear environmental benefits.
The Board is aware of the requirement under Section 414 of the Act to
provide information about environmental matters (including the impact of
the Company's business on the environment), employee, human rights,
social and community issues; including information about any policies it
has in relation to these matters and effectiveness of these policies.
The Company has no employees or policies in these matters, and this
requirement is not applicable.
Gender diversity
The Board comprises three male Directors, however, the Board is
conscious of the need for diversity and will consider both male and
female candidates when appointing new Directors.
The Manager has an equal opportunities policy and currently employs 54
men and 30 women.
Dividend policy
A proportion of realised gains will normally be retained for
reinvestment and to meet future costs. Subject to this, the Company will
endeavour to maintain a flow of dividend payments of the order of 5p per
share across all share classes, although greater or lesser sums may be
paid in any year. It is the intention to maximise the Company's tax-free
income available to investors from a combination of dividends and
interest received on investments and the distribution of capital gains
arising from trade sales or flotations.
Purchase of own shares
It is the Company's policy, subject to adequate cash availability, to
consider repurchasing shares when they become available in order to help
provide liquidity to the market in the Company's shares.
Principal risks, risk management and regulatory environment
The Board believes that the principal risks faced by the Company are:
-- Economic risk
-- Loss of approval as a Venture Capital Trust
-- Investment and strategic
-- Regulatory
-- Reputational
-- Operational
-- Financial
-- Market risk
-- Liquidity risk
Further detail on these principal risks is given in note 16 on page 59.
The Board regularly reviews the principal risks and uncertainties facing
the Company which the Board and the Manager have identified and the
Board sets out delegated controls designed to manage those risks and
uncertainties. Key risks within investment strategy are managed by the
Board through a defined investment policy, with guidelines and
restrictions, and by the process of oversight at each Board meeting.
Operational disruption, accounting and legal risks are also covered at
least annually and regulatory compliance is reviewed at each Board
meeting.
The Directors have adopted a framework of internal controls which is
designed to monitor the principal risks and uncertainties facing the
Company and to provide a monitoring system to enable the Directors to
mitigate these risks as far as possible. Details of the Company's
internal controls are contained in the Corporate Governance and Internal
Control sections.
Performance-related incentives
Ordinary Shares fund
Following completion of the share merger in March 2013, Foresight Group
agreed to terminate the existing Ordinary Shares fund and C Shares fund
performance incentive fee arrangements. The Board may, in due course,
consider implementing a new performance incentive scheme in respect of
the Ordinary Shares fund to reward superior performance although this is
not currently under consideration.
Planned Exit Shares fund
Foresight Group has a performance incentive which is conditional on
distributions of a minimum of 110p per Planned Exit Share issued under
the offer and remaining in issue at the date of calculation. The
performance incentive is equivalent to the next 15p of distributions
above this hurdle of 110p plus 20% of any distributions above 125p. The
performance incentive may be satisfied in cash or by the issue of new
Planned Exit Shares to Foresight Group, at the discretion of the Board.
No performance incentive fees have been earned or paid during the year.
Infrastructure Shares fund
Foresight Group has a performance incentive fee equal in value to 15% of
Distributions made to the holders of Infrastructure Shares in excess of
100p per Infrastructure Share issued under the Offer and remaining in
issue at the date of calculation. No payment of the performance
incentive fee will be made to Foresight Group until Distributions exceed
100p per Infrastructure Share. Performance incentive fees may, at the
discretion of the Board, be satisfied wholly or partly in cash or by the
issue of new Infrastructure Shares. No performance incentive fees have
been earned or paid during the year.
Valuation Policy
Investments held by the Company have been valued in accordance with the
International Private Equity and Venture Capital Valuation ("IPEVCV")
guidelines (December 2012) developed by the British Venture Capital
Association and other organisations. Through these guidelines,
investments are valued as defined at 'fair value'. Ordinarily, unquoted
investments will be valued at cost for a limited period following the
date of acquisition, being the most suitable approximation of fair value
unless there is an impairment or significant accretion in value during
the period. Quoted investments and investments traded on AiM are valued
at the bid price as at 30 September 2014. The portfolio valuations are
prepared by Foresight Group, reviewed and approved by the Board
quarterly and subject to review by the auditors annually.
VCT Tax Benefit for Shareholders
To obtain VCT tax reliefs on subscriptions up to GBP200,000 per annum, a
VCT investor must be a 'qualifying' individual over the age of 18 with
UK taxable income. The tax reliefs for subscriptions since 6 April 2006
are:
-- Income tax relief of 30% on subscription for new shares, which is
forfeit by shareholders if the shares are not held for more than five
years;
-- VCT dividends (including capital distributions of realised gains on
investments) are not subject to income tax in the hands of qualifying
holders;
-- Capital gains on disposal of VCT shares are tax-free, whenever the
disposal occurs.
Venture Capital Trust Status
Foresight 2 VCT plc has been granted approval as a Venture Capital Trust
(VCT) under S274-S280A of the Income Tax Act 2007 for the year ended 30
September 2013. The next complete review will be carried out for the
year ended 30 September 2014. It is intended that the business of the
Company be carried on so as to maintain its VCT status.
The Directors have managed, and continue to manage, the business in
order to comply with the legislation applicable to VCTs. In addition,
the Board has appointed SGH Martineau to monitor and provide continuing
advice in respect of the Company's compliance with applicable VCT
legislation and regulation. As at 30 September 2014 the Company had
72.9% of its funds in such VCT qualifying holdings.
Future Strategy
The Board and the Manager believe that the strategy now adopted of
focusing on private equity investments will be in the best interests of
Ordinary Shareholders. Information provided in this report gives
evidence of some positive recent performance in this area.
It is intended to realise all of the investments in the Planned Exit
Shares fund over the next 12-18 months.
The Board also expects that the transition of the Infrastructure Shares
fund from solely PFI investments to a mix of PFI and solar
infrastructure, which has been completed, will enhance the current
returns of the infrastructure portfolio.
The Company's performance relative to its peer group and benchmarks will
depend on the Manager's ability to allocate the Company's assets
effectively, make successful investments and manage its liquidity
appropriately.
Jocelin Harris
Director
20 January 2015
Manager's Report
Despite good performances by some portfolio investments, the overall
performance of the Ordinary Shares fund during the year to 30 September
2014 was particularly disappointing, principally because a large
provision was made against the investment in Closed Loop Recycling, as
explained below. Net asset value per Ordinary Share fell by 21.1% to
59.4p per share as at 30 September 2014 from 75.3p per share as at 30
September 2013.
The net asset value per share of the Planned Exit Shares at 30 September
2014 was 73.7p compared with 94.6p at 30 September 2013. After adding
back the interim dividend of 5.0p per Planned Exit Share paid in October
2013, this represented a fall of 16.8%, principally reflecting
provisions made against Closed Loop Recycling, Industrial Engineering
Plastics and Trilogy Communications.
The net asset value per share of the Infrastructures Shares at 30
September 2014 was 91.4p compared with 93.0p per Share at 30 September
2013. After adding back the interim dividend of 2.5p per Infrastructure
Share paid in December 2013, this represented an increase of 1.0%.
During the year, economic and trading conditions in the UK and USA
continued to improve gradually, in contrast to most parts of Europe, and
are currently relatively benign although major risks and uncertainties
remain. Several portfolio companies continued to perform well during the
year and are continuing to do so. With business confidence remaining
generally positive, these conditions look set to continue for the time
being.
In late October 2014, Channel Technical Services, a subsidiary of
Channel Safety Systems Group, was sold for GBP1.6 million as a result of
which the Planned Exit Shares fund was repaid loan capital and interest
totalling GBP641,647.
A further dividend of 7.5p per Planned Exit Share was paid on 12 January
2015.
A summary of the portfolio investments for all three share classes,
namely the Ordinary Shares fund, the Planned Exit Shares fund and the
Infrastructure Shares fund, is set out below. The Manager remains
focussed on achieving exits in both the Ordinary Shares fund and the
Planned Exit Shares fund to realise cash to facilitate paying dividends,
implementing share buy backs or making new investments as appropriate.
Review: Ordinary Shares Fund
1. New and Follow-On Investments and Realisations
No new or follow-on investments were made by the Ordinary Shares fund
during the year.
The Ordinary Shares fund received loan repayments of GBP170,292,
GBP43,165 and GBP659 respectively from Evance Wind Turbines, i-plas
Group and Global Immersion. In December 2014 after the financial year
end, ICA completed a recapitalisation enabling loans and interest
totalling GBP600,000 to be paid to the Ordinary Shares fund.
2. Material Provisions to a level below cost
Company
GBP
AlwaysOn Group
AlwaysOn Group
1,100,975
Closed Loop Recycling
5,198,404
Evance Wind Turbines
569,937
Trilogy Communications
836,895
Total
7,706,211
3.Review and Outlook
Several investments performed well during the year. Datapath Group
Holdings, TFC Europe and The Bunker Secure Hosting all achieved record
EBITDA profits and sales and are continuing to trade well. Autologic
Diagnostics Group similarly continued to generate significant EBITDA
profits. With stronger demand from SMEs for its document management
solutions and good cash generation, ICA Group completed a
recapitalisation post the financial year end in December 2014 enabling
loans and interest totalling GBP600,000 to be paid to the Ordinary
Shares fund. Ixaris Systems again enjoyed growing demand for its range
of online payments services, as did Procam Television Holdings for its
TV broadcast hire services. Trading continued to improve at AtFutsal
Group as a result of greater efforts to develop the educational business
while O-Gen UK also made good progress, obtaining planning permission
for a further waste to energy power station.
However, the above performances were overshadowed by provisions
totalling GBP7.71 million made against four investments during the year,
including a major provision of GBP5.2 million made against the
investment in Closed Loop Recycling following the failure to conclude a
sale process post the year end.
During 2013/14, Closed Loop Recycling successfully doubled the capacity
of its Dagenham plant, which is now operating at full capacity and
processing almost 1,000 tonnes per week of waste plastic bottles. In
October 2014, following protracted negotiations, the shareholders of
Closed Loop Recycling entered into a confidential, conditional sale and
purchase agreement with a purchaser planning to seek a public listing
simultaneously with completion of the acquisition, at a price higher
than the then carrying valuation. One of the conditions related to the
financial performance of the company during the listing process. However,
the company's recent and short term projected performance have been
impacted by adverse movements in the price of waste plastic bottles as a
result of overseas demand for bottles and weaker prices for virgin resin,
reflecting the falling price of oil. The latter impacts the price
customers pay for the company's competing recycled HDPE and PET pellets.
The conditional sale and purchase agreement was formally terminated in
December 2014, following weaker than projected financial performance by
the company and weaker short term profit projections. As a consequence
of these two factors, a provision of GBP5,198,404 was made against the
cost of the investment.
The company is focussing its efforts on current trading and improving
profitability and whilst with the help of an independent adviser, is
also considering strategic options including raising capital from third
party sources and an outright sale.
AlwaysOn Group continued to experience trading losses and merged in
March 2014 by way of a share for share exchange with the Foresight Group
managed portfolio company Data Continuity Group, necessitating a
provision of GBP1.1 million. Following a reorganisation and significant
cost reductions, the enlarged group's sales pipeline is much improved
and the rate of loss has been reduced substantially.
Evance Wind Turbines, an environmental infrastructure investment,
continued to be adversely affected by reductions in Feed-in-Tariffs
which started in October 2012. Administrators were appointed on 24 April
2014 and GBP170,292 has since been repaid. The reductions in the
Feed-in-Tariff were the principal factor in the company going from a
position of profitability to administration in less than two years. A
provision of GBP569,937 has been made against the value of this
investment after taking into account the expected recovery proceeds.
Reflecting continuing trading losses at Trilogy Communications,
provisions totalling GBP836,895 were made against the value of the
investment. Following management changes and cost reductions, losses
have been reduced substantially with a clear plan to reach cash break
even while there are signs of a recovery in US defence orders.
As stated in the last Annual Report, the Manager has agreed with the
Board that no further environmental investments will be made and, in
future, only private equity investments will be made, reflecting the
better risk adjusted returns that they offer. The three remaining
environmental investments - Closed Loop Recycling, O-Gen UK and O-Gen
Acme Trek - now represent only 4.6% of the net assets of the Ordinary
Shares fund.
In the absence of any investment realisations during the year, the fund
currently has insufficient cash to pay dividends or make new
investments. We continue to examine ways to release capital from the
portfolio by disposals, dividends and recapitalisations.
Review: Planned Exit Shares Fund
1. Follow-on funding (excluding capitalised interest)
Company GBP
Trilogy Communications 45,654
AlwaysOn Group (formerly Data Continuity Group) 929
Total 46,583
2. New Investments
No new investments were made during the period.
3. Realisations
Industrial Efficiency repaid a loan of GBP25,000 in October 2013. Loan
repayments of GBP58,401 were received from the administrator of Withion
Power.
4. Material Provisions to a level below cost
Company GBP
Closed Loop Recycling 507,650
Industrial Engineering Plastics 344,825
Trilogy Communications 403,764
Total 1,256,239
1. Review and Outlook
The net asset value of the Planned Exit Shares fund decreased by 16.8%
to 73.7p at 30 September 2014 (after adding back the interim dividend of
5.0p per Planned Exit Share paid on 25 October 2013) compared to 94.6p
per share at 30 September 2013, principally reflecting provisions
totalling GBP1,256,239 made against three investments, namely Closed
Loop Recycling and Trilogy Communications as explained above and also
Industrial Engineering Plastics. Notwithstanding a good start by
Industrial Engineering Plastics in 2014 (with record monthly sales
achieved in March 2014) and improved market sentiment, performance
deteriorated subsequently during the Summer. A new Chairman and
experienced turnround CEO were appointed with a view to improving
trading, operational efficiency and systems and performance has already
started to improve.
In late October 2014, Channel Technical Services, a subsidiary of
Channel Safety Systems Group, was sold for GBP1.6 million as a result of
which the Planned Exit Shares fund was repaid loan capital and interest
totalling GBP641,647. This investment has already returned 1.21 times
original cost while the equity shareholding in the parent company
remains unchanged.
An interim dividend of 7.5p per Planned Exit Share was paid on 12
January 2015.
Leisure Efficiency and Industrial Efficiency, both of which provide
energy and cost saving services to industrial sector clients, continued
to perform well. In January 2015, the investments in Leisure Efficiency
and Industrial Efficiency were sold for GBP793,000 and GBP205,500
respectively to another Foresight managed fund, based on independent
third party valuations. The sale of Leisure Efficiency realised a profit
of GBP470,975 and generated a total return of 1.7 times original cost of
GBP690,000. The sale of Industrial Efficiency realised a profit of
GBP85,215 and generated a total return of 1.5 times original cost of
GBP180,000.
We continue to focus on positioning portfolio investments to be realised
with a view to returning capital to investors as originally planned
within the period from June 2015 to June 2016.
Review: Infrastructure Shares Fund
Background
By the closing date of 18 July 2012, a total of GBP33,295,716 had been
raised for the Infrastructure Share fund jointly with Foresight VCT's
Infrastructure Share fund (i.e. some GBP16.6 million for each fund). The
strategy of both funds is to invest in infrastructure assets on a pari
passu basis in the secondary PFI, solar infrastructure, energy
efficiency and onsite power generation markets.
The two funds acquired shareholdings in eight operating PFI companies,
four in the education sector holding interests in 13 schools and four in
the health sector, comprising three acute hospitals and one forensic
psychiatry unit. In terms of geographic diversification, four of the
investments are located in Scotland, three in England and one in
Northern Ireland. All of the projects are contracted under UK PFI
standard form and the counterparties are various Local Authorities and
NHS Trusts. These investments have strong operating records and have
remaining contract terms ranging from 13 to 28 years. All also have
project finance debt in place with interest rate hedging contracts for
the duration of the concession removing any refinancing or interest rate
risks. All benefit from having long term facilities management
subcontracts which pass all operational risks through to major companies
that are well established in the UK PFI market.
Good progress was made in investing the majority of the Infrastructure
Share fund in secondary PFI investments. Secondary PFI yields have
fallen significantly during the last two years owing to increased
competition from new and established PFI infrastructure funds, driven by
increasing investor appetite for PFI investments. The increased demand
combined with lower supply resulting from the Coalition Government's
reduction in primary market PFI spending resulted in fewer secondary PFI
investment opportunities than forecast. We have experienced the yield
compression first-hand when the Infrastructure Share fund was out-bid
during competitive bidding processes.
Portfolio Developments
Although advance VCT clearances were received from HMRC in respect of
four of the PFI investments, only one is a VCT qualifying investment
because the co-shareholders in the other three would not enter into a
VCT qualifying structure. Accordingly we took action to rebalance the
portfolio and increased the VCT qualifying proportion of the
Infrastructure Share fund to 70% by the end of July 2014 to meet the VCT
qualification test, which is applied to the Company as a whole, and is
currently 72.9%. This rebalancing exercise included the refinancing of
GBP4.5m of non-qualifying PFI assets with a component of third party
debt to reduce the non-qualifying holdings and utilising the refinancing
proceeds to invest in five suitable qualifying solar infrastructure
companies, in accordance with the investment policy.
Investments in a number of infrastructure projects were reduced through
the repayment of loans totalling GBP4.5 million from the Foresight
Inheritance Tax Service. This has released an equal sum for reinvestment
in qualifying solar infrastructure assets and has reduced the portion of
non-qualifying investments to 30% of the Infrastructure Shares Fund.
New Investments
In July 2014 the fund invested GBP2 million in Rovinj Solar Limited
set-up to acquire a shareholding in the Ford Farm solar project which is
a 5.5MW project located in St Ives, Cornwall that has been generating
electricity since March 2013. The investment has received HMRC clearance
and was completed in December 2014.
In July 2014 the fund invested GBP2 million in FS Hayford Farm Limited
which had a binding contract in place to acquire the Hayford Farm solar
project following satisfaction of certain conditions precedent. The
conditions were satisfied and the acquisition was completed in December
2014. Hayford Farm is a 9.8MW project which was partially financed with
a co-investment from the Foresight Inheritance Tax Solutions and third
party debt from Investec Bank. The investment received HMRC clearance in
July 2014 and has been generating revenues for the fund since connection
to the grid in September 2014.
In July 2014 the fund invested GBP2 million in Krk Solar Limited which
on 14 October 2014 completed the acquisition of the 3.3MW Tope Farm
Solar Project near Blackawton in Devon. The investment has received HMRC
clearance.
In July 2014 the fund invested GBP800k on a qualifying basis in Zagreb
Solar Limited. An investment has been identified for Zagreb and we
expect this to complete during Q1 2015. Furthermore, new investments in
Zadar Infrastructure Limited (GBP279,503) and Pula Infrastructure
Limited (GBP133,996) were formed during the year and acquired interests
in the two hospitals.
Follow-on investments
A further investment of GBP1.25m was made into Canterbury Infrastructure
15 Limited taking the investment in the company to GBP2.25m. In April
2014, it invested GBP1.7 million in the Pentre Solar Project and will
invest a further GBP0.4 million alongside third party debt of GBP4.1
million from Investec Bank when the installation receives its Ofgem RO
Accreditation, which is expected in January 2015. Pentre is a 6MW ground
mounted solar power project in Carmarthenshire, South Wales. The
investment has received HMRC clearance. The project has been connected
to the grid and generating revenue for the Fund since September 2014.
All of the six remaining follow-on investments were non-material and
totalled GBP463,651.
Outlook
The fund has now reduced its exposure to non-qualifying PFI investments
to 30% of net assets and has successfully deployed the remaining funds
into a combination of PFI and solar investments that have already
received HMRC clearance. During the reporting period, five solar
investments have been completed which provide an infrastructure risk and
return profile and offer diversification and yield benefits to the
portfolio.
Reflecting progress being made in generating yield from these
investments, the Board declared a dividend of 2.5p per Infrastructure
Share on 16 September 2014. Shareholders will be updated further in due
course.
Portfolio Review
Following the all-share merger in April 2014 of the two Foresight
portfolio companies, AlwaysOn Group and Data Continuity Group, a major
reorganisation was implemented, involving significant cost reductions
and the year end was changed to March 2015. As part of the transaction,
a further GBP500,000 was invested by other Foresight VCTs into AlwaysOn
Group to ensure that the enlarged group had sufficient resources for
growth. The merged business provides data backup services, connectivity
and collaboration software (Microsoft Lync) to SMEs and larger
enterprises. AlwaysOn Group's shareholders received a total of 30.6% of
the equity of the enlarged Group. Overall, the merger has been
successfully completed, with no major outages and a well-run Service
Operation Center. There is an increased focus on indirect channels,
particularly for the sale of Microsoft Lync, where AlwaysOn is a
Microsoft Gold partner. In the year to date, revenues have lagged budget
resulting in small monthly losses being incurred, mostly due to weaker
product sales and data back up renewals, whilst the managed services are
performing ahead of expectations. With a number of significant pipeline
opportunities generated through partners, performance is expected to
improve significantly once some of these convert into orders. In view of
the losses incurred, a provision of GBP1.1 million was made against the
cost of the investment in the Ordinary Shares fund during the period.
In March 2014, a small number of additional shares in Data Continuity
Group were acquired from a departing shareholder by the Planned Exit
Shares fund for GBP929. The original investment in Data Continuity Group
held by the Planned Exit Shares fund comprises both loans and shares
which are currently valued above cost. Held in the Ordinary Shares and
Planned Exit Shares funds.
AtFutsal Group runs government approved education programmes for
students aged 16-18 years old in conjunction with a consortium made up
of Football League clubs, colleges and academies and training/
accreditation organisations. Funding for these programmes is sourced
from the Education Funding Agency. The company's three arenas in
Birmingham, Leeds and Swindon are used as part of these education
programmes. AtFutsal is introducing a wider range of government approved
BTech courses and has developed its own online education software
platform so that it can provide a broader range of educational services.
A separate English Colleges education programme has been developed to
provide additional futsal related courses for 16-18 year olds at sixth
form colleges. For the current student year which commenced in September
2014, the company registered some 1,400 students on its futsal related
courses, compared with 1,200 in the previous academic year and some 100
for its new English Colleges programme. AtFutsal is also improving its
capacity utilisation across its three arenas with a variety of different
sports being regularly played at each arena alongside futsal at both
child and adult level. This improved utilisation has enabled the arenas
to approach cash breakeven. For the 12 month period ended 30 June 2014,
a small operating profit was achieved on sales of GBP4.3 million, with
the growing Education division generating the majority of the profit and
cash flow within the Group. Management is focussed on increasing the
number of students and range of education programmes, increasing usage
of its online education platform and achieving a consistent breakeven on
the arenas each month. Held in the Ordinary Shares fund.
Following the GBP48 million secondary buy-out by ISIS Private Equity in
January 2012, investments in equity and loan stock valued at GBP1.98
million were retained in Autologic Diagnostics Group. Autologic
Diagnostics Group generated reduced profits for the year to December
2013 achieving EBITDA of GBP5.4 million on sales of GBP18.8 million (an
EBITDA of GBP5.9 million on revenues of GBP17.2 million in 2012). The
company has traded satisfactorily during 2014, with relatively stronger
sales in the UK and Europe compared with the USA. As at 30 September
2014, the company had a healthy cash balance of GBP5.1 million.
Management continues to develop a business model to generate recurring
revenues and improve the quality of the company's earnings through a new
service-oriented product, the launch of which has now been delayed to
mid 2015. In the short term, the change in strategy towards a pure
recurring revenue model may impact short term EBITDA in 2015 and 2016
while helping to drive shareholder value. During the year, interest of
GBP98,659 deferred under the terms of the loan agreement with Autologic
Diagnostics Group was capitalised. Held in the Ordinary Shares fund.
In December 2010, the Planned Exit Shares fund provided GBP565,000 to
partially fund a management buy-in of long established Petersfield based
Channel Safety Systems Group which designs and distributes emergency
lighting and fire safety systems, as well as providing associated
installation and maintenance services through its subsidiary, Channel
Technical Services. For the year to 31 October 2013, Channel Safety
Systems Group performed well, achieving an EBITDA of GBP580,000 on sales
of GBP8.58 million (GBP420k EBITDA on sales of GBP8.5 million for the
previous year). In the year to 31 October 2014, the group traded well
ahead of budget and the previous year and has a strong cash position. In
late October 2014, Channel Technical Services, was sold for GBP1.6
million, as a result of which the Planned Exit Shares fund was repaid
loan capital and interest totalling GBP641,647. This investment has
already returned close to original cost while the equity shareholding in
the parent company remains unchanged. Held in the Planned Exit Shares
fund.
During 2013/14, Closed Loop Recycling successfully doubled the capacity
of its Dagenham plant, which is now operating at full capacity
processing approaching 1,000 tonnes per week of waste plastic bottles.
In October 2014, following protracted negotiations, the shareholders
entered into a confidential, conditional sale and purchase agreement
with a purchaser planning to seek a public listing simultaneously with
completion of the acquisition, at a price higher than the then carrying
valuation. One of the conditions related to the financial performance of
the company during the listing process. However, the company's recent
and short term projected performance have been impacted by adverse
movements in the price of waste plastic bottles reflecting overseas
demand for such bottles and weaker prices for virgin resin, reflecting
the falling price of oil. The latter impacts the price customers pay for
the company's competing recycled HDPE and PET pellets. To mitigate the
impact of these price movements, price increases have been negotiated
with key customers. The conditional sale and purchase agreement was
formally terminated in December 2014, following weaker than projected
financial performance by the company and weaker short term profit
projections. As a consequence of these two factors, a provision of
GBP5,198,404 and GBP507,650 against the value of the Planned Exit Shares
fund was made against the cost of the investment.
The company is focussing its efforts on current trading and improving
profitability, whilst with the help of an independent adviser, is also
considering strategic options including raising capital from third party
sources and an outright sale. Held in the Ordinary and Planned Exit
Shares funds.
Derby based Datapath Group is a world leading innovator in the field of
computer graphics and video-wall display technology utilised in a number
of international markets. The company is increasing its market share in
control rooms, betting and signage and is entering other new markets.
Audited accounts for the year to 31 March 2014 show record operating
profits of GBP7.36 million on sales of GBP19.6 million (for the year
ended 31 March 2013, a record operating profit of GBP5.1 million was
achieved on sales of GBP14.1 million). Trading and cash generation in
the current year remains strong, with the company continuing to enjoy
good demand from its main OEM partners and distributors. The company has
acquired its US distributor and has established an office in
Philadelphia to develop more US sales and distributorships. Held in the
Ordinary Shares fund.
Evance Wind Turbines, which manufactured 5kW tree sized (up to 50 feet)
wind turbines, enjoyed strong sales growth during 2012, driven primarily
by the introduction of the UK Feed-in-Tariff regime. Both sales and
profits grew well in the year to 31 March 2013, the company delivering
its fifteen hundredth machine and achieving an operating profit of
GBP354,000 on sales of GBP8.6 million. However, trading was adversely
affected by the reductions in the applicable Feed-in-Tariff which
started in October 2012. Despite substantial cost cuts and efforts to
diversify the company's activities, significant monthly losses continued
to be incurred. As a consequence, administrators were appointed in April
2014 and GBP170,292 has since been repaid. The reductions in the
Feed-in-Tariff were the principal factor in the company going from a
position of profitability to administration in less than two years. A
provision of GBP569,937 has been made against the value of this
investment after taking into account the expected recovery proceeds.
Held in the Ordinary Shares fund.
ICA Group is a leading document management solutions provider in the
South East of England, reselling and maintaining Ricoh, Toshiba and
Kyocera office printing equipment to customers in the commercial and
public sectors. For the year to 31 January 2014, an EBITDA of GBP561,000
was achieved on sales of GBP3 million and the company continues to trade
well in the current year as a result of enhanced sales efforts. With
stronger demand from SMEs and good cash generation, ICA completed a
recapitalisation post the financial year end in December 2014 enabling
loans and interest totalling GBP600,000 to be paid to the Ordinary
Shares fund. Held in the Ordinary Shares fund.
As a part of a GBP360,000 funding round in April 2013, the Planned Exit
Shares fund invested GBP180,000 in Industrial Efficiency, alongside
GBP180,000 from the Foresight VCT Planned Exit Shares fund. The company
installs and maintains proven and robust energy switching equipment,
allowing customers to reduce emissions and make significant cost
savings. The company completed its first energy cost reduction project
in September 2013 and continues to pursue a number of similar
opportunities. Returns are based solely on the cost savings made and do
not depend on government subsidies or Feed-in- Tariffs. In October 2013,
a loan of GBP25,000 was repaid, together with interest of GBP18,075.
Reflecting the continuing strong performance, the valuation of the
investment was increased by GBP33,510 during the year. In January 2015,
the investment in Industrial Efficiency was sold for GBP205,500 to
another Foresight managed fund, based on an independent third party
valuation. The sale of Industrial Efficiency realised a profit of
GBP85,215 and generated a total return of 1.5 times original cost of
GBP180,000. Held in the Planned Exit Shares fund.
In December 2011 and March 2012, the Planned Exit Shares fund provided a
total of GBP875,000 by way of loans and equity to help fund a management
buy-in at Industrial Engineering Plastics. The company is a long
established Liphook-based plastics distributor and fabricator to a wide
range of industries nationally, principally supplying ventilation and
pipe fittings, plastic welding rods, hygienic wall cladding, plastic
tanks and sheets. For the 18 month period ended 31 May 2014, reflecting
increased competition in its plastics distribution and industrial
fabrication markets, the company achieved a reduced EBITDA of GBP205,000
on sales of GBP6.7 million, (compared to an EBITDA of GBP648,000 on
sales of GBP4.9 million in 2012). Notwithstanding a good start in the
following year (with record monthly sales achieved in March 2014) and
improved market sentiment, performance deteriorated subsequently during
the Summer. A new Chairman and experienced turnround CEO were appointed
with a view to improving trading, operational efficiency and systems and
performance has already started to improve. Reflecting this performance,
a provision of GBP344,825 was made against this investment. Held in the
Planned Exit Shares fund.
Ixaris Systems has developed and operates Entropay, a web based global
prepaid payment service using the VISA network, and offers its new IxSol
(formerly known as Opn) product on a 'Platform as a Service' basis to
enable enterprises to develop their own customised global applications
for payments over various payment networks. IxSol is trading
satisfactorily with a number of deployments in progress and a strong
sales pipeline. IxSol is being used by companies in the affiliate
marketing and travel sectors and sales efforts are now also focussing on
the international e-commerce and financial services sectors.
During 2013, the company invested in developing and marketing its Ixaris
Payment System, the platform that runs IxSol, to financial institutions.
The platform enables financial institutions to offer payment services to
their customers based on prepaid cards. The company has signed one
customer with four others in prospect and good progress has been made on
building a sales pipeline. In the year to 31 December 2013, an EBITDA
loss of GBP617k was incurred on sales of GBP9.5 million, reflecting the
above mentioned investment in software and systems (cf. an EBITDA loss
of GBP293k on sales of GBP8.4 million in the previous year). In January
2014, Ixaris Systems raised GBP2 million of new equity capital to
accelerate investment in the Payment System. In the current year,
revenues are currently behind the aggressive budget but the EBITDA loss
is appreciably less than budgeted following cost reductions which have
resulted in a monthly breakeven position. Held in the Ordinary Shares
fund.
As part of a GBP1.38 million funding round in January 2012, the Planned
Exit Shares fund invested GBP690,000 in Leisure Efficiency. The company
installs and maintains energy efficiency equipment, including voltage
optimisers and heat exchangers, in 34 David Lloyd Leisure ("DLL") sites
across the UK. The contract with DLL has a life of seven years during
which revenues are generated from taking a significant part of the value
of the energy savings made by the equipment. Reflecting the continuing
strong performance, the valuation of the investment was increased by
GBP139,194 during the year. In January 2015, the investment in Leisure
Efficiency was sold for GBP793,000 to another Foresight managed fund,
based on an independent third party valuation. The sale of Leisure
Efficiency realised a profit of GBP470,975 and generated a total return
of 1.7 times original cost of GBP690,000. Held in the Planned Exit
Shares fund.
In February 2014, O-Gen Acme Trek received planning permission for the
proposed rebuild of the plant in Stoke as a 7MW waste wood to energy
power plant. Management is currently working with the selected
technology provider and a major EPC contractor to develop the project to
the next stage, but this is taking longer than anticipated. The project
is now expected to qualify under the new Contacts for Difference (CfD)
regime, rather than the ROC regime. Held in the Ordinary Shares fund.
O-Gen UK is a leading developer of waste wood gasification facilities in
the UK and in December 2013 reached financial close on a contract to
construct GBP48 million, 10MW waste wood to energy power plant project
in Birmingham. Construction of the plant is progressing ahead of
schedule. The company has established a number of partnerships which
have led to the development of a growing pipeline of similar
opportunities, including one in Lincolnshire for which planning
permission was obtained in July 2014 and ROC grace period secured in
October, with financial close anticipated early in 2015. The company
continues to develop relationships with a number of technology providers
and major Engineering, Procurement and Construction (EPC) contractors.
O-Gen UK will not finance the construction of these plants but will
benefit from project management fees, equity shareholdings and fuel and
operation and maintenance contracts. Held in the Ordinary Shares fund.
In April 2013, the Ordinary Shares fund invested GBP100,000 alongside
other Foresight VCTs in a GBP1.8 million round to finance a management
buy-out of Procam Television Holdings. Procam is one of the UK's leading
broadcast hire companies, supplying equipment and crews for UK location
TV production to broadcasters, production companies and companies for
over 20 years. Headquartered in Battersea, London, with additional
facilities in Manchester, Edinburgh and Glasgow, Procam is a preferred
supplier to BSkyB and an approved supplier for the BBC and ITV. Over the
last four years revenues have doubled, following the introduction of new
camera formats.
In September 2013, Hammerhead, a competitor with facilities in London,
Manchester, Edinburgh and Glasgow, was acquired in order to broaden the
customer base, national coverage and realise various synergistic
benefits. For the year to 31 December 2013, an EBITDA of GBP1.8 million
was achieved on sales of GBP6.4 million, well ahead of trading in 2012.
In the year to 31 December 2014, significant growth in sales and profits
has been achieved, well ahead of the prior year, reflecting both strong
organic growth and the successful integration of the Hammerhead
acquisition. Held in the Ordinary Shares fund.
TFC Europe, a leading distributor of technical fasteners in the UK and
Germany, performed well during the year to 31 March 2014, again
achieving record operating profits of GBP2.75 million on sales of
GBP19.5 million (cf. a record operating profit of GBP2.45 million on
sales of GBP18.1 million in 2013). Trading in the current year continues
to be strong, supporting an increased valuation of GBP622,256 during the
year. In September 2013, a small Scottish distribution business was
acquired, thereby improving national UK coverage. Management's current
focus is to expand in Southern Germany. A new full service centre was
opened in Bochum near Dusseldorf in October 2013 and existing customers
are already expanding their business with TFC. A seventh service centre
was acquired in October 2014 in Singen, near Stuttgart. This acquisition
will provide increased opportunities to service existing Southern German
customers and target new customers with a wider product range. This
strong physical presence in Europe's largest manufacturing market is
expected to assist TFC greatly in growing its sales and profits. Held in
the Ordinary Shares fund.
The Bunker Secure Hosting, which operates two ultra secure data centres,
continues to generate substantial profits at the EBITDA level. For the
year to 31 December 2013, a record EBITDA of GBP2.2 million was achieved
on sales of GBP9.25 million (cf. in 2012, an EBITDA of GBP1.77 million
on sales of GBP8.5 million). Sales growth slowed during that year,
however, reflecting increased competition, but has since recovered well.
Recurring annual revenues presently exceed GBP9 million. For the year to
date, trading continues in line with budget. To meet growing customer
demand, a number of new Cloud based services have recently been launched
while the sales and marketing strategy has been reassessed and sales
efforts strengthened. A number of customers have already been signed and
a growing pipeline has been developed through Channel partners for the
Cloud 2.0 and Object Storage services. Investment continues in upgrading
the existing infrastructure. Held in the Ordinary Shares fund.
Trilogy Communications achieved strong trading results in the two years
to 29 February 2012, following a number of defence contract orders from
partners such as Northrop Grumman and Raytheon. Trading has since been
affected by delays in long-term US defence programme orders. In the year
to February 2014, despite cost reductions, the company incurred an
EBITDA loss of GBP808k on sales of GBP3.8 million. As part of a
GBP250,000 funding round, the Planned Exit Shares fund advanced a loan
of GBP45,654 in January 2014. Following further cost reductions and some
recovery in defence orders, losses have since been reduced. A new
non-executive Chairman has been appointed and the Chief Operating
Officer has recently been appointed as Chief Executive. Discussions are
in progress in relation to further defence programmes and the company
continues to develop its range of communication equipment and related
services, including the planned launch of a software only variant.
Assuming successful completion of two important test programmes,
significant defence orders are expected in early 2015 which would
largely be met from existing stock, materially improving cash
conversion. The broadcast division has recently underperformed budget
and efforts are being made to increase broadcast sales. To reflect the
above trading performance, provisions totalling GBP836,895 and
GBP403,764 respectively were made during the year against the cost of
the investments in the Ordinary Shares fund and the Planned Exit Shares
fund. Held in the Ordinary Shares and Planned Exit Shares funds
David Hughes
Chief Investment Officer
Foresight Group
20 January 2015
The Disclosure and Transparency Rules ("DTR") of the UK Listing
Authority require certain disclosures in relation to the annual
financial report, as follows:
Principal risks, risk management and regulatory environment
The Board believes that the principal risks faced by the Company are:
-- Economic risk - events such as an economic recession and movement in
interest rates could affect smaller companies' performance and
valuations.
-- Loss of approval as a Venture Capital Trust - the Company must comply
with Section 274 of the Income Tax Act 2007 which allows it to be
exempted from corporation tax on investment gains. Any breach of these
rules may lead to: the Company losing its approval as a VCT; qualifying
shareholders who have not held their shares for the designated holding
period having to repay any income tax relief they obtained; and future
dividends paid by the Company becoming subject to tax in the hands of
investors. The Company would also lose its exemption from corporation
tax on capital gains.
-- Investment and strategic - inappropriate strategy, poor asset
allocation or consistently weak stock selection leading to under
performance and poor returns to shareholders.
-- Regulatory - the Company is required to comply with the Companies
Acts 2006, the rules of the UK Listing Authority and United Kingdom
Accounting Standards. Breach of any of these might lead to suspension of
the Company's Stock Exchange listing, financial penalties or a qualified
audit report.
-- Reputational - inadequate or failed controls might result in breaches
of regulations or loss of shareholder trust.
-- Operational - failure of the Manager's or Company Secretary's
accounting systems or disruption to its business leading to an inability
to provide accurate reporting and monitoring.
-- Financial - inadequate controls might lead to misappropriation or
loss of assets. Inappropriate accounting policies might lead to
misreporting or breaches of regulations. Additional financial risks,
including interest rate, credit, market price and currency, are detailed
later in this note.
-- Market risk - investment in AIM traded, ISDX Growth Market traded and
unquoted companies by its nature involves a higher degree of risk than
investment in companies traded on the main market. In particular,
smaller companies often have limited product lines, markets or financial
resources and may be dependent for their management on a small number of
key individuals. In addition, the market for shares in smaller companies
is often less liquid than that for shares in larger companies, bringing
with it potential difficulties in acquiring, valuing and disposing of
such shares.
-- Liquidity risk - the Company's investments, both unquoted and quoted,
may be difficult to realise. The spread between the buying and selling
price of such shares may be very wide, the number of shares that can be
traded may be restricted and the fact that a share is quoted on AIM does
not guarantee that it can be traded at all.
The Board regularly reviews the principal risks and uncertainties facing
the Company which the Board and the Manager have identified and the
Board sets out delegated controls designed to manage those risks and
uncertainties. Key risks within investment strategy are managed by the
Board through a defined investment policy, with guidelines and
restrictions, and by the process of oversight at each Board meeting.
Operational disruption, accounting and legal risks are also covered at
least annually and regulatory compliance is reviewed at each Board
meeting. The Directors have adopted a robust framework of internal
controls which is designed to monitor the principal risks and
uncertainties facing the Company and provide a monitoring system to
enable the Directors to mitigate these risks as far as possible. Details
of the Company's internal controls are contained in the Corporate
Governance and Internal Control sections.
Statement of Directors' Responsibilities in respect of the Annual Report
and Financial Statements
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for
each financial year. Under that law they have elected to prepare the
financial statements in accordance with UK Accounting Standards and
applicable law (UK Generally Accepted Accounting Practice).
Under company law the directors must not approve the financial
statements unless they are satisfied they give a true and fair view of
the state of affairs of the Company and of the profit or loss of the
Company for that period. In preparing these financial statements, the
directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the
financial statements; and
-- prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the company's transactions and
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the assets
of the company and to prevent and detect fraud and other irregularities.
Under applicable law and regulations, the directors are also responsible
for preparing a Strategic Report, Directors' Report, Directors'
Remuneration Report and Corporate Governance Statement that complies
with that law and those regulations.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website
(which is delegated to Foresight Group and incorporated into their
website). Legislation in the UK governing the preparation and
dissemination of financial statements differs from legislation in other
jurisdictions.
Statement of Directors' in respect of the Annual Financial Report
We confirm that to the best of our knowledge:
-- the financial statements, prepared in accordance with the
applicable accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
-- the Annual Report includes a fair review of the development and
performance of the business and the position of the Company, together
with a description of the principal risks and uncertainties that the
Company faces; and
-- the report and accounts, taken as a whole, are fair, balanced, and
understandable and provide the necessary information for shareholders to
assess the Company's performance, business model and strategy.
On behalf of the Board
Jocelin Harris
Chairman
20 January 2015
Unaudited Non-Statutory Analysis of the Share Classes
Income Statement
for the year ended 30 September 2014
Ordinary Shares Fund
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Realised losses on investments - (4,089) (4,089)
Investment holding losses - (3,059) (3,059)
Income 634 - 634
Investment management fees (170) (510) (680)
Other expenses (252) - (252)
Return/(loss) on ordinary activities before
taxation 212 (7,658) (7,446)
Taxation 10 - 10
Return/(loss) on ordinary activities after
taxation 222 (7,658) (7,436)
Return/(loss) per share 0.5p (16.5)p (16.0)p
Planned Exit Shares Fund
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Realised losses on investments - (125) (125)
Investment holding losses - (970) (970)
Income 222 - 222
Investment management fees (14) (41) (55)
Other expenses (42) - (42)
Return/(loss) on ordinary activities before
taxation 166 (1,136) (970)
Taxation (4) 4 -
Return/(loss) on ordinary activities after
taxation 162 (1,132) (970)
Return/(loss) per share 2.7p (18.5)p (15.8)p
Infrastructure Shares Fund
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Realised gains on investments - 122 122
Investment holding losses - (299) (299)
Income 698 - 698
Investment management fees (67) (201) (268)
Other expenses (111) - (111)
Return/(loss) on ordinary activities before
taxation 520 (378) 142
Taxation (29) 19 (10)
Return/(loss) on ordinary activities after
taxation 491 (359) 132
Return/(loss) per share 3.0p (2.2)p 0.8p
Unaudited Non-Statutory Analysis of the Share Classes
Balance Sheets
at 30 September 2014
Ordinary Planned Exit Infrastructure
Shares Fund Shares Fund Shares Fund
GBP'000 GBP'000 GBP'000
Fixed assets
Investments held at fair value
through profit or loss 26,046 4,403 14,534
Current assets
Debtors* 1,459 277 201
Money market securities and other
deposits 1 1 -
Cash 689 206 452
2,149 484 653
Creditors
Amounts falling due within one
year* (599) (384) (30)
Net current assets 1,550 100 623
Net assets 27,596 4,503 15,157
Capital and reserves
Called-up share capital 465 61 165
Share premium account 9,206 - 3
Capital reserve - realised (8,072) (283) (342)
Capital reserve - investment
holding losses (4,963) (929) (299)
Distributable reserve 30,841 5,653 15,629
Capital redemption reserve 119 1 1
Equity shareholders' funds 27,596 4,503 15,157
Number of shares in issue 46,457,032 6,104,028 16,590,558
Net asset value per share 59.4p 73.7p 91.4p
*At 30 September 2014 there was an inter-share class debtor/creditor for
running expenses of GBP375,000 which has been eliminated on aggregation.
Unaudited Non-Statutory Analysis of the Share Classes
Reconciliations of Movements in Shareholders' Funds
for the year ended 30 September 2014
Capital
Capital reserve -
Called-up Share reserve investment Capital
share premium - holding Distributable redemption
capital account realised losses reserve reserve Total
Ordinary
Shares Fund GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1
October
2013 465 9,171 (3,473) (1,904) 30,619 119 34,997
Expenses in
relation to
share
issues - 35 - - - - 35
Realised
losses on
disposal of
investments - - (4,089) - - - (4,089)
Investment
holding
losses - - - (3,059) - - (3,059)
Management
fees
charged to
capital - - (510) - - - (510)
Revenue
return for
the year - - - - 222 - 222
As at 30
September
2014 465 9,206 (8,072) (4,963) 30,841 119 27,596
Capital
Capital reserve -
Called-up Share reserve investment Capital
share premium - holding Distributable redemption
capital account realised gains/(losses) reserve reserve Total
Planned Exit
Shares Fund GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1
October
2013 61 - (121) 41 5,833 1 5,815
Repurchase
of shares - - - - (35) - (35)
Realised
losses on
investment - - (125) - - - (125)
Investment
holding
losses - - - (970) - - (970)
Dividends - - - - (307) - (307)
Revenue
return for
the year - - - - 162 - 162
Management
fees
charged to
capital - - (41) - - - (41)
Tax credited
to capital - - 4 - - - 4
As at 30
September
2014 61 - (283) (929) 5,653 1 4,503
Capital
Capital reserve -
Called-up Share reserve investment Capital
share premium - holding Distributable redemption
capital account realised losses reserve reserve Total
Infrastructure
Shares Fund GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 October
2013 166 - (282) - 15,596 - 15,480
Expenses in
relation to
share issues - 3 - - - - 3
Repurchase of
shares (1) - - - (52) 1 (52)
Realised gains - - 122 - - - 122
Investment
holding
losses - - - (299) - - (299)
Dividends - - - - (416) - (416)
Revenue return
for the year - - - - 491 - 491
Transaction
fees - - - - 10 - 10
Management fees
charged to
capital - - (201) - - - (201)
Tax credited to
capital - - 19 - - - 19
As at 30
September
2014 165 3 (342) (299) 15,629 1 15,157
Income Statement
for the year ended 30 September 2014
Year ended 30 September Year ended 30 September
2014 2013
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Realised losses
on investments 9 - (4,092) (4,092) - (6,281) (6,281)
Investment
holding
(losses)/gains 9 - (4,328) (4,328) - 3,542 3,542
Income 2 1,554 - 1,554 1,368 - 1,368
Investment
management
fees 3 (251) (752) (1,003) (268) (802) (1,070)
Other expenses 4 (405) - (405) (427) - (427)
Return/(loss) on
ordinary
activities
before
taxation 898 (9,172) (8,274) 673 (3,541) (2,868)
Taxation 6 (23) 23 - (51) 51 -
Return/(loss) on
ordinary
activities
after taxation 875 (9,149) (8,274) 622 (3,490) (2,868)
Return/(loss)
per share:
Ordinary Share 8 0.5p (16.5)p (16.0)p 0.4p (7.1)p (6.7)p
C Share (up to
28 March 2013) 8 N/A N/A N/A 0.0p (4.9)p (4.9)p
Planned Exit
Share 8 2.7p (18.5)p (15.8)p 3.5p 4.2p 7.7p
Infrastructure
Share 8 3.0p (2.2)p 0.8p 1.7p (1.0)p 0.7p
The total column of this statement is the profit and loss account of the
Company and the revenue and capital columns represent supplementary
information.
All revenue and capital items in the above Income Statement are derived
from continuing operations. No operations were acquired or discontinued
in the year.
The Company has no recognised gains or losses other than those shown
above, therefore no separate statement of total recognised gains and
losses has been presented.
Reconciliation of Movements in Shareholders' Funds
Capital
Capital reserve -
Called-up Share reserve investment Capital
share premium - holding Distributable redemption
capital account realised losses reserve reserve Total
Year ended 30 September 2013 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Company
As at 1 October 2012 683 24,223 3,156 (5,405) 36,966 116 59,739
Share issues in the year 13 1,024 - - - - 1,037
Expenses in relation to share issues (including trail
commission) - (488) - - - - (488)
Repurchase of shares (3) - - - (89) 3 (89)
Cancellation of share premium - (15,778) - - 15,778 - -
Transfer from distributable reserve - 190 - - (190) - -
Realised losses on disposal of investments - - (6,281) - - - (6,281)
Investment holding gains - - - 3,542 - - 3,542
Enhanced buyback adjustment - - - - (241) - (241)
Dividends - - - - (798) - (798)
Revenue return for the year - - - - 622 - 622
Management fees charged to capital - - (802) - - - (802)
Tax credited to capital - - 51 - - - 51
Net effect of transfer of capital & reserves from
C Shares fund to Ordinary Shares fund (1) - - - - 1 -
As at 30 September 2013 692 9,171 (3,876) (1,863) 52,048 120 56,292
Capital
Capital reserve -
Called-up Share reserve investment Capital
share premium - holding Distributable redemption
capital account realised losses reserve reserve Total
Year ended
30 September
2014 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Company
As at 1
October
2013 692 9,171 (3,876) (1,863) 52,048 120 56,292
Expenses in
relation to
share
issues - 38 - - - - 38
Repurchase
of shares (1) - - - (87) 1 (87)
Realised
losses on
disposal of
investments - - (4,092) - - - (4,092)
Investment
holding
losses - - - (4,328) - - (4,328)
Dividends - - - - (723) - (723)
Revenue
return for
the year - - - - 875 - 875
Transaction
fees - - - - 10 - 10
Management
fees
charged to
capital - - (752) - - - (752)
Tax credited
to capital - - 23 - - - 23
As at 30
September
2014 691 9,209 (8,697) (6,191) 52,123 121 47,256
Balance Sheet
at 30 September 2014
Registered Number:
05200494
As at As at
30 September 2014 30 September 2013
Notes GBP'000 GBP'000
Fixed assets
Investments held at fair
value through profit or
loss 9 44,983 52,707
Current assets
Debtors 10 1,562 2,996
Money market securities
and other deposits 2 2
Cash 1,347 676
2,911 3,674
Creditors
Amounts falling due
within one year 11 (638) (89)
Net current assets 2,273 3,585
Net assets 47,256 56,292
Capital and reserves
Called-up share capital 12 691 692
Share premium account 9,209 9,171
Capital reserve -
realised (8,697) (3,876)
Capital reserve -
investment holding
losses (6,191) (1,863)
Distributable reserves 52,123 52,048
Capital redemption
reserve 121 120
Equity shareholders'
funds 47,256 56,292
Net asset value per
share:
Ordinary Share 13 59.4p 75.3p
Planned Exit Share 13 73.7p 94.6p
Infrastructure Share 13 91.4p 93.0p
Cash Flow Statement
for the year ended 30 September 2014
Year ended Year ended
30 September 30 September
2014 2013
GBP'000 GBP'000
Cash flow from operating activities
Investment income received 977 638
Dividends received from investments 170 297
Deposit and similar interest received 1 2
Investment management fees paid (445) (1,102)
Secretarial fees paid (98) (159)
Other cash payments (264) (413)
Net cash inflow/(outflow) from operating activities
and returns on investment 341 (737)
Returns on investment and servicing of finance
Purchase of unquoted investments and investments quoted
on AIM (7,622) (10,372)
Net proceeds on sale of investments 8,720 6,272
Net capital inflow/(outflow) from financial investment 1,098 (4,100)
Equity dividends paid (723) (865)
Management of liquid resources
Movement in money market funds - 99
- 99
Financing
Issue of shares - 1,019
Expenses arising from the issue of shares 42 (316)
Repurchase of own shares (87) (203)
(45) 500
Net inflow/(outflow) of cash for the year 671 (5,103)
Reconciliation of net cash flow to movement in net
funds
Increase/(decrease) in cash for the year 671 (5,103)
Net cash at start of year 676 5,779
Net cash at end of year 1,347 676
Analysis of changes in net
debt At 1 October 2013 Cashflow At 30 September 2014
GBP'000 GBP'000 GBP'000
Cash and cash equivalents 676 671 1,347
Notes
1. The audited Annual Financial Report has been prepared on the basis of
accounting policies set out in the statutory accounts of the Company for
the year ended 30 September 2014. All investments held by the Company
are classified as 'fair value through the profit and loss'. Unquoted
investments have been valued in accordance with IPEVC guidelines. Quoted
investments are stated at bid prices in accordance with the IPEVC
guidelines and Generally Accepted Accounting Practice.
2. These are not statutory accounts in accordance with S436 of the
Companies Act 2006. The full audited accounts for the year ended 30
September 2014, which were unqualified and did not contain and
statements under S498(2) of Companies Act 2006 or S498(3) of Companies
Act 2006, will be lodged with the Registrar of Companies. Statutory
accounts for the year ended 30 September 2014 including an unqualified
audit report and containing no statements under the Companies Act 2006
will be delivered to the Registrar of Companies in due course.
3. Copies of the Annual Financial Report will be sent to shareholders
and will be available for inspection at the Registered Office of the
Company at The Shard, 32 London Bridge Street, London, SE1 9SG and can
be accessed on the following website: www.foresightgroup.eu
4.
Net asset value per share
The net asset value per share is based on net assets at the end of the
period and on the number of shares in issue at that date.
30 September 2014 30 September 2013
Net
Net assets assets
Number of Net asset Net asset
shares in value per Number of value per
GBP'000 issue share GBP'000 shares in issue share
Ordinary Shares
Fund 27,596 46,457,032 59.4p 34,997 46,457,032 75.3p
Planned Exit
Shares Fund 4,503 6,104,028 73.7p 5,815 6,145,511 94.6p
Infrastructure
Shares Fund 15,157 16,590,558 91.4p 15,480 16,647,858 93.0p
5. Return/(loss) per share
Year ended Year ended
30 September 2014 30 September 2013
Ordinary Shares Planned Exit Shares Infra- structure Shares Ordinary Shares C Shares Planned Exit Shares Infra-structure Shares
fund fund fund fund fund fund fund
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Total (loss)/return after taxation (7,436) (970) 132 (2,269) (1,185) 474 112
Basic (loss)/return per share (note a) (16.0)p (15.8)p 0.8p (6.7)p (4.9)p 7.7p 0.7p
Revenue return from ordinary activities after
taxation 222 162 491 121 12 213 276
Revenue return per share (note b) 0.5p 2.7p 3.0p 0.4p 0.0p 3.5p 1.7p
Capital (loss)/return from ordinary shares after
taxation (7,658) (1,132) (359) (2,390) (1,197) 261 (164)
Capital (loss)/return per share (note c) (16.5)p (18.5)p (2.2)p (7.1)p (4.9)p 4.2p (1.0)p
Weighted average number of shares in issue in the
year 46,457,032 6,127,190 16,633,258 **33,829,725 *24,271,337 6,162,249 16,647,858
Notes:
a) Total return per share is total return after taxation divided by the
weighted average number of shares in issue during the year.
b) Revenue return per share is revenue return after taxation divided by
the weighted average number of shares in issue during the year.
c) Capital return per share is capital return after taxation divided by
the weighted average number of shares in issue during the year.
**The weighted average number of shares for the Ordinary Shares fund
incorporates shares issued to original C Share holders as a result of
the merger on 28 March 2013.
* The weighted average number of shares for the C Shares is fund is
calculated for the period to 31 March 2013, based on 24,816,760 C Shares
in issue at the merger date.
6. Annual General Meeting
The Annual General Meeting will be held at 1:00 pm on 17 February 2015
at the offices of SGH Martineau, One America Square, Crosswall, London,
EC3N 2SG.
7. Income
Year ended Year ended
30 September 2014 30 September 2013
GBP'000 GBP'000
Loan stock interest 1,372 1,163
Dividend income 181 204
Deposit interest 1 1
1,554 1,368
The Directors are of the opinion that the Company is engaged in a single
segment of business and therefore no segmental reporting is provided.
8. Investments
2014 2013
GBP'000 GBP'000
Quoted investments 52 79
Unquoted investments 44,931 52,628
44,983 52,707
Company Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost at 1 October 2013 194 54,598 54,792
Investment holding losses (115) (1,970) (2,085)
Valuation at 1 October 2013 79 52,628 52,707
Movements in the period:
Purchases at cost - 9,985 9,985
Disposal proceeds - (9,666) (9,666)
Realised losses - (4,344) (4,344)
Investment holding losses (27) (3,672) (3,699)
Valuation at 30 September 2014 52 44,931 44,983
Book cost at 30 September 2014 194 50,573 50,767
Investment holding losses (142) (5,642) (5,784)
Valuation at 30 September 2014 52 44,931 44,983
Quoted Unquoted Total
Ordinary Shares fund GBP'000 GBP'000 GBP'000
Book cost at 1 October 2013 194 34,039 34,233
Investment holding losses (115) (2,000) (2,115)
Valuation at 1 October 2013 79 32,039 32,118
Movements in the period:
Purchases at cost - 913 913
Disposal proceeds - (214) (214)
Realised losses - (4,341) **(4,341)
Investment holding losses (27) (2,403) *(2,430)
Valuation at 30 September 2014 52 25,994 26,046
Book cost at 30 September 2014 194 30,397 30,591
Investment holding losses (142) (4,403) (4,545)
Valuation at 30 September 2014 52 25,994 26,046
*Included within the investment holding losses in the Income Statement,
is GBP629,000 that was unrecognised in the year in respect of deferred
consideration on investment disposals from previous years.
**Included within realised losses in the Income Statement is GBP252,000
that was received in respect of deferred consideration on investment
disposals from previous years.
Quoted Unquoted Total
Planned Exit Shares Fund GBP'000 GBP'000 GBP'000
Book cost at 1 October 2013 - 5,406 5,406
Investment holding gains - 30 30
Valuation at 1 October 2013 - 5,436 5,436
Movements in the period:
Purchases at cost - 145 145
Disposal proceeds - (83) (83)
Realised losses (125) (125)
Investment holding losses - (970) (970)
Valuation at 30 September 2014 - 4,403 4,403
Book cost at 30 September 2014 - 5,343 5,343
Investment holding losses - (940) (940)
Valuation at 30 September 2014 - 4,403 4,403
Quoted Unquoted Total
Infrastructure Shares Fund GBP'000 GBP'000 GBP'000
Book cost at 1 October 2013 - 15,153 15,153
Investment holding gains - - -
Valuation at 1 October 2013 - 15,153 15,153
Movements in the period:
Purchases at cost - 8,927 8,927
Disposal proceeds (9,369) (9,369)
Realised gains 122 122
Investment holding losses - (299) (299)
Valuation at 30 September 2014 - 14,534 14,534
Book cost at 30 September 2014 - 14,833 14,833
Investment holding losses - (299) (299)
Valuation at 30 September 2014 - 14,534 14,534
9. Transactions with the manager
Foresight Group which acts as manager to the Company in respect of all
its assets earned fees of GBP1,003,000 (2013: GBP1,070,000) during the
year and GBP130,000 excluding VAT (2013: GBP128,000) during the year in
respect of Company Secretarial and accounting fees. At the balance sheet
date, there was GBP512,000 due to Foresight Group (2013: GBP1,500) in
respect of management fees and GBP4,500 due in respect of secretarial
and accounting fees (2013: GBP4,500). No amounts have been written off
in the year in respect of debts due to or from the related parties.
Foresight Group also received from investee companies arrangement fees
of GBPnil (2013: GBP21,318) as a result of investments made by the
Ordinary Shares fund, GBPnil (2013: GBP5,400) as a result of investments
made by the Planned Exit Shares fund and GBP237,263 (2013: GBP259,834)
as a result of investments made by the Infrastructure Shares fund.
VCF Partners, an associate of Foresight Group received from investee
companies, Directors fees of GBP198,109 (2013: GBP216,479).
Further details on payments to Foresight Group are given in the
Directors' report.
10. Related party transactions
No Director has an interest in any contract to which the Company is a
party.
END
This announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Foresight 2 VCT PLC via Globenewswire
HUG#1888469
http://www.foresightgroup.eu/
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