Foresight Solar & Technology VCT Plc


FORESIGHT SOLAR & TECHNOLOGY VCT PLC

Ordinary Shares Total Net Assets as at 31 March 2020: £25.8m
Ordinary Shares Net Asset Value per share as at 31 March 2020: 72.7p
Foresight Williams Technology Shares Total Net Assets as at 31 March 2020: £1.1m

Ordinary Shares Fund

  • Two interim dividends of 3.0p per Ordinary Share were paid during the year, on 26 April 2019 and 22 November 2019.
  • After payment of 6.0p in dividends, Net Asset Value per Ordinary Share at 31 March 2020 was 72.7p (31 March 2019: 96.4p). The fall in Net Asset Value was largely driven by a material reduction in market power prices forecast by the energy industry’s independent, external modelling agencies.
  • The Company completed a tender offer in March 2020, allowing holders of Ordinary Shares an opportunity to exit their investment at a price of 81.2p per share, which represents a total return of 125.2p per share, net of all expenses and performance fees.
  • On 19 September 2019, David Hurst-Brown retired from the Board, with Ernie Richardson taking over as Chairman.
  • At 31 March 2020, the fund held positions in 12 UK solar assets, with a total installed capacity of 74.7MW. During the year the portfolio generated 71.48 gigawatt hours of electricity, sufficient to power approximately 24,000 UK homes for a year.
  • At 31 March 2020, the fund also held positions in one Italian solar asset with a total installed capacity of 0.4MW.
  • During the year, our existing portfolio company completed the disposal of its entire interest in the ForVEI II platform, returning c.£6.2m to the fund, corresponding to a multiple of c.1.08x in less than 18 months.

Foresight Williams Technology Shares Fund

  • On 20 December 2019, the Company launched the Foresight Williams Technology Shares fund (the “FWT Shares fund”), offering for subscription up to £20 million (with an over-allotment facility for up to an additional £10 million) through the issue of a new share class, the Foresight Williams Technology Shares (the “FWT Shares”).
  • At 31 March 2020, under this offer, the Company had raised £1.1m, and was yet to make an investment.
  • Since the end of the reporting period, a further £1.3m has been raised, bringing the total raised under the December 2019 offer to £2.4m.

Chairman’s Statement

As your new Chairman and on behalf of the Board, I am pleased to present the Annual Report and Accounts for Foresight Solar & Technology VCT Plc (formerly Foresight Solar & Infrastructure VCT Plc) for the year ended 31 March 2020 and to provide you with an update on the exciting developments affecting the Company, including the rebranding of the Company and the launch of the new share class, the Foresight Williams Technology Shares.  

On behalf of the Board, I would like to thank the previous Chairman, David Hurst-Brown, who retired from the Board in September 2019, for his valuable contributions and stewardship of the Company during his tenure, and to wish him well for the future.

ORDINARY SHARES

Performance and portfolio activity
The underlying net asset value decreased by 17.7p per Ordinary Share before deducting the 6.0p per Ordinary Share dividend paid during the year.

This decrease was driven by a fall in the underlying value of the portfolio caused by a material reduction in market power prices forecast by the energy industry’s independent, external modelling agencies. As described further in the Investment Manager’s report on page 8 of the Annual Report and Accounts, changes in the macro environment, including the COVID-19 pandemic, have caused the long term power price forecasts to fall significantly.

Total electricity production of the sites operated was 1.9% above expectations at 71.48 gigawatt hours of electricity, sufficient to power approximately 24,000 UK homes for a year.

During the year, following the Board’s decision to refocus the portfolio, the Company’s existing portfolio companies successfully divested from the ForVEI II platform returning c.£6.2m to the fund, corresponding to a multiple of c.1.08x in less than 18 months. Telecomponenti, the small Italian rooftop asset, was also sold post period end, completing in July 2020.

The Board was also pleased that the Investment Manager was able to complete the refinancing of the investment portfolio in June 2020, reducing finance costs across the portfolio.

With a portfolio now solely situated in the UK, the Board consider the Ordinary Shares fund to be optimally invested and well placed to maximise future returns for Shareholders.

The Ordinary Shares fund ended the year with investments in portfolio companies with total generating capacity of 75.0MW compared with 78.0MW at 31 March 2019.

Following the award of the Spanish claim (equivalent to £2m-£2.5m, or 5.6-7.1p per Ordinary Share) communicated in the last annual report, there continues to remain significant challenges with respect to collectability. The non-binding offer communicated in my Chairman’s Statement in the Half-Yearly Financial Report unfortunately failed to progress, therefore the Company continues to follow up this claim in the courts. The Board has not assigned any current value to the claim in the net asset value reported.

The overall performance of the Ordinary Shares remains robust and the total return since inception as at 31 March 2020 was 116.7p per Ordinary Share. 

Cash and working capital
The Company had cash and liquid resources of £1.8m at 31 March 2020 (excluding cash held in portfolio companies).

The Board acknowledges that at the year end the Company had net current liabilities primarily due to a loan of £15m from the Company’s wholly owned subsidiary, Youtan Limited, which was repayable on demand. Post year end, in July 2020, Youtan released the Company from this liability, thereby bringing the Company to a net current asset position.

The Company receives regular interest and loan stock payments and dividends from its underlying investments enabling it to continue to fund its dividend policy as well as meeting expenses in the ordinary course of business as they fall due.

Dividends, share buybacks and tender offer
In its original prospectus, the Board’s stated objective was to pay dividends of 5.0p per Ordinary Share each year throughout the life of the Company after the first year. The level of dividends was not, however, guaranteed. During the year, total dividends of 6.0p per Ordinary Share were paid. This means that total dividends of 44.0p per Ordinary Share have been paid during the ten years since launch.

In March 2020, the Ordinary Shares fund completed its tender offer, enabling 246 shareholders to sell 7,435,016 Ordinary Shares (approximately 17.33% of shares in issue) at NAV less costs generating a total return (net of all costs, management fees and performance incentive fees) of 125.2p per Ordinary Share.

In addition to the tender offer, during the year the Ordinary Shares fund repurchased 351,615 shares for cancellation at a cost of £324,000, at an average discount to NAV of 0.9%. Stamp duty of £29,000 was also paid during the year. No new Ordinary Shares were issued during the year.

Following the completion of the tender offer, the Board has considered the future dividend policy of the Ordinary Shares fund. With the objective of maximising long-term future returns for Ordinary Shareholders, the Board will endeavour to pay out dividends derived from the income generated by the underlying portfolio, rather than a fixed pence per share. The Board and the Investment Manager hope that this may be enhanced by additional ‘special’ dividends as and when particularly successful portfolio exits are made. The impact of COVID-19 will be taken into consideration when the Board considers dividends in the near term.

The Board is pleased to announce that the next interim dividend, of 2.0p per Ordinary Share, will be paid on 25 September 2020 based on an ex-dividend date of 10 September 2020 and a record date of 11 September 2020. This means that total dividends of 46.0p per Ordinary Share will have been paid during the ten years since launch.

Management fees
The annual management fee of the Ordinary Shares fund is calculated as 1.5% of Net Assets and equated to £586,000 during the year.

In the context of realisations achieved during the year and the continuing professional management of the portfolio, the Board believe that the annual management fee represents good value for investors.

Green Mark Economy
The Board is pleased to announce that the Company has been classified as a Green Economy Issuer by the London Stock Exchange (“LSE”). This is a new initiative launched by the LSE supporting sustainable finance on its markets. The Green Economy Mark recognises listed companies with 50% or more of revenues from environmental solutions.

FWT SHARES

As it is no longer possible to raise new funds for investment in the Ordinary Shares fund, which is now considered to be fully and optimally invested, the Board was delighted to launch the new Foresight Williams Technology share class (the ‘FWT Shares’), which was formally approved by shareholders at the General Meeting on 27 January 2020.

The new share class represents an exciting investment opportunity made possible by the collaboration between Foresight Group and the Williams Advanced Engineering business of the Williams F1 Group and provides investors with the opportunity to invest in a portfolio of early-stage companies with high growth-potential, developing innovative and occasionally transformational technologies across a range of different sectors.

Fundraising and share issues
The Offer, which opened on 20 December 2019, offers for subscription up to £20 million (with an over-allotment facility for up to an additional £10 million) through the issue of FWT Shares. As at the year end date, 1,145,927 FWT Shares had been allotted, raising £1.1m. Post year end, a further 1,275,452 FWT Shares had been allotted, raising a further £1.3m. The Offer remains open for investment.

Management fees
The annual management fee of the FWT Shares fund is calculated as 2.0% of Net Assets and equated to £1,000 during the year.

Annual General Meeting
The Company’s Annual General Meeting will take place on 24 September 2020 at 12.30pm. Due to travel restrictions and social distancing measures implemented as a result of the COVID-19 Coronavirus pandemic, the meeting will be held by way of a closed meeting and shareholders will not be permitted to attend. Shareholders are encouraged to vote through proxy and send any questions to the Investment Manager’s Investor Relations team. Please refer to the formal notice on page 78 of the Annual Report and Accounts for further details in relation to the format of this year’s meeting and the request to observe social distancing and travel restrictions in place.

Outlook
Following the successful refinancing of the underlying portfolio, the Company will continue to seek to optimise the performance of the existing Ordinary Shares portfolio including fixing power price agreements (PPAs) when they are deemed attractive, and pay dividends through a combination of income earned and realised gains. While the effects of COVID-19 on the existing investment portfolio appear to be reasonably limited given the nature of the underlying investments, the Board and the Investment Manager continue to be carefully monitor the ongoing impact.

Over the medium to long term, once all Ordinary Shareholders have reached their minimum 5-year qualifying holding period, the Board and the Investment Manager will, if appropriate, begin a managed process of returning the value of the Ordinary Shares fund to its Shareholders.

The Company will also continue to raise new funds in the FWT Shares fund and seek appropriate qualifying investments for this share class.

Ernie Richardson
Chairman
29 July 2020

Investment Manager’s Review

Portfolio summary and performance
The Investment Manager’s focus during the year has been on maintaining and improving portfolio performance, both from an operational perspective and in respect of the assets’ ability to support a sustainable level of debt to enhance returns to the Ordinary Shares fund.

Performance of the UK assets was positive during the year with total electricity production 1.9% above expectations. The assets generated a total of 71.48GWh, enough clean electricity to power over 24,000 UK homes. This positive performance reflects higher than average irradiation levels and good availability of the solar plants. Further details on performance of the individual assets are included on pages 14 to 22 of the Annual Report and Accounts.

There were no UK acquisitions during the year. Prior to its disposal (described further below), ForVEI II, in which existing portfolio companies have invested, acquired three further small ground-mounted solar assets in Sicily, the Apulia region of southern Italy and Veneto, with a total capacity of 2.6MW.

In September 2019, an extension of the existing project-level debt across the UK solar assets was negotiated, allowing time to finalise a cross-portfolio debt facility next year. This refinancing successfully concluded at the end of June 2020 and will reduce finance costs across the portfolio.

Disposals
Following a decision to refocus the portfolio on the UK market and in order to provide liquidity for the fund, in November 2019 the Investment Manager agreed the sale of the Italian solar assets held through ForVEI II to another Foresight managed fund. The sale was based on a third-party valuation and returned c.£6.2m to the fund, corresponding to a multiple of c.1.08x in less than 18 months.

The Investment Manager also continues to work towards completing the sale of three small assets. In March 2020, the Board approved the decision to sell Littlewood, a UK asset. This process is underway and expected to conclude during Summer 2020. Post-year end in May, final terms were agreed for the sale of the small Italian rooftop asset, Telecomponenti, with proceeds also due to be received during Summer 2020. Preparations are also underway to sell Greenersite, the smallest UK asset.

Market update
The UK remains committed to its ambitious 2050 goal of becoming the world’s first fully carbon-neutral nation. The target will require the UK to bring all greenhouse gas emissions to net zero by 2050, compared with the previous target of at least 80% reduction from 1990 levels. The Office of Gas and Electricity Markets (Ofgem) recently set out its vision for how gas and electricity markets will contribute towards meeting the target in its ‘Decarbonisation Programme Action Plan’ which was published in February 2020. Continuing to foster the growth of renewable energy and integrating these new sources of intermittent power into the network remains a core area of focus. While 2019 saw a number of milestones in regard to the contribution of renewable energy sources, including coal-generation hitting a historic low, the period as a whole recorded relatively modest renewables buildout compared with the growth rates witnessed over the last decade. Offshore wind capacity continued to grow during the year, but there were very limited onshore renewable projects.

The slowdown in new solar construction has been particularly pronounced as the market continued to adapt to the commercial reality of a post-subsidy environment. However, the recent announcement that established onshore technologies such as solar and onshore wind will once again be able to participate in Contract for Difference (“CfD”) auctions could see a reversal in this trend. In addition to projects supported by Government subsidies via the CfD regime, the emergence of a commercially viable subsidy free sector will be vital if the UK is to continue to make progress towards its decarbonisation goals. Whilst the number of subsidy-free solar projects completed in 2019 was extremely limited, there is a pipeline totalling an estimated 6GW expected to come online in the coming years.

The re-election of the Conservative Party in December and the comprehensive nature of the result should provide investors with a degree of clarity on several fronts. The European Union (Withdrawal Agreement) Act 2020 was passed into law in January 2020 leading to the UK leaving the European Union (EU) on 31 January 2020. The withdrawal triggered an expected 11-month transition period during which the UK and the EU will seek to agree the future terms of their economic and security partnership. There is a transition period until January 2021 whilst the UK and EU negotiate further arrangements, meaning current rules on trade and business continue to apply. For example, the EU Emissions Trading System (EU ETS), which sets a cap on the total amount of greenhouse gases that can be emitted by installations, will continue until April 2021 at the latest. Foresight’s view has not changed from that set out previously; the energy market in the UK is closely aligned with European markets and this is not expected to change over the long term. The exit from the EU has yet to cause significant volatility in the energy markets in the short term. Longer term impacts such as weaker economic demand and the availability of unskilled labour are not deemed material to the future operations of the portfolio. Foresight remains of the view that Brexit is unlikely to have a significant impact on the financial and operational performance of the assets.

COVID-19
Towards the end of the reporting period on 23 March 2020, the Government imposed lockdown restrictions on the UK population in order to limit the spread of the COVID-19 pandemic. The Company’s solar plants typically operate with minimal human involvement and have been able to carry on operating during all stages of the UK lockdown. As electricity generators, the solar plants provide an essential service and are therefore classified as a `Critical Sector’, with all those responsible for maintaining them deemed `Key Workers’. Over the last four months, the solar projects continued to generate electricity and received payments for the green energy that they produced, which was essential in keeping the country running during this time. There are no known significant production issues with the portfolio that would represent a risk of future production decline.

Despite fossil-fuelled power plant shutdowns seen in the UK since March 2020, the Investment Manager does not consider there is a material risk of reduced production in the solar energy market. While shutdowns of fossil fuel plants are a result of declining energy demand throughout lockdowns in the UK, due to current UK government targets toward renewable energy sources, the Investment Manager considers that the solar energy market is sufficiently insulated from the impacts of future reductions in productions, with solar energy now comprising a greater percentage of the energy produced in the UK since March 2020.

As discussed in further detail below, the power purchase agreements (PPA) entered into between the solar sites and offtakers in the UK electricity supply market guarantee a substantial portion of the site revenue for the life of these contracts. The ongoing demand for solar energy throughout the pandemic, and the limited risk of contractual default, as a government backed body, has been considered by the Investment Manager in assessing the impact of COVID-19 on the Company.

The Investment Manager has conducted a full review of all key service providers for the solar sites’ operations. We are confident in the resilience of the business continuity plans in place. Daily conversations are ongoing to monitor the situation and to understand any risks within the supply chain for spare parts.

Regulatory
Targeted Charging Review
Following a period of consultation over potential reforms to network charging, Ofgem published an update in May 2019 on the timing and next steps of Future Charging and Access reforms. Amongst the reforms is a change to Balancing Use of System (“BSUoS”), being the means through which the cost to National Grid of balancing the network is recovered. Currently, generators connecting to the distribution network receive BSUoS as a credit, recognising the positive effect this capacity has on alleviating constraint on the transmission network. In recent years the volume of embedded generation has increased significantly and this, together with the impact on consumers, has caused Ofgem to consider removing the credit and applying a charge.

On 21 November 2019 Ofgem released its decision on the Targeted Charging Review. For generators, the embedded benefits received for Balancing Use of System (“BSUoS”) will be removed from April 2021 as anticipated. The decision on whether to impose the BSUoS as a charge has been deferred to a new Task Force. The value of BSUoS does vary but at its worst, it is expected that the removal of BSUoS and charging of it could adversely impact some generators by £4 /MWh. Foresight continues to engage with Ofgem and industry more widely as a member of the Solar Trade Association to ensure the adverse impact and potential consequences are understood. It should be noted that embedded benefits revenue represents just 3.3% of revenues for the portfolio during the year.

Corporation Tax
Boris Johnson was elected as Prime Minister on 13 December 2019. Despite the Conservative Party’s previous pledge to cut corporation tax from 19% to 17%, the planned cuts have been put on hold and the Government confirmed that the rate will be held at 19% for the financial year 2020/2021. As the project valuations are derived from expected future cash flows, this policy change resulted in a £0.6m reduction to the Net Asset Value of the Company.

Revenues
During the year, 59.8% of revenue for underlying UK portfolio investments came from subsidies (predominantly under the ROC scheme) and other green benefits to an offtaker. These revenues are directly and explicitly linked to inflation for 20 years from the accreditation date under the ROC regime and subject to Retail Price Index (“RPI”) inflationary increases applied by Ofgem in April of each year. The remaining 40.2% of revenues derive from electricity sales by our UK portfolio companies, which are subject to wholesale electricity price movements.

The average power price achieved during the current year was £44.45 per MWh, representing a decrease on the price achieved in the nine months to 31 March 2019 (£54.20 per MWh.). This reduction continues to be driven by declining natural gas prices globally as a result of new supplies from the US and Australia entering the market. Recent developments in the oil market added further downward pressure on wholesale power prices. A slight increase in the deployment of onshore wind in the UK and the build out of renewables in interconnected countries has also contributed to downward pressure on electricity prices.

During the year there was a 14% decrease in long term power price forecasts. The reduction in the forecast period 2020-2025 was 21% down from April 2019. This is driven by a major reduction in forecast electricity demand as a result of COVID-19 induced economic restrictions. The Investment Manager uses these forward-looking power price assumptions to assess the likely future income of the portfolio investments for valuation purposes. The Company’s assumptions are formed from a blended average of the forecasts provided by third party consultants and are updated on a quarterly basis. The Investment Manager’s forecasts continue to assume an increase in power prices in real terms of 0.97% per annum (31 March 2019: 0.27%). However, this increase from the March 2019 figure is largely driven by lower prices in the short term as mentioned above, the real growth from 2026-2050 is forecast as 0.15% per annum (31 March 2019: 0.04%).

Power Purchase Agreements (“PPAs”) are entered into between each portfolio company and offtakers in the UK electricity supply market. Under the PPAs, each portfolio company will sell the energy generated and ROCs to the designated offtaker. Under the terms of a PPA, electricity can be supplied at a fixed price for an agreed duration, or at a variable rate.

The PPA strategy adopted by our portfolio companies seeks to optimise their revenues from the power generated, while keeping the flexibility to manage their solar assets appropriately. The Boards of our portfolio companies, with assistance from Foresight, constantly assess conditions in the electricity market and set their pricing strategy on the basis of likely future movements. Seven of the UK solar sites have 10-year PPAs, in place since 1 April 2019 with lower fees than previously. Under the terms of these PPAs the electricity generated is sold at a variable market rate.

The remaining four larger assets have fixed price arrangements in place. The Company’s strategy is to maintain c.30% of the portfolio under fixed pricing agreements. The assets with fixed arrangements account for 41% of capacity. These will maintain the hedging strategy throughout 2020 whilst contributing a positive net impact to valuations.

Sustainable Investing
Sustainability lies at the heart of the Manager’s approach, and the Manager believes that investing responsibly, seeking to make a positive social and environmental impact, is critical to its long-term success. These factors have been integrated into the investment process, and are actively supported by all involved, regardless of seniority. Foresight continues to refine its sustainability tracking to further improve its investment processes, enhance the sustainability performance of existing assets and demonstrate more comprehensively the environmental benefits and social contribution of the Company’s activities, implementing Foresight Group’s Sustainable Investing in Infrastructure Strategy. This strategy focuses on ensuring all assets are evaluated prior to acquisition and throughout their ownership, in accordance with Foresight Group’s Sustainability Evaluation Criteria. There are five central themes to the Criteria, which cover the key areas of sustainability.

The five criteria are:

  1. Sustainable Development Contribution: The development of affordable and clean energy and improved resource and energy efficiency.
  2. Environmental Footprint: Assessing potential environmental impact such as emissions to air, land and water, effects on biodiversity and noise and light pollution
  3. Social Engagement: Engagement and consultation with local stakeholders. Ensuring a positive local economic and social impact, community engagement and the health and wellbeing of stakeholders.
  4. Governance: Compliance with relevant laws and regulations and ensuring best practice is followed.
  5. Third Party Interactions: Third party due diligence is conducted on key counterparties to ensure adherence to the aforementioned criteria where relevant.

Land Management
Compliance audits have been carried out on all UK sites held by portfolio companies, confirming that they are in line with government permits and conditions.

Foresight Group remains a working partner of the Solar Trade Association’s Large Scale Asset Management Working Group. Foresight is a signatory to the Solar Farm Land Management Charter and seeks to ensure that the solar farms operated by all of our portfolio companies are managed in a manner that maximises the agricultural, landscaping, biodiversity and wildlife potential, which can also contribute to lowering maintenance costs and enhancing security. As such, Foresight Group regularly inspects sites and advises portfolio companies to develop site specific land management and biodiversity enhancement plans to secure long term gains for wildlife and ensure that the land and environment are maintained to a high standard. This includes:

  • Management of grassland areas within the security fencing to promote wildflower meadows and sustainable sheep grazing;
  • Planting and management of hedgerows and associated hedge banks;
  • Management of field boundaries between security fencing and hedgerows;
  • Sustainable land drainage and pond restoration;
  • Installation of insect hotels and reptile hibernacula;
  • Installation of boxes for bats, owls and kestrels; and
  • Installation of beehives by local beekeepers.

Most solar parks are designed to enable sheep grazing and the remaining plants are investigated for alterations to ensure that the farmland on which the solar assets are located can remain useful in agricultural production, which is a frequent desire of local communities.

Examples of recent land management activities across the portfolio include the addition of a flock of free range chickens grazing throughout the New Kaine site. The grounds of Turweston and Littlewood solar farms are being managed as wildflower meadow. Further environmental improvements have been implemented at Turweston including the installation of beehives. During the reporting period bird and bat boxes were installed at Basin Bridge and at Turweston additional gates with sufficient gaps at the lower edge were installed to allow for safe wildlife passage across the site. New trees and hedgerows were planted, and hedge infill work undertaken at Dove View, Hurcott and Littlewood.

Social and Community Engagement
Foresight Group actively seeks to engage with the local communities around the solar assets operated by our portfolio companies and regularly attends parish meetings to encourage community engagement and promote the benefits of their solar assets. During the year, the Manager has continued to make annual community payments for Marchington, which have been extended to reflect the site’s 40-year consent.

Health and Safety
There were no reportable health and safety incidents during the year.

A transformer at the Laurel Hill site experienced an oil leak in February 2020, causing the substation to shut down. All oil was contained within the site, which does not include any watercourses, and a specialist contractor hired to remove and dispose of the oil safely.

Safety, Health, Environment and Quality (“SHEQ”) performance and risk management are a top priority at all levels for Foresight Group. To further improve the management of SHEQ risks, reinforce best practice and ensure non-compliance with regulations is avoided, Foresight Group has appointed an independent health and safety consultant who regularly visits the portfolio assets operated by our portfolio companies to ensure they not only meet, but exceed, industry and legal standards. The consultants have confirmed that all sites are in compliance with applicable regulations.

Recommendations have been implemented to help raise standards further. During the year improvements to method statements have been made relating to weed management and hygiene practices. Further upgrades have been completed to control works in the vicinity; namely overhead cables and pressurised gas mains. Additional recommendations to manage the deterioration of safety warning signage is being administrated by operation and maintenance companies.

Outlook
Despite a fall in the external power prices negatively impacting the portfolio valuation, it has otherwise been another positive year for the Company with good performance from the assets. The Company will continue to focus on delivering strong operational performance across the portfolio. Post year end, the Investment Manager successfully concluded the negotiation of new debt terms with the existing lender to refinance the majority of the UK solar assets, with pricing materially less than the previous arrangements.

Long-term renewable energy projects typically have inflation-linked income streams, often with a high degree of Government backing through subsidies, which will be unaffected by a slowdown in economic growth. We believe this offers a degree of protection for investors from the inevitable economic impact of the coronavirus pandemic.

Foresight Group LLP
Investment Manager
29 July 2020

Unaudited Non-Statutory Analysis of the Share Classes

Income Statement            
for the year ended 31 March 2020            
  Ordinary Shares Fund FWT Shares Fund
  Revenue Capital Total Revenue Capital Total
  £’000 £’000 £’000 £’000 £’000 £’000
Investment holding losses (7,881) (7,881)
Realised losses on investments (941) (941)
Income 3,385 3,385
Investment management fees (147) (439) (586) (1) (1)
Interest payable (397) (397)
Other expenses (441) (441) (8) (8)
Profit/(loss) before taxation 2,400 (9,261) (6,861) (8) (1) (9)
Taxation
Profit/(loss) after taxation 2,400 (9,261) (6,861) (8) (1) (9)
Profit/(loss) per share 5.6p (21.6)p (16.0)p (0.7)p (0.1)p (0.8)p
 

Balance Sheet

           
at 31 March 2020            
        Ordinary Shares Fund   FWT Shares Fund
        £’000   £’000
Fixed assets            
Investments held at fair value through profit or loss       42,170  
             
Current assets          
Debtors       233   61
Cash and cash equivalents       640   1,162
        873   1,223
Creditors            
Amounts falling due within one year       (17,256)   (87)
Net current (liabilities)/assets       (16,383)   1,136
Net assets       25,787   1,136
             
Capital and reserves            
Called-up share capital       354   11
Share premium       6,967   1,134
Capital redemption reserve       200  
Distributable reserve       12,853   (8)
Capital reserve       (12,226)   (1)
Revaluation reserve       17,639  
Equity shareholders’ funds       25,787   1,136
Number of shares in issue       35,460,961   1,145,927
Net asset value per share       72.7p   99.1p
             
             

At 31 March 2020 there was an inter-share debtor/creditor of £1,000 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 2020

                                                                       

Ordinary Shares Fund Called-up share capital Share premium account Capital redemption reserve Distributable reserve Capital reserve Revaluation reserve Total
  £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 April 2019 432 7,032 122 19,426 (10,846) 25,520 41,686
Expenses in relation to prior year share issues (26) (26)
Repurchase of shares (78) 78 (6,390) (6,390)
Expenses in relation to tender offer (39) (39)
Realised losses on disposal of investments (941) (941)
Investment holding losses (7,881) (7,881)
Dividends paid (2,583) (2,583)
Management fees charged to capital (439) (439)
Revenue profit for the year 2,400 2,400
As at 31 March 2020 354 6,967 200 12,853 (12,226) 17,639 25,787
               
FWT Shares Fund Called-up share capital Share premium account Capital redemption reserve Distributable reserve Capital reserve Revaluation reserve Total
  £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 April 2019
Share issues in the year 11 1,162 1,173
Expenses in relation to share issues (28) (28)
Investment holding gains
Dividends paid
Management fees charged to capital (1) (1)
Revenue loss for the year (8) (8)
As at 31 March 2020 11 1,134 (8) (1) 1,136

 Income Statement for the year ended 31 March 2020

  Year ended 31 March 2020 Nine months ended 31 March 2019
  Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total
£’000
Investment holding (losses)/gains (7,881) (7,881) 3,612 3,612
Realised losses on investments (941) (941) (197) (197)
Income 3,385 3,385 546 546
Investment management fees (147) (440) (587) (117) (350) (467)
Interest payable (397) (397) (311) (311)
Other expenses (449) (449) (374) (374)
Profit/(loss) before taxation 2,392 (9,262) (6,870) (256) 3,065 2,809
Taxation
Profit/(loss) after taxation 2,392 (9,262) (6,870) (256) 3,065 2,809
Profit/(loss) per share:            
Ordinary Share 5.6p (21.6)p (16.0)p (0.6)p 7.1p 6.5p
FWT Share (0.7)p (0.1)p (0.8)p n/a n/a n/a

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
comprehensive income has been presented.

Reconciliation of Movements in Shareholders’ Funds
  

Year ended 31 March 2020 Called-up share capital Share premium account Capital redemption reserve Distributable reserve* Capital reserve* Revaluation reserve Total
  £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 April 2019 432 7,032 122 19,426 (10,846) 25,520 41,686
Share issues in the year 11 1,162 1,173
Expenses in relation to share issues (28) (28)
Expenses in relation to prior year share issues (26) (26)
Repurchase of shares (78) 78 (6,390) (6,390)
Expenses in relation to
tender offer
(39) (39)
Realised losses on disposal of investments (941) (941)
Investment holding losses (7,881) (7,881)
Dividends paid (2,583) (2,583)
Management fees charged to capital (440) (440)
Revenue profit for the year 2,392 2,392
As at 31 March 2020 365 8,101 200 12,845 (12,227) 17,639 26,923
               
Nine months ended 31 March 2019 Called-up share capital Share premium account Capital redemption reserve Distributable reserve* Capital reserve* Revaluation reserve Total
  £’000 £’000 £’000 £’000 £’000 £’000 £’000
As at 1 July 2018 439 7,050 115 21,605 (10,299) 21,908 40,818
Expenses in relation to prior year share issues (18) (18)
Repurchase of shares (7) 7 (619) (619)
Realised losses on disposal of investments (197) (197)
Investment holding gains 3,612 3,612
Dividends paid (1,304) (1,304)
Management fees charged to capital (350) (350)
Revenue loss for the period (256) (256)
As at 31 March 2019 432 7,032 122 19,426 (10,846) 25,520 41,686

 * Total distributable reserves at 31 March 2020 were £618,000 (2019: £8,580,000).
 

Balance Sheet at 31 March 2020                                Registered Number: 07289280

  As at 31 March 2020 £’000 As at 31 March 2019 £’000
     
Fixed assets    
Investments held at fair value through profit or loss 42,170 56,767
     
Current assets    
Debtors 293 405
Cash and cash equivalents 1,802 2,334
  2,095 2,739
Creditors    
Amounts falling due within one year (17,342) (17,820)
Net current liabilities (15,247) (15,081)
Net assets 26,923 41,686
     
Capital and reserves    
Called-up share capital 365 432
Share premium 8,101 7,032
Capital redemption reserve 200 122
Distributable reserve 12,845 19,426
Capital reserve (12,227) (10,846)
Revaluation reserve 17,639 25,520
Equity shareholders’ funds 26,923 41,686
     
     
Net asset value per share:    
Ordinary Share 72.7p 96.4p
FWT Share 99.1p n/a

 
 Cash Flow Statement for the year ended 31 March 2020

  Year ended 31 March 2020
£’000
Nine months ended 31 March 2019
£’000
Cash flow from operating activities    
Deposit and similar interest received 11 8
Investment management fees paid (600) (466)
Performance incentive fee paid (130)
Secretarial fees paid (128) (99)
Other cash payments (387) (441)
Net cash outflow from operating activities (1,104) (1,128)
     
Cash flow from investing activities    
Net proceeds on sale of investments 5,280
Investment income received 3,129 550
Net cash inflow from investing activities 8,409 550
     
Cash flow from financing activities    
Proceeds of fund raising 1,162
Expenses of fund raising (26) (18)
Repurchase of own shares (6,390) (619)
Equity dividends paid (2,583) (1,304)
Net cash outflow from financing activities (7,837) (1,941)
Net outflow of cash in the period (532) (2,519)
     
Reconciliation of net cash flow to movement in net funds    
Decrease in cash for the period (532) (2,519)
Net cash at start of period 2,334 4,853
Net cash at end of period 1,802 2,334
Analysis of changes in net debt

 

     
  At 1 April 2019
£’000
Cash Flows
£’000
Other non cash changes
£’000
At 31 March 2020
£’000
         
Cash and cash equivalents        
Cash 2,334 (532) 1,802
Borrowings        
Loan with Youtan due within one year 15,811 15,811

 
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 2020.  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, as updated in December 2018 with further COVID-19 guidance issued in March 2020.

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 2020, which were unqualified and did not contain any statements under S498(2) or S498(3) of Companies Act 2006, will be lodged with the Registrar of Companies. Statutory accounts for the year ended 31 March 2020 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 £25,787,000 (2019: £41,686,000) and on 35,460,961 Ordinary Shares (2019: 43,247,592), being the number of Ordinary Shares in issue at that date.

Net asset value per FWT Share is based on net assets at the year end of £1,136,000 (2019: £nil) and on 1,145,927 FWT Shares (2019: nil), being the number of FWT Shares in issue at that date.

5.    Return per share

  Year ended 31 March 2020 Nine months ended
31 March 2019
  Ordinary
Shares
£’000
FWT Shares £’000 Ordinary
Shares
£’000
       
Total (loss)/profit after taxation (6,861) (9) 2,809
Total (loss)/profit per share (note a) (16.0)p (0.8)p 6.5p
Revenue profit/(loss) from ordinary activities after taxation 2,400 (8) (256)
Revenue profit/(loss) per share (note b) 5.6p (0.7)p (0.6)p
Capital (loss)/profit from ordinary activities after taxation (9,261) (1) 3,065
Capital (loss)/profit per share (note c) (21.6)p (0.1)p 7.1p
Weighted average number of shares in issue during the period (note d) 42,897,610 1,145,927 43,399,944

Notes:
a) Total (loss)/profit per share is total (loss)/profit after taxation divided by the weighted average number of shares in issue during the period.
b) Revenue profit/(loss) per share is revenue profit/(loss) after taxation divided by the weighted average number of shares in issue during the period.
c) Capital (loss)/profit per share is capital (loss)/profit after taxation divided by the weighted average number of shares in issue during the period.
d) The weighted average number of shares in issue for the FWT shares reflect the weighted average number of shares in issue following the first allotment of shares.

6.    The Annual General Meeting will be held at 12.30pm on 24 September 2020. In light of the continuing Covid-19 situation, the meeting will be held by way of a closed virtual meeting and shareholders will not be permitted to attend. Shareholders are encouraged to vote by way of proxy and send any questions to the Investment Manager’s Investor Relations team as further set out in the notice. Please refer to the formal notice on page 78 of the Annual Report and Accounts for further details in relation to the format of this year’s meeting and the request to observe social distancing and travel restrictions in place.

7.    Income

  Year ended
31 March
2020
£’000
Nine months ended
31 March
2019
£’000
     
Loan stock interest 609 538
Dividends received 2,765
Bank interest 11 8
  3,385 546

8.    Investments held at fair value through profit or loss

  Ordinary
Shares Fund
£’000
FWT
Shares Fund
£’000
Company
£’000
Book cost at 1 April 2019 31,247 31,247
Investment holding gains 25,520 25,520
Valuation at 1 April 2019 56,767 56,767
Movements in the year:      
Purchases at cost
Disposal proceeds (5,775) (5,775)
Realised losses (941) (941)
Investment holding losses (7,881) (7,881)
Valuation at 31 March 2020 42,170 42,170
Book cost at 31 March 2020 24,531 24,531
Investment holding gains 17,639 17,639
Valuation at 31 March 2020 42,170 42,170

9.    Transactions with the manager

Details of arrangements with Foresight Group LLP and Foresight Group CI Limited are given in the Directors’ Report and Notes 3 and 13. All arrangements and transactions were on an arms length basis.

Foresight Group CI Limited, which acted as investment manager to the Company until 27 January 2020 when Foresight Group LLP was appointed as Investment Manager, earned fees of £491,000 (2019: £467,000). Foresight Group LLP, who was appointed as Investment Manager on 27 January 2020 earned fees of £96,000 up to 31 March 2020 (2019: nil). No performance fee was paid or accrued for the year (2019: nil).

Foresight Group LLP, to whom the Manager delegated the function of Company Secretary from November 2017, earned fees of £131,000 (2019: £97,000), during the year.

At the balance sheet date there was £112,000 (2019: £1,000) due from Foresight Group CI Limited and £86,000 (2019: £nil) due from Foresight Group LLP. No amounts have been written off in the year in respect of debts due to or from related parties.

END



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