Foresight Solar VCT PLC : Annual Financial Report
FORESIGHT SOLAR VCT PLC
2012 Highlights
Net asset value total return per Ordinary Share in the year to 30 June 2012 increased by 5.6%, represented by an uplift in net asset value to 98.8p.
In the year, 5,408,320 Ordinary Shares were allotted at 100.0p per share. In the same period 104,510 Ordinary Shares were bought back at prices ranging from 92.0p to 93.5p per share.
The fund provided funding totalling £38.1 million for 30 companies. Included in this total was a £7.1 million investment into SE Solar Limited which was then repaid in the year.
The fund's offer, launched on 31 August 2010, raised further gross proceeds and re-invested commission of £5,363,500 and £44,820 respectively in the year.
In line with original expectations, an interim dividend of 2.5p per Ordinary Share will be paid to shareholders on 31 October 2012.
| Year ended 30 June 2012 | Period from 18 June 2010 to 30 June 2011 | |
| Net asset value per Ordinary Share | 98.8p | 93.6p |
| Revenue return/(loss) per Ordinary Share | 0.1p | (1.1)p |
| Total return/(loss) per Ordinary Share | 5.2p | (1.8)p |
| Share price per Ordinary Share | 93.0p | 95.0p |
Chairman's Statement
The Board of Foresight Solar VCT plc was saddened by the sudden and unexpected death of its previous Chairman, Lord Maples of Stratford upon Avon, who had steered the VCT so ably through its recent fundraising and investment program. The Board, Directors of Foresight Group CI Limited ("Foresight Group") and his many colleagues and friends within the Group continue to extend their thoughts and deepest sympathy to his family.
Results
I am pleased to be able to report that the construction of the Company's portfolio of solar investments was completed during the year under review and the fund is now considered fully invested. As a result of a sunnier than expected spring, and despite the recent wet weather, the plants are performing in line or better than original expectations. All of the investments made are more fully described in the Investment Manager's Report, although the initial performance of our investments has resulted in a 5.6% increase in net asset value to 98.8p at 30 June 2012 from 93.6p a year earlier.
In addition, the offer for subscription to raise up to £40 million by issues of Ordinary Shares pursuant to the prospectus originally published by Foresight Solar VCT plc on 31 August 2010 ('the Offer') proved attractive to investors with some £37.8 million having been raised by the time the offer closed in November 2011.
Dividends
The Board plans to pay dividends of 5.0p per Ordinary Share each year throughout the life of Foresight Solar VCT plc after the first year, payable bi-annually via dividends of 2.5p per Ordinary Share in April and October each year. The level of dividends is not, however, guaranteed. In line with original expectations, the first interim dividend of 2.5p per Ordinary Share will be paid on 31 October 2012. It will have a record date of 19 October 2012 and an ex dividend date of 17 October 2012.
Share Issues
During the year, the Board allotted 5,408,320 Ordinary Shares at 100.0p per share and repurchased 104,510 Ordinary Shares for cancellation at a cost of £98,000. A total of 38,366,252 Ordinary Shares were in issue at 30 June 2012.
Valuation Policy
Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) valuation guidelines (August 2010) developed by the British Venture Capital Association and other organisations. Through these guidelines, investments are valued as defined at 'fair value'. Ordinarily, unquoted investments will be valued at cost for a limited period following the date of acquisition, being the most suitable approximation of fair value unless there is an impairment or significant accretion in value during the period. The portfolio valuations are prepared by Foresight Group, reviewed and approved by the Board quarterly and subject to audit annually.
Annual General Meeting
The Company's Annual General Meeting will take place on 18 December 2012. I look forward to welcoming you to the Meeting, which will be held in Sevenoaks, details of which can be found on page 39 of the Annual Report and Accounts.
Outlook
The Board and Foresight Group, the Investment Manager, are satisfied with the current portfolio and the quality of the returns expected from those projects, which gives us confidence in achieving the original objectives of the Company.
Although wider economic conditions are still fragile the Board and the Investment Manager believe that those projects made to date will provide attractive returns to shareholders over the longer term.
David Hurst-Brown
Chairman
31 October 2012
Investment Manager's Report
During the financial year, the VCT offer closed having raised £37.8 million. The initial investment phase was also completed by our target date of 5 April 2012 which facilitates the cash generation required to meet the VCT's annual 5.0p per Ordinary Share dividend targets. The majority of the underlying investments are UK ground based solar plants.
The UK photovoltaic ('PV') solar market has now grown to more than 1.3 gigawatts representing 10% of the UK's total renewable energy output. Most of the installed capacity post the 1 August 2011 Feed-in Tariff (FiT) deadline for larger scale projects has been in the domestic rooftop market. As a result, current opportunities to invest in larger scale projects, the preferred domain of the VCT, are limited. The larger scale UK solar market is now focusing on the Renewable Obligation Credit (ROC) subsidy mechanism which is set at an attractive level for Solar PV (two ROCs per kw/h produced), for plants connected before 1 April 2013. We therefore expect quarter 1 in 2013 to be an active period for new installations which may present further investment opportunities for the VCT. Funding for further investment opportunities could be delivered by refinancing the existing investments within the VCT.
Portfolio Review
Investments were completed during the period in qualifying companies which commenced trading in operational ground-based PV plants in Kent, Wiltshire and Somerset representing some £27.5 million. Foresight Group's Solar EIS Fund has also invested in similar plants. The PV plants were all connected to the electricity grid before 1 August 2011 either in their entirety or under the extension scheme allowed by Ofgem and therefore all of the VCT's UK solar investments benefit from the highest level of FiT that has been available for larger scale PV plants in the UK.
The VCT has also indirectly invested a further £3.5 million in an Italian co-investment vehicle, ForVEI, together with French infrastructure investor, CDC, and other Italian and Middle East institutions and family offices. ForVEI has invested in seven operating Italian ground based solar PV plants and continues to have capital available to make further investments. The larger scale of the ForVEI portfolio should help attract interest from eventual acquirers of the VCT's solar assets which could enhance potential proceeds on a sale. A small investment has also been made in an operating Spanish solar PV plant.
The portfolio is currently performing above expectations. We are alert to opportunities that can optimise energy production at the solar plants and lead to cost efficiencies. We are currently reviewing opportunities to consolidate operating and maintenance activities, optimise equipment, power purchase agreements where relevant and generate administrative efficiencies.
Outlook
The VCT has invested in a portfolio of qualifying companies trading in operating solar PV plants that should deliver the cash flow for the target dividend payments to shareholders. The cash flow should be predictable given the nature of PV projects and the indexed 25 year feed-in tariff in place. Where possible, we will consider a re-financing of a proportion of the investments made to date if suitable opportunities arise which would enhance returns to shareholders.
Jamie Richards
Head of Infrastructure
31 October 2012
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require certain disclosures in relation to the annual financial report, as follows:
Principal risks, risk management and regulatory environment
The Board believes that the principal risks faced by the Company are:
Economic - events such as an economic recession and movement in interest rates could affect performance and valuations.
Loss of approval as a Venture Capital Trust - the Company must comply with Section 274 of the Income Tax Act 2007 which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to: the Company losing its approval as a VCT; qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained; and future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains.
Investment and strategic - inappropriate strategy, poor asset allocation or consistent weak stock selection might lead to under performance and poor returns to shareholders. Changes in the rates of Feed-in Tariffs (FiTs) could impact the underlying returns of the Company's investments.
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.
Natural disasters - severe weather/natural disaster could lead to reduction in performance and value of the assets.
Reputational - inadequate or failed controls might result in breaches of regulations or loss of shareholder trust.
Operational - failure of the Manager's accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring.
Fraud - inadequate controls might lead to misappropriation of assets.
Theft - inadequate security and control could lead to the theft of assets.
Financial - 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 of the financial statements.
Market risk - investment in AIM traded, PLUS 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 - the Company's investments, being unquoted, may be difficult to realise.
Currency risk - short-term currency risk, such as that associated with the investments in Spain and Italy, is mitigated by taking out options that convert the capital investment proceeds back into sterling at the same rate as the original sterling investment was converted into Euros when making the original investment. This ensures no currency loss on the investment up to original cost. The cost of the option is covered by the returns on the investment.
The Board seeks to mitigate the internal risks by setting policy, regular review of performance, enforcement of contractual obligations and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies the principles detailed in the UK Corporate Governance Code. Details of the Company's internal controls are contained in the Corporate Governance and Internal Control sections.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the financial statements, in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its 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 comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (which is delegated to Foresight Group and incorporated into their website). Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge:
the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
the Directors' Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces.
On behalf of the Board
David Hurst-Brown
Chairman
31 October 2012
Audited Income Statement
for the year ended 30 June 2012
| Year ended | Period from 18 June 2010 to | ||||||
| 30 June 2012 | 30 June 2011 | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||
| Investment holding gains | - | 2,240 | 2,240 | - | 56 | 56 | |
| Income | 488 | - | 488 | 11 | - | 11 | |
| Investment management fees | (130) | (390) | (520) | (45) | (134) | (179) | |
| Gains/(losses) on the value of derivatives | - | 63 | 63 | - | (47) | (47) | |
| Other expenses | (339) | - | (339) | (174) | - | (174) | |
| Return/(loss) on ordinary activities before taxation | 19 | 1,913 | 1,932 | (208) | (125) | (333) | |
| Taxation | - | - | - | - | - | - | |
| Return/(loss) on ordinary activities after taxation | 19 | 1,913 | 1,932 | (208) | (125) | (333) | |
| Return/(loss) per Ordinary Share | 0.1p | 5.1p | 5.2p | (1.1)p | (0.7)p | (1.8)p | |
The total column of this statement is the profit and loss account of the Company and the revenue and capital columns represent supplementary information.
All revenue and capital items in the above Income Statement are derived from continuing operations. No operations were acquired or discontinued in the year.
The Company has no recognised gains or losses other than those shown above, therefore no separate statement of total recognised gains and losses has been presented.
AuditedReconciliation of Movements in Shareholders' Funds
| Called-up share capital | Share premium account | Capital redemption reserve | Profit and loss account | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Period from 18 June 2010 to 30 June 2011 | |||||
| As at 18 June 2010 | - | - | - | - | - |
| Share issues in the period | 331 | 32,731 | - | - | 33,062 |
| Expenses in relation to share issues | - | (1,785) | - | - | (1,785) |
| Loss for the period | - | - | - | (333) | (333) |
| As at 30 June 2011 | 331 | 30,946 | - | (333) | 30,944 |
| Called-up share capital | Share premium account | Capital redemption reserve | Profit and loss account | Total | |
| £'000 | £'000 | £'000 | £'000 | £'000 | |
| Year ended 30 June 2012 | |||||
| As at 1 July 2011 | 331 | 30,946 | - | (333) | 30,944 |
| Share issues in the year | 54 | 5,354 | - | - | 5,408 |
| Expenses in relation to share issues | - | 338 | - | (633) | (295) |
| Repurchase of shares | (1) | - | 1 | (98) | (98) |
| Cancellation of share premium* | - | (36,638) | - | 36,638 | - |
| Return for the year | - | - | - | 1,932 | 1,932 |
| As at 30 June 2012 | 384 | - | 1 | 37,506 | 37,891 |
*The share premium of the Company was cancelled by order of the High Court of Justice, Chancery Division, on 8 February 2012 and registered at Companies House on 21 February 2012. This has enabled the Company to increase its distributable reserve to which, amongst other things, losses can be written off, providing the Company greater flexibility when considering dividend payments to shareholders and from which share buybacks can be financed.
Audited Balance Sheet
at 30 June 2012
| Registered Number: 07289280 | |||
| As at | As at | ||
| 30 June 2012 | 30 June 2011 | ||
| £'000 | £'000 | ||
| Fixed assets | |||
| Investments held at fair value through profit or loss | 36,511 | 3,294 | |
| 36,511 | 3,294 | ||
| Current assets | |||
| Debtors | 1,240 | 6,514 | |
| Money market securities and other deposits | 336 | 18,000 | |
| Cash | 58 | 3,556 | |
| 1,634 | 28,070 | ||
| Creditors | |||
| Amounts falling due within one year | (254) | (420) | |
| Net current assets | 1,380 | 27,650 | |
| Net assets | 37,891 | 30,944 | |
| Capital and reserves | |||
| Called-up share capital | 384 | 331 | |
| Share premium account | - | 30,946 | |
| Capital redemption reserve | 1 | - | |
| Profit and loss account | 37,506 | (333) | |
| Equity shareholders' funds | 37,891 | 30,944 | |
| Net asset value per Ordinary Share: | 98.8 p | 93.6 p | |
David Hurst-Brown
Chairman
31 October 2012
Audited Cash Flow Statement
for the year ended 30 June 2012
| Year ended | Period from 18 June | ||||
| 30 June 2012 | 2010 to 30 June 2011 | ||||
| £'000 | £'000 | ||||
| Cash flow from operating activities | |||||
| Investment income received | 36 | - | |||
| Deposit and similar interest received | 7 | 11 | |||
| Investment management fees paid | (495) | (71) | |||
| Secretarial fees paid | (106) | (30) | |||
| Other cash payments | (232) | (85) | |||
| Net cash outflow from operating activities and returns on investment | (790) | (175) | |||
| Returns on investment and servicing of finance | |||||
| Purchase of investments | (32,190) | (3,134) | |||
| Net proceeds on sale of investments | 7,108 | - | |||
| Purchase of financial assets | (361) | (322) | |||
| Held in Escrow account pending investment | - | (6,000) | |||
| Net capital outflow from financial investment | (25,443) | (9,456) | |||
| Equity dividends paid | - | - | |||
| Financing | |||||
| Proceeds of fund raising | 5,577 | 32,279 | |||
| Re-invested commission | - | 557 | |||
| Expenses of fund-raisings | (408) | (1,649) | |||
| Repurchase of own shares | (98) | - | |||
| 5,071 | 31,187 | ||||
| (Decrease)/increase in cash | (21,162) | 21,556 | |||
| Reconciliation of net cash flow to movement in net funds | |||||
| (Decrease)/increase in cash for the year | (21,162) | 21,556 | |||
| Net cash at start of year | 21,556 | - | |||
| Net cash at end of year | 394 | 21,556 | |||
| Analysis of changes in net cash | |||||
| At 1 July 2011 | Cash flow | At 30 June 2012 | |||
| £'000 | £'000 | £'000 | |||
| Cash and cash equivalents | 21,556 | (21,162) | 394 | ||
Notes to the Accounts
for the year ended 30 June 2012
1. The Audited Annual Financial Report has been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 30 June 2012. All investments held by the Company are classified as "fair value through profit and loss". The Directors fair value investments in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines, as updated in August 2010. This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.
2. These are not statutory accounts in accordance with S436 of the Companies Act 2006. The full audited accounts for the year ended 30 June 2012, 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 30 June 2012 including an unqualified audit report and containing no statements under the Companies Act 2006 will be delivered to the Registrar of Companies in due course.
3. Copies of the Annual Report and Accounts will be sent to shareholders and will be available for inspection at the Registered Office of the Company at ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU and can be accessed on the following website: www.foresightgroup.eu
4. Net asset value per Ordinary Share
Net asset value per Ordinary Share is based on net assets at the year end of £37,891,000 (2011: £30,944,000), and on 38,366,252 Ordinary Shares (2011: 33,062,442 Ordinary Shares), being the number of Ordinary Shares in issue at that date.
5. Return per share
| Year ended 30 June 2012 | Period from 18 June 2010 to 30 June 2011 | |
| £'000 | £'000 | |
| Total return/(loss) after taxation | 1,932 | (333) |
| Total return/(loss) per share (note a) | 5.2p | (1.8)p |
| Revenue return/(loss) from ordinary activities after taxation | 19 | (208) |
| Revenue return/(loss) per share (note b) | 0.1p | (1.1)p |
| Capital return/(loss) from ordinary activities after taxation | 1,913 | (125) |
| Capital return/(loss) per share (note c) | 5.1p | (0.7)p |
| Weighted average number of shares in issue during the year | 37,361,746 | 18,971,720 |
Notes:
a) Total return per share is total return after taxation divided by the weighted average number of shares in issue during the year.
b) Revenue return per share is revenue return after taxation divided by the weighted average number of shares in issue during the year.
c) Capital return per share is capital return after taxation divided by the weighted average number of shares in issue during the year.
6. The Annual General Meeting of Foresight Solar VCT plc ("the Company") will be held on 18 December 2012 at 1 pm at the offices of Foresight Group, ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU.
7. Income
| Year ended 30 June | Period from 18 June 2010 to 30 June | |
| 2012 | 2011 | |
| £'000 | £'000 | |
| Bank interest | 7 | 11 |
| Overseas based Open Ended Investment Companies ("OEICs") | 37 | - |
| Loan stock interest | 444 | - |
| 488 | 11 |
8. Investments held at fair value through profit or loss
| 2012 | 2011 | |
| £'000 | £'000 | |
| Unquoted investments | 36,511 | 3,294 |
| 36,511 | 3,294 | |
| Unquoted | Total | |
| £'000 | £'000 | |
| Book cost at 1 July 2011 | 3,238 | 3,238 |
| Investment holding gains | 56 | 56 |
| Valuation at 1 July 2011 | 3,294 | 3,294 |
| Movements in the year: | ||
| Purchases at cost | 38,085 | 38,085 |
| Disposal proceeds | (7,108) | (7,108) |
| Investment holding gains | 2,240 | 2,240 |
| Valuation at 30 June 2012 | 36,511 | 36,511 |
| Book cost at 30 June 2012 | 34,215 | 34,215 |
| Investment holding gains | 2,296 | 2,296 |
| Valuation at 30 June 2012 | 36,511 | 36,511 |
9. Related party transactions
Foresight Group is considered to be a related party of the Company.
Foresight Group, which acts as investment manager to the Company in respect of its venture capital investments earned fees of £520,000 in the year.
Foresight Group also provides administration services to the Company, and received fees of £104,000 plus VAT during the year. The annual administration and accounting fee (which is payable together with any applicable VAT) is 0.3% of the net funds raised by the offer (subject to a minimum index-linked fee of £60,000).
At the balance sheet date there was £159,000 due to Foresight Group.
Foresight Group are responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ('abort expenses'). In line with industry practice, Foresight Group retain the right to charge arrangement and syndication fees and Directors' or monitoring fees ('deal fees') to companies in which the Company invests. From this, Foresight Group received from investee companies arrangement fees of £716,000 in the year.
Foresight Fund Managers are the Secretary of the Company and received £nil during the year for their services.
END
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other applicable laws; and
(ii) they are solely responsible for the content, accuracy and originality of the
information contained therein.
Source: Foresight Solar VCT PLC via Thomson Reuters ONE
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