Latest Chairman's Statement

"Despite the setbacks in the environmental sector, Foresight Group remains
positive about the prospects for a number of the remaining investments in this
portfolio.”

Philip Stephens
Chairman

Performance

In the year to 31 March 2016, the net asset value per Ordinary Share decreased by 11.3% to 70.4p from 83.9p at 31 March 2015, after allowing for the 4.0p per share dividend paid in December 2015.

Overall, the Board is pleased with the composition of the portfolio, particularly the prospects for the recent addition of seven new investments for a total consideration of £7.2 million. Of these new investments made during the year, several are already making encouraging progress, particularly Itad and Specac. Reflecting the Board and Manager’s confidence in the current portfolio, the performance in the last quarter of the year under review showed an increase in underlying NAV of 2.5%. We believe the portfolio is well placed to deliver growth, underpin future dividends and enhance shareholder returns.

The overall fall in the year is, however, disappointing and was largely due to the performance of one portfolio company, Aerospace Tooling, which saw a reduction or delay in orders as some of its customers were severely impacted by the significant drop in the price of oil. Although it did not feel the impact as acutely as Aerospace Tooling, TFC Europe also suffered a drop in revenues from market driven factors related to the fall in the price of oil. Aerospace Tooling was reduced by £4.6 million or 7.9p per share. Some encouraging progress has been made in winning orders and acquiring new customers but this process and the related sales cycles inevitably takes time. A new, experienced, CEO was appointed in January 2016 and the company is now returning to profitability. Despite the further provisions against the valuation following the period of sustained difficult trading conditions, I would like to remind Shareholders that the Company has previously repaid the entire cost of the original investment to the VCT.

Derby-based Datapath Group is the largest holding in the portfolio, being valued at £8.7 million and is a world leading innovator in the field of computer graphics and video-wall display technology utilised in a number of international markets. The company is increasing market share in control rooms, betting shops and signage and entering other new areas such as the medical market. For the year to 31 March 2015, an operating profit of £6.8 million was achieved on sales of £20.3 million, with the North American division trading ahead of budget. The Board and Manager continue to focus on derisking large portfolio exposures such as Datapath and, in November 2015, Datapath paid a special dividend of £2.1 million to the Company. This was met principally from the company’s own cash resources and management loans which are expected to be repaid from internally generated cash flow over the next year.

Please click here for the full report.

Dividends

Prior to the merger, on 6 August 2015, a special dividend of 25.0p per C Share was paid to C Shareholders, following good performance of the portfolio including the sale of Defaqto Group Limited on 30 March 2015 for £9.5 million, as announced on 31 March 2015. Holders of C Shares receiving this dividend were also given the opportunity to reinvest their dividend proceeds into new Ordinary Shares by way of a
top up offer.

An interim dividend of 4.0p per Ordinary Share for the year ended 31 March 2016 was paid on 18 December 2015 to the Shareholders on the register on 3 December 2015. It continues to be the Company’s policy to provide a flow of tax-free dividends, generated from income and from capital profits realised on the sale of investments. Distributions will, however, inevitably be dependent on cash being generated from portfolio investments and successful realisations.

The recent and continuing success in generating cash from portfolio investments within the fund gives the Board confidence that it will be able to maintain the future payment of dividends to Shareholders.

Merger, Top-up Share Issues and Share Buy-backs

On 10 August 2015 the O and C share funds were merged, based on the net asset value of the Company’s C Shares as at 31 March 2015 of 85.8p per C Share (being the audited NAV per C Share of 110.8p as at 31 March 2015, adjusted to take account of the 25.0p per C Share dividend paid on 6 August 2015) and the NAV of the Company’s Ordinary Shares as at 31 March 2015 of 83.9p. The conversion ratio was 1.022646. On the basis of this conversion ratio, 19,101,896 new Ordinary Shares were allotted.

In accordance with the terms of the dividend reinvestment offer referred to above, on 11 August 2015, 423,717 Ordinary Shares were allotted at 83.9p per share.

During the period under review 434,528 Ordinary Shares were repurchased for cancellation at a cost of £266,000. These were purchased at a discount to NAV ranging from 20.9% to 30.1%.

Shareholder Communication

As part of its ongoing commitment to improving shareholder communication the Board has solicited shareholder views by means of a survey in 2016 and has also held a successful Shareholder Forum in June 2016. As the event was oversubscribed we will be in touch later this year about opportunities to attend similar events.

VCT Legislation

As previously discussed, changes to VCT regulations were finally confirmed on 18 November 2015. There were no material changes to those detailed in my interim report. One of the principal purposes of the
changes was to prevent VCT investment being used to acquire existing shares or the principal trade or assets of businesses.

The key aspects of the proposed new rules are as follows:

  • Introducing an ‘age of company’ restriction of a maximum of
    seven years at the time of first VCT investment;
  • Introducing a lifetime state aided investment limit of £12 million;
    and
  • Prohibiting VCT investment financing acquisitions (as mentioned
    above).

Although the recent rule changes preclude VCTs investing in replacement capital transactions, the Treasury and HMRC have since agreed to review this policy following representations from inter alia the British Venture Capital Association, the Association of Investment Companies, a number of legal firms and VCT managers, including Foresight Group.

Rather than an absolute restriction on replacement capital transactions, this review will consider relaxing the current rules to enable VCTs to invest an element of replacement capital alongside a significant element of growth capital in any particular transaction, possibly up to a maximum of 50% of the total amount invested. Agreement for the change is currently expected to take up to two years and shareholders will be kept informed of any significant developments.

If concluded satisfactorily, the range of potential investment opportunities for VCTs would be widened, compared to the more restrictive regime that currently applies.

Brexit

There are two principal areas where the implementation of Brexit could impact the VCT:

  1. Investee Companies – there has been much debate on the possible impact on trade between Europe and the UK following the Brexit vote and how this will impact UK corporates. Although it is much too early to say how large or small the impact may ultimately be, we do not believe that the impact will be material in the short to medium term; and
  2. Regulation – many parts of the current VCT legislation has been cast from EU State Aid Directives, however, we do not believe that even following Brexit that changing VCT legislation will be a priority for the UK Government and therefore we do not expect any changes to the existing legislation in the short to medium term.

Merger Consideration

The Board has been closely monitoring the successful merger of Foresight VCT plc and Foresight 2 VCT plc following Shareholder approval in December 2015. Although the Board has not formally engaged with another company at this time, it is considering whether a merger and the benefits therefrom would be in Shareholders long term interests and hopes to provide a further update in that regard in due course.

Restatement of reserves

The Company completed a cancellation of £30,963,251 and £1,750,587 of the amounts standing to the credit of share premium account and capital redemption reserve respectively on 29 November 2012. The amounts so cancelled created additional distributable reserves which could be used to support dividend payments or distributions, buy-backs, set off losses against and for other corporate purposes. The cancellation has not been reflected in the financial statements for the years ended 31 March 2013 to 31 March 2015 and has now been corrected in the enclosed financial statements.

Annual General Meeting

The Company’s Annual General Meeting will take place on 30 September 2016 at 1.00pm. I look forward to welcoming you to the Meeting, which will be held at the offices of Shakespeare Martineau LLP in London. Details can be found on page 62 of the Annual Report and Accounts.

Prior to the formal business of the Annual General Meeting, Foresight Group, the investment Manager and two investee companies will give presentations between 12.00pm and 1.00pm.

Outlook

Although there is still considerable uncertainty in continental Europe as a result of stresses within the Euro area the UK economy is in reasonable health and many businesses are making steady progress. The recent decision resulting from the referendum on 23 June, for the UK to begin negotiations to leave the European Union has also given rise to further uncertainty and it will take time to gauge the full effect that this may have for the Company. Many of the familiar risks, both financial and political, remain and there can be no grounds for complacency as all of our investments operate in competitive environments.

We hope that the effect of the improvement in the economy over the last few years continues, as this has been reflected in the improving performance of the private equity part of the portfolio. Within the portfolio, there is an ongoing focus on performance and realisations  refinancings, dividends and loan repayments which underpin the Board’s dividend commitment to Shareholders. It has also enabled several new investments to be made which we anticipate will further enhance Shareholder returns.

 
Philip Stephens

Chairman
29 July 2016

Restricted Disclaimer

Terms and Conditions

Please read this important information before accessing the website.
These Terms and Conditions were last revised in December 2015.

Please Scroll Down to Accept These Terms

About Us

The information contained on these website pages (this "Site”) is communicated and issued by Foresight Group LLP and Foresight Group CI Limited (details below) in accordance with the following terms and conditions. By accessing any part of this Site, you will be deemed to have accepted these Terms and Conditions in full. If you do not accept these Terms and Conditions please do not continue to access this Site.


Foresight Group LLP

Foresight Group LLP is authorised and regulated by the Financial Conduct Authority ("FCA”). FCA firm reference number 198020. The website of the FCA can be accessed at www.fca.org.uk.

Foresight Group LLP is a limited liability partnership incorporated in England and Wales (registered number 0C300878). Its registered office is at The Shard, 32 London Bridge Street, London, SE1 9SG.


Foresight Group CI Limited

Foresight Group CI Limited is licensed by the Guernsey Financial Services Commission (reference number 2006518) to undertake controlled investment business as defined in The Protection of Investors (Bailiwick of Guernsey) Law 1987.

Foresight Group CI Limited is a private company registered in Guernsey (registered number 51471). Its registered office is Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey, GY1 2HT.

Save as mentioned below, references to "Foresight”, "Foresight Group”, "The Manager”, "we” and "our” are to Foresight Group LLP and/or Foresight Group CI Limited as the context dictates.


Intended Audience and Purpose of Information

The information contained within this Site does not constitute an offer to invest or an invitation to apply for securities:

The information has been issued and approved by Foresight Group LLP and Foresight Group CI Limited and does not in any way constitute investment, tax, legal or other advice. Investors should not rely on any information or opinions contained in this Site in making an investment or other decision but should obtain appropriate and specific professional advice.

Nothing contained on this Site constitutes or should be construed to constitute investment, legal, tax or other advice. The information contained on this Site shall in no way be construed to constitute a recommendation with respect to the purchase or sale of any investment.

The website is provided for the main purpose of providing generic information on Foresight Group LLP and Foresight Group CI Limited and on the products and funds we currently manage. Persons accessing specific information about the funds and investment products referred to on this website are strongly advised to refer to the relevant terms and conditions of access, including any relevant risk warnings and disclaimers, and in the event that they do not accept them, should not proceed to access the material to which they are applicable.

Certain products or investment services managed by Foresight are not generally considered suitable for private investors. Therefore, certain areas of the website are password protected or require additional confirmation that you are an appropriately experienced or qualified investor. This website also contains links that lead to other websites. These links are provided solely for your convenience and do not constitute any endorsement, sponsorship or approval of the materials appearing in such sites.

You should note that investment in any of the Foresight Funds or Foresight Products should ONLY be made on the basis of reading any applicable Documentation (including any Brochure, Fund Prospectus, Offer Documents and Disclosure Documentation) or Terms and Conditions of Investment as appropriate.


Risk Factors

The following list of risk factors is provided as an indication of the variety of risks which exist with investment in the funds and products featured on this website ("Foresight Funds”, "Foresight Products”). Not all risks as stated will necessarily apply to each of the Foresight Funds or Foresight Products. Investors' attention is nevertheless drawn to these risks as investments in the Foresight Funds or Foresight Products may not be suitable for all investors.

Risks Applicable to All Foresight Funds and Products


Risks Applicable to Venture Capital Funds (VCTs)

Existing and prospective investors should consider carefully the following VCT-specific risk factors. If any of the risks described below were to occur, it could have a material effect on a VCT's business, financial condition or results of operations. The risks and uncertainties described below are not the only ones that VCT and investors may face. Additional risks not currently known to the Foresight, or that the Foresight currently believes are not material, may also adversely affect its business, financial condition and results of operations and those of the VCTs it manages or operates. The value of shares in Foresight Funds could decline due to any of these risk factors, and investors could lose part or all of their investment.

Prospective investors should be aware that the value of shares and the income from them can fluctuate and that they may not get back the amount they invested. In addition, there is no certainty that the market price of a VCT's shares will fully reflect the underlying net asset value of the VCT in question, that shareholders will be able to realise their shareholding, or that dividends will be paid. Investment in a VCT should be seen as a long term investment. Investors who are in doubt should consult their independent financial adviser. The attention of prospective investors is drawn to the following risks:


Disclaimers and Exclusion of Liability

Foresight Group LLP and Foresight Group CI Limited act for the funds and clients they manage or advise and not for anyone else. They will not act for, advise or be responsible for providing the protections afforded to their customers to anyone other than such funds and clients. Entrepreneurs and others working for Foresight should be aware of this and should not expect that they will be treated as customers of Foresight.

Please do not send us any confidential or proprietary material using this website and without first contacting us as we do not agree to obligations of nondisclosure or non-use of material which is sent to us. We receive numerous business plans and other proposals, and reserve the right to review only those which appear to us to fit our investment criteria from time to time and to reject proposals without giving a reason or returning material sent to us. We are not restricted in any way from pursuing opportunities with others. Foresight and funds and clients under its management or advice invest in many companies, some of which may compete with one another.

Whilst we aim to update the Site regularly, its content is provided in good faith "as is” for information purposes only with no representation or warranty, express or implied by Foresight or by any of its members or employees as to its accuracy or completeness or that it is up to date, and it should not be relied on as such.

To the fullest extent allowed by law, Foresight and its members and employees shall not be liable, whether in tort (including negligence) or otherwise howsoever, for any losses, damages, costs or expenses of whatever nature (including (without limitation) any consequential, indirect or unforeseeable loss or loss of bargain, opportunity or profit) incurred or suffered by you or any third party arising out of or in connection with the access to or use of, or linking to other Sites from, this Site or reliance on any information contained on this Site. Nothing in this legal notice shall limit our liability for death or personal injury resulting from any negligence of Foresight.

Nothing in this legal notice excludes or restricts any duty or liability that Foresight may have under the regulatory system (as defined in the glossary to FCA's Handbook of Rules and Guidance) and which may not be excluded or restricted thereunder.


Intellectual Property Rights

All intellectual property rights in the Site are owned or licensed by Foresight and are protected by law. We reserve all such rights save that you may print off and download extracts from any part of the Site for your personal reference or to bring to the attention of others within your organisation. You may not use any illustrations, photographs, video or audio sequences or any graphics separately from any accompanying text and the status of Foresight Group LLP, Foresight Group CI Limited and our contributors as the authors of material on the Site must always be acknowledged. You may not modify or use any content from the Site for commercial purposes without obtaining a licence to do so from us or our licensors.


Content and Access

We may withdraw or change Site content at any time without notice and, if the need arises, we may suspend access to the Site, close it indefinitely or restrict access to users who have registered with us.

You agree to treat any user identification code, password or other piece of information used as part of our security procedures as confidential and not disclose it to any third party. We may disable your access if in our opinion you have failed to comply with any of these Terms and Conditions.


Your information, Privacy and Cookies

Any personal data provided by you through this site is accurate to the best of your knowledge and you consent to us processing such information for the purpose you have requested. We will process such information only for this purpose.

The Site does not automatically capture or store your personal data, other than to record your IP address and session information (such as the duration of your visit and the browser used) for administration and compilation of Site use statistics.


Links

Links to other websites and resources provided by third parties are provided for your information only; we have no control over the contents of those sites or resources, and accept no responsibility for them or for any loss or damage that may arise from your use of them.

You may link to the Site home page, provided you do so in a way that is fair and legal and does not damage or take advantage of our reputation, or suggest any form of association, approval or endorsement on our part where none exists. You may not create a link to any part of the Site other than the home page, establish a link from any website that is not owned by you or frame the Site in any other website. We reserve the right to withdraw linking permission without notice.
If you wish to make use of material on the Site other than that set out above, please address your request to Marketing department, Foresight Group LLP, The Shard, 32 London Bridge Street, London, SE1 9SG.


Viruses

We will not be liable for any loss or damage caused by a distributed denial-of-service attack, virus, worm, Trojan horse or other harmful material that may infect your computer equipment, computer programs, data or other proprietary material due to your use of the Site or to your downloading of any material from it.


Governing Law

This Site including these Terms and Conditions and all matters arising from or connected with them shall be governed by and construed in accordance with English law and shall be subject to the exclusive jurisdiction of the English courts.


Variations

Some of these Terms and Conditions may be superseded by specific provisions published elsewhere on the Site. We reserve the right to vary these terms from time to time by amending this page and you should check it from time to time to note any changes made.


Contact Details for Further Information and Queries

If you have any queries regarding this website, or would like further information about Foresight Group, you may send an email to info@foresightgroup.eu or telephone 020 3667 8100. Full contact details for Foresight Group are available on the "Contact Us" page of this website.