Half-yearly report
FORESIGHT 4 VCT PLC
Summary
* Net asset value per Ordinary Share as at 31 August 2010 displayed upward
momentum, moving to 104.1p compared to 99.0p
      as at 28 February 2010.
* An interim dividend of 5.0p per share will be paid on 4 February 2011.
* The Company made ten follow-on investments totalling £1,183,711.
* Cash proceeds of £373,008 were received via loan repayments from two
investments.
* The linked offer with Foresight 3 VCT raised gross proceeds of £17.0 million
between its launch in October 2009 and its close on 4 May 2010, of which the
Company's share was £8.5 million. Of the £17.0 million raised in total,
£10.5 million was raised in the current year, of which the Company's share
was £5.27 million.
 Six months ended Year ended
31 August 2010 28 February 2010
Net asset value per Ordinary Share 104.1p 99.0p
Net asset value per Ordinary Share (including 186.4p 181.3p
all dividends paid)
Share price per Ordinary Share 90.5p 85.0p
Share price total return per Ordinary Share 172.8p 167.3p
(including all dividends paid)
Chairman's Statement
Introduction
In this, my first communication to shareholders since my recent appointment as
Chairman, I am pleased to be able to report sound progress in the development of
the investment portfolio.
I am pleased to report that between 28 February 2010 and 31 August 2010, the net
asset value of the Ordinary Shares increased by 5.2% to 104.1p per share. The
current performance of several of the unquoted investments within the portfolio
both in terms of revenues and profits generated has improved over the six months
under review. A significant amount of this improvement can be attributed to
export driven growth, principally to the US and Europe. Furthermore, the order
books of several portfolio companies give the Manager cause for optimism for the
latter half of the current year and that the recent positive portfolio
performance can be maintained.
Notwithstanding these positive signs, stock market sentiment is relatively
fragile, significant macroeconomic uncertainties remain, and trading and credit
conditions continue to be difficult in many sectors of the economy. Against this
background, Foresight Group continues to adopt a cautious approach to managing
the portfolio. An interim dividend of 5.0p per share for the year ending 28
February 2011 will be paid on 4 February 2011. The Company's policy is to
maximise the level of tax-free dividends generated either from income or from
capital profits realised on the sale of investments.
Portfolio Review
The performance of a number of portfolio companies continued to improve,
reflecting growing demand and strong sales pipelines.
Diagnos develops and sells sophisticated automotive diagnostic software and
hardware to independent mechanics and garages to allow them to service and
repair vehicles. The investment in Diagnos was made in February 2009. For the
period 20 February 2009 to 31 December 2009, Diagnos produced an operating
profit of £1.48 million on sales of £5.49 million. It is continuing to grow
sales and profits in its current financial year and on 1 July 2010 took an
important step forward by acquiring its previously independently-owned US
distributor.
Trilogy Communications is continuing to build partnerships with large
international defence companies and its order book and pipeline of sales
opportunities has continued to grow. The company's financial year for 2010/11
has started very strongly and both its broadcast and defence divisions are ahead
of plan. The company's order book is strong and the outlook for the remainder of
the year is very positive.
Having recovered from a fire in late 2009, Closed Loop Recycling continues to
make solid operational, commercial and revenue progress with production rates at
record levels, processing 100 tonnes per day and producing material of a
particularly high quality. The capex work, associated with the equipment
replacement and upgrade to both replace fire damaged equipment and optimise the
plant, has been successfully completed. Closed Loop is currently generating
revenues in excess of £1 million per month.
Adeptra generated strong growth in North America and Europe for its call centre
automation systems and handles over 2 million calls per day currently made in
11 countries from its five data centres Worldwide. For the year to 31 December
2009 sales increased by 68% to £20.5 million, generating a maiden profit of
£656,000. For the sixth year, Adeptra was listed as one of the UK's fastest
growing technology companies in The Sunday Times Microsoft Tech Track 100.
Ixaris continues to see strong growth in its core business of virtual Visa
cards, which remains Europe's most successful virtual card programme. The
company is investing heavily in its unique open payments platform that lets
businesses create and run their own payment applications, enabling payment
innovation by greatly reducing the cost, complexity and time needed to bring
them to market.
TFC Europe, which distributes technical fasteners, reported an operating profit
of £951,000 on sales of £10,000,000 in the year ended 31 March 2010. It is
continuing to perform well in its current financial year.
Global Immersion, which provides visualisation systems for planetariums and the
immersive theatre market produced its first operating profit (unaudited) in its
financial year ended 30 June 2010. It has started its new financial year with a
healthy order book and has a number of other potential projects in its pipeline.
Across all of the portfolio companies the Manager has, where appropriate,
ensured management are focused on cash conservation and cost reductions in light
of the recession and, as yet, fragile economic recovery.
Investment Activity
Over the last two years, as a result of tougher trading and credit conditions,
the number of follow-on investments has increased. In part, this has reflected
the need for additional working capital as a result of lower trading and reduced
bank credit lines and overdrafts but also funding for growth.
The Company made ten follow-on investments totalling £1,183,711 in the period.
These were O-Gen Acme Trek (£512,404), @Futsal (£141,977), Closed Loop Recycling
(£140,000), SkillsMarket (£128,456), The Bunker Secure Hosting (£77,040),
Trilogy Communications (£62,500), Land Energy (£48,808), Amberfin Holdings
(£40,688), alwaysON (£20,020) and i-plas Group (£11,818).
The investment in O-Gen Acme Trek of £512,404 (£1.22 million total investment)
resulted from delays in achieving full commissioning of the underlying plant and
to provide ongoing working capital for the company.
A planned second tranche of funds was invested into @Futsal to develop its
existing capacity in Swindon and to commission a new super-arena in Birmingham.
This should enable the business to reach a scale where it can operate profitably
and generate cash, as well as prove the concept and viability of the super arena
model.
Foresight 4 VCT invested a further £128,456 into SkillsMarket to fund the
operational costs associated with the turnaround strategy which was successful.
The company successfully launched a new web-based, Software as a Service (SaaS)
product, iProfile Recruiter Account, at the start of the year and is now
focusing its efforts on growing the sales of the new product and early
indications are that the product is proving to be popular within the company's
target markets.
The investment in i-plas Group of £11,818 was a small secondary purchase of
shares. i-plas Group (formerly Lynwood Group Holdings), produces building
products in an area of plastics recycling which has significant growth
potential.
The Bunker Secure Hosting continues to win new orders, grow its recurring annual
revenues, and is now generating substantial profits. Foresight 4 provided
further funds (£77,040) for hardware infrastructure improvements to support the
company's growth in high value managed services.
Realisations
Despite the difficult underlying economic conditions there were loan repayments
during the period totalling £373,008 from two investee companies:
Datapath Holdings, following continuing good results and positive cash flow
generation, repaid £340,908 of loan stock during the year and SkillsMarket
(£32,100) repaid a short-term loan following a further funding round.
Dividend
The Company's dividend policy is to aim to distribute to shareholders a steady
flow of dividends from income and realised capital gains. Reflecting recent
realised gains and income generated from loan stock, an interim dividend of
5.0p per share for the year ending 28 February 2011 will be paid on 4 February
2011 compared with 5.0p in 2009, making 27.5p per share of cumulative dividend
payments in the last five years. The record date of the dividend will be 28
January 2011 and the ex-dividend date will be 26 January 2011.
Valuation Policy
Investments held by the Company have been valued in accordance with the
International Private Equity and Venture Capital (IPEVC) valuation guidelines
(September 2009) 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 PLUS are valued at the bid price as at 31 August 2010. The portfolio
valuations are prepared by Foresight Group, as investment manager, and are
subject to approval by the Board.
Share Issues and Share Buy-backs
I am pleased to report that the linked offer with Foresight 3 VCT plc, launched
on 15 October 2009, proved to be popular with investors, raising £17.0 million
between the two VCTs up until its close on 4 May 2010. From 1 March 2010 until
the offer closed on 4 May, 5,348,100 shares were issued in the Company at prices
ranging from 100.0p to 101.0p representing gross proceeds of £5.27 million.
These new funds will enable the Company to remain an active investor in the
current market and take advantage of new opportunities.
All of these share issues were under the new VCT provisions that 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.
It continues to be the Company's policy to consider purchasing shares in the
market when they become available in order to help provide liquidity for the
Company's shareholders. During the period, the Company repurchased 258,037
shares at a cost of £231,640 representing an average discount of 12.5% to net
asset value.
Change of Year-end Date
In order to coincide with the quarterly reporting cycles of investee companies
and the valuation processes of the other Foresight VCTs co-investing alongside
Foresight 4 VCT, the Board has decided to alter the Company's yearend to 31
March 2011 (from 28 February 2011). This will mean a 13 month 'year' in the
current reporting cycle but will have no other impact on shareholders.
Directorate Change
As a public listed company, Foresight 4 VCT plc is required to comply with the
regulations of the UK Listing Authority ("UKLA"). As a result, certain changes
to the existing Board were required prior to the introduction of new UKLA
regulations on Board independence which came into effect on 28 September 2010.
As Bernard Fairman was Foresight Group's representative on the Board, he was
deemed not to be independent. He therefore stepped down from the Board on 18
June 2010. Additionally, because Peter Dicks was Chairman of a number of trusts
managed by Foresight Group, he was also deemed not to be independent and thus he
resigned as our Chairman on 30 July 2010 but remains as a Director. I was
appointed as Chairman on the same day. Foresight Group continues unchanged as
our Investment Manager.
I would like to thank Peter for all of his hard work in his role as Chairman and
Bernard for his contribution as a Director, since their appointments in 2004.
Outlook
The recovery in the underlying trading of many portfolio companies has
benefitted, to varying degrees, from the positive export conditions created by a
weaker currency and reflects better than expected growth in portfolio companies'
target markets. We remain optimistic about the current prospects and outlook for
many portfolio companies, which continue to display strong order books and
revenue and profit growth but this is tempered by continuing macroeconomic
uncertainties that could lead to a double dip recession or prolonged period of
low growth.
Although there has been very little portfolio activity in terms of purchases or
sales over the last six months, we are witnessing potential acquirers slowly
returning to the market following two years of economic fragility. Additionally,
Foresight Group is seeing its dealflow of new investment opportunities
increasing but we remain cautious about the economic outlook and will aim to
invest only in new opportunities which seem robust. The Board and Investment
Manager are, therefore, hopeful that the positive current performance of the
portfolio will translate into realisations over the coming months and will, over
the medium term, be reflected in the net asset value performance and
distributions.
Philip Stephens
Chairman
28 October 2010
For further information please contact:
Gary Fraser, Foresight Fund Managers Limited Tel: 01732 471800
Unaudited Half-Yearly Results and Responsibility Statements
Principal Risks and Uncertainties
The principal risks faced by the Company are as follows:
* Performance;
* Regulatory;
* Operational; and
* Financial.
The Board reported on the principal risks and uncertainties faced by the Company
in the Annual Report and Accounts for the year ended 28 February 2010 ('the
Annual Report'). A detailed explanation can be on found on page 12 of the Annual
Report which is available on www.foresightgroup.eu or by writing to Foresight
Group at ECA Court, South Park, Sevenoaks, Kent, TN13 1DU.
In the view of the Board, there have not been any changes to the fundamental
nature of these risks since the previous report and these principal risks and
uncertainties are equally applicable to the remaining six months of the
financial year as they were to the six months under review.
Directors' Responsibility Statement:
The Disclosure and Transparency Rules ('DTR') of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Report and financial statements.
The Directors confirm to the best of their knowledge that:
(a) the summarised set of financial statements has been prepared in accordance
with the pronouncement on interim reporting issued by the Accounting Standards
Board;
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R (indication of important events during the first six
months and description of principal risks and uncertainties for the remaining
six months of the year);
(c) the summarised set of financial statements give a true and fair view in
accordance with UK GAAP of the state of affairs of the Company and of the profit
and loss of the Company for that period and comply with UK GAAP and Companies
Act 2006; and
(d) the interim management report includes a fair review of the information
required by DTR 4.2.8R (disclosure of related parties' transactions and changes
therein).
Going Concern
The Company's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Business
Review of the Annual Report. The financial position of the Company, its cash
flows, liquidity position and borrowing facilities are described in the
Chairman's Statement, Business Review and Notes to the Accounts of the Annual
Report. In addition, the Annual Report includes the Company's objectives,
policies and processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities; and its
exposures to credit risk and liquidity risk.
The Company has considerable financial resources together with investments and
income generated therefrom across a variety of industries and sectors. As a
consequence, the Directors believe that the Company is well placed to manage its
business risks successfully despite the current uncertain economic outlook.
The Directors have reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future. Thus
they continue to adopt the going concern basis of accounting in preparing the
annual financial statements.
The half-yearly Financial Report has not been audited or reviewed by the
auditors.
By order of the Board
Philip Stephens
Chairman
28 October 2010
Unaudited Income Statement
for the six months ended 31 August 2010
 Six months ended Six months ended Year ended
 31 August 2010 31 August 2009 28 February 2010
 (unaudited) (unaudited) (audited)
 Revenue Capital Total Revenue Capital Total Revenue Capital Total
 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
holding gains - 1,930 1,930 - Â 4,384 4,384 - Â 6,300 6,300
Realised
gains/(losses)
on investments - 10 10 - Â (3,342) (3,342) - Â (4,181) (4,181)
Income 476 - 476 323 - Â 323 697 - Â 697
Investment
management
fees  (99)  (298)  (397) (75) (225) (300) (155) (467) (622)
Other expenses  (160) -  (160) (139) -  (139) (279) -  (279)
-----------------------------------------------------------------------
Return on
ordinary
activities
before
taxation 217 1,642 1,859 109 817 926 263 1,652 1,915
Taxation - - - - Â - Â - Â (74) 74 -
-----------------------------------------------------------------------
Return on
ordinary
activities
after taxation 217 1,642 1,859 109 817 926 189 1,726 1,915
-----------------------------------------------------------------------
Return per
share 0.7p 5.2p 5.9p 0.4p 3.4p 3.8p 0.8p 6.9p 7.7p
-----------------------------------------------------------------------
The total column of this statement is the profit and loss account of the Company
and the revenue and capital columns represent supplementary information.
All revenue and capital items in the above Income Statement are derived from
continuing operations. No operations were acquired or discontinued in the year.
The Company has no recognised gains or losses other than those shown above;
therefore, no separate statement of total recognised gains and losses has been
presented.
Unaudited Balance Sheet
at 31 August 2010
    Registered Number: 03506579
  As at  As at  As at
  31 August 2010  31 August 2009  28 February 2010
  (unaudited)  (unaudited)  (audited)
  £'000  £'000  £'000
Non-current assets
Investments at fair value
through profit or loss  24,889  19,656  22,148
Debtors: amounts receivable
in more than one year  1,028  544  760
---------------- ---------------- -----------------
    25,917  20,200  22,908
Current assets
Debtors: amounts receivable
within one year  1,402  1,442  1,495
Money market and other
deposits  6,452  1,438  1,940
Cash  69  1,300  2,051
---------------- ---------------- -----------------
  7,923  4,180  5,486
Creditors: amounts falling
due within one year  (459)  (73)  (1,681)
---------------- ---------------- -----------------
Net current assets  7,464  4,107  3,805
---------------- ---------------- -----------------
Net assets  33,381  24,307  26,713
---------------- ---------------- -----------------
Capital and reserves
Called-up share capital  321  242  270
Share premium account  20,411  12,312  15,425
Capital redemption reserve  1,840  1,833  1,837
Profit and loss account  10,809  9,920  9,181
---------------- ---------------- -----------------
Equity shareholders' funds  33,381  24,307  26,713
---------------- ---------------- -----------------
Net asset value per
Ordinary Share  104.1p  100.3p  99.0p
---------------- ---------------- -----------------
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 August 2010
Called-up Share Capital
share premium redemption Profit and
  capital account reserve loss account Total
  £'000 £'000 £'000 £'000 £'000
As at 1 March
2010 Â 270 15,425 1,837 9,181 26,713
Share issues in
the period  54 5,219 -  -  5,273
Expenses on
share issues  -  (233) -  -  (233)
Repurchase of
shares  (3) -  3 (231) (231)
Return for the
period  -  -  -  1,859 1,859
--------------------------------------------------------------
As at 31 August  321 20,411 1,840 10,809 33,381
2010
--------------------------------------------------------------
Unaudited Summary Cash Flow Statement
for the six months ended 31 August 2010
 Six months ended Six months ended Year ended
 31 August 2010 31 August 2009 28 February 2010
 (unaudited) (unaudited) (audited)
 £'000 £'000 £'000
Cash flow from operating
activities
Investment income received 181 106 182
Deposit and similar interest
received 23 12 14
Investment management fees
paid (388) (288) (614)
Secretarial fees paid (62) (45) (85)
Other cash payments (133) (109) (216)
---------------------------------------------------
Net cash outflow from
operating activities and
returns on investment (379) (324) (719)
---------------------------------------------------
Taxation - Â - Â -
---------------------------------------------------
Investing activities
Purchase of unquoted
investments and investments
quoted on AIM (1,143) (640) (2,980)
Net proceeds on sale of
unquoted investments 373 600 1,373
Net proceeds on deferred
consideration 10 601 620
---------------------------------------------------
Net capital (outflow)/inflow
from investing activities (760) 561 (987)
Equity dividends paid - Â - Â (1,342)
---------------------------------------------------
Net cash (outflow)/inflow
before financing and liquid
resource management (1,139) 237 (3,048)
---------------------------------------------------
Management of liquid
resources
Subscription to money market (4,512) 211 (511)
Redemption from money market - Â - Â 220
---------------------------------------------------
 (4,512) 211 (291)
Financing
Proceeds of fund-raisings 4,298 1,000 5,580
Expenses of fund-raisings (179) (45) (85)
Repurchase of own shares (450) (282) (284)
---------------------------------------------------
 3,669 673 5,211
---------------------------------------------------
(Decrease)/increase in cash (1,982) 1,121 1,872
---------------------------------------------------
Notes to the Unaudited Half-Yearly Results
1. The unaudited half-yearly results have been prepared on the basis of
accounting policies set out in the statutory accounts of the Company for the
year ended 28 February 2010. Unquoted investments have been valued in
accordance with IPEVC guidelines. Quoted investments are stated at bid
prices in accordance with UK Generally Accepted Accounting Practice.
2. These are not statutory accounts in accordance with S436 of the Companies
Act 2006 and the financial information for the six months ended 31 August
2010 and 31 August 2009 has been neither audited nor reviewed. Statutory
accounts in respect of the period to 28 February 2010 have been audited and
reported on by the Company's auditors and delivered to the Registrar of
Companies and included the report of the auditors which was unqualified and
did not contain a statement under S498(2) or S498(3) of the Companies Act
2006. No statutory accounts in respect of any period after 31 August 2010
have been reported on by the Company's auditors or delivered to the
Registrar of Companies.
3. Copies of the Half-yearly Financial Report have been sent to shareholders
and are available for inspection at the Registered Office of the Company at
ECA Court, South Park, Sevenoaks, Kent, TN13 1DU. Copies of the Half-yearly
Financial Report are also available electronically atwww.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 the number of Ordinary Shares in issue at that date.
 Net Assets Number of Shares
 £'000 in Issue
31 August 2010 33,381 32,060,833
31 August 2009 24,307 24,237,663
28 February 2010 26,713 26,970,770
--------------------------------
      .
5. Return per share
 Six months ended Six months ended Year ended
 31 August 2010 31 August 2009 28 February 2010
 (unaudited) (unaudited) (audited)
 £'000 £'000 £'000
Total return after taxation 1,859 926 1,915
Total return per Ordinary
Share (note a) 5.9p 3.8p 7.7p
---------------------------------------------------
Revenue return from ordinary
activities after taxation 217 109 189
Revenue return per Ordinary
Share (note b) 0.7p 0.4p 0.8p
---------------------------------------------------
Capital return from ordinary
activities after taxation 1,642 817 1,726
Capital return per Ordinary
Share (note c) 5.2p 3.4p 6.9p
---------------------------------------------------
Weighted average number of
shares in issue in the period 31,463,140 24,318,461 24,879,997
Notes:
a) Total return per Ordinary Share is total return after taxation divided by the
weighted average number of shares in issue during the period.
b) Revenue return per Ordinary Share is revenue return after taxation divided by
the weighted average number of shares in issue during the period.
c) Capital return per Ordinary Share is capital return after taxation divided by
the weighted average number of shares in issue during the period.
6. Income
  Six months ended Six months ended Year ended
  31 August 2010 31 August 2009 28 February 2010
  (unaudited) (unaudited) (audited)
  £'000 £'000 £'000
Loan stock interest  451 313 685
Overseas based Open Ended
Investment Companies
("OEICs") Â 13 8 10
Bank deposits  12 2 2
---------------------------------------------------
  476 323 697
---------------------------------------------------
7. Investments at fair value through profit or loss
  Quoted Unquoted Total
  £'000 £'000 £'000
Book cost at 1 March 2010 Â 1,600 19,226 20,826
Investment holding (losses)/gains  (379) 1,701 1,322
-----------------------------
Valuation at 1 March 2010 Â 1,221 20,927 22,148
Purchases at cost  -  1,184 1,184
Disposal proceeds  -  (373) (373)
Investment holding gains  393 1,537 1,930
-----------------------------
Valuation at 31 August 2010 Â 1,614 23,275 24,889
-----------------------------
Book cost at 31 August 2010 Â 1,600 20,037 21,637
Investment holding gains  14 3,238 3,252
-----------------------------
Valuation at 31 August 2010 Â 1,614 23,275 24,889
-----------------------------
8. Related parties
      Foresight Group, as investment Manager of the Company, is considered to be
a related party by virtue of its management contract with the Company. During
the period, services of a total value of £397,000 (31 August 2009: £300,000; 28
February 2010: £622,000) were purchased by the Company from Foresight Group. At
31 August 2010, the amount due to Foresight Group was £15,000.
      Foresight Fund Managers Limited, as Secretary of the Company and as a
subsidiary of Foresight Group, is also considered to be a related party of the
Company. During the period, services of a total value of £35,000 excluding VAT
(31 August 2009: £34,000; 28 February 2010: £70,000) were purchased by the
Company from Foresight Fund Managers Limited. At 31 August 2010, the amount due
to Foresight Fund Managers was £nil.
      No Director has, or during the period had, a contract of service with the
Company. Bernard Fairman, who resigned on 18 June 2010, is the ultimate
beneficial owner of Foresight Group, the Company's investment Manager. Subject
to these exceptions, no Director was party to, or had an interest in, any
contract or arrangement (with the exception of Directors' fees) with the Company
at any time during the period under review or as at the date of this report.
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 4 VCT PLC via Thomson Reuters ONE
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