Foresight VCT PLC : Annual Financial Report
FORESIGHT VCT PLC
Financial Highlights
Net asset value per Ordinary Share decreased by 4.1% for the year ended 31 December 2012 to 111.3p compared to 123.9p as at 31 December 2011, after adjusting for the interim dividend of 7.5p per share paid on 23 March 2012.
Net asset value per Planned Exit Shares increased by 13.6% for the year ended 31 December 2012 to 100.0p compared to 92.4p as at 31 December 2011, after adjusting for the interim dividend of 5.0p per share paid on 31 August 2012.
Net asset value per Infrastructure Share as at 31 December 2012 was 94.6p compared to 94.5p at launch.
Ordinary Shares Fund
Interim dividend of 5.0p per Ordinary Share to be paid on 14 June 2013.
Realisation proceeds and loan repayments totalling £7,469,282 were received from seven portfolio companies by the Ordinary Shares fund.
The Ordinary Shares fund provided follow-on funding totalling £3,537,147 for ten portfolio companies and invested £6,980,181 in six new companies.
Planned Exit Shares Fund
The Planned Exit Shares fund provided follow-on funding totalling £295,835 for four portfolio companies and invested £690,000 in one new company.
Loan repayments were received by the Planned Exit Share fund totalling £625,000.
An interim dividend of 5.0p per Planned Exit Share was paid on 31 August 2012.
Infrastructure Shares Fund
Two investments were made by the Infrastructure Shares fund totalling £2,087,750.
Chairman's Statement
Performance and Dividends
I am pleased to be able to report generally sound progress in the development of our investment portfolios, with the Ordinary Shares fund benefiting from several profitable realisations but being negatively impacted by write-downs in its environmental investments and one investment in particular.
At 31 December 2012, the Company had three classes of shares (Ordinary Shares, Planned Exit Shares and Infrastructure Shares) and each class of shares has its own portfolio of investments, the performances of which are more fully described in the Investment Manager's Report.
Ordinary Shares
The continued strong performance in the private equity portfolio of the Ordinary Shares fund was off set by a significant write-down on Withion Power. As a result the net asset value decreased by 4.1% to 111.3p per share after adjusting for the 7.5p per share interim dividend. The Ordinary Share portfolio benefited from the strong performances of Autologic Diagnostics Group, Aquasium and Alaric, all of which saw increases in valuation or improved trading during the year, and from significant realisations, Autologic Diagnostics realising £2.19 million in January 2012 and including half of the investment in Infrared Integrated Systems Limited from which £0.6 million was realised in July 2012. The valuation of Trilogy fell as a result of lower sector multiples in the defence and communications sectors as well as some deferrals of orders, particularly in the US defence market in the second half of the year as Congress debated the 'fiscal cliff' and further spending cuts. Amongst other valuation adjustments, an additional provision was made in the case of Abacuswood. Overall, valuation decreases outweighed portfolio gains. However, despite these setbacks, Foresight Group (the 'Manager' comprising Foresight Group CI Limited and its subsidiaries) remains positive about the prospects for this portfolio.
Notwithstanding these predominantly positive signs, significant macroeconomic uncertainties remain, while trading and credit conditions continue to be difficult in many sectors of the economy. Against this background the Board and Foresight Group continues to believe it important to adopt a cautious approach to managing the portfolio.
Planned Exit Shares
The Planned Exit Shares fund is effectively fully invested, although realisations and loan repayments may be reinvested in new opportunities as they occur, in a range of established businesses on terms which the Manager believes will meet the fund's ultimate yield and capital return objectives. Based on evidence to date the Manager remains confident about the prospects for the Planned Exit portfolio. The net asset value of the Planned Exit Shares increased after adjusting for the 5.0p dividend paid in the year, by 13.6% to 100.0p per share principally as a result of an increase in the value of Industrial Engineering Plastics.
Infrastructure Shares
The infrastructure Shares fund made 13 investments during the year under review in acquisition vehicles preparing to trade and made two trading investments during the year. The first secondary PFI market investment, made in October, was the Drumglass High School PFI contract in Dungannon, Northern Ireland. The investment cost was £1.8m and the PFI contract has 13 years remaining. The second investment was completed on 20 December 2012 with the acquisition of a 12.5% share in the Stirling Schools PFI Project for £2.2m. The contract has been operational for two years and has 26.5 years remaining.
Two further investments were completed in the first two weeks of 2013 which involved the acquisition of a 25% stake in each of the Sandwell Schools PFI Project and the Staffordshire Schools PFI Project, both of which are located in the West Midlands with an aggregate investment value of £3.4m. Four investments in the PFI healthcare sector were completed in March 2013 comprising three acute hospitals and one forensic psychiatry unit with an aggregate investment value of £11.5m. Across the eight investments, the fund now has 13 individual school buildings, three hospitals and a forensic psychiatry unit under
management.
Although the rate of investment to date is behind original expectations, Foresight Group expects to have fully invested the fund within the next six months and negotiations are currently well advanced to acquire interests in further PFI contracts and investments in the wider infrastructure sector.
Dividends
The Company's policy is whenever possible to maintain a steady flow of tax-free dividends, generated from income or from capital profits realised on the sale of investments. As a result of the series of recent successful realisations, the Board is pleased to announce an interim dividend of 5.0p per Ordinary Share, which will be paid on 14 June 2013. This dividend will have an ex-date of 29 May 2013 and a record date of 31 May 2013. In addition to underpinning dividends in the future, these realisations have provided the funds required for new investments to replace those that have been sold and the opportunity to generate further value for shareholders.
An interim dividend for the Planned Exit Shares of 5.0p was paid on 31 August 2012.
In line with the dividend policy set out in the original prospectus, a dividend of 5.0p per Infrastructure Share is currently targeted to be paid in July 2014.
Valuation Policy
Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) valuation guidelines (August 2010) 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 and ISDX Growth Market (formerly PLUS) are valued at the bid price as at 31 December 2012. The portfolio valuations are prepared by Foresight Group and are subject to approval by the Board.
Enhanced Share Buyback
I am pleased to report that the Company's 2012 enhanced buyback scheme proved to be popular with shareholders with 2,830,963 Ordinary Shares being tendered at 117.49p per share. As a result of this transaction, 2,748,723 new Ordinary Shares were issued at 121.20p per share.
Other Share Issues and Share Buybacks
Alongside the enhanced buyback, the Company announced a top-up offer of Ordinary Shares. During April and August 2012, 222,522 Ordinary Shares were issued at prices ranging from 121.20p to 127.10p per share.
On 30 March 2012, 70,844 Ordinary Shares were allotted under the Company's Dividend Reinvestment Scheme at 117.46p per share.
On 7 October 2011, the Company launched a joint offer with Foresight 2 VCT plc to raise some £30 million through the issue of Infrastructure Shares, a new share class. Between 1 January 2012 and 18 July 2012, when the offer closed fully subscribed, 16,647,858 Infrastructure Shares were allotted at 100.00p per share.
All of these share issues were under the VCT provisions which commenced on 6 April 2006, namely: 30% upfront income tax relief which can be retained by qualifying investors if the shares are held for the minimum five year holding period.
During the period, as part of the Company's continuing buyback programme, 827,338 Ordinary Shares were purchased for cancellation at a cost of £884,359 and 37,020 Planned Exit Shares for cancellation at a cost of £31,097.
Investment Manager Novation
On 18 June 2012, the Board approved the novation of the investment management contract from Foresight Group LLP to Foresight Group CI Limited, another Foresight Group company. The novation does not affect the services provided to the company or the terms, conditions or costs of those services.
Annual General Meeting
The Company's Annual General Meeting will take place on 28 May 2013. I look forward to welcoming you to the meeting, which will be held in London.
Outlook
The Board remains cautious about the economic outlook in general. Our first priority is to support the existing portfolio so as to optimise the possibility of realising gains on the disposal of soundly based investments. Over the medium term we are optimistic that further realisations at attractive prices can be achieved and that this will facilitate distributions to shareholders. These realisations are likely to be achieved through mergers and acquisitions as many large companies have significant cash resources available to them. However many are waiting for improved economic conditions before committing these funds to growth or acquisition strategies. Your Manager believes that this has resulted in the Company's holding period for its portfolio companies being longer than originally anticipated, but we expect this to change as economic conditions improve.
John Gregory
Chairman
Telephone: 01296 682751
Email: j.greg@btconnect
30 April 2013
For further information please contact:
Gary Fraser, Foresight Fund Managers Limited Tel: 01732 471800
Investment Manager's Report
| Share Class | % NAV Change to 31 December 2012 | Dividend | NAV | Status |
| Ordinary Shares | -4.1 | 7.5p | 111.3p | Fully invested |
| Planned Exit Shares | 13.6 | 5.0 | 100.0p | Fully invested |
| Infrastructure Shares | - | - | 94.6p | In deployment phase |
Manager's Commentary
The mixed trading conditions experienced in 2012 are expected to continue for the foreseeable future and there remains a significant risk of further macroeconomic stagnation, particularly in Europe where weakness in demand persists across the consumer, manufacturing and construction sectors. We continue to manage the various portfolio investments to ensure that their business models remain responsive to the persistence of these poor conditions and that costs are challenged in the interest of organisational efficiency.
Markets have displayed considerable volatility and uncertainty during the year, with a consequent impact on the valuations of several of the portfolio companies. Lower multiples are applied to earnings despite reasonably good performances. With the exception of the Infrastructure Share class which continues to make its early investments, our focus is upon the achievement of profitable realisations from existing portfolio companies.
Annual Portfolio Review: Ordinary Shares
The Ordinary Shares fund benefited from profitable realisations during the year but was negatively impacted by provisions made against certain environmental investments.
The performances of a number of portfolio companies continued to improve during the year, reflecting growing demand and strong sales pipelines, most notably Alaric Systems, Autologic Diagnostics, Aquasium, DCG Group, Infrared Integrated Systems and Closed Loop Recycling. Others experienced more difficult trading conditions, being affected to varying degrees by recession induced factors, including Trilogy Communications, i-plas, Silvigen and Withion. These mixed trading conditions are likely to continue for the foreseeable future, putting greater emphasis on robust business models and quality of
management.
Follow-on funding
| Company | £ |
| Abacuswood Limited | 300,265 |
| alwaysON Limited | 150,150 |
| AtFutsal Group Limited | 98,173 |
| Autologic Diagnostics Holdings Limited | 1,486,358 |
| Closed Loop Recycling Limited | 230,069 |
| DCG Group Limited | 20,129 |
| i-plas Group Limited | 123,334 |
| Silvigen Limited | 66,669 |
| Trilogy Communications Limited | 32,000 |
| Withion Power Limited | 1,030,000 |
| Total | 3,537,147 |
New Investments
| Company | £ |
| Biofortuna Limited | 312,531 |
| Blackstar Amplification Holdings Limited | 2,500,000 |
| Flowrite Refrigeration Holdings Limited | 492,500 |
| Wholesale Efficiency II Limited | 1,000,000 |
| Leisure Efficiency II Limited | 675,150 |
| Leisure Efficiency III Limited | 2,000,000 |
| Total | 6,980,181 |
Realisations
The sale of Ebtec, a subsidiary of Aquasium (£2,187,278).
The partial sale of the investments in Autologic Diagnostics (£3,578,535), Camwood (£473,316) and Infrared Integrated Systems (£621,311).
Loan repayments and redemption premiums were received from Alaric Systems (£194,794) and a loan repayment from Withion Power (£100,000) while £47,439 was recovered from i-plas Group.
A redemption premium was received from AppDNA(£196,800) and a distribution was received from Oxonica (£69,809).
Provisions to a level below cost in the year
| Company | £ |
| Abacuswood Limited | 278,890 |
| AtFutsal Group Limited | 116,833 |
| i-plas Group Limited | 341,076 |
| Silvigen Limited | 422,217 |
| Withion Power Limited | 4,411,960 |
| Total | 5,570,976 |
Performance Summary
Notwithstanding four successful realisations during 2012, the net asset value of the Ordinary Shares fund was held back by the significant provisions made against the investments in Withion Power, Silvigen and i-plas, all environmental investments. Despite the uncertain economic conditions, underlying trading at several of the portfolio companies has been relatively strong, as evidenced by the performances of Alaric Systems, Aquasium, Autologic Diagnostics and DCG Group while initial indications at the three most recent investments, namely Biofortuna, Blackstar and Flowrite, look promising. Other businesses operating solely in UK markets have experienced relatively difficult trading conditions, except where the companies have particular competitive advantages. Following the recent completion of a £12.8 million funding round to double its capacity, Closed Loop Recycling is now well placed to demonstrate its potential.
Although these mixed conditions are expected to continue during 2013 and beyond, we are cautiously optimistic about the current prospects and outlook for several portfolio companies, which continue to display strong order books and revenue and profit growth. The M & A market continues to be active which augurs well for further possible realisations during 2013. However, macro economic fundamentals remain challenging with considerable uncertainties and so we are planning for a prolonged period of sluggish growth. Foresight is now actively pursuing new investment opportunities but is adopting a cautious approach in the light of current trading conditions. The Board and Manager have agreed that, within the existing investment policy, greater emphasis should, for the foreseeable future, be placed on private equity investments and less emphasis on environmental infrastructure investments.
Annual Portfolio Review: Planned Exit Shares
The performance of the Planned Exit Shares fund during the year was affected by both positive and negative factors, the former outweighing the latter resulting in the net asset value per Planned Exit Share increasing by 13.6% to 100.0p per share during the year. Several follow on investments were made during the year, most notably to fund the growth strategy of Channel Safety and to purchase additional shares in DCG Group and Industrial Engineering Plastics, all of which continue to trade well. Provisions were made against the investments in Closed Loop Recycling and i-plas. Where provisions have been made against the value of underlying investments, we have also provided against the income due from such investments.
Follow-on funding
| Company | £ |
| Channel Safety Systems Limited | 125,000 |
| DCG Group Limited | 2,835 |
| Industrial Engineering Plastics Limited | 75,000 |
| Trilogy Communications Limited | 93,000 |
| Total | 295,835 |
New Investments
One new investment was made in the year. As part of of £1.4 million funding round in January 2012, the Planned Exit Shares fund invested £690,000 in Leisure Efficiency Limited.
Realisations
Portchester Equity repaid £125,000 to the Planned Exit Shares fund in February 2012, with the remaining £500,000 of loans being repaid in August 2012.
Provisions to a level below cost in the year
| Company | £ |
| Closed Loop Recycling Limited | 44,729 |
| i-plas Group Limited | 262,015 |
| Total | 306,744 |
Performance Summary
The Planned Exit Shares fund is now fully invested in a range of established businesses on attractive terms. We are cautiously optimistic about the current prospects and outlook for most of the portfolio companies, which continue to display good revenue and profit growth notwithstanding the uncertain economic climate. Although provisions had to be made against the investments in i-plas Group and Closed Loop Recycling, this was more than made up by increases in the valuations of Channel Safety and Industrial Engineering Plastics. Their performance, combined with encouraging prospects at DCG Group, Leisure Efficiency and Closed Loop Recycling following the recent raising of £12.8 million of loans to double its capacity, give comfort that the Planned Exit Shares fund's yield and capital return objectives can be met on the planned exit timetable. However, macro economic fundamentals remain challenging with considerable uncertainties and so we are planning for a prolonged period of sluggish growth. Foresight is actively monitoring the performance and likely returns from each investment to ensure that sufficient interest and cash are generated to meet the fund investors' running yield expectations and capital repayment profile.
Annual Portfolio Review: Infrastructure Shares Fund
By the closing date of 18 July 2012, a total of £33,295,716 had been raised for the Infrastructure Shares fund jointly with Foresight 2 VCT's Infrastructure Shares fund (i.e. c. £16.6m for each fund). The strategy of both funds is to invest in infrastructure assets on a pari passu basis in the secondary PFI, energy efficiency and onsite power generation markets.
The two funds have acquired shareholdings in eight operating PFI companies, comprising four in the education sector and four in the health sector. Across the eight investments in the portfolio, the Infrastructure Shares fund manages 13 individual schools, 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. All of the 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 of the companies have long term facilities management subcontracts in place which pass all operational risks through to blue chip companies that are well established in the UK PFI market.
Strong progress has been made towards investing the majority of the Infrastructure Shares fund in secondary PFI investments with 60% invested to date, although the proportion of VCT qualifying investments and yield profile are below the levels targeted. Secondary PFI yields have fallen significantly during the last 12 months owing to increased competition from four new PFI infrastructure funds and various tap issues from established funds, driven by increasing investor appetite for PFI investments. Foresight has experienced first hand these falling yields when the Infrastructure Shares fund has been out-bid during
competitive bidding processes. Although the yield profile of the current PFI investments is lower than planned, Foresight expects to invest the balance of the fund to generate superior yields in order to compensate for this.
Although advance VCT clearances have been received from HMRC in respect of four of the portfolio investments, only one has been executed as a VCT qualifying investment because the co-shareholders in three of those companies would not cooperate in entering into a VCT qualifying structure. The funds raised via the Infrastructure Share class will fall within the Company's qualifying holdings test from December 2014 and the intention is to increase the VCT qualifying proportion of the Infrastructure Share class to approximately 70% by this date. Prior to this date, non-qualifying assets will either be restructured as qualifying holdings where possible or alternatively replaced with VCT qualifying shareholdings which may be in secondary PFI, operational solar power plants or investments in the wider infrastructure sector in accordance with the investment policy.
Portfolio Outlook
Although the rate of investment to date is behind our original expectations, Foresight Group expects to have fully invested the fund within the next six months and negotiations are currently well advanced on a number of investments in the solar infrastructure sector. Due to the more challenging conditions in the secondary PFI market, there is an increasing probability that, in line with the investment policy set out in the original prospectus, the balance of the fund will be invested in attractive solar infrastructure opportunities. Solar investments exhibit an infrastructure-like risk and return profile, are likely to achieve VCT qualifying trade status with HMRC and also offer diversification and yield benefits to the portfolio.
Reflecting progress being made in generating yield from these investments, a dividend of 5.0p per Infrastructure share is currently targeted to be paid in July 2014 in line with the dividend policy set out in the original prospectus. Shareholders will be updated further in due course.
Portfolio Company Highlights
Following the demerger of the business on 1 January 2012 referred to in the last Annual Report, Abacuswood (formerly Land Energy) made progress during the year. The company aims to be the market leading waste wood pellet supplier in the UK to both the developing energy fuel market and the established animal bedding market. In the year to 31 December 2012, the Bridgend plant produced some 20,000 tonnes of pellets of which 70% was sold as animal bedding and 30% as fuel to biomass boiler schemes in the UK, enabling the average selling price per tonne to be increased. Demand continues to exceed supply for the plant's wood pellets and a further £300,265 was invested by the Ordinary Shares fund to finance capital expenditure and working capital. Upgrades have been made to the Bridgend plant to increase capacity to 28,000 tonnes per annum (prior to a planned further upgrade to 50,000 tonnes per annum), enabling the customer base to be broadened and in anticipation of the expected growth in the energy market following the introduction of the Government backed Renewable Heat Incentive. New contracts have been signed with animal bedding customers for 16,000 tonnes as well as contracts for
the supply of waste wood which will guarantee raw material prices for 60% of purchases over the next three years. Small contracts to supply pellets into boilers in schools and other commercial premises have been signed recently, with larger contracts currently under negotiation.
The new management team, led by Julian Tranter, an experienced CEO, plans to double plant capacity at Bridgend and ultimately expand into the growing distributed energy supply markets by establishing ESCos (Energy Supply Companies), many of which are already supplied. The first phase of this expansion is proposed to be funded by raising £5.5 million from new third party investors. Reflecting the terms of the demerger and delays in fund raising, a provision of £287,890 has been made against the original cost of investment. Held in the Ordinary Shares fund.
Alaric Systems, which develops and sells credit card authorisation and credit card anti fraud software to major financial institutions and retailers worldwide, performed particularly strongly in the year to 31 March 2013, generating an estimated profit before interest and tax of £2.1 million on sales of £10.4 million, significantly ahead of the previous year (PBIT of £1.5 million on sales of £8.7 million). A number of significant orders have been won recently which support achievement of the demanding budget for the current year. Capacity to satisfy these orders and further develop the product range is being met through continuing expansion of offices in Kuala Lumpur, Rome, Budapest and also London. In May and September 2012, reflecting strong cash generation, Alaric paid a total of £148,845 to the Company, comprising interest (£10,937), redemption premium (£68,954) and repayment of loan principal (£68,954). The strong performance resulted in an increase in Alaric's valuation of £3.16 million. Held in the Ordinary Shares fund.
In May 2012, as part of a phased £750,000 funding round, a further £150,150 was invested to fund alwaysON's working capital requirements. Following a change of management, the turnround of this VPN/VOIP service provider has continued to gather pace, such that for the year to 30 June 2012, the company achieved a breakeven operating profit on sales of £2.7 million. A recently awarded significant contract extension with a major customer and a growing sales pipeline are expected to underpin future profitability. Held in the Ordinary Shares fund.
Trading during the year at both subsidiaries of Aquasium Technology, namely CVE and Ebtec, exceeded budgeted revenues and operating profits with continuing demand for CVE's smaller electron welding machines. In June 2012, the Massachusetts based subsidiary, Ebtec Corporation, was successfully sold to NASDAQ listed EDAC Technologies Corporation for approximately $11 million in cash and stock, generating a 2.5 times return on original cost. Ebtec is an engineering services company providing high energy beam precision electron welding, cutting and drilling services to diverse industry sectors including the aerospace, power and medical sectors. Having invested a total of £1.93 million in Aquasium since 2001, the Company received £3,036,059 from the sale of Ebtec, comprising an initial £2,613,294 in cash (including interest of £426,016) on completion plus a further deferred payment during 2012 of £196,840, with up to a further £233,587 held in escrow receivable over the next 10 months. The Company still holds 33% of Aquasium's equity and £666,667 of loans.
The strong performance of CVE resulted in an increase in Aquasium's valuation of £1,758,215. Held in the Ordinary Shares fund.
AtFutsal Group provides facilities for futsal, a fast growing type of indoor football with 30 million participants worldwide and the only type of indoor football recognised by the Football Association. The Swindon arena is generating cash while sales have built up steadily at the flagship super arena in Birmingham. Educational activities are increasingly important with some 750 students now taking sports related courses within AtFutsal's arenas and a number of partnerships established with educational establishments, football clubs and training organisations. This number is lower than budgetted although some 2,000 students are planned to be recruited for the forthcoming academic year starting in September 2013. The small, sub optimal Cardiff arena was closed down in June as a result of continuing small losses and a change in educational funding in Wales from September 2012. To help create national coverage, a further super arena was opened in Leeds in August 2012 funded with £762,500 from Foresight VCTs, including £98,173 from the Company. Sales growth is behind
original expectations with UK consumer spending under pressure, and progress towards profitability has been impacted. As a result, AtFutsal is now trading at near cash break even. A provision of £116,833 has accordingly been made against the cost of investment. Held in the
Ordinary Shares fund.
Approximately 50% of the investment in Autologic Diagnostics was successfully sold in January 2012 in a £48 million secondary management buy-out funded by ISIS Equity Partners. The sale generated cash proceeds of £2.187 million for the Ordinary Shares fund (nearly 2.7 times original cost of £0.8 million). The Ordinary Shares fund has retained an ongoing investment of £1.486 million in a combination of equity and loan stock in the new buy-out company. In the year ended 31 December 2012, an operating profit of £5.9 million is estimated on sales of £17.2 million (£5.2 million on sales of £12.2 million in 2011). Autologic is continuing to grow sales and profits further, particularly in the USA. Held in the Ordinary Shares fund.
Biofortuna, a molecular diagnostics business based in the Wirral, has developed unique expertise in the important area of enzyme stabilisation, effectively hi-tech freeze drying. Its first range of products, SSPGo, is a series of genetic compatibility tests for organ transplant recipients, although the application of the technology is extremely broad. Because of the company's stabilisation and freeze-drying technology, its products can be transported easily (in the post if needed) and stored at room temperature for up to two years. The company is making progress in a number of areas, including an expansion into adjacent premises, improving manufacturing and internal processes and with FDA trials for its SSPGo product range, needed to make sales in the USA, starting in 2013. The SSPGo product range continues to see repeat orders from Abbott. The freeze-dried kit manufacturing service shows promise, with contract discussions with a number of parties. Held in the Ordinary Shares fund.
In July 2012, the Ordinary Shares fund invested £2.5 million in Blackstar Amplification Holdings alongside £1 million from Foresight 4 VCT to finance a management buy-out of and provide growth capital to Blackstar Amplification Limited. The company was founded in 2004 by four senior members of the new product development team at Marshall Amplification to design and manufacture a range of innovative guitar amplifiers. Following commercial launch in 2007, sales grew rapidly, reflecting new product launches and entry into new markets, and a global brand was soon established. As a result of supply chain issues in 2011/12, UK and international demand could not be met fully and so terms were agreed with new suppliers to facilitate dual sourcing. Based in Northampton, the company is forecasting strong sales growth driven by new product launches (such as the ID: Series, a new entry level digital amplifier) and increased penetration in key markets, most notably the US. Turnover since July has grown substantially in line with budget. Held in the Ordinary Shares fund.
Foresight first invested in Camwood, an IT consulting company providing application portfolio management services to large enterprises, in October 2003, ultimately investing a total of £1.54 million in loans and equity on behalf of the Foresight VCT plc (who's share was £514,090) and another Foresight managed fund. During 2008, the Camwood software IP and development staff were hived down into a subsidiary, App-DNA, which was subsequently sold to Citrix Systems Inc in October 2011 for $92 million. As referred to in the last Annual Accounts, the sale of App-DNA generated a return for the Company of £7.5 million (with up to a further £0.9 million held in escrow), some 32 times original cost. The Company's residual investment in Camwood (original cost £90,378 after recent loan repayments) was sold in April 2012 to the senior management team for £473,316, generating a 5.2 times return. Sold.
In December 2010, the Planned Exit Shares fund provided £565,000 to partially fund a management buy-in of long established Petersfield based Channel Safety Systems which designs and distributes fire safety systems and emergency lighting, as well as providing associated services. Having traded profitably through the recession, the company achieved an operating profit of over £420,000 on sales of £8.3 million for the year to 31 October 2012 (£246,000 operating profit on sales of £7.8 million for the previous year). The management team is implementing a growth strategy, including introducing new products such as energy efficient LED emergency lighting, a domestic fire detection range and is combining this with a more effective marketing programme. In September 2012, as part of a £300,000 round to fund this growth strategy, a further £125,000 was invested by the Planned Exit Shares fund. Reflecting good trading results, the valuation of the investment was increased during the year by £228,882. Held in the Planned Exit Shares fund.
Closed Loop Recycling continued to make solid operational, commercial and revenue progress during the year, with production rates at record levels and significantly improved plant reliability, generating revenues in excess of £1.4 million per month. The company cannot meet customer demand for its recycled PET and HDPE. In March 2012, the Company advanced a short-term loan of £230,069 to meet working capital requirements. In the fourth quarter of 2012, the company signed a number of landmark agreements, including a major new supply contract and new customer contracts worth £17 million per annum as well as securing £12.8 million of loan finance (including £6 million from the Foresight Environmental Fund) to double capacity and turnover at the Dagenham factory to satisfy the new contracts. This capacity expansion will take a year to complete but, once commissioned, is forecast to result in substantial profits being generated. Notwithstanding the above solid trading and expansion plans, a provision of 10% (£175,640) has been made against the original cost of the investment to reflect the introduction of an executive share option scheme. Principally because of the weight of prior ranking capital provided by the Foresight funds, the recently enlarged management team had no realistic equity incentive, a situation which was not considered to be in the best, longer term interests of all shareholders. To address this, a capital reorganisation was effected to facilitate the introduction of such an incentive scheme, which is in line with normal market practice but necessitates making such a provision. Held in the Ordinary Shares and Planned Exit Shares fund.
DCG Group designs, sources, implements and maintains data storage solutions for companies and provides them as a managed service. Managed service contracts typically run for an initial term of three years and the company has a high level of customer retention. The £750,000 initial investment from the Planned Exit Shares fund was used to re-finance existing loans and to provide additional working capital to enable the company to continue the growth of its managed services. For the year to 31 March 2012, an operating profit of £486,000 was achieved on sales of £6.7 million and a similar performance is expected to be achieved in the current year. In February 2012, shares representing 1.3% of the equity were acquired from a retiring director for £22,964 (£20,129 by the Ordinary Shares fund and £2,835 by the Planned Exit Shares fund). After the year end, further shares representing 12.8% of the equity were acquired from other departing shareholders in January 2013 for £250,915 (£219,933 by the Ordinary Shares fund and £30,982 by the Planned Exit Shares fund). Held in the Ordinary Shares and Planned Exit Shares fund.
In May 2012, the Ordinary Shares fund invested £492,500 in Flowrite Refrigeration Holdings alongside other Foresight VCTs to finance the £3.2 million management buyout of Flowrite Services Limited, a long established Maidstone based company which provides refrigeration and air conditioning maintenance and related services nationally, principally to leisure and commercial businesses, such as hotels, clubs, pubs and restaurants. The management team has accelerated sales efforts, already winning a number of significant new customers and contracts, and a number of possible acquisitions are being considered
to broaden national coverage. Trading since May has been well ahead of budget. Held in the Ordinary Shares fund.
In December 2011 and March 2012, the Planned Exit Shares fund provided a total of £875,000 by way of loans and equity to partially 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 year ended 30 June 2012, with some 20 employees, the company achieved an adjusted EBITDA of £700,000 on sales of £5.1 million, slightly ahead of the performance in the previous year. A new Chief Executive has recently been recruited to replace the founder. Reflecting the terms of the purchase of additional shares in March 2012 from the retiring Chief Executive and also current trading, the valuation of the investment has been increased by £717,026 to £1,592,026. Held in the Planned Exit Shares fund.
Northampton based Infrared Integrated Systems, a market leader in the retail queue monitoring and people counting markets, continued to grow strongly and profitably, implementing a significant contract in the US to provide its queue monitoring solution across the estate of a major supermarket group. The company was trading at record levels, with a strong pipeline of large potential customers undergoing product trials and was strongly cash generative. Following a competitive sale process, a large US corporation made an attractive takeover offer in June 2012. The Company sold its investment for up to £901,878, of which £621,311 was paid at completion and up to a further £280,567 is receivable over the following two years and is held either in escrow or subject to future performance criteria being met, giving a 2.5 to 3.6 times return on the original cost of investment of £250,005. Sold.
Following a cost-cutting programme, a management reorganisation and price rises for its recycled plastic products in late 2011, i-plas Group's trading improved in Spring 2012, break even EBITDA effectively being achieved in April 2012. To fund working capital requirements, the Company advanced short-term loans totalling £123,334 in May and June. However, during the Summer, the company then experienced a marked fall in demand from its customers in the construction industries and also significant margin pressure, resulting in growing losses. With little prospect of a sustained recovery in its markets, the decision was reluctantly made not to provide further funding, and an administrator was appointed in October 2012, necessitating full provisions of £341,076 and £262,015 being made against the cost of investments respectively held by the Ordinary Shares fund and Planned Exit Shares fund. Held in the Ordinary Shares and Planned Exit Shares fund.
In January 2012, the Foresight VCT and Foresight 2 VCT Planned Exit Funds each invested £690,000 (i.e. £1.38 million in total) in a new, special purpose company, Leisure Efficiency Limited, to purchase and install energy saving equipment at 34 David Lloyd Leisure ("DLL") sites. All the equipment was installed by May 2012. The new company has a fixed life of seven years and will generate a strong yield over that period, after which it will be sold to DLL for a nominal value. Revenues are generated from taking a significant part of the value of the energy savings made by the equipment. The equipment is currently saving energy in excess of original projections and the company has already received several cash payments from DLL. Held in the Planned Exit Shares fund
£66,669 was invested in Silvigen to fund urgently needed working capital during the year. Reflecting much slower than expected growth in sales and continuing losses, the decision was reluctantly made not to provide further funding, resulting in the company going into administration in September 2012. A full provision of £422,217 was made against the cost of this investment. Held in the Ordinary Shares fund
Trilogy Communications achieved strong trading results in the two years to 29 February 2012, following a number of contract wins in the defence sector with partners such as Northrop Grumman and Raytheon. Trading in the current year, however, has been adversely affected by the deferral of certain expected orders under long-term defence contracts, particularly from the US, reflecting uncertainties about reductions in US defence spending. Specified annual reductions in fund spending are now in place (the so called 'Sequester'). These factors have resulted in Trilogy incurring substantial trading losses and requiring major cost reductions, although the broadcast division has continued to trade satisfactorily. There is evidence that these deferred programme orders are recommencing and are expected to continue in 2013 but reflecting these lower sales and losses, the valuation in the Ordinary Shares fund has been reduced by £946,751. As part of a phased £1.5 million funding round in late 2011, the Planned Exit Shares fund invested £93,000 and the Ordinary Shares fund invested £32,000 in January 2012 alongside Foresight 2 VCT Planned Exit fund and Trilogy's management team and other shareholders. Held in the Ordinary Shares and Planned Exit Shares fund.
Withion Power successfully built and commissioned a second generation 0.5MW advanced gasification waste wood to energy plant in Derby, being the first of three planned phases to build ultimately a 3MW plant. During 2012, the company invested £998,000 to finance additional capital expenditure and working capital requirements. As operating this small, first phase of the plant alone would be subeconomic, the decision was taken to hibernate the plant until the additional planned finance for the much larger second and third phases could be raised from strategic partners and funders or, alternatively, redevelop the site but this has proved challenging. Reflecting the continuing delay in raising funding for the expansion or pursuing the above mentioned alternative, it was considered prudent to make a provision of 75% (£3,942,373) against the cost of this investment in the Ordinary Shares fund. No such provision was considered necessary against the cost of investment in the Planned Exit Shares fund (£375,000) as this fund has prior ranking security over certain surplus assets. Under the terms of the merger between the Ordinary Shares fund and the Keydata VCTs in February 2011, additional share consideration would be due to former Keydata shareholders after September 2013 if the value of the merger assets (Withion Power) at 30 September 2013 exceeds their value at the time of the merger. At present, there has been no increase in value and none is currently considered likely by that date. Held in the Ordinary Shares and Planned Exit Shares fund.
The two energy efficiency transactions proposed to be completed by Wholesale Efficiency II (£1,000,000) and Leisure Efficiency II (£675,150) respectively were delayed. Leisure Efficiency III (£2,000,000) was similarly set up in anticipation of an impending energy efficiency transaction for which an application was made to HMRC seeking VCT clearance. However, after much effort, HMRC neither declined nor pre-approved the proposed transaction so the decision was taken not to proceed. Other opportunities are now being pursued from both Foresight's energy efficiency and private equity pipeline. Held in the Ordinary Shares fund.
David Hughes
Chief Investment Officer
Foresight Group
30 April 2013
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 regulatoryenvironment
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 capital gains 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 the income tax relief they obtained; and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains.
Investment and strategic - inappropriate strategy, poor asset allocation or consistent weak stock selection might lead 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 might lead to an inability to provide accurate reporting and monitoring.
Financial - inadequate controls might lead to misappropriation 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 in note 15 to the accounts.
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 smaller number of key individuals. In addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock.
Liquidity risk - the Company's investments, both unquoted and quoted, may be difficult to realise. Furthermore, the fact that a share is traded on AIM or ISDX Growth Market does not guarantee its liquidity. The spread between the buying and selling price of such shares may be wide and thus the price used for valuation may not be achievable.
The Board seeks to mitigate the internal risks by setting policy, regular review of performance, enforcement of contractual obligations and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies the principles detailed in the UK Corporate Governance Code.
Statement of Directors' Responsibilities in respect of the Annual Report and the Financial Statements
The directors are responsible for preparing the Annual Report and the 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 that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; 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 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 may differ from legislation in other jurisdictions.
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; and
the Directors' 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.
On behalf of the Board
John Gregory
Chairman
30 April 2013
Unaudited Non-Statutory Analysis between the Ordinary Shares, Planned Exit Shares and Infrastructure Shares Funds
Income Statements
for the year ended 31 December 2012
at 31 December 2012 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| At 31 December 2012 there was an inter-share debtor/creditor of £194,000 which has been eliminated on aggregation. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Movements in Shareholders' Funds
for the year ended 31 December 2012
| Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Ordinary Shares Fund | ||||||||
| As at 1 January 2012 | 279 | - | 352 | 30,932 | (181) | 8,372 | (5,137) | 34,617 |
| Share issues in the year | 31 | 3,657 | - | - | - | - | - | 3,688 |
| Expenses in relation to share issues | - | (144) | - | - | - | - | - | (144) |
| Repurchase of shares | (37) | - | 37 | (4,229) | - | - | - | (4,229) |
| Net realised gains on disposal of investments | - | - | - | - | - | 3,372 | - | 3,372 |
| Investment holding losses | - | - | - | - | - | - | (4,384) | (4,384) |
| Dividends | - | - | - | - | - | (2,096) | - | (2,096) |
| Management fees charged to capital | - | - | - | (497) | - | - | - | (497) |
| Tax credited to capital | - | - | - | - | - | 10 | - | 10 |
| Revenue gain for the year | - | - | - | - | 74 | - | - | 74 |
| As at 31 December 2012 | 273 | 3,513 | 389 | 26,206 | (107) | 9,658 | (9,521) | 30,411 |
| Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Planned Exit Shares Fund | ||||||||
| As at 1 January 2012 | 62 | - | - | 5,682 | 179 | (146) | (64) | 5,713 |
| Repurchase of shares | (1) | - | 1 | (84) | - | - | - | (84) |
| Investment holding gain | - | - | - | - | - | - | 648 | 648 |
| Dividends | - | - | - | - | - | (309) | - | (309) |
| Management fees charged to capital | - | - | - | (42) | - | - | - | (42) |
| Tax credited to capital | - | - | - | - | - | 8 | - | 8 |
| Revenue return for the year | - | - | - | - | 210 | - | - | 210 |
| As at 31 December 2012 | 61 | - | 1 | 5,556 | 389 | (447) | 584 | 6,144 |
| Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Infrastructure Shares Fund | ||||||||
| As at 1 January 2012 | - | - | - | - | - | - | - | - |
| Share issues in the period | 166 | 16,481 | - | - | - | - | - | 16,647 |
| Expenses in relation to share issues | - | (704) | - | - | - | - | - | (704) |
| Investment stamp duty | - | - | - | (12) | - | - | - | (12) |
| Management fees charged to capital | - | - | - | (157) | - | - | - | (157) |
| Tax credited to Capital | - | - | - | - | - | 3 | - | 3 |
| Revenue loss for the PERIOD | - | - | - | - | (23) | - | - | (23) |
| As at 31 December 2012 | 166 | 15,777 | - | (169) | (23) | 3 | - | 15,754 |
Audited Income Statement
for the year ended 31 December 2012
| Year ended | Year ended | |||||
| 31 December 2012 | 31 December 2011 | |||||
| Revenue | Capital | Total | Revenue | Capital | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Realised gains on investments | - | 3,372 | 3,372 | - | 11,312 | 11,312 |
| Investment holding losses | - | (3,736) | (3,736) | - | (2,871) | (2,871) |
| Realised gains on derivatives | - | - | - | - | 25 | 25 |
| Unrealised losses on the value of derivatives | - | - | - | - | (25) | (25) |
| Income | 974 | - | 974 | 712 | - | 712 |
| Investment management fees | (232) | (696) | (928) | (166) | (499) | (665) |
| Other expenses | (460) | - | (460) | (460) | - | (460) |
| Return/(loss) on ordinary activities before taxation | 282 | (1,060) | (778) | 86 | 7,942 | 8,028 |
| Taxation | (21) | 21 | - | (8) | 8 | - |
| Return/(loss) on ordinary activities after taxation | 261 | (1,039) | (778) | 78 | 7,950 | 8,028 |
| Return per share: | ||||||
| Ordinary Share | 0.3p | (5.4)p | (5.1)p | (0.1)p | 25.0p | 24.9p |
| Planned Exit Share | 3.4p | 10.0p | 13.4p | 1.4p | (1.0)p | 0.4p |
| Infrastructure Share | (0.2)p | (1.0)p | (1.2)p | - | - | - |
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.
Audited Reconciliation of Movements in Shareholders' Funds
| Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total | |
| Year ended 31 December 2011 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Company | ||||||||
| As at 1 January 2011 | 537 | 17,677 | 29 | 18,038 | (80) | (1,605) | (2,304) | 32,292 |
| Share reconstruction | (241) | - | 241 | - | - | - | - | - |
| Share issues in the year | 127 | 9,785 | - | - | - | - | - | 9,912 |
| Expenses in relation to share issues | - | (126) | - | (87) | - | - | - | (213) |
| Repurchase of shares | (82) | - | 82 | (8,043) | - | - | - | (8,043) |
| Transfer from capital account | - | (131) | - | - | - | 131 | - | - |
| Cancellation of share premium | - | (27,205) | - | 27,205 | - | - | - | - |
| Net realised gain on disposal of investments | - | - | - | - | - | 11,313 | - | 11,313 |
| Net realised gain on derivatives | - | - | - | - | - | 25 | - | 25 |
| Investment holding losses | - | - | - | - | - | - | (2,872) | (2,872) |
| Unrealised losses on the value of derivatives | - | - | - | - | - | - | (25) | (25) |
| Dividends | - | - | - | - | - | (1,646) | - | (1,646) |
| Management fees charged to capital | - | - | - | (499) | - | - | - | (499) |
| Tax credited to capital | - | - | - | - | - | 8 | - | 8 |
| Revenue return for the year | - | - | - | - | 78 | - | - | 78 |
| As at 31 December 2011 | 341 | - | 352 | 36,614 | (2) | 8,226 | (5,201) | 40,330 |
| Called-up share capital | Share premium account | Capital redemption reserve | Special distributable reserve | Revenue reserve | Capital reserve | Revaluation reserve | Total | |
| Year ended 31 December 2012 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| Company | ||||||||
| As at 1 January 2012 | 341 | - | 352 | 36,614 | (2) | 8,226 | (5,201) | 40,330 |
| Share issues in the year | 197 | 20,138 | - | - | - | - | - | 20,335 |
| Expenses in relation to share issues | - | (848) | - | - | - | - | - | (848) |
| Repurchase of shares | (38) | - | 38 | (4,313) | - | - | - | (4,313) |
| Net realised gain on disposal of investments | - | - | - | - | - | 3,372 | - | 3,372 |
| Investment holding losses | - | - | - | - | - | - | (3,736) | (3,736) |
| Investment stamp duty | - | - | - | (12) | - | - | - | (12) |
| Dividends | - | - | - | - | - | (2,405) | - | (2,405) |
| Management fees charged to capital | - | - | - | (696) | - | - | - | (696) |
| Tax credited to capital | - | - | - | - | - | 21 | - | 21 |
| Revenue return for the year | - | - | - | - | 261 | - | - | 261 |
| As at 31 December 2012 | 500 | 19,290 | 390 | 31,593 | 259 | 9,214 | (8,937) | 52,309 |
Audited Balance Sheet
at 31 December 2012
| Registered Number: 03421340 | |||
| As at | As at | ||
| 31 December 2012 | 31 December 2011 | ||
| £'000 | £'000 | ||
| Fixed assets | |||
| Investments held at fair value through profit or loss | 44,433 | 27,458 | |
| Current assets | |||
| Debtors | 2,266 | 2,119 | |
| Money market securities and other deposits | 3,419 | 11,341 | |
| Cash | 2,309 | 98 | |
| 7,994 | 13,558 | ||
| Creditors | |||
| Amounts falling due within one year | (118) | (686) | |
| Net assets | 52,309 | 40,330 | |
| Capital and reserves | |||
| Called-up share capital | 500 | 341 | |
| Share premium account | 19,290 | - | |
| Capital redemption reserve | 390 | 352 | |
| Special distributable reserve | 31,593 | 36,614 | |
| Revenue reserve | 259 | (2) | |
| Capital reserve | 9,214 | 8,226 | |
| Revaluation reserve | (8,937) | (5,201) | |
| Equity shareholders' funds | 52,309 | 40,330 | |
| Net asset value per share: | |||
| Ordinary Share | 111.3p | 123.9p | |
| Planned Exit Share | 100.0p | 92.4p | |
| Infrastructure Share | 94.6p | - |
Audited Cash Flow Statement
for the year ended 31 December 2012
| Year ended | Year ended | |
| 31 December 2012 | 31 December 2011 | |
| £'000 | £'000 | |
| Cash flow from operating activities | ||
| Investment income received | 1,209 | 400 |
| Deposit and similar interest received | 39 | 20 |
| Investment management fees paid | (796) | (713) |
| Secretarial fees paid | (114) | (138) |
| Other cash payments | (891) | (551) |
| Net cash outflow from operating activities and returns on investment | (553) | (982) |
| Taxation | - | - |
| Returns on investment and servicing of finance | ||
| Purchase of unquoted investments and investments quoted on AIM | (23,605) | (3,259) |
| Net proceeds on sale of investments | 6,342 | 16,120 |
| Net proceeds from deferred consideration | 197 | - |
| Net proceeds of derivative transactions | - | 49 |
| Net capital (outflow)/inflow from financial investment | (17,066) | 12,910 |
| Equity dividends paid | (2,321) | (1,646) |
| Management of liquid resources | ||
| Movement in money market funds | 7,922 | (9,343) |
| (12,018) | 939 | |
| Financing | ||
| Proceeds of fund raising | 15,857 | 235 |
| Acquisition issue shares | - | 8 |
| Expenses of fund raising | (320) | (180) |
| Dividends reinvested | - | 59 |
| Repurchase of own shares | (1,308) | (1,633) |
| 14,229 | (1,511) | |
| Increase/(decrease) in cash | 2,211 | (572) |
| Reconciliation of net cash flow to movement in net funds | ||
| Increase/(decrease) in cash for the year | 2,211 | (572) |
| Net cash at start of year | 98 | 670 |
| Net cash at end of year | 2,309 | 98 |
| ||||||||||||
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 31 December 2012. 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 31 December 2012, 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 31 December 2012 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 Report will be sent to shareholders and will be available for inspection at the Registered Office of the Company at ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU 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.
| 31 December 2012 | 31 December 2011 | |||||
| Ordinary Shares Fund | Planned Exit Shares Fund | Infrastructure Shares Fund | Ordinary Shares Fund | Planned Exit Shares Fund | Infrastructure Shares Fund | |
| Net assets | £30,411,000 | £6,144,000 | £15,754,000 | £34,617,000 | £5,713,000 | - |
| No. of shares at year end | 27,324,155 | 6,142,813 | 16,647,858 | 27,940,367 | 6,179,833 | - |
| Net asset value per share | 111.3p | 100.0p | 94.6p | 123.9p | 92.4p | - |
5. Return per share
| Year ended | Year ended | |||||
| 31 December 2012 | 31 December 2011 | |||||
| Ordinary Share | Planned Exit Share | Infrastructure Share | Ordinary Share | Planned Exit Share | Infrastructure Share | |
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Total return after taxation | (1,425) | 824 | (177) | 8,005 | 23 | N/A |
| Total return per share (note a) | (5.1)p | 13.4p | (1.2)p | 24.9p | 0.4p | N/A |
| Revenue return from ordinary activities after taxation | 74 | 210 | (23) | (9) | 87 | N/A |
| Revenue return per share (note b) | 0.3p | 3.4p | (0.2)p | (0.1)p | 1.4p | N/A |
| Capital return from ordinary shares after taxation | (1,499) | 614 | (154) | 8,014 | (64) | N/A |
| Capital return per share (note c) | (5.4)p | 10.0p | (1.0)p | 25.0p | (1.0)p | N/A |
| Weighted average number of shares in issue in the year | 27,783,381 | 6,170,224 | 14,626,385 | 32,097,234 | 6,179,833 | N/A |
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.
6. Annual General Meeting
The Annual General Meeting will be held at 1.00pm on 28 May 2013 at the offices of RW Blears, 125 Old Broad Street, London, EC2N 1AR.
7. Income
| Year ended | Year ended | |
| 31 December 2012 | 31 December 2011 | |
| £'000 | £'000 | |
| Loan Stock interest | 836 | 599 |
| Overseas based Open Ended Investment Companies ("OEICs") | 30 | 24 |
| Dividends | 106 | 77 |
| Bank deposits | 2 | 2 |
| Other | - | 10 |
| 974 | 712 |
8. Investments
| 2012 | 2011 | ||
| £'000 | £'000 | ||
| Company | |||
| Quoted investments | 878 | 1,033 | |
| Unquoted investments | 43,555 | 26,425 | |
| 44,433 | 27,458 | ||
| Company | Quoted | Unquoted | Total |
| £'000 | £'000 | £'000 | |
| Book cost as at 1 January 2012 | 6,265 | 26,333 | 32,598 |
| Investment holding (losses)/gains | (5,232) | 92 | (5,140) |
| Valuation at 1 January 2012 | 1,033 | 26,425 | 27,458 |
| Movements in the period: | |||
| Purchases at cost | - | 25,200 | 25,200 |
| Disposal proceeds | - | (8,095) | (8,095) |
| Realised gains | - | 3,232 | 3,232 |
| Investment holding losses | (155) | (3,207) | (3,362) |
| Valuation at 31 December 2012 | 878 | 43,555 | 44,433 |
| Book cost at 31 December 2012 | 6,265 | 46,670 | 52,935 |
| Investment holding losses | (5,387) | (3,115) | (8,502) |
| Valuation at 31 December 2012 | 878 | 43,555 | 44,433 |
| Investment holding losses in the income statement, include a write down of £375,000 relating to a bank overdraft Guarantee Facility provided by the Ordinary Shares Fund, which is not reflected above. | |||
| Deferred consideration of £140,000 was also recognised by the Ordinary Shares fund in the year, and is included in debtors. | |||
| Capitalised interest of £109,000 was recognised by the Ordinary Shares fund in the year, and is included within purchases at cost. | |||
| Ordinary Shares Fund | Quoted | Unquoted | Total |
| £'000 | £'000 | £'000 | |
| Book cost as at 1 January 2012 | 6,265 | 21,662 | 27,927 |
| Investment holding (losses)/gains | (5,232) | 156 | (5,076) |
| Valuation at 1 January 2012 | 1,033 | 21,818 | 22,851 |
| Movements in the period: | |||
| Purchases at cost | - | 10,626 | 10,626 |
| Disposal proceeds | - | (7,470) | (7,470) |
| Realised gains | - | 3,232 | 3,232 |
| Investment holding losses | (155) | (3,855) | (4,010) |
| Valuation at 31 December 2012 | 878 | 24,351 | 25,229 |
| Book cost at 31 December 2012 | 6,265 | 28,050 | 34,315 |
| Investment holding losses | (5,387) | (3,699) | (9,086) |
| Valuation at 31 December 2012 | 878 | 24,351 | 25,229 |
| Investment holding losses in the income statement, include a write down of £375,000 relating to a bank overdraft Guarantee Facility provided by the Ordinary Shares Fund, which is not reflected above. | |||
| Deferred consideration of £140,000 was also recognised by the Ordinary Shares fund in the year, and is included in debtors. | |||
| Capitalised interest of £109,000 was recognised by the Ordinary Shares fund in the year, and is included within purchases at cost. | |||
| Planned Exit Shares Fund | Quoted | Unquoted | Total |
| £'000 | £'000 | £'000 | |
| Book cost as at 1 January 2012 | - | 4,671 | 4,671 |
| Investment holding losses | - | (64) | (64) |
| Valuation at 1 January 2012 | - | 4,607 | 4,607 |
| Movements in the period: | |||
| Purchases at cost | - | 986 | 986 |
| Disposal proceeds | - | (625) | (625) |
| Realised gains | - | - | - |
| Investment holding gain | - | 648 | 648 |
| Valuation at 31 December 2012 | - | 5,616 | 5,616 |
| Book cost at 31 December 2012 | - | 5,032 | 5,032 |
| Investment holding gain | - | 584 | 584 |
| Valuation at 31 December 2012 | - | 5,616 | 5,616 |
| Infrastructure Shares Fund | Quoted | Unquoted | Total |
| £'000 | £'000 | £'000 | |
| Book cost as at 1 January 2012 | - | - | - |
| Investment holding gain | - | - | - |
| Valuation at 1 January 2012 | - | - | - |
| Movements in the period: | |||
| Purchases at cost | - | 13,588 | 13,588 |
| Disposal proceeds | - | - | - |
| Realised gains | - | - | - |
| Investment holding gain | - | - | - |
| Valuation at 31 December 2012 | - | 13,588 | 13,588 |
| Book cost at 31 December 2012 | - | 13,588 | 13,588 |
| Investment holding gain | - | - | - |
| Valuation at 31 December 2012 | - | 13,588 | 13,588 |
9. Related party transactions
No Director has an interest in any contract to which the Company is a party.
10. Transactions with the manager
Foresight Group which acts as investment manager to the Company in respect of its venture capital investments earned fees of £1,005,949 during the year (2011: £665,540). Foresight Fund Managers Limited, Company Secretary, received fees excluding VAT of £100,000 (2011: £100,000) during the year.
At the balance sheet date, there was £nil (2011: £161,146) due to Foresight Group and £nil (2011: £nil) due to Foresight Fund Managers Limited. No amounts have been written off in the year in respect of debts due to or from the related parties.
END
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Foresight VCT PLC via Thomson Reuters ONE
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