Foresight Solar VCT PLC : Annual Financial Report
FORESIGHTSOLAR VCT PLC
Summary and Financial Highlights
* Net asset value per Ordinary Share as at 30 June 2011 was 93.6p compared to
94.5p at launch.
* 33,062,442 Ordinary Shares had been allotted at 100.0p per share by 30 June
2011.
* Following the period end a further 3,946,100 Ordinary Shares were allotted
at 100.0p per share.
* New investments were completed before and after the period ended 30 June
2011.
+------------------------------------+--------------+---------------+
| Â | Period ended | Incorporation |
+------------------------------------+--------------+---------------+
| Â | 30 June 2011 | 18 June 2010 |
+------------------------------------+--------------+---------------+
| Net asset value per Ordinary Share | 93.6p | 94.5p |
+------------------------------------+--------------+---------------+
| Revenue loss per Ordinary Share | (1.1)p | N/A |
+------------------------------------+--------------+---------------+
| Total loss per Ordinary Share | (1.8)p | N/A |
+------------------------------------+--------------+---------------+
| Share Price per Ordinary Share | 95.0p | N/A |
+------------------------------------+--------------+---------------+
Chairman's Statement
Results
I am pleased to be able to report sound progress in the construction of the
Company's portfolio of solar investments, both before and following the period
end, which are more fully described in the Investment Manager's Report. In
addition, the offer for subscription to raise up to £40,000,000 by issues of
Ordinary Shares pursuant to the prospectus published by Foresight Solar VCT plc
on 31 August 2010 ("the Offer") proved attractive to investors with some
£37,000,000 having been raised at the time of writing.
Dividend Policy
The Board plans to pay dividends of 5.0p per Share each year throughout the life
of Foresight Solar VCT plc, except in respect of the first year from the closing
date of the Offer when it is intended that no dividend will be paid. Dividends
are expected to be paid bi-annually at or close to the end of April and October
in each year, commencing in October 2012. The level of dividends is not,
however, guaranteed.
Share Issues
During the period from incorporation on 18 June 2010 to 30 June 2011, the Board
allotted 33,062,442 Ordinary Shares at 100.0p per share.
Two further allotments totalling 3,946,100 Ordinary Shares at 100.0p per share
have been made since the period end, resulting in a total of 37,008,542 ordinary
shares at 100.0p per share being allotted before the offer closed on 30 August
2011.
Valuation Policy
Investments held by the Company have been valued in accordance with the
International Private Equity and Venture Capital (IPEVC) valuation guidelines
(August 2010) developed by the British Venture Capital Association and other
organisations. Through these guidelines, investments are valued as defined at
'fair value'. Ordinarily, unquoted investments will be valued at cost for a
limited period following the date of acquisition, being the most suitable
approximation of fair value unless there is an impairment or significant
accretion in value during the period. Quoted investments and investments traded
on AIM and PLUS (formerly OFEX) are valued at the bid price as at 30 June 2011.
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 9 November 2011. I look
forward to welcoming you to the meeting, which will be held in Sevenoaks,
details of which can be found on page 35 of the annual report and accounts.
Outlook
The Board and Foresight Group, the Investment Manager, believe that satisfactory
progress is being made towards the full investment of funds raised under the
Offer, which gives us confidence in achieving the original objectives of the
Company.
Although wider economic conditions are still fragile and the Government has
confirmed its intention to reduce the availability of feed-in-tariffs (FiTs) to
VCTs after March 2012, the Board and Investment Manager believe that a
combination of the investments made to date and the pipeline of potential
opportunities currently being considered will provide attractive returns to
shareholders over the longer term.
Lord Maples
Chairman
12 October 2011
For further information please contact:
Gary Fraser, Foresight Fund Managers Limited Tel: 01732 471800
Investment Manager's Report
The focus during the period has been on fundraising and origination of
investment opportunities. It has been an unpredictable regulatory climate in
which to carry out these activities, but deal flow has been strong in all
segments of the solar photovoltaic ('PV') market within the VCT's scope.
The Department of Energy and Climate Change (DECC) during the period accelerated
the deadline for completing PV projects greater than 50 kilowatts in size from
31 March 2012 to 1 August 2011. This was DECC's response to a concern that
larger scale plants would get a disproportionate share of the feed-in tariff
(FiT) subsidy available. A smaller number of larger scale plants have been built
in the sector as a result.
The breadth of the Fund's deal flow has enabled an approach that can adapt to
changes in regulations affecting the sector and,as a result, a number of
transactions were formally completed or conditionally completed around the
financial period end.
Portfolio Review
The Company's largest investments to date completed after the year end in August
2011, when £16 million was invested in 5MW ground-based PV projects located in
Aylesford, Kent. These projects are one of a small handful of larger scale UK
ground-based PV plants to be built and connected to the grid before the
accelerated 1 August 2011 deadline imposed by DECC, to qualify for the original
FiT.
A conditional £10 million investment in a residential rooftop programme with
German energy company E.ON was agreed in June 2011. This is subject to E.ON
delivering up to 1,000 of its residential customers to the programme.
Installations will be carried out by an experienced UK PV installation company
and
Foresight Solar VCT plc will acquire batches of installations once the FiT on
batches of installations has been locked in.
A conditional investment of up to £20 million was agreed in August 2011 for the
acquisition of other UK ground-based projects. The projects are subject to a
limited extension period beyond 1 August.
In June 2011, £2,318,966 was invested in Foresight Luxembourg Solar 2 S.à .r.l
which is a holding company for a Spanish groundbased PV asset, called La
Castilleja. This represents a 14% stake alongside the Foresight European Solar
Fund LP 36%, and GWM Holdings 50%, an Italian Family Office.
In June 2011, £882,613 was invested in ForVEI Srl (Longiano & Abantia). ForVEI
is a joint venture with VEI Capital, an investment fund owned by five Italian
institutions including Generali and Intesa, which will allow the Company to
invest in higher yielding Italian solar opportunities but with the benefit of
the backing
and partnership of these experienced financial institutions. This will enable
the joint venture to invest in a much larger and more diverse portfolio of
Italian solar assets. ForVEI currently owns two operating Italian ground-based
PV assets, Longiano and Abantia.
Allocation Policy and Diversification
There are likely to be common investments between Foresight Solar EIS (another
Foresight Group managed fund) and Foresight Solar VCT plc as determined by
Foresight Group's allocation policy, diversification requirements and the
structuring requirements of making qualifying VCT and EIS investments.
Outlook
We expect to complete the investment period of the VCT by April 2012. This is
likely to result in a PV portfolio that is expected to deliver the cash flow for
the target dividend payments to shareholders. The cash flow will be predictable
given the nature of PV projects and the indexed 25 year feed-in tariff attached.
Where possible, projects will be re-financed with bank debt to enhance the level
of returns.
Jamie Richards
Chief Executive, Foresight Solar
12 October 2011
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 smaller companies' performance and valuations.
* Loss of approval as a Venture Capital Trust - the Company must comply with
Section 274 of the Income Tax Act 2007 which allows it to be exempted from
capital gains tax on investment gains. Any breach of these rules may lead
to: the Company losing its approval as a VCT; qualifying shareholders who
have not held their shares for the designated holding period having to repay
the income tax relief they obtained; and future dividends paid by the
Company becoming subject to tax. The Company would also lose its exemption
from corporation tax on capital gains.
* Investment and strategic - inappropriate strategy, poor asset allocation or
consistent weak stock selection might lead to under performance and poor
returns to shareholders.
Changes in the rates of Feed-in Tariffs 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.
* Reputational - inadequate or failed controls might result in breaches of
regulations or loss of shareholder trust.
* Operational - failure of the Manager's or Company Secretary's accounting
systems or disruption to its business might lead to an inability to provide
accurate reporting and monitoring.
* Financial - inadequate controls might lead to misappropriation of assets.
Inappropriate accounting policies might lead to misreporting or breaches of
regulations. Additional financial risks, including interest rate, credit,
market price and currency, are detailed in note 15 to the accounts.
* Market risk - investment in AIM traded, 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, both unquoted and quoted, may be
difficult to realise. Furthermore, the fact that a share is traded on AIM or
PLUS Markets does not guarantee its liquidity. The spread between the buying
and selling price of such shares may be wide and thus the price used for
valuation may not be achievable.
* 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 to make 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 Combined 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 Directors' Report and the
financial statements, in accordance with applicable United Kingdom law and
United Kingdom Generally Accepted Accounting Practice.
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 United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable law).
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; and
* state whether applicable accounting standards have been followed, subject to
any material departures disclosed and explained in the financial
statements.
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 (including Business Review), 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 Investment Manager's website,
www.foresightgroup.eu. Visitors to the website should be aware that 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 it faces.
On behalf of the Board
Lord Maples
Chairman
12 October 2011
Audited Income Statement
for the period from 18 June 2010 to 30 June 2011
Period from incorporation on 18 June
2010
  to 30 June 2011
  Revenue Capital Total
  £'000 £'000 £'000
Investment holding gains  - 56 56
Investment income and deposit interest  11 - 11
Investment management fees  (45) (134) (179)
Other expenses  (174) - (174)
Unreaslised loss on value of derivatives  - (47) (47)
--------------------------------------
Loss on ordinary activities before
taxation  (208) (125) (333)
Tax on ordinary activities  - - -
--------------------------------------
Loss on ordinary activities after
taxation  (208) (125) (333)
--------------------------------------
Loss per share  (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,
prepared in accordance with the Statement of Recommended Practice (SORP):
Financial Statements of Investment Trust Companies and Venture Capital Trusts
issued in January 2009.
All revenue and capital items in the above Income Statement are derived from
continuing operations. No operations were acquired or discontinued in the
period.
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
for the period from 18 June 2010 to 30 June 2011
Called-up share Share premium Profit and loss
 capital account account Total
 £'000 £'000 £'000 £'000
As at 18 June 2010 - - - -
Share issues in
the period 331 32,731 - 33,062
Expenses on share
issues - Â (1,785) - Â (1,785)
Loss for the
period - Â - Â (333) (333)
--------------------------------------------------------------
As at 30 June 2011 331 30,946 Â (333) 30,944
--------------------------------------------------------------
Audited Balance Sheet
at 30 June 2011
Registered Number: 07289280
  As at
 30 June 2011
  £'000
Non-current assets
Investments held at fair value through profit or loss  3,294
---------------
Current assets
Debtors  6,514
Cash and cash equivalents  21,556
---------------
  28,070
Creditors: Amounts falling due within one year  (420)
---------------
Net current assets  27,650
---------------
---------------
Net assets  30,944
---------------
Capital and reserves
Called-up share capital  331
Share premium account  30,946
Profit and loss account  (333)
---------------
Equity shareholders' funds  30,944
---------------
Net asset value per Ordinary Share  93.6p
---------------
Audited Cash Flow Statement
for the period from 18 June 2010 to 30 June 2011
  Period from incorporation on
  18 June 2010 to 30 June 2011
  £'000
Cashflow from operating activities
Deposit and similar interest received  11
Investment management fees paid  (71)
Secretarial fees paid  (30)
Other cash payments  (85)
-----------------------------
Net cash outflow from operating activities and
returns on investment  (175)
Taxation  -
-----------------------------
Investing activities
Purchase of unquoted investments and
investments quoted on AIM Â (3,134)
Purchase of financial assets  (322)
Held in Escrow account pending investment  (6,000)
-----------------------------
Net capital outflow from investing activities  (9,456)
Equity dividends paid  -
-----------------------------
Net cash outflow before financing and liquid
resource management  (9,631)
-----------------------------
Financing
Proceeds of fund-raising  32,279
Reinvested commission  557
Expenses of fund-raising  (1,649)
-----------------------------
Net cash inflow from financing activities  31,187
-----------------------------
Increase in cash  21,556
-----------------------------
Reconciliation of net cash flow to movement in
net cash
Increase in cash for the period  21,556
Net cash at start of period  -
-----------------------------
Net cash at end of period  21,556
-----------------------------
Reconciliation of net income to net cash flow
from operating activities
Total loss in ordinary activities before
taxation  (333)
Capital loss before taxation  125
Investment management fees charged to capital  (134)
Increase in debtors  (11)
Increase in creditors  178
-----------------------------
Net cash outflow from operating activities  (175)
-----------------------------
Analysis of changes in net debt
At 18 June 2010 Cash At 30 June 2011
 flow
 £'000 £'000 £'000
Cash and cash equivalents - 21,556 21,556
-----------------------------------------
Notes
1. Â Â 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
period ended 30 June 2011. Â 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. Â Â These are not statutory accounts in accordance with S436 of the Companies
Act 2006. The full audited accounts for the period ended 30 June 2011, 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 period ended 30 June 2011 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. Â Â Copies of the Annual Report will be sent to shareholders and will be
available for inspection at the Registered Office of the Company at ECA Court,
24-26 South Park, Sevenoaks, Kent TN13 1DU and can be accessed on the following
website:www.foresightgroup.eu
4. Â Â Net asset value per Ordinary Share
Net asset value per Ordinary Share is based on net assets at the period end of
£30,944,000 and on 33,062,442 Ordinary Shares, being the number of Ordinary
Shares in issue at that date.
5. Â Â Loss per share
For the period from 18 June 2010 to 30
 June 2011
 £'000
Total loss after taxation (333)
Basic loss per share (note a) (1.8)p
----------------------------------------
Revenue loss from ordinary activities
after taxation (208)
Revenue loss per share (note b) (1.1)p
----------------------------------------
Capital loss from ordinary activities
after taxation (125)
Capital loss per share (note c) (0.7)p
----------------------------------------
Weighted average number of shares in
issue during the period 18,971,720
----------------------------------------
Notes:
a. Total loss per share is total loss after taxation divided by the weighted
average number of shares in issue during the period.
b. Revenue loss per share is revenue loss after taxation divided by the average
weighted average number of shares in issue during the period.
c. Capital loss per share is capital loss after taxation divided by the
weighted average number of shares in issue during the period
6. Â Â The Annual General Meeting will be held at 1.00pm on 9 November 2011 at
the offices of Foresight Group, ECA Court, 24-26 South Park, Sevenoaks, Â Â Kent
TN13 1DU.
7. Â Â Income
    As at 30 June 2011
    £'000
Bank interest    11
---------------------
    11
---------------------
8. Â Â Investments held at fair value through profit or loss
 As at
30 June
  2011
   £'000
Unquoted investments   3,294
----------
   3,294
----------
  Unquoted Total
  £'000 £'000
Book cost as at 18 June 2010 Â - Â -
------------
Valuation at 18 June 2010 Â - Â -
Movements in the period:
  Purchases at cost  3,238 3,238
  Investment holding gains  56 56
---------------------
Valuation at 30 June 2011 Â 3,294 3,294
---------------------
Book cost at 30 June 2011 Â 3,238 3,238
Investment holding gains  56  56
---------------------
Valuation at 30 June 2011 Â 3,294 3,294
---------------------
9. Â Â Related party transactions
Foresight Group LLP and Foresight Fund Managers Limited are considered to be
related parties of the Company. Details of arrangements with these parties are
given in the Directors' Report and Notes 3 and 13 of the annual report and
accounts.
Foresight Group, which acts as investment manager to the Company in respect of
its venture capital investments earned fees of £179,000 during the period.
Foresight Fund Managers Limited is the Secretary of the Company and received
fees of £40,000 plus VAT during the period. The annual secretarial 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 £213,743 due to Foresight Group and £14,959
due to Foresight Fund Managers Limited.
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.
Foresight Group is also a party to the performance incentive agreement described
in Note 13 of the annual report and accounts.
of
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Source: Foresight Solar VCT PLC via Thomson Reuters ONE
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