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Foresight VCT PLC : Annual Financial Report(dpa-AFX International Compact Via Acquire Media NewsEdge) FORESIGHT 4 VCT PLC Summary Financial Highlights * Net asset value per Ordinary Share at 31 March 2014 was 86.7p after a 4.0p dividend (31 March 2013: 87.3p). * Net asset value per C Share at 31 March 2014 was 66.1p (31 March 2013: 95.8p). Ordinary Shares fund * The Ordinary Shares fund provided follow-on funding totalling £1.3 million to seven portfolio companies and £1.4 million for three new investments. * The Ordinary Shares fund realised £0.7 million from sales and loan redemptions from six portfolio companies. C Shares fund * Three new investments were made by the C Shares fund totalling £1.8 million and four follow-on investments were made totalling £1.6 million. * The C Shares fund realised £1.1 million from the sales and loan redemptions from two portfolio companies and £3.7 million from the repayment of loans and equity from three special purpose vehicles. Chairman's Statement Strategic Report This is the first time that my annual Statement has been produced under the recently introduced UK 'narrative reporting' framework. This includes a requirement to provide a separate Strategic Report with certain prescribed content in accordance with regulations made under the provisions of the Companies Act 2006. This now brings together various governance disclosures and related matters and you will find it immediately following this statement. Some of the information previously contained in my statement will therefore be found elsewhere in the Report and Accounts. Performance During the year, our private equity investments benefited from the recent economic upturn both in the UK and traditional export markets. Their performance outweighed the poor performance of the environmental investments such that the overall net asset value of the Ordinary Shares fund at 31 March 2014 increased by 3.9% to 86.7p per share from 87.3p per Ordinary Share at 31 March 2013, after adjusting for the interim dividend of 4.0p per share paid on 26 April 2013. The C Shares fund net asset value decreased by 31.0% to 66.1p per share at 31 March 2014 from 95.8p per C Share at 31 March 2013, mainly due to the write off of The Fin Machine Company. It has been another difficult year for the environmental investments in the Ordinary Shares portfolio, although the Ordinary Shares fund's exposure is limited to just three remaining investments, namely Closed Loop Recycling, O-Gen Acme Trek and O-Gen UK. When our Manager, Foresight Group, started to focus on investments in environmental infrastructure in 2007 it appeared there would be attractive opportunities to develop substantial new businesses particularly through the application of technologies used elsewhere in the world. As I said in my statement with the half year accounts, however, it has proved very difficult with the capital available to create viable businesses in the power generation and materials recycling sectors in which the Company has invested. This has been partly because the technology needed more development effort than any of those originally involved had anticipated and in part because following the severe problems in the banking sector the additional loan finance needed to set up full scale facilities was not forthcoming. As noted in last years' interim reports and accounts, the principal loss in the C Shares fund was caused by the entry into administration of The Fin Machine Company, which is covered in greater detail in the Manager's Report. For a detailed review of all of the Company's investments I refer you to the Manager's Report that starts on page 10 of the Annual Report and Accounts. Dividends 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 generated from portfolio investments and successful realisations. Unfortunately, since the payment of a 4.0p per Ordinary Share dividend on 26 April 2013, realisations have been limited and therefore the Board elected not to declare a dividend at the current time but continues to be conscious of the need to make distributions to investors as soon as reasonably practical. Top-up Share Issues and Share Buy-backs The Company launched an Ordinary Share top-up offer on 3 December 2012 and 401,724 Ordinary Shares were allotted during the year ended 31 March 2014, based on prices ranging from 84.0p to 92.6p per Ordinary Share. These allotments raised gross proceeds of £366,133. During the period under review 150,000 Ordinary Shares were repurchased for cancellation at a cost of £108,001. Enhanced Buyback I am pleased to report that there was a significant take up by shareholders of the enhanced buyback offer with shareholders representing 2,277,357 Ordinary Shares and 2,171,765 C Shares taking up the offer between April 2013 and June 2013. Alternative Investment Fund Management Registration The Board has considered the impact on the Company of an EU directive regulating Alternative Investment Fund Managers (AIFM) which applies to most UK investment funds including the Company. To minimise the regulatory and financial cost of compliance, as a 'full scope UK AIFM', with this legislation the Board has decided that the Company will register directly with the Financial Conduct Authority as permitted by the rules as a 'small registered UK AIFM'. The application process, which must be completed by July 2014, has been completed. This will not affect the current arrangements with the Manager who will continue to report to the Board and manage the Company's investments on a discretionary basis. Management Fees During the year, the Board and Foresight Group agreed that investment management fees would be reduced by 0.25%, from 2.5% to 2.25% per annum. The effective date for the reduction in management fees was 1 October 2013. 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 and ISDX Growth Market are valued at the bid price as at 31 March 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 Prior to the Annual General Meeting, two investee companies will give presentations between 3.00 pm and 4.00 pm. The Company's Annual General Meeting will take place on 25 September 2014 at 4.00 pm. 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 on page 66 of the Annual Report and Accounts Outlook It is encouraging that the UK economy is continuing to recover and we believe that this should help the development of the businesses in which we have invested. We have a number of well managed companies in the portfolio which are well placed to continue their successful expansion. Many of the familiar risks, both financial and political, remain and there can be no grounds for complacency as all of our investments operate in competitive environments. The Manager continues to concentrate on improving the performance of the existing portfolio and look for appropriate opportunities to realise gains from the disposal of successful investments, which will, in turn, lead to the Board returning to the payment of dividends to Shareholders. The C Shares fund will be managed separately to the Ordinary Shares fund for another year, at which point it is expected that the C Shares fund will be merged with the Ordinary Shares fund on a relative net asset value basis using the audited net asset values of each fund as at 31 March 2015. Philip Stephens Chairman 24 July 2014 Strategic Report Introduction This Strategic Report, on pages 4 to 9 of the Annual Report and Accounts, 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 4 VCT plc - Ordinary Shares fund In August 2004, Foresight was appointed to manage Advent 2 VCT plc, which was subsequently renamed Foresight 4 plc. On 6 February 2012, Foresight Clearwater VCT plc was merged into the existing Ordinary Share class. The number of Ordinary Shares in issue at 31 March 2014 was 38,569,414. Foresight 4 VCT plc - C Shares fund On 6 February 2012, Acuity VCT 3 plc and Foresight 5 VCT plc merged into a new "C" Share class within Foresight 4 VCT plc. The number of C Shares in the Company in issue at 31 March 2014 was 18,680,907. Summary of the Investment Policy The Manager (Foresight Group) will target investments in 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. C Shares fund To achieve capital gains and maximise UK tax-free income to its shareholders from dividends and capital distributions. It is intended that this objective will be achieved by investing the majority of the funds in a portfolio of qualifying investments. Performance and key performance indicators (KPIs) The Board expects the Manager to deliver a performance which meets the objectives of the two 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 the discount of the share price relative to the net asset value and total expenses as a proportion of shareholders' funds. A record of some of these indicators is contained below. The on going charges ratio in the period was 3.5%. Share buy-backs, (excluding enhanced buybacks), have been completed at a discount of 17.5%. The level of these KPIs are reasonable when compared with the wider VCT marketplace based on independently published information, for reasonableness. 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 objective against the primary KPIs highlighted above. 31 March 2014 31 March 2013 Ordinary C Ordinary C Shares Shares Shares Shares------------------------------------------------------------------------------- Net asset value per share 86.7p 66.1p 87.3p 95.8p Net asset value total return (including all 183.0p 66.1p 179.6p 95.8p dividends paid*) ------------------------------------------------------------------------------- Ordinary C Ordinary C Shares Shares Shares Shares------------------------------------------------------------------------------- Share price 62.0p 36.0p 82.6p 64.0p Share price total return (including all 158.3p 36.0p 174.9p 64.0p dividends paid*) ------------------------------------------------------------------------------- Ordinary C Ordinary C Shares Shares Shares Shares------------------------------------------------------------------------------- Dividends paid 96.3p - 92.3p - Dividends paid in the year 4.0p - - - Dividend yield % 6.5 - - -------------------------------------------------------------------------------- * Since the date of the merger on 6 February 2012, for the C Shares fund. Ordinary Shares fund ------------------------------------------------------------------------------- Discount to NAV at 31 March 2014 28.4% Average discount on buybacks 17.5% Shares bought back during the year under review 150,000 Increase in net asset value during year (after adding back 4.0p 3.9% dividend) Ongoing charges ratio (Company/Fund) 3.5%/3.3% ------------------------------------------------------------------------------- C Shares fund ------------------------------------------------------------------------------- Discount to NAV at 31 March 2014 45.5% Decrease in net asset value during year 31.0% Ongoing charges ratio (Company/Fund) 3.5%/4.1% Strategies for achieving objectives Investment Policy The Company 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 or 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, guarantees to banks or third parties providing loans or other investments into investee companies and other assets where it is believed that the risk/return portfolio is consistent with the overall investment objectives of the portfolio. UK companies Investments are primarily made in companies which are substantially based in the UK, although many will trade overseas. The companies in which investments are made must have no more than £7 million of gross assets at the time of investment (or £15 million depending on applicable HMRC rules) 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 (no less than 70%) of any funds raised by the Company will ultimately be invested in VCT qualifying investments. Risk diversification and maximum exposures Risk is spread by investing in a range of different businesses within different industry sectors using a mixture of securities. The maximum amount invested in any one company including any guarantees to banks or third parties providing loans or other investments into investee companies, is limited to 15% of the portfolio, at the time of investment. Investment style Investments are selected in the expectation that value will be enhanced by the application of private equity disciplines, including an active management style for unquoted companies through the placement of an investor director on investee company boards. Borrowing powers The Company has a borrowing limit of an amount not exceeding an amount equal to the adjusted capital and reserves (being the aggregate of the amount paid up on the issued share capital of the Company and the amount standing to the credit of its reserves). Whilst the Company does not currently borrow, its policy allows it to do so. 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 amount to a maximum of £5.0 million per annum for unquoted or 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 more than 15% of its investments (by VCT value at the time of investment) in a single company 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 VCT value (70% for funds rasied after 5 April 2011) 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 Fund Managers 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: * 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 three to five years. Environmental, Human Rights, Employee, Social and Community Issues The Board recognises 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. As the Company has no employees or policies in these matters this requirement does not apply. Gender diversity The Board currently comprises three male Directors. The Board is, however, 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 46 men and 23 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. 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 15 on page 56. 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 Foresight Group is entitled to a payment equal to 15% of dividends paid to Ordinary Shareholders, subject to the net asset value plus cumulative dividends paid per Ordinary Share exceeding 100.0p per Share (''High Watermark''), both immediately before and immediately after the performance related incentive fee is paid. After each distribution is made to Ordinary Shareholders where a performance incentive is paid to Foresight Group, the High Watermark required to be achieved by the Company to trigger a further performance incentive fee increases by a per Ordinary Share amount equivalent to the aggregate amount of the dividend paid less the 15% performance fee paid to Foresight Group. The performance incentive fee may be satisfied by either a cash payment or the issue of Ordinary Shares (or by a combination of both) ultimately at the Board's discretion. Any new Ordinary Shares to be issued to Foresight Group would be calculated by dividing the performance fee cash equivalent amount by the latest net asset value per Ordinary Share after adding the cumulative dividends to be paid. No performance incentive was paid in the year (2013: £nil paid). There is no performance incentive for the C Shares fund. 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 and ISDX Growth Market are valued at the bid price as at 31 March 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 £200,000 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 4 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 31 March 2013. The next complete review will be carried out for the year ended 31 March 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 LLP as taxation adviser to the Company to provide further independent assurance of compliance with venture capital tax legislation and to provide guidance on changes in taxation legislation affecting Foresight 4 VCT plc. As at 31 March 2014 the Company had 78.9% of its funds in such VCT qualifying holdings. Future Strategy The Board and the Manager believe that the strategy of focusing on traditional private equity investments is in the best interests of Ordinary and C Shareholders and the historical information reproduced in this report is evidence of positive recent performance in this area. 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, and manage its liquidity appropriately. Philip Stephens Director 24 July 2014 Investment Manager's Report Compared to the start of the year, economic sentiment has improved markedly, reflected in encouraging signs of generally improving trading conditions across the Ordinary Shares fund and C Shares fund portfolios. The economic climate and business confidence in the UK have improved more quickly than expected a year ago, as demonstrated by the continuing strength of the Stock Market, the volume of new issues and high level of mergers and acquisition activity. These conditions look set to continue for the time being, although significant macroeconomic risks remain, particularly in major overseas markets. During the year to 31 March 2014, the Ordinary Share fund performed reasonably well with the net asset value per Ordinary Share increasing by 3.9% to 86.7p from 87.3p per Ordinary Share at 31 March 2013, after adjusting for the interim dividend of 4.0p per share paid on 26 April 2013. Several investments performed strongly during the year, including Aerospace Tooling Corporation, Datapath Group, TFC Europe and The Bunker Secure Hosting, all of which achieved record profits and together generated an increase in valuation of £4.2 million. Other investments, such as Flowrite Refrigeration Holdings, Ixaris Systems and Procam Television Holdings, also performed well. Material provisions totalling £1.9 million were made against investments during the year, including alwaysON, which was merged with Data Continuity Group, Closed Loop Recycling where the ramp up to full production has been slower than expected and forecast profitability reduced and Evance Wind Turbines, to which administrators were appointed in April 2014. During the year, the net asset value per C Share decreased by 31.0% to 66.1p from 95.8p per C Share at 31 March 2013, reflecting the impact of the failed turnaround at The Fin Machine Company, a legacy investment originally made by the previous manager and the largest single investment in the portfolio. Following the appointment of administrators on 21 August 2013, a full provision was made against the investment, reducing the net asset value by 35.8p per C Share. Extensive details on The Fin Machine Company investment were announced at the time of administration. The information on this investment published in the Unaudited Half-Yearly Financial Report for the six months to 30 September 2013 is repeated below. The promising performance of the remaining C Share portfolio was marred by the inability of Connect 2 Media, another legacy investment, to raise finance for its new B2B game development, necessitating a full provision of £1.1 million being made against the cost of this investment. Aerospace Tooling Corporation, Defaqto Group and Flowrite Refrigeration all performed notably well during the year, together generating an increase in valuation of £1.9 million. The investment in Hallmarq Systems was sold in March 2014 for £746,064, an increase of £74,305 during the year. The C Share fund was created through the merger of Acuity Growth VCT and Acuity VCT 3 in February 2012. The C Share fund will be managed separately to the Ordinary Share fund for another year, at which point it is expected that the C Share fund will be merged with the Ordinary Share fund on a relative net asset value basis using the audited net asset values of each fund as at 31 March 2015. Foresight Group remains positive about the prospects for both portfolios and is focused on achieving realisations from the existing investments which should help increase net asset value, facilitate shareholder distributions and provide additional funding for new investments. A summary of the portfolio investments in the Ordinary Shares fund and C Shares fund is set out below. Portfolio Review: Ordinary Shares fund 1. New investments Company £ ---------------------------------------------------- Aerospace Tooling Corporation Limited 600,000 Fire and Air Services Limited 500,000 Procam Television Holdings Limited 250,000 ---------------------------------------------------- Total 1,350,000 ---------------------------------------------------- 2. Follow-on funding (including capitalised interest) Company £ ------------------------------------------------------- alwaysON Group Limited 180,050 Autologic Diagnostics Group Limited* 98,391 Biofortuna Limited 99,066 Flowrite Refrigeration Holdings Limited* 6,591 Ixaris Systems Limited 299,799 The Bunker Secure Hosting Limited* 463,790 Trilogy Communications Holdings Limited 174,668 ------------------------------------------------------- Total 1,322,355 ------------------------------------------------------- *Includes capitalised interest 3. Exits and realisations Company £ ----------------------------------------------------- Abacuswood Limited 29,549 Amberfin Holdings Limited 294 Flowrite Refrigeration Holdings Limited* 127,709 Global Immersion Limited 1,055 Probability plc 316,487 Zoo Digital Group plc 177,812----------------------------------------------------- Total 652,906 ----------------------------------------------------- *Includes capitalised interest 4. Material provisions to a level below cost Company £ ------------------------------------------------------ alwaysON Group Limited 333,692 Closed Loop Recycling Limited 474,479 Evance Wind Turbines Limited 877,466 Trilogy Communications Holdings Limited 253,811 ------------------------------------------------------ Total 1,939,448 ------------------------------------------------------ Portfolio Review: C Shares fund 1. New investments Company £ ---------------------------------------------------- Aerospace Tooling Corporation Limited 900,000 Fire and Air Services Limited 500,000 Procam Television Holdings Limited 400,000 ---------------------------------------------------- Total 1,800,000 ---------------------------------------------------- 2. Follow-on funding (including capitalised interest) Company £ ------------------------------------------------------- Biofortuna Limited 99,066 Connect2 Holdings Limited 650,000 Flowrite Refrigeration Holdings Limited* 16,231 The Fin Machine Company Limited 860,000------------------------------------------------------- Total 1,625,297 ------------------------------------------------------- *Includes capitalised interest 3. Exits and realisations Company £ ------------------------------------------------------ Flowrite Refigeration Holdings Limited* 314,484 Hallmarq Systems Limited 746,064 Leisure Efficiency II Limited 675,150 Leisure Efficiency III Limited 2,000,000 Wholesale Efficiency II Limited 1,000,000------------------------------------------------------ Total 4,735,698 ------------------------------------------------------ *Includes capitalised interest A total of £3,675,150 was repaid by Leisure Efficiency II, Leisure Efficiency III and Wholesale Efficiency II to facilitate new and follow-on investments. 4. Material provisions to a level below cost Company £ ---------------------------------------------- Connect2 Holdings Limited 1,055,020 The Fin Machine Company Limited 6,709,000 ---------------------------------------------- Total 7,764,020 ---------------------------------------------- The Fin Machine Company ("Fin") Given the significant movement of the C Share Portfolio resulting from the failure of The Fin Machine Company, the information on this investment published in the Unaudited Half-Yearly Financial Report for the six month period ended 30 September 2013 has been repeated below. With more than 200 employees, Fin designed and manufactured capital equipment used to manufacture heat exchangers for the worldwide automotive and air conditioning markets. Fin's global customer base included a broad range of blue chip OEMs, automotive industry majors and Asian air conditioning companies. Fin had manufacturing facilities in Seaham, Co. Durham, in Tianjin, China, and an assembly/service centre in Indiana, USA. In any one year, Fin manufactured a relatively small number of machines, costing up to £1.5 million each, together with spares for its installed base of over 600 machines worldwide. To fund its working capital requirements, the company relied heavily on substantial stage payments from customers and a continuing flow of orders. For the year to 31 December 2012, the company incurred an unaudited EBITDA loss of £1.2 million on sales of £26.2 million, after charging exceptional costs of approximately £1.5 million, at which date it had net liabilities of over £11 million reflecting accumulated past losses. To meet the company's working capital requirements, a further £860,000 was invested during the year. The proximate reason for the appointment of administrators was the serving of a winding-up order by HM Revenue & Customs at short notice relating to the company's failure to pay PAYE arrears, despite continuing negotiations to phase payments with HMRC. Considerable progress had been made by the company's new management team in effecting the turnaround. For example, the UK business' annual EBITDA losses reduced from £4.5 million for the year to 31 December 2010 to around breakeven over the six months to 30 June 2013. Various historic liabilities were resolved notably penalties for late delivery of machines and the cost of rectifying and commissioning already delivered machines. Production efficiency was improved and in introducing essential financial and production control systems had been implemented. Growing rumours and concerns about the company's weak financial position caused major customers to become increasingly reluctant over the last quarter to place new orders with Fin despite management's efforts to address these concerns. Within the last month, unexpected trading difficulties also came to light in the Chinese subsidiary which resulted in significant expected payments not being made to the parent company for tooling work done in the UK for shipment to China. Given the reliance on stage payments with new orders and an unexpected net cash outflow in China, the company's working capital position worsened rapidly. The Board appointed corporate financiers to seek additional sources of finance and potential acquirers but the untimely actions of HMRC cut short their work. On 21 August 2013, administrators were appointed, necessitating a full provision of £6,709,000 being made against this investment in the year. In summary, since Foresight took over responsibility for this particularly badly managed investment in April 2011 and attempted to effect a turnaround, the full extent of the historic problems and liabilities became apparent which, when combined with the volatility of the company's large working capital requirement, were such that the C Share fund could no longer justify providing further financial support to the company. Outlook for the Portfolios With generally improving economic conditions, Foresight remains positive about the prospects for both portfolios and is focused on achieving realisations from the existing investments to generate funds for dividends and re-investment. Although Foresight is now seeing a number of high quality investment opportunities, at present, the O Share fund has limited cash resources with which to make new investments. Foresight is, however, actively seeking suitable investment opportunities for the C Share fund with the aim of generating income, capital appreciation and broadening the portfolio while diversifying risk. Portfolio Review In September 2012, Adeptra was acquired by one of its longstanding US partners, the NYSE listed business analytics group FICO, for £72 million. Having received an initial £1.55 million, a further £270,892 held in escrow was received on 24 December 2013. This compared with a valuation of £1,354,235 and original cost of £1,304,718. Held in the Ordinary Shares fund. In June 2013, the Ordinary Share fund invested £600,000 and the C Share fund invested £900,000 alongside other Foresight VCTs in a £3.5 million shareholder recapitalisation of Dundee based Aerospace Tooling Corporation, a well established specialist engineering company providing repair, refurbishment and remanufacturing services to large international companies for components in high-specification aerospace and turbine engines. The company was founded in 2007 by the former CEO, John Seaton, who, following the transaction, has assumed the role of Executive Chairman. John Green, formerly General Manager of the Dundee facility, became Operations Director, alongside a newly appointed Finance Director and Business Development Director. With a heavy focus on quality assurance, the company enjoys strong relationships with companies serving the aerospace, military, marine and industrial markets. A number of recent orders have underpinned growth, profitability and cash generation in the current financial year such that turnover is now expected to double and profits to increase significantly, supporting an increase in valuation of £503,996 in the Ordinary Share fund and £755,994 in the C Share fund during the year. Held in the Ordinary and C Shares funds. For the year to 30 June 2013, alwaysON Group incurred an unaudited EBITDA loss of £388k on revenues of £2.9 million, reflecting inter alia considerable investment in upgrading the underlying network and recruiting additional staff for the network and applications teams. With these losses continuing, exacerbated by technical network problems, a formal sales process was initiated which culminated in acceptance of an all-share offer from the Foresight portfolio company Data Continuity Group, whose Chairman was also Finance Director of AlwaysOn Group. This merger completed in April 2014 and enabled a major reorganisation and significant cost reductions to be effected, while creating the opportunity to sell a broader range of services across both companies' customer bases. Key customers reacted positively to the merger and alwaysON shareholders received a total of 30.6% of the equity of the enlarged Data Continuity Group. As part of the transaction, a further £500,000 was invested by the Foresight VCTs into alwaysOn, including £180,050 from the Company, to ensure that the enlarged Group had sufficient resources for growth. As both companies are Foresight portfolio companies, Foresight played no part in the negotiations or decisions. The key milestones for the enlarged Group are to resolve any outstanding operational issues arising from the merger and accelerate the sales of both Data Continuity Group's back-up services and alwaysOn's Lync SaaS service, for which there is growing interest from channel partners. Reflecting the above, a provision of £333,692 was made against the cost of the investment. Held in the Ordinary Shares fund. AtFutsal Group runs a series of education programmes for 16 to 18 year olds in conjunction with Football League clubs, educational establishments and training organisations utilising three futsal arenas, an increasingly popular type of indoor football with 30 million participants worldwide and the only type of indoor football recognised by the Football Association. AtFutsal is commencing a wider range of government approved BTech courses and has developed its own education software platform so that it can provide a number of educational services previously outsourced. AtFutsal Group is also developing a separate English Colleges education programme to provide additional courses for 16-18 year olds at sixth form colleges. For the current student year which commenced in September 2013, the company registered some 1,200 students on its futsal related courses, nearly double the number of students in the previous student year. The company is now generating operating profits, with the Education division now generating significant profits and cash flow and the three arenas enjoying improved utilisation and operating at above cash breakeven. Held in the Ordinary Shares fund. In April 2014, post the end of the financial year, the entire issued share capital of Amberfin Holdings was acquired by Dalet SA, a Paris based media asset management software company. The Ordinary Share fund received £54,148 at completion for its small 1.8% shareholding and loan and may receive up to a further £8,211 on the first anniversary, making a total of £62,359. Held in the Ordinary Shares fund. Following the £48 million secondary buy-out by ISIS Private Equity in January 2012, investments in equity and loan stock, valued at £1.98 million were retained in Autologic Diagnostics Group. Autologic Diagnostics Group continues to generate strong profits and for the year to December 2013 achieved an EBITDA of £5.4 million on sales of £18.6 million (an EBITDA of £5.9 million on revenues of £17.2 million in 2012). However, the company underperformed against budget in 2013, reflecting strong growth in the USA, the most important market, and a slowing of sales in the UK and European markets. The company traded well in the first quarter and as at 31 March 2014, had a healthy cash balance of £4.5 million. In recent months, Autologic has further strengthened its management team, including recruiting a new Sales Director, to more effectively address the maturing UK market and focus more on continental European markets. The USA continues to perform well, largely driven by a well-structured sales effort. Management continues to develop a business model to generate recurring revenues through a new service-oriented product, with the aim of launching this in Q4 2014, thereby facilitating growth in 2015 and beyond. Over the short/medium term, the challenge is to ensure revenues, profits and cash flow do not fall as the current product range is gradually replaced by the new service offering. In the long term, the quality of earnings should improve, helping to drive shareholder value. During the period, interest of £98,391 deferred under the terms of the loan agreement with Autologic was capitalised. 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 breadth of application of the technology is extremely wide. 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. A £1.3 million round to finance capital expenditure and working capital was completed in August 2013, in which £99,066 was invested by each of the Ordinary Share fund and the C Share fund. The company is progressing in a number of areas, including broadening its product range, increasing manufacturing capacity and improving internal processes. Following successful FDA trials, Biofortuna has now obtained FDA approval for its SSPGo genetic testing product range in the USA, a particularly important milestone enabling access to the USA market, the largest in the World, as well as obtaining FDA registration for its manufacturing site. The freeze-dried kit manufacturing service shows promise, with paid for feasibility studies and contract discussions occurring with a number of parties. Held in the Ordinary and C Shares funds. In July 2012, the C Share fund invested £1.0 million in Northampton based Blackstar Amplification alongside £2.5 million from Foresight VCT to finance a management buy-out and provide growth capital. Blackstar Amplification 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. In its financial year to 30 April 2013, the company achieved an EBITDA of £394k on sales of £9.7 million, nearly twice that achieved in the previous year. Reflecting continuing investment in new product development and marketing initiatives, a similar performance was achieved for the year to April 2014. Management is focused on product sell through in established markets while also increasing the company's presence in new, emerging markets, such as Asia and South America. The company currently has a presence in over 35 countries worldwide and its products are stocked in over 2,500 stores globally. Management is also focused on completing the portfolio of core amplifiers, whilst investigating brand extension into non-core markets. The new ID: Lite range of amplifiers, which will be the company's first products at the value end of the market, was launched to critical acclaim in the US and UK markets in February and March 2014. Held in the C Shares fund. In February 2013, Closed Loop Recycling concluded a major new supply contract and new customer contracts worth £17 million per annum as well as securing £12.8 million of loan finance (of which £6 million was provided by the Foresight Environmental Fund) to double capacity at the Dagenham plant. The new sorting and production equipment has now been commissioned and increased production utilising this additional capacity commenced in November 2013. Output of rHDPE has continued to increase although this ramp up in production has taken several months longer to achieve than expected. Higher market prices for feed stock have put margins under pressure reducing forecast profitability. Additional loan capital of £1.0 million was agreed with the Foresight Environmental Fund in May 2014 to provide the necessary capital to achieve the forecast production run rate. Reflecting the above factors, a provision of £474,479 has been made against the cost of the investment. Management is examining a number of avenues to improve profitability further. Held in the Ordinary Shares fund. Connect 2 Media develops and publishes digital media entertainment on a range of devices, such as mobile phones and games consoles. This feature phone market is in structural decline, having been adversely impacted by the rapid growth of smartphones and free-to-play games. A new management team was appointed during 2012 to stabilise the business and change the business model. In May 2012, a new CEO was appointed whose experience included founding two US software companies and migrating from a B2C to a B2B business model. In April 2013, as part of a £1 million round to support this change in strategy, the C Share fund invested a further £650,000 to finance a B2B development platform, Game Brain. For the year to 31 December 2013, an EBITDA loss of £971,000 was incurred on sales of £2.4 million, after taking into account over £770,000 of Game Brain platform development costs (cf. an EBITDA loss of £200,000 on sales of £3.1 million in 2012). The Beta version of Game Brain, the company's Cloud based game development and publishing technology platform (which provides game developers with software tools to support their development, distribution and discovery requirements) was launched in late 2013. Provided as a highly scalable Platform as a Service (PaaS), this was designed to achieve recurring monthly revenues from games developers generating recurring revenues. In early 2014, corporate financiers were appointed to raise up to £4 million to commercialise and launch Game Brain but met with no success despite wide ranging efforts. Accordingly, development of Game Brain has ceased, a restructuring implemented and costs reduced substantially. Reflecting the above, a full provision of £1.055 million has been made against the value of this investment. Held in the C Shares fund. 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. Management accounts for the year to 31 March 2014 show a record operating profit of £7.4 million on sales of £18.7 million, well ahead of budget (for the year ended 31 March 2013, a record operating profit of £5.1 million was achieved on sales of £14.5 million), supporting an increase in valuation of some £2.5 million during the year. With over £3.5m of cash currently, the company is continuing to enjoy strong demand from its main OEM partners and distributors. Terms have been agreed to acquire its US distributor and an office has been opened in Philadelphia to develop more US sales and distributorships. Held in the Ordinary Shares fund. For the year to 31 March 2013, Defaqto returned to substantial profitability, achieving an unaudited EBITDA of £756,000 on sales of £7.2 million, which contrasts with the previous year, when an operating loss of £937,000 was incurred on sales of £8.3 million, after heavy investment in new product development. In the year to 31 March 2014, the company traded well ahead of the previous year and also budget, after a notably strong star rating season in December 2013, supporting an increase in valuation of £1.005 million during the year. A new Chairman was appointed in January 2013. The CEO, appointed in July 2012, has improved operational efficiency by focusing on tangible and financial metrics and on winning more orders and trials, including from comparison websites and major UK companies serving consumer markets. Held in the C 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 £354,000 on sales of £8.6 million (£222,000 on sales of £7.25 million in 2012, over three times the level of sales in the previous year). 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 on 24 April 2014 and the business sold subsequently. The reductions in the Feed-in-Tariff were essentially the sole factor in the Company going from a position of record profits to administration in less than two years. A provision of £877,466 has been made against the cost of this investment after taking into account the expected recovery proceeds. Held in the Ordinary Shares fund. Following the sale of Factory Media in February 2012, a final sum of £779,832 held in escrow was received by the C Share fund in March 2014, achieving a 2.4 times cash return overall. In August 2013, the Ordinary Share fund and C Share fund each invested £500,000 alongside other Foresight VCTs in a £2.5 million shareholder recapitalisation of Stockport based Fire and Air Services, a hard facilities management provider which designs, installs and services air conditioning and fire sprinkler systems for retail, commercial and residential properties through a national network of engineers. The company focusses primarily on the retail sector and enjoys long term customer relationships and multi-year preferred supplier contracts with various blue chip high street retailers, giving good revenue visibility. Two recent acquisitions give access to new customer relationships and the commercial real estate sector. A number of new contracts have been won recently, including two major retailers, further increasing sales prospects. Held in the Ordinary and C Shares funds. In May 2012, the Ordinary Share fund and the C Share fund invested £200,000 and £492,500 respectively in Flowrite Refrigeration Holdings alongside other Foresight VCTs to finance the £3.2 million management buyout of Maidstone based Flowrite Services Limited, which provides refrigeration and air conditioning maintenance services nationally, principally to leisure and commercial businesses such as hotels, clubs, pubs and restaurants. Management has accelerated sales efforts, won a number of significant new contracts, a new customers and also reviewed several potential acquisitions with the aim of broadening its national coverage. In the year to 31 October 2013, reflecting a particularly busy summer, the company traded well ahead of budget, achieving an operating profit of £1.06 million on sales of £10.0 million (cf. an operating profit of £852,000 on sales of £7.9 million in 2012), and also repaid loans, including capitalised interest, of £127,709 and £314,484 respectively to the Ordinary Share fund and the C Share fund, representing some 75% of original cost of investment, after only 18 months from the MBO. During the year, interest of £6,591 deferred under the terms of the loan agreement was capitalised in the Ordinary Share fund and £16,231 in the C Share fund. Held in the Ordinary and C Shares funds. Guildford based Hallmarq Veterinary Imaging is the only manufacturer of MRI systems for the standing equine market, with over 64 MRI scanners in use at equine practices throughout the world. For the year ended 31 August 2013, the company achieved a record EBITDA of £1.3 million on sales of £3.8 million, ahead of budget (compared to EBITDA of £1.2 million on sales of £3.3 million in 2012). Trading in the current year is ahead of budget. Having invested heavily in developing its PetVet scanner (an MRI scanner for the companion animal market (i.e. cats and dogs)), the first sale has now been made and the company is focussed on converting its growing sales pipeline for this new scanner into firm orders. Following an unsolicited approach and subsequent negotiations, the entire 7% shareholding in the company was sold in March 2014 for £746,064, an increase of £74,305 during the year. This, together with £1 million of loan repayments received in 2012, represents a 1.6 times return on the carrying value of £1.1 million when Foresight took responsibility for managing the investment. Previously held in the C 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 continues to demonstrate potential with a number of deployments in progress and a growing 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, thereby reducing reliance on the gaming sector. Ixaris charges a small percentage of each transaction on the platform. During 2013, the company invested in developing and marketing its Ixaris Payment System, the platform that runs Opn, to financial institutions. The platform enables financial institutions to offer payment services based on prepaid cards to their customers. The company has made good progress on building a pipeline, although these sales are likely to be slow to negotiate and deploy. In the year to 31 December 2013, an EBITDA loss of £617k was incurred on sales of £9.5 million, reflecting the above mentioned investment in software and systems (cf. an EBITDA loss of £293,000 on sales of £8.4 million in the previous year). Trading in the first quarter to 31 March 2014 was ahead of budget. The management team has been strengthened by the appointments of a new Chief Operating Officer, Marketing Director and Sales Director. In January 2014, the Ordinary Share fund invested a further £299,799 as part of a £2 million equity funding round to finance further investment in the payment system. Held in the Ordinary Shares fund. A total of £3,675,150 was repaid in total during the period to the C Share fund by Leisure Efficiency II, Leisure Efficiency III and Wholesale Efficiency II to provide funds for new and further investments. Held in the C 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, with a view to reaching financial close later this year and thereafter commence construction. Discussions are being held with potential funders to raise the required £35 million to finance the project. 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 £46 million, 10.5MW, waste wood to energy power plant project in Birmingham. Construction of the plant is progressing on schedule. The company has established a number of partnerships which have led to the development of a growing pipeline of similar opportunities at various stages of maturity, including three forecast to close during 2014 (including O-Gen Acme Trek's Stoke plant referred to above). The company continues to develop relationships with a number of technology providers and major EPC contractors. O-Gen UK will not finance the construction of these plants but will benefit from project management fees, equity shareholdings as well as fuel, operation and maintenance contracts. Held in the Ordinary Shares fund. During the year, the total holding of 689,473 ordinary shares in AiM listed Probability plc was sold, realising proceeds of £316,487. Previously held in the Ordinary Shares fund. In April 2013, the Ordinary Share fund and the C Share fund invested £250,000 and £400,000 respectively alongside other Foresight VCTs in a £1.8 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 corporates for over 20 years. Headquartered in Battersea, London, with additional facilities in Manchester, Edinburgh and Glasgow, Procam has supported shows including Made in Chelsea, ITV's Splash, Watch's The Incredible Mr Goodwin, BBC2's The Great British Sewing Bee, Derren Brown and The Great British Bake Off. It is a preferred supplier to BSkyB and an approved supplier for BBC and ITV. Over the last four years revenues have more than doubled, following the introduction of new camera formats. In September 2013, Hammerhead, a competitor with facilities in London, Manchester and Edinburgh and Glasgow, was acquired in order to broaden the customer base and national coverage and realise various synergistic benefits. The Hammerhead acquisition has now been successfully bedded in and is expected to improve profits substantially, with the Manchester and London operations all integrated within the existing Procam infrastructure. With stronger trading in H2 2013, preliminary results for the year to 31 December 2013 show an EBITDA of £2.0 million on sales of £6.4 million, well ahead of trading in 2012. Trading in the first quarter to 31 March was strong, well ahead of the corresponding quarter in 2013. During 2014, Procam plan to open a facility in Wales and launch a 'supertruck' operating as a mobile outdoor camera facility. With a number of opportunities being pursued with both new and existing customers, further significant growth in sales and profits is forecast in the current year. Held in the Ordinary and C Shares funds. On 11 March 2014, the Ordinary Share fund sold its small equity shareholding (0.31%) and loans in Snell Corporation in return for non interest bearing, unsecured B1 loan notes totalling £197,116 in Quantel Holdings (2010) Limited, a subsidiary of Quantel Holdings Limited, redeemable on a sale of the enlarged group. Following the acquisition of Snell Corporation, Quantel Holdings (2010) will be a major global broadcast equipment manufacturer, thereby creating a more attractive investment. 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 £2.75 million on sales of £19.5 million, with all UK service centres performing well (cf. a record operating profit of £2.45 million on sales of £18.1 million in 2013). In September 2013, a small Scottish distribution business was acquired, thereby improving national coverage. Management's current focus is to generate greater sales and broaden the existing customer base in Southern Germany. A new full service centre was opened in Bochum near Dusseldorf in October 2013 and existing customers are already discussing expanding the number of parts supplied through this service centre. A possible acquisition is also being pursued in Southern Germany. A strong physical presence will greatly assist TFC Europe in growing its sales and profits in Europe's largest manufacturing market. Held in the Ordinary Shares fund. The Bunker Secure Hosting, which operates two ultra secure data centres, continues to generate substantial profits. For the year to 31 December 2013, a record EBITDA of £2.2 million was achieved on sales of £9.25 million, ahead of budget (cf. in 2012, an EBITDA of £1.77 million on sales of £8.5 million). However, sales growth slowed, reflecting increased competition and higher than expected contract attrition rates. Recurring annual revenues currently exceed £9 million. In the current year to date, trading continues ahead of budget, with a much reduced attrition rate. 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. Investment continues in upgrading the existing infrastructure. In April 2013, the Ordinary Share fund purchased a number of shares from two minority shareholders for £128,200. In September 2013, interest of £335,590 deferred under the terms of the loan agreement was capitalised. 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 in the year to 28 February 2013 was adversely affected by the deferral of expected orders under long-term defence programmes, particularly from the US, reflecting uncertainties about reductions in US defence spending. These uncertainties continued to impact trading in the year to February 2014, the company incurring an EBITDA loss of £808k on sales of £3.8 million with most of the losses being incurred in the first quarter. Following further cost reductions and a recovery in defence orders, the company is now trading at or above breakeven EBITDA and the budget for the current year shows a return to a positive EBITDA. Discussions are in progress about further defence programmes and the company continues to develop its range of communication equipment and related services, including the launch of a software only variant. The broadcast division continues to win orders and trade satisfactorily. To reflect the above trading performance, a further provision of £253,811 has been made against the cost of the investment in the Ordinary Shares fund. During the year, as part of a £1 million funding round in three tranches, the Ordinary Shares fund advanced loans totalling £174,668. Held in the Ordinary Shares fund. On 31 October 2013, the investment of £233,250 6% Unsecured Convertible Redeemable Loan note in AiM listed Zoo Digital Group was sold for £177,812 plus interest of £5,831. Held in the Ordinary Shares fund. David Hughes Foresight Group Chief Investment Officer 24 July 2014 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 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 the 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 consistent weak stock selection might lead to under performance and poor returns to shareholders. * Regulatory - the Company is required to comply with the Companies Act 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 Annual Report and 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 not reflect the price that any realisation is actually made. 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. In the Annual Report and Accounts. Statement of Directors' Responsibilities Statement of Directors' Responsibilities in respect of the Annual Report and Financial Statements The Directors are responsible for preparing the Annual Report and 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 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 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. 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 Philip Stephens Chairman 24 July 2014 Unaudited Non-Statutory Analysis of the Share Classes Income Statements for the year ended 31 March 2014 Ordinary Shares Fund C Shares Fund Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Investment holding gains/(losses) - 3,626 3,626 - (5,802) (5,802) Realised (losses)/gains on investments - (1,752) (1,752) - 340 340 Income 622 - 622 204 - 204 Investment management fees (203) (608) (811) (88) (263) (351) Other expenses (283) - (283) (150) - (150) ------------------------------------------------ Return/(loss) on ordinary activities before taxation 136 1,266 1,402 (34) (5,725) (5,759) Taxation - - - - - - ------------------------------------------------ Return/(loss) on ordinary activities after taxation 136 1,266 1,402 (34) (5,725) (5,759) ------------------------------------------------ Return per share 0.3p 3.3p 3.6p (0.2)p (30.6)p (30.8)p ------------------------------------------------ Balance Sheets at 31 March 2014 Ordinary Shares Fund C Shares Fund £'000 £'000 Fixed assets Investments held at fair value through profit or loss 31,624 9,791 ---------------------- -------------- Current assets Debtors 1,219 856 Money market securities and other deposits 637 - Cash 72 1,776 ---------------------- -------------- 1,928 2,632 Creditors: Amounts falling due within one year (96) (74) ---------------------- -------------- Net current assets 1,832 2,558 ---------------------- -------------- Net assets 33,456 12,349 ---------------------- -------------- Capital and reserves Called-up share capital 386 187 Share premium account 10,314 25,567 Capital redemption reserve 1,938 71 Profit and loss account 20,818 (13,476) ---------------------- -------------- Equity shareholders' funds 33,456 12,349 ---------------------- -------------- Number of shares in issue 38,569,414 18,680,907 Net asset value per share 86.7p 66.1p ---------------------- -------------- At 31 March 2014 there was an inter-share debtor/creditor of £74,000 which has been eliminated on aggregation. Unaudited Non-Statutory Analysis of the Share Classes Reconciliations of Movements in Shareholders' Funds for the year ended 31 March 2014 Called-up Share Capital share premium redemption Profit and capital account reserve loss account Total £'000 £'000 £'000 £'000 £'000 Ordinary Shares As at 1 April 2013 384 8,076 1,914 23,131 33,505 Share issues in the year 26 2,408 - - 2,434 Expenses in relation to share issues - (170) - - (170) Repurchase of shares (24) - 24 (2,169) (2,169) Investment transaction costs - - - (3) (3) Dividends - - - (1,543) (1,543) Profit for the year - - - 1,402 1,402 -------------------------------------------------------------- As at 31 March 386 10,314 1,938 20,818 33,456 2014 -------------------------------------------------------------- Called-up Share Capital share premium redemption Profit and capital account reserve loss account Total £'000 £'000 £'000 £'000 £'000 C Shares As at 1 April 2013 187 23,442 49 (5,714) 17,964 Share issues in the year 22 1,979 - - 2,001 Expenses in relation to share issues - 146 - - 146 Repurchase of shares (22) - 22 (1.994) (1,994) Investment transaction costs - - - (9) (9) Loss for the year - - - (5,759) (5,759) -------------------------------------------------------------- As at 31 March 187 25,567 71 (13,476) 12,349 2014 -------------------------------------------------------------- Audited Income Statement for the year ended 31 March 2014 Year ended Year ended 31 March 2014 31 March 2013 Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 Investment holding losses - (2,176) (2,176) - (1,107) (1,107) Realised losses on investments - (1,412) (1,412) - (674) (674) Income 826 - 826 218 - 218 Investment management fees (291) (871) (1,162) (324) (970) (1,294) Other expenses (433) - (433) (555) - (555) -------------------------------------------------- Return/(loss) on ordinary activities before taxation 102 (4,459) (4,357) (661) (2,751) (3,412) Taxation - - - - - - -------------------------------------------------- Return/(loss) on ordinary activities after taxation 102 (4,459) (4,357) (661) (2,751) (3,412) -------------------------------------------------- Return per share: Ordinary Share 0.3p 3.3p 3.6p (1.6)p (7.9)p (9.5)p -------------------------------------------------- C Share (0.2)p (30.6)p (30.8)p (0.3)p 1.4p 1.1p -------------------------------------------------- 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 redemption Profit and capital account reserve loss account Total Year ended 31 £'000 £'000 £'000 £'000 £'000 March 2013 Company As at 1 April 565 19,949 1,851 31,857 54,222 2012 Share issues in 118 11,949 - - 12,067 the year Expenses in relation to - (380) - - (380) share issues Repurchase of (112) - 112 (11,028) (11,028) shares Loss for the - - - (3,412) (3,412) year --------------------------------------------------------------- As at 31 March 571 31,518 1,963 17,417 51,469 2013 --------------------------------------------------------------- Called-up Share Capital Profit and share premium redemption loss capital account reserve account Total Year ended 31 £'000 £'000 £'000 £'000 £'000 March 2014 Company As at 1 April 571 31,518 1,963 17,417 51,469 2013 Share issues in 48 4,387 - - 4,435 the year Expenses in relation to - (24) - - (24) share issues Repurchase of (46) - 46 (4,163) (4,163) shares Investment transaction - - - (12) (12) costs Dividends - - - (1,543) (1,543) Loss for the - - - (4,357) (4,357) year -------------------------------------------------------------- As at 31 March 573 35,881 2,009 7,342 45,805 2014 -------------------------------------------------------------- Audited Balance Sheet at 31 March 2014 Registered Number: 03506579 As at As at 31 March 2014 31 March 2013 £'000 £'000 Fixed assets Investments held at fair value through profit or loss 41,415 44,527 ---------------------------------- Current assets Debtors 2,001 2,746 Money market securities and other deposits 637 536 Cash 1,848 3,995 ---------------------------------- 4,486 7,277 Creditors Amounts falling due within one year (96) (335) ---------------------------------- Net current assets 4,390 6,942 ---------------------------------- Net assets 45,805 51,469 ---------------------------------- Capital and reserves Called-up share capital 573 571 Share premium account 35,881 31,518 Capital redemption reserve 2,009 1,963 Profit and loss account 7,342 17,417 ---------------------------------- Equity shareholders' funds 45,805 51,469 ---------------------------------- Net asset value per share: Ordinary Share 86.7p 87.3p ---------------------------------- C Share 66.1p 95.8p ---------------------------------- Audited Cash Flow Statement for the year ended 31 March 2014 Year ended Year ended 31 March 2014 31 March 2013 £'000 £'000 Cash flow from operating activities Investment income received 380 311 Deposit and similar interest received 2 7 Investment management fees paid (1,157) (1,674) Secretarial fees paid (155) (155) Other cash payments (553) 65 ---------------------------- Net cash outflow from operating activities and returns on investment (1,483) (1,446) Returns on investment and servicing of finance Purchase of unquoted investments and investments quoted on AIM (5,641) (6,673) Net proceeds on sale of investments 4,643 3,040 Net proceeds on deferred consideration 1,052 451 ---------------------------- Net capital inflow/(outflow) from financial investment 54 (3,182) Taxation - - Equity dividends paid (1,543) - ---------------------------- Management of liquid resources Movement in money market funds (101) 1,003 ---------------------------- (101) 1,003 Financing Proceeds of fund raising 1,208 836 Expenses of fund raising (77) (114) Repurchase of own shares (205) (876) ---------------------------- 926 (154) ---------------------------- Net outflow of cash for the year (2,147) (3,779) ---------------------------- Reconciliation of net cash flow to movement in net funds Decrease in cash for the year (2,147) (3,779) Net cash at start of year 3,995 7,774 ---------------------------- Net cash at end of year 1,848 3,995 ---------------------------- Analysis of changes in net debt At 1 April 2013 Cash flow At 31 March 2014 £'000 £'000 £'000 Cash and cash equivalents 3,995 (2,147) 1,848 -------------------------------------------- Notes to the accounts 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 March 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 31 March 2014, which were unqualified and did not contain any 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 March 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 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 Net asset value per Ordinary Share is based on net assets at the year end of £33,456,000 (2013: £33,505,000) and on 38,569,414 (2013: 38,384,591) Ordinary Shares, being the number of Ordinary Shares in issue at that date. Net asset value per C Share is based on net assets at the year end of £12,349,000 (2013: £17,964,000) and on 18,680,907 (2013: 18,744,740) C Shares, being the number of C Shares in issue at that date. 5. Return per share Year ended Year ended 31 March 2014 31 March 2013 Ordinary Ordinary Shares C Shares Shares C Shares £'000 £'000 £'000 £'000 Total return/(loss) after taxation 1,402 (5,759) (3,617) 205 Total return/(loss) per share (note a) 3.6p (30.8)p (9.5)p 1.1p ------------------------------------------------- Revenue return/(loss) from ordinary activities after taxation 136 (34) (602) (59) Revenue return/(loss) per share (note b) 0.3p (0.2)p (1.6)p (0.3)p ------------------------------------------------- Capital return/(loss) from ordinary activities after taxation 1,266 (5,725) (3,015) 264 Capital return/(loss) per share (note c) 3.3p (30.6)p (7.9)p 1.4p ------------------------------------------------- Weighted average number of 38,590,648 18,687,245 37,965,547 18,730,684 shares in issue in the period ------------------------------------------------- Notes: a) Total return/(loss) per share is total return after taxation divided by the weighted average number of shares in issue during the period. b) Revenue return/(loss) per share is revenue return after taxation divided by the weighted average number of shares in issue during the period. c) Capital return/(loss) per share is capital return after taxation divided by the weighted average number of shares in issue during the period. 6. The Annual General Meeting will be held at 4.00pm on 25 September 2014 at the offices of SGH Martineau LLP, One America Square, Crosswall, London EC3N 2SG. 7. Income Year ended Year ended 31 March 31 March 2014 2013 £'000 £'000 Loan stock interest 822 216 Overseas based Open Ended Investment Companies ("OEICS") 2 2 Bank deposits 2 - ------------------------------------ 826 218 ------------------------------------ 8. Investments held at fair value through profit or loss 2014 2013 £'000 £'000 Quoted investments 212 981 Unquoted investments 41,203 43,546 41,415 44,527 Quoted Unquoted Total Company £'000 £'000 £'000 Book cost as at 1 April 2013 1,725 44,178 45,903 Investment holding losses (744) (632) (1,376) -------------------------------------------- Book cost as at 1 April 2013 981 43,546 44,527 Movements in the year: Purchases at cost - 6,097 6,097 Disposal proceeds (494) (4,895) (5,389) Realised losses (338) (1,623) (1,961) Investment holding gains/(losses) 63 (1,922) (1,859) -------------------------------------------- Valuation at 31 March 2014 212 41,203 41,415 -------------------------------------------- Book cost at 31 March 2014 893 43,757 44,650 Investment holding losses (681) (2,554) (3,235) -------------------------------------------- Valuation at 31 March 2014 212 41,203 41,415 -------------------------------------------- Quoted Unquoted Total Ordinary Shares £'000 £'000 £'000 Book cost as at 1 April 2013 1,725 26,052 27,777 Investment holding (losses)/gains (744) 651 (93) -------------------------------------------- Valuation at 1 April 2013 981 26,703 27,684 Movements in the year: Purchases at cost - 2,672 2,672 Disposal proceeds (494) (160) (654) Realised losses (338) (1,683) (2,021) Investment holding gains 63 3,880 3,943 -------------------------------------------- Valuation at 31 March 2014 212 31,412 31,624 -------------------------------------------- Book cost at 31 March 2014 893 26,881 27,774 Investment holding (losses)/gains (681) 4,531 3,850 -------------------------------------------- Valuation at 31 March 2014 212 31,412 31,624 -------------------------------------------- In addition a deferred consideration realised gain of £269,000 was recognised by the Ordinary Shares fund in the year. Investment holding gains in the income statement includes £4,000 of deferred consideration recognised in the year. A transfer of £141,000 has also been made from investment holding gains to realised losses to recognise deferred income received. An overdraft guarantee of £180,000, which was included in debtors, has been written off and is recognised in investment holding gains. Capitalised interest of £441,000 was recognised by the Ordinary Shares fund in the year and is included within purchases at cost. Quoted Unquoted Total C Shares £'000 £'000 £'000 Book cost as at 1 April 2013 - 18.126 18,126 Investment holding losses - (1,283) (1,283) -------------------------------------------- Valuation at 1 April 2013 - 16,843 16,843 Movements in the year: Purchases at cost - 3,425 3,425 Disposal proceeds - (4,735) (4,735) Realised gains - 60 60 Investment holding losses - (5,802) (5,802) -------------------------------------------- Valuation at 31 March 2014 - 9,791 9,791 -------------------------------------------- Book cost at 31 March 2014 - 16,876 16,876 Investment holding losses - (7,085) (7,085) -------------------------------------------- Valuation at 31 March 2014 - 9,791 9,791 -------------------------------------------- Deferred consideration of £280,000 was also recognised in the year by the C Shares fund through realised gains in the income statement. Capitalised interest of £16,000 was recognised by the C Shares fund in the year and is included within purchases at cost. 9. Transactions with the manager Foresight Group, which acts as investment manager to the Company in respect of its venture capital investments earned fees of £1,162,000 during the year (2013: £1,294,000). Foresight Fund Managers Limited, Company Secretary, received fees of £155,000 (2013: £155,000) during the year. The annual secretarial fee (which is payable together with any applicable VAT) is adjusted annually in line with the UK Retail Prices Index. At the balance sheet date there was £10,336 (2013: £5,432 due from) due to Foresight Group and £nil (2013: £nil) due to Foresight Fund Managers Limited. No amounts have been written off in the year in respect of debts due to or from related parties. Foresight Group is also a party to the performance incentive agreement described in note 13 within the Annual Report and Accounts. END This announcement is distributed by GlobeNewswire on behalf of GlobeNewswire clients. 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 GlobeNewswire [HUG#1837284] A0LG3VB68K371R401 Copyright RTT News/dpa-AFX |