Foresight Solar & Infrastructure VCT plc : Annual Financial Report

 

 

FORESIGHT SOLAR & INFRASTRUCTURE VCT PLC

 

 

Summary Financial Highlights

 

  • Net asset value per Ordinary Share at 30 June 2016 was 100.7p after payment of 6.0p in dividends (30 June 2015: 109.9p).
  • Net asset value per C Share at 30 June 2016 was 80.5p after payment of 5.0p in dividends (30 June 2015: 91.7p).
  • Net asset value per D Share at 30 June 2016 was 99.4p.
  • Total net asset value return (including dividends paid since launch) at 30 June 2016 is 123.7p for the Ordinary Shares fund, 90.5p for the C Shares fund and 99.4p for the D Shares fund.
  • The D Shares fund launched on 1 February 2016 and has raised £3.1 million at the time of writing.

 

Ordinary Shares Fund

  • Two interim dividends of 3.0p per Ordinary Share were paid on 13 November 2015 and 8 April 2016.
  • An interim dividend of 3.0p per Ordinary Share will be paid on 18 November 2016 based on an ex-dividend date of 3 November 2016 and a record date of 4 November 2016.
  • Fifth anniversary of final allotment under the original offer is 8 November 2016.

 

C Shares Fund

  • Two interim dividends of 2.5p per C Share were paid on 13 November 2015 and 8 April 2016.
  • An interim dividend of 2.5p per C Share will be paid on 18 November 2016 based on an ex-dividend date of 3 November 2016 and a record date of 4 November 2016.
  • One new investment was made during the year totalling £0.95 million and one new investment of £3.7 million was made during July 2016. The fund is considered fully invested.

 

D Shares Fund

  • One new investment was made during the year totalling £1.6 million.

 

 

Dividend History

 

Ordinary Shares Dividend per share
8 April 20163.0p
13 November 20153.0p
10 April 20153.0p
14 November 20143.0p
4 April 20143.0p
25 October 20133.0p
12 April 20132.5p
31 October 20122.5p
Total 23.0p

 

C Shares Dividend per share
8 April 20162.5p
13 November 20152.5p
10 April 20152.5p
14 November 20142.5p
Total 10.0p

 

 

Chairman's Statement

 

Introduction

As outlined in my statement last October, 2015 saw a significant strategic shift in the UK Government's policies with respect to renewable energy investment. Although this has fundamentally changed the landscape for future investment in PV solar, as an established owner of assets these changes have not had a material detrimental effect on our existing portfolio.

 

Performance - Ordinary Shares Fund

The underlying net asset value decreased by 3.2p per Ordinary Share before deducting the 6.0p per Ordinary Share dividend paid during the year. However, this reduction also includes an accrual for a performance incentive fee to the investment manager of approximately 5.9p per Ordinary Share, which would become payable should the total distributions on exit exceed 100p per Ordinary Share.

 

The valuation of the UK portfolio decreased by approximately £291,000 (0.8p per Ordinary Share) principally as a result of the Government's removal of Levy Exemption Certificates (LECs) for renewable energy schemes from August 2015. Other negative factors were a material increase in future business rates for solar plants, poorer levels of irradiation across the UK during the year under review (actual plant performance performed ahead of expectations) and lower power prices. The overall impact was partially offset by improvements in the valuations of our European assets.

 

The restructuring of the debt component of our Italian holdings was completed in February 2016, and we expect to see distributions to the VCT recommence in the 2016/17 year. We decided during the year to dispose of La Castilleja. This transaction is progressing and a provision against the previous carrying value of this asset has been taken to reflect likely disposal proceeds. There remains a possibility that the Company will recover some of these Spanish asset losses from the international arbitration proceedings we have taken against the Government of Spain for breaching the protections available under the Energy Charter Treaty. The Spanish and Italian assets account for circa 15% of the Ordinary Share portfolio.

 

The overall performance of the Ordinary Shares fund remains robust and the total return since inception as at 30 June 2016 was 123.7p per Ordinary Share compared with the fund's original target of a total 5 year return of 130.0p per Ordinary Share.

 

Ordinary Shareholder Individual Option to Remain Invested

The fifth anniversary of the final closing of the original public offering of the Ordinary Shares will occur in November of this year and Shareholders will be given the option to retain or divest their investment. During the year the Investment Manager began exploring options for the generation of liquidity to fund shareholders' returns including through a refinancing or sale of all or part of the Ordinary Share portfolio. The Board has included with the Annual Report & Accounts a letter to shareholders providing an update in this regard.

 

i. Movement in Net Asset Value of the Ordinary Shares Fund

During the year, the net asset value of the Ordinary Shares fund decreased to 100.7p per share (£38.6 million) at 30 June 2016 from 109.9p per share (£42.1 million) at 30 June 2015. The main reason behind the fall in net assets was the accrual of the Manager's performance incentive fee (5.9p) and a dividend payment of 6.0p per Ordinary Share. This is summarised further in the table below:

 

  £'000 Pence per Ordinary Share
NAV at 30 June 201542,111109.9
Dividends paid(2,298)(6.0)
UK investments valuation decrease(291)(0.8)
Italian investments valuation increase1,7954.7
Spanish investments valuation decrease(132)(0.2)
Performance incentive fee(2,270)(5.9)
Other(362)(1.0)
NAV at 30 June 201638,553100.7

 

ii. Cash & Deal Flow

The Ordinary Shares fund had cash and liquid resources of £1.9 million at 30 June 2016. 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.

 

iii. Investment Gains & Losses

There were no realised gains or losses during the year for the Ordinary Shares fund.

 

During the period the Ordinary Shares fund recognised unrealised gains of £1,372,000. Further information regarding the breakdown of this amount is contained in the Manager's Report.

 

iv. Running Costs

The annual management fee of the Ordinary Shares fund is calculated as 1.5% of Net Assets. During the period the management fees (excluding the accrued performance incentive fee) totalled £613,000, of which £153,000 was charged to the revenue account and £460,000 was charged to the capital account.

 

v. Ordinary Share Dividends

The Board originally planned to pay dividends of 5.0p per Ordinary Share each year throughout the life of Foresight Solar & Infrastructure VCT plc after the first year, payable bi-annually via dividends of 2.5p per Ordinary Share in April and October each year. The level of dividends is not, however, guaranteed. The Board is pleased to announce that the next interim dividend, of 3.0p per Ordinary Share, will be paid on 18 November 2016 based on an ex-dividend date of 3 November 2016 and a record date of 4 November 2016, which means that total dividends of 26.0p per Ordinary Share will have been paid since launch.

 

vi. Ordinary Share Issues & Buybacks

During the year under review, 26,094 Ordinary Shares were repurchased for cancellation. No new shares were issued.

 

Performance - C Shares Fund

The underlying net asset value decreased by 6.2p per C Share before deducting the 5.0p per C share dividend paid during the year.

 

The valuation of the UK portfolio decreased by approximately £569,000 (4.5p per C Share). This decrease in valuation was driven principally by the removal of Levy Exemption Certificates (LECs) for renewable energy by the Government from August 2015, lower irradiation than expected and a reduction in actual and forecast power prices. The C shares fund has a greater exposure to ROC subsidised projects than the Ordinary shares fund. This means a greater proportion of project revenues are exposed to changes in wholesale power prices. The US solar investment in the C share portfolio helps to diversify this particular risk.

 

The overall performance of the C Shares fund to date and the time it took to invest the proceeds of the original offer is disappointing but the opportunity to refinance the portfolio together with other operational efficiencies being implemented should see performance improving, albeit the original target of 120p per C Share remains challenging.

 

i. Movement in Net Asset Value of the C Shares Fund

During the period, the net assets of the C Shares fund decreased to 80.5p per share (£10.1 million) at 30 June 2016 from 91.7p per share (£11.5 million) as at 30 June 2015, largely due to the aggregate performance of the investment portfolio and dividends paid. This is summarised further in the table below:

 

  £'000 Pence per C share
NAV at 30 June 201511,47791.7
Dividends paid(625)(5.0)
UK investments valuation decrease(569)(4.5)
Other(216)(1.7)
NAV at 30 June 201610,06780.5

 

ii. Cash & Deal Flow

During the year, the C Shares fund invested £0.95 million in the EOSOL project in Lancaster, California. The project has been operational since 2013 and the region benefits from some of the highest irradiation levels in the world. Following the year end the C Shares fund invested £3.7 million in a 5 MW project at Marchington, Staffordshire. The site was connected to the grid in March 2016 and benefits from a ROC subsidy. At 30 June 2016 the C Shares fund had cash resources of £4,000.

 

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.

 

iii. Investment Gains & Losses

There were no realised gains or losses during the year.

 

During the year the C Shares fund recognised unrealised losses of £569,000. Further information regarding the breakdown of this amount is contained in the Manager's Report.

 

iv. Running Costs

The annual management fee of the C Shares fund is calculated as 1.75% of Net Assets. During the year the management fees totalled £188,000, of which £47,000 was charged to the revenue account and £141,000 was charged to the capital account.

 

v. C Share Dividends

The Board is pleased to announce that the next interim dividend, of 2.5p per C Share, will be paid on 18 November 2016 based on an ex-dividend date of 3 November 2016 and a record date of 4 November 2016.

 

vi. C Share Issues & Buybacks

There were no C Share buybacks and no new shares were issued during the year.

 

Outlook - C Shares Fund

The proceeds of the C Share offer have now been fully deployed into new projects. This has taken considerably longer than originally anticipated which has had a negative impact on the overall returns generated by the C Shares fund. With the fund now fully invested we expect returns to improve especially if power prices recover strongly.

 

D Shares Fund

The D Shares fund offer opened on 1 February 2016, following a window of opportunity to invest in energy generating investments (subject to them not benefitting from any form of Government subsidy) for a very short period until 5 April 2016, after which time they were prohibited for VCTs. After 5 April 2016 the fund will invest in energy related infrastructure investments such as smart meters. The D Shares fund has raised £3.1 million at the time of writing.

 

Name Change

Following the launch of the D Share Offer in February 2016, which has both a solar and more general infrastructure mandate, the Board considered it appropriate to amend the name of the Company from Foresight Solar VCT plc to Foresight Solar & Infrastructure VCT plc to reflect the wider remit of the Company across all three of its share classes.

 

Annual General Meeting

The Company's Annual General Meeting will take place on 8 December 2016 at 1pm. I look forward to welcoming you to the Meeting, which will be held at the offices of Foresight Group in London. Details can be found on page 57.

 

Overall Company Outlook

The O Share portfolio continues to perform in line with expectations. As a mature solar fund based on both FiT and ROC revenues, its future performance will be enhanced by a successful outcome to the manager's portfolio optimisation programme including locking in more stable power price agreements. It will also seek to negotiate land lease extensions that should generate enhanced revenues and value from the UK projects. Within the European portfolio, the successful refinancing of the portfolio of Italian solar assets has led to an increase in value but a small provision has been taken against the value of the Spanish asset, to reflect the likely proceeds from an ongoing disposal process.

 

The performance of the C Share portfolio in the last year has been impacted by several negative factors, namely the abrupt removal of LECs by the UK government in August 2015, poorer than anticipated levels of irradiation, an overall fall in power prices and the delay in investing all of the C Share monies. Our objective is to focus on a combination of operational and financing improvements and, with our final investment at Marchington now generating revenue, we hope the trend in NAV will improve; although we are unlikely to achieve the C Share fund's original target of 120p per share.

 

David Hurst-Brown

Chairman

28 October 2016

 

 

 


Strategic Report

 

Introduction

This Strategic Report, on pages 5 to 9, has been prepared in accordance with the requirements of Section 414 of the Companies Act 2006 and best practice. Its purpose is to inform the members of the Company and help them to assess how the Directors have performed their duty to promote the success of the Company, in accordance with Section 172 of the Companies Act 2006.

 

Foresight Solar & Infrastructure VCT plc Ordinary Shares Fund

Foresight Solar & Infrastructure VCT plc originally raised £37.8 million through an Ordinary Share issue in 2010/2011 and 2011/2012. This fund currently has investments and assets totalling £38.6 million. The number of Ordinary Shares in issue at 30 June 2016 was 38,290,862.

 

Foresight Solar & Infrastructure VCT plc C Shares Fund

In 2013/2014 and 2014/2015, £13.1 million was raised for the C Shares fund. This fund currently has investments and assets totalling £10.1 million. The number of C shares in issue at 30 June 2016 was 12,509,245.

 

Foresight Solar & Infrastructure VCT plc D Shares Fund

Foresight Solar & Infrastructure VCT plc is currently raising funds through a D Share issue. The fund currently has investments and assets totalling £2.0 million. The number of D shares in issue at 30 June 2016 was 1,997,691.

 

Summary of the Investment Policy

Foresight Solar & Infrastructure VCT plc invests mainly in unquoted companies that generate electricity from solar power systems and benefit from long-term government-related price guarantees as well as companies that generate and sell data derived from their ownership and operation of smart data assets.

 

Investment Objectives

 

Ordinary Shares Fund

The key objective of the Ordinary Shares fund is to distribute 130.0p per share, through a combination of tax-free income, buy-backs and tender offers before the sixth anniversary of the closing date of the offer.

 

C Shares Fund

The key objective of the C Shares fund is to distribute 120.0p per share, through a combination of tax-free income, buy-backs and tender offers before the sixth anniversary of the closing date of the offer.

 

D Shares Fund

The key objective of the D Shares fund is to distribute between 110.0p and 115.0p per share, through a combination of tax-free income, buy¬backs and tender offers before the sixth anniversary of the closing date of the offer.

 

Performance and Key Performance Indicators (KPIs)

The Board expects the Manager to deliver a performance which meets the objectives of the three classes of shares. The KPIs covering these objectives are net asset value performance and dividends paid, which, when combined, give net asset value total return. Additional key performance indicators reviewed by the Board include the discount of the share price relative to the net asset value and total expenses as a proportion of shareholders' funds.

 

A record of some of these indicators is contained below and on the following page. The total expense ratio in the period was 2.7% and the average discount at which shares were repurchased in the market was 0.7%. The level of these KPIs compare favourably with the wider VCT marketplace based on independently published information.

 

A review of the Company's performance during the financial year, is contained within the Manager's Report. The Board assesses the performance of the Manager in meeting the Company's objective against the primary KPIs highlighted above.

 

  30 June 2016 30 June 2015
  Ordinary Shares C Shares D Shares Ordinary SharesC SharesD Shares
Net asset value per share 100.7p 80.5p 99.4p 109.9p91.7pN/A
Net asset value total return 123.7p 90.5p 99.4p 126.9p96.7pN/A
           
  Ordinary Shares C Shares D Shares Ordinary SharesC SharesD Shares
Share price 92.5p 84.0p 100.0p 102.5p93.5pN/A
Share price total return 115.5p 94.0p 100.0p 119.5p98.5pN/A
           
  Ordinary Shares C Shares D Shares Ordinary SharesC SharesD Shares
Dividends paid from inception 23.0p 10.0p - 17.0p5.0pN/A
Dividends paid in the year 6.0p 5.0p - 6.0p5.0pN/A
Dividend yield % 6.5 6.0 - 5.95.3N/A

 

 

Ordinary Shares Fund  
Share price discount to NAV at 30 June 20168.1%
Average discount on buybacks0.7%
Shares bought back during the year under review26,094
Decrease in net asset value during year (after adding back 6.0p dividend)2.9%
Total expense ratio2.5%
  
C Shares Fund  
Share price premium to NAV at 30 June 20164.3%
Average discount on buybacks-
Shares bought back during the year under review-
Decrease in net asset value during year (after adding back 5.0p dividend)6.8%
Total expense ratio3.2%
  
D Shares Fund  
Share price premium to NAV at 30 June 20160.6%
Average discount on buybacks-
Shares bought back during the year under review-
Increase in net asset value during yearN/A
Total expense ratio3.4%

 

 

 

Strategies for achieving objectives

 

Investment Policy

Foresight Solar & Infrastructure VCT plc invests mainly in unquoted companies that generate electricity from solar power systems and benefit from long-term government-related price guarantees as well as companies that generate and sell data derived from their ownership and operation of smart data assets.

 

Investment securities

The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stock, convertible securities, and fixed-interest securities as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stock. Non Qualifying Investments may include holdings in money market instruments, short-dated bonds, unit trusts, OEICs, structured products, guarantees to banks or third parties providing loans or other investment to investee companies and other assets where Foresight Group believes that the risk/return portfolio is consistent with the overall investment objectives of the portfolio.

 

UK companies

Investments are primarily made in companies which are substantially based in the UK. The companies in which investments are made must have no more than £15 million of gross assets at the time of investment for funds raised after 6 April 2012 (or £7 million if the funds being invested were raised after 5 April 2006 but before 6 April 2012) to be classed as a VCT qualifying holding.

 

Asset mix

The Company invests in unquoted companies that seek to generate solar electricity and benefit from long-term government-backed price guarantees. Investments may be made in companies seeking to generate renewable energy from other sources provided that these benefit from similar long-term government-backed price guarantees. No investments of this nature have been made to date. The Board has ensured that at least 70% of net funds raised under the Offer have been invested in companies whose primary business is the generation of solar electricity. Any uninvested funds are held in cash, interest bearing securities or other investments.

 

Risk diversification and maximum exposures

Risk is spread by investing in a number of different companies and by targeting a variety of separate locations for the solar power assets. The maximum amount invested by the Company in any one company is limited to 15% of the portfolio at the time of investment. The value of an investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale. Solar projects can in aggregate exceed this limit but suitable structures are put in place so that individual corporate investments do not. Although risk is spread across different companies, concentration risk is fairly high, given that a significant portion are all UK Solar projects.

 

Borrowing powers

The Company's Articles permit borrowing, to give a degree of investment flexibility. The Board's current policy is not to use borrowing. In any event, under the Company's Articles no money may be borrowed without the sanction of an ordinary resolution if the principal amount outstanding of all borrowings by the Company and its subsidiary undertakings (if any), then exceeds, or would as a result of such borrowing exceed, a principal amount equal to the aggregate of the share capital and consolidated reserves of the Company and each of its subsidiary undertakings as shown in the audited consolidated balance sheet. The underlying portfolio companies in which Foresight Solar & Infrastructure VCT plc invests may utilise bank borrowing or other debt arrangements to finance asset purchases but such borrowing would be non-recourse to Foresight Solar & Infrastructure VCT plc.

 

VCT regulation

The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue & Customs ("HMRC"). Amongst other conditions, the Company may not invest in a single company more than 15% of its gross assets at the time of making any investment and must have at least 70% by value of its investments throughout the period in shares or securities in qualifying holdings, of which the specified percentage by value in aggregate must be in ordinary shares which carry no preferential rights (although only 10% of any individual investment needs to be in the ordinary shares of that Company). In respect of capital raised before 6 April 2011 the specified percentage was 30% and in respect of capital raised on or after 6 April 2011 the specified percentage was 70%.

 

Management

The Board has engaged Foresight Group as discretionary investment manager. Foresight Fund Managers Limited also provides or procures the provision of company secretarial, administration and custodian services to the Company.

 

Foresight Fund Managers Limited is the secretary of the Company.

 

Foresight Group prefers to take a lead role in the companies in which it invests. Larger investments may be syndicated with other investing institutions, or strategic partners with similar investment criteria.

 

A review of the investment portfolio and of market conditions during the year is included within the Manager's Report.

 

Environmental, Human Rights, Employee, Social and Community Issues

The Company's investments have been made in clean energy and environmental infrastructure projects which have clear environmental benefits.

 

The Board recognises the requirement under Section 414 of the Act to provide information about environmental matters (including the impact of the Company's business on the environment), employee, human rights, social and community issues; including information about any policies it has in relation to these matters and effectiveness of these policies. As the Company has no employees or policies in these matters this requirement does not apply.

 

Gender diversity

The Board currently comprises three male Directors. The Board is, however, conscious of the need for diversity and will consider both male and female candidates when appointing new Directors.

 

The Manager has an equal opportunities policy and currently employs 79 men and 52 women.

 

Dividend policy

The Board plans to pay dividends of 5.0p per share each year throughout the life of Foresight Solar & Infrastructure VCT plc after the first year, payable bi-annually via dividends of 2.5p per share in April and October each year. The level of dividends is not however, guaranteed.

 

Purchase of own shares

It is the Company's policy, subject to adequate cash availability, to consider repurchasing shares when they become available in order to help provide liquidity to the market in the Company's shares.

 

Principal risks, risk management and regulatory environment

The Board carries out a regular and robust review of the risk environment in which the company operates. The principal risks and uncertainties identified by the Board which might affect the Company's business model and future performance, and the steps taken with a view to their mitigation, are as follows:

 

Economic risk: events such as economic recession or general fluctuation in stock markets and interest rates may affect the performance of projects, as well as affecting the Company's own share price and discount to net asset value. Mitigation: the Company invests in a portfolio of investments and maintains sufficient cash reserves to be able to meet its liabilities.

 

VCT qualifying status risk: the Company is required at all times to observe the conditions laid down in the Income Tax Act 2007 for the maintenance of approved VCT status. The loss of such approval could lead to the Company losing its exemption from corporation tax on capital gains, to investors being liable to pay income tax on dividends received from the Company and, in certain circumstances, to investors being required to repay the initial income tax relief on their investment. Mitigation: the Manager keeps the Company's VCT qualifying status under continual review, seeking to take appropriate action to maintain it where required, and its reports are reviewed by the Board on a quarterly basis. The Board has also retained RW Blears LLP to undertake an independent VCT status monitoring role.

 

Investment and liquidity risk: many of the Company's investments are in small and medium-sized unquoted companies which are VCT qualifying holdings, and which by their nature entail a higher level of risk and lower liquidity than investments in larger quoted companies. Mitigation: the Directors aim to limit the risk attaching to the portfolio as a whole by careful selection, close monitoring and timely realisation of investments, by carrying out rigorous due diligence procedures. The Board reviews the investment portfolio with the Manager on a regular basis.

 

Legislative and regulatory risk: in order to maintain its approval as a VCT, the Company is required to comply with current VCT legislation in the UK, which reflects the European Commission's State aid rules. Changes to the UK legislation or the State aid rules in the future could have an adverse effect on the Company's ability to achieve satisfactory investment returns whilst retaining its VCT approval. Mitigation: The Board and the Manager monitor political developments and where appropriate seek to make representations either directly or through relevant trade bodies.

 

Natural disasters: severe weather/natural disasters could lead to reduction in performance and value of the assets. Mitigation: there is no mitigation that can be taken against natural disasters; however, our Operations and Maintenance provider is able to respond quickly to repair any damage and reduce the amount of down time.

 

Internal control risk: the Company's assets could be at risk in the absence of an appropriate internal control regime. This could lead to theft, fraud, and/or an inability to provide accurate reporting and monitoring. Mitigation: the Board regularly reviews the system of internal controls, both financial and non-financial, operated by the Company and the Manager. These include controls designed to ensure that the Company's assets are safeguarded and that proper accounting records are maintained.

 

Financial risk: inappropriate accounting policies might lead to misreporting or breaches of regulations. Mitigation: the Manager is continually reviewing accounting policies and regulations, and its reports are reviewed by the Board on a quarterly basis.

 

Viability Statement

In accordance with principle 21 of the AIC Code of Corporate Governance published by the AIC in February 2015, the Directors have assessed the prospects of the Company over the three year period to 30 June 2019. This three year period is used by the Board during the strategic planning process and is considered reasonable for a business of its nature and size.

 

In making this statement, the Board carried out an assessment of the principal risks facing the Company, including those that might threaten its business model, future performance, solvency, or liquidity.

 

The Board also considered the ability of the Company to raise finance and deploy capital. This assessment took account of the availability and likely effectiveness of the mitigating actions that could be taken to avoid or reduce the impact of the underlying risks, including the Manager adapting their investment process to take account of the more restrictive VCT investment rules.

 

This review has considered the principal risks which were identified by the Board. The Board concentrated its efforts on the major factors that affect the economic, regulatory and political environment.

 

The Directors have also considered the Company's income and expenditure projections and underlying assumptions for the next three years and found these to be realistic and sensible.

 

Based on the Company's processes for monitoring cash flow, share price discount, ongoing review of the investment objective and policy, asset allocation, sector weightings and portfolio risk profile, the Board has concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three years to 30 June 2019.

 

Performance-related incentives

 

Ordinary Shares fund

After distributions of 100.0p per Ordinary Share issued under the Offer and remaining in issue at the date of calculation have been paid to Ordinary shareholders of the Company, Foresight Group will become entitled to a performance incentive which will be calculated at the rate of 20% of distributions in excess of 100.0p per Ordinary Share until total distributions reach 130.0p per share and 30% above that level.

 

C Shares fund

After distributions of 100.0p per C Share issued under the Offer and remaining in issue at the date of calculation have been paid to C shareholders by the Company, Foresight Group will become entitled to a performance incentive which will be calculated at the rate of 20% of distributions in excess of 100.0p per C Share until total distributions reach 120.0p per share and 30% above that level.

 

D Shares fund

After distributions of 100.0p per D Share issued under the offer and remaining in issue at the date of calculation have been paid to D shareholders by the Company, Foresight Group will become entitled to a performance incentive which will be calculated at the rate of 20% of distributions in excess of 100.0p per D Share until total distributions reach 115.0p per share and 30% above that level.

 

Valuation Policy

Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines (December 2015) developed by the British Venture Capital Association and other organisations. Through these guidelines, investments are valued as defined at 'fair value'. Ordinarily, unquoted investments will be valued at cost for a limited period following the date of acquisition, being the most suitable approximation of fair value unless there is an impairment or significant accretion in value during the period. The portfolio valuations are prepared by Foresight Group, reviewed and approved by the Board quarterly and subject to review by the auditors annually.

 

A broad range of assumptions are used in our valuation models. These assumptions are based on long-term forecasts and are not affected by short-term fluctuations in inputs, be it economic or technical. Under the normal course of events, we would expect asset valuations to reduce each period due to the finite nature of the cash flows.

 

VCT Tax Benefit for Shareholders

To obtain VCT tax reliefs on subscriptions up to £200,000 per annum, a VCT investor must be a 'qualifying' individual over the age of 18 with UK taxable income. The tax reliefs for subscriptions since 6 April 2006 are:

 

  • Income tax relief of 30% on subscription for new shares, which is forfeit by shareholders if the shares are not held for more than five years;
  • VCT dividends (including capital distributions of realised gains on investments) are not subject to income tax in the hands of qualifying holders; and
  • Capital gains on disposal of VCT shares are tax-free, whenever the disposal occurs.

 

Venture Capital Trust Status

Foresight Solar & Infrastructure VCT plc is approved by HMRC as a venture capital trust (VCT) in accordance with Part 6 of the Income Tax Act 2007. It is intended that the business of the Company be carried on so as to maintain its VCT status.

 

The Directors have managed, and continue to manage, the business in order to comply with the legislation applicable to VCTs. The Board has appointed RW Blears LLP to monitor and provide continuing advice in respect of the Company's compliance with applicable VCT legislation and regulation. As at 30 June 2016 the Company had 74.68% (2015: 81.0%) of its funds in such VCT qualifying holdings.

 

Future Strategy

The Company will limit its future investment in new energy and infrastructure related projects for the D share class as well as optimising the performance and returns from the existing portfolio of solar and infrastructure assets. This will enable the Board to deliver an attractive exit for those investors who elect to redeem their investments after the five-year holding period, whilst targeting an attractive dividend yield for those Shareholders who elect to remain invested in the Company for the longer term.

 

 

 

David Hurst-Brown

Director

28 October 2016

 

 

 


Manager's Report

 

UK Regulatory and Market Changes

UK assets account for 85% of the Company's total investment valuation and, while there have been certain specific adjustments to certain mechanisms within the national regulatory framework, the Investment Manager believes that the UK Government remains committed to the development of renewable energy as part of its long-term objective of reducing the carbon intensity of the UK economy.

 

Following the consultations in July 2015, the Department of Energy and Climate Change ("DECC") announced in December 2015 it would close the Renewable Obligation Scheme ("RO Scheme") to new solar PV of 5MW and below from 1 April 2016 onwards, subject to certain grace periods. This was driven by the significant increase in the installed capacity of UK solar in recent years, with the Solar Trade Association estimating that UK solar capacity surpassed 10GW at the end of March 2016. DECC had previously flagged that it would continue to monitor the deployment of new installations and the subsequent impact this would have on the Levy Control Framework ("LCF"). It should be noted that the changes to the RO Scheme described above had no impact on the existing installed capacity of the UK component of the Company's portfolio.

 

In July 2015, DECC also announced the postponement of the 2015 auction under the Contracts for Difference ("CfD") scheme for large renewables projects. In November 2015, the mechanism was suspended indefinitely amidst a purported overspend within the LCF and in February 2016, the then Energy Secretary Amber Rudd confirmed that there are currently no plans for large-scale solar to be handed future contracts under the CfD mechanism.

 

On 23 June 2016, the UK Government held a referendum in which the majority of the electorate voting indicated a preference for the UK to leave the European Union. Whilst unexpected, we expect the result to have limited, if any, impact on the Company. The fundamentals of the UK solar sector are not materially underpinned by any EU regulation or legislation. The Renewable Obligation and the Levy Control Framework are enshrined in the Law of England and Wales and do not require transposition from EU Directives or other legislation. Asset revenue streams are principally driven by UK Government subsidies and UK wholesale power prices and all of the Company's UK operational costs are denominated in Pound Sterling. The main costs to the portfolio are land leases and O&M contracts which have been secured under long term contracts. Financing costs also have a limited exposure to interest rate movements.

 

In July 2016, it was announced that DECC would be dissolved and the department's functions would be transferred to the new Department of Business, Energy and Industrial Strategy a combination of DECC and the Department of Business, Innovation and Skills. The new department will be led by the Rt. Hon. Greg Clark, the former Communities Secretary who has also held the position of shadow Energy Secretary in the past. The appointment has been broadly well-received by those in the renewable industry, as the Minister has previously been vocal of his support for renewable energy and the green economy. While the impact this will have on the renewable energy sector is at this point unclear, there are several positives that may result from the decision such as the ability for more co-ordinated policy decisions.

 

Following these announcements, the Investment Manager does not anticipate any further regulatory changes that may impact the UK's renewable initiatives or the Government's commitment to the 2008 Climate Change Act targets. Indeed, on 30 June 2016 the Government approved the Fifth Carbon Budget demonstrating its continued commitment to the development of renewable and low carbon energy supply. This commitment is set within the context of further strengthening of the international consensus regarding the requirement to implement climate change mitigation actions, as evidenced by the ratification of the 2015 Paris Agreement on reducing greenhouse gas emissions by the US and China on 3 September 2016.

 

Power Prices

UK power prices continued a downward trend throughout the year, driven in part by lower gas prices due to stockpiles of natural gas and above average winter temperatures during the fourth quarter of 2015. The market experienced a recovery in spot prices in Q2 2016 supported by an increase in gas prices with average power prices increasing to levels above £40/MWh by the end of the quarter. Despite this recovery, the Company has revised downwards its forecast power prices by an average of c. 11% over the year for valuation purposes, in line with the most recently published advisor reports.

 

The Company's power curve assumptions are solely based on a blended average of the forecasts provided by a number of third party consultants and the Investment Manager believes that the recent power price declines have been appropriately reflected. It should be noted that the Company's forecasts continue to assume an increase in power prices in real terms over the medium to long-term of 2.0% per annum.

 

It should also be noted that although the Investment Manager incorporates the latest curves published by its third party consultants in the Company's NAV calculations, the reports are published relatively infrequently and tend to display a lag to actual market developments. As such, the recent recovery in spot prices has not yet been reflected in the Company's NAV.

 

The impact of falling power prices can be mitigated, to a certain extent, by the fact that c. 78% of portfolio revenues received are from fixed electricity price contracts, subsidies and associated green benefits which are grandfathered and index-linked.

 

Portfolio Optimisation

The Investment Manager has run a number of concurrent processes to maximise the free cash being generated by the portfolio. As well as increasing the technical efficiency of the sites, the asset management team has been able to significantly improve the commercial terms across a number of contracts.

 

Power Purchase Agreements

To date, the Company has adopted a Power Purchase Agreement ("PPA") strategy that seeks to optimise revenues from power generated, whilst maintaining the flexibility to manage the portfolio appropriately. During the year the Investment Manager used the significant scale of its wider portfolio (including assets not owned by the Company) in order to optimise the PPA and commercial terms of the Company's portfolio.

 

During the year the Company entered into new PPA contracts and secured an increase in passthrough rates for the sale of both ROCs and electricity against the original contracts, resulting in an increase of 3% for ROC passthrough rates and 4.6% for electricity sales passthrough rates.

 

The Company will benefit from further upward movements if power prices continue to increase as forecast by independent consultants. At the same time, the existing PPA contracts allow the Investment Manager to fix the price at any time by giving notice to the offtaker, thereby mitigating the risk of revenue reductions from significant downward movements in prices. It should be noted that the PPAs also provide the flexibility to incorporate new technologies such as batteries and storage, which may provide potential upside in the future.

 

Project Insurance

Over the past two years the like for-like cost of insurance across the portfolio has fallen by over 50%. This reduction in cost has been achieved at the same time as improving the terms of cover such as lowering the level of claim deductibles. The Investment Manager has fixed the current price for a three-year period, subject to certain loss limits not being breached.

 

O&M Service

O&M costs are expected to decrease in the short and medium term as the increase in total UK solar installed capacity allows for market consolidation and economies of scale. The Investment Manager aims to improve cost efficiency by renegotiating the majority of the existing O&M agreements when current agreements expire. This will allow the Company to secure competitive renewal terms while ensuring the standard of work expected by the Investment Manager is met, either by entering new contracts with the existing O&M contractor or by appointing a new contractor.

 

As part of this process, Brighter Green Engineering ("BGE"), a subsidiary of Foresight Group, was appointed as O&M contractor to the FiT sites in Q2 2016. This has resulted in a decrease in annual fees and an uplift in asset performance since the company took over the sites, driven by the company's technical expertise and market leading incident response times.

 

Further to the reduction in cost, the new contract provides for a comprehensive scope of work in excess of that typically offered by competitors, including:

 

  • Full turnkey scope including, but not limited to, unlimited corrective maintenance (with key components replaced), response times, high-voltage works, plant security and monitoring;
  • Frequent module and panel cleaning;
  • Annual thermographic study of all modules, with further investigation and/or laboratory testing in case of malfunctions as required in preparation of claims;
  • Annual voltage and current testing of a photovoltaic modules sample in order to confirm that module output power is in line with manufacturer technical specifications;
  • Assistance with laboratory testing of up to 50 modules annually (including demounting, mounting, transport);
  • Annual testing of transformer oil and two-yearly testing of partial discharge activity on all switchgear. These activities are typically only recommended by the equipment manufacturers but the Investment Manager has included it in the scope as mandatory, recognising the importance of high-voltage equipment on site, regarding their replacement cost in case of catastrophic faults, and particularly the associated plant downtime and costs; and
  • Full management of Landscape and Environmental Management Plans, ensuring compliance with planning conditions and collaborations with ecologists to enhance biodiversity.

 

We expect similar efficiencies to be secured for other assets in the portfolio once the existing O&M contractual terms reach either the end of their two year guaranteed performance period, when applicable, or final contract term, further reducing costs to the Company.

 

Portfolio Performance - Ordinary Shares UK Assets

The UK assets account for 85% of the total investment valuation. Although the technical efficiency of the plants was above the expectations of the investment manager total production was slightly below long term expectations due to solar irradiation being 4.1% below expectations over the year.

 

The principal UK assets in the Ordinary Shares fund are as follows:

 

  • Four plants in Kent, Somerset and Wiltshire which all possess index linked Feed-in Tariffs (FiTs) over 25 years. These assets have a favorable yield profile in relation to later ROC-based projects and benefit from the low cost of the bond re-financing, executed in 2013; and
  • the Turweston 16.45 MW project in Buckinghamshire which benefits from 1.4 ROCs.

 

Irradiation expectations are formed at the point of acquisition and validated by independent technical advisers. The irradiation variance for the period represents short-term volatility levels which would not be considered atypical, though the irradiation forecasts produced at the time of acquisition are prepared based on a normal probability distribution of long term historical annual irradiation data and don't incorporate such intra-period volatility. For reference, the irradiance variance verified for the year to June 2015 were 6.6% above forecast.

 

European Assets

Production from the Italian and Spanish assets was in line with expectations of the Investment Manager. While irradiation levels across the European assets mirrored the low levels seen in the UK strong technical performance more than compensated for the lower levels of solar resources available.

 

Sale of La Castilleja

The Investment Manager has explored the possibility of both refinancing and selling the La Castilleja investment. Given that the proposed restructuring terms were unattractive, and also required a further equity injection, a sale was pursued. Following a tender exercise, the sale exchanged after the period end. The year-end valuation in these accounts represents the proposed sale price.

 

Although the agreed sale price was at a discount to the initial equity investment, the Investment Manager believes it represented good value for investors under the strained circumstances especially considering future political uncertainty.

 

Concurrently, in order to allow the Fund to recover the damages created from a change-in-law, the Investment Manager has been pursuing arbitration against the Spanish government for the breach of fair and equitable treatment of investors provided under the Energy Charter Treaty ("ECT"), to which Spain is a party.  A litigation funding agreement is in place to limit the cost risks of this litigation.

 

This will be a lengthy process but will be unaffected by the sale.

 

Refinancing of Italian Assets

In Q1 2016 the Investment Manager refinanced existing debt across the Italian investments, reducing the cost of debt and restoring cash distributions following a period of political uncertainty. Alongside further asset optimisation and consolidation the refinancing has led to an increase in the asset valuations.

 

Exit

The fifth anniversary of the final closing of the original public offering of the Ordinary Shares will occur in November of this year. During the year the Investment Manager began exploring options for the generation of liquidity to shareholders through a refinancing or sale of all or part of the Ordinary Share portfolio. The Board has included with the Annual Report & Accounts a letter to shareholders providing an update in this regard.

 

Portfolio Performance - C Shares

Mirroring the performance of the Ordinary shares, the technical efficiency of the plants was above the expectations of the investment manager but total production was below long term expectations due to solar irradiation being 5.4% below expectations over the year. Irradiation levels are measured by site specific monitoring equipment and so local weather patterns can vary between portfolios.

 

The C Shares fund has acquired equity ownership of the 3.6MW portfolio located in Lancaster, California, a region which benefits from some of the highest levels of irradiance in the world. To date the project has performed above base case projections. The C Shares fund invested c. £1 million in the project in September 2015 via Skibo Solar III Limited.

 

Following the acquisition of the 5MW Marchington plant the share class is now fully deployed. The site, located in Staffordshire, was connected to the grid in March 2016.

 

The Investment Manager is currently investigating refinancing options for short-term debt in respect of one asset within portfolio of this share class, being the 6 MW Saron project; this is being undertaken as part of a wider refinancing exercise of several solar portfolios (including assets not owned by the Company).

 

Risk Management

Reliance is placed on the internal systems and controls of the Investment Manager and external service providers such as the Administrator to effectively manage risk across the portfolio. Foresight has a comprehensive Risk Management framework in place which is reviewed on a regular basis by the Directors.

 

Environmental Social and Governance Considerations

The Company believes Environmental, Social and Governance ("ESG") considerations play an important part in delivering responsible and sustainable growth for the long term. These factors have been integrated into all stages of the investment process, and are actively supported by all involved, regardless of seniority. With that in mind, the Company has developed its Responsible Investment Framework to provide a suitable operational framework in matters related to the investment process, such that ESG has become part of the normal day-to-day operation.

 

Health and Safety

There were no health and safety incidents reported during the period. The Investment Manager has appointed a health and safety consultant to review all portfolio assets to ensure they not only meet, but exceed, industry and legal standards.

 

Environmental

Further to the environmental advantages of large scale renewable energy, each investment is closely scrutinised for localised environmental impact. Where improvements can be made, the Company will work with planning and local authorities to minimise visual and auditory impact of sites.

 

Biodiversity Assessments

The Investment Manager is actively exploring ways of maximising the biodiversity and wildlife potential for all of its UK solar assets. As such, the Investment Manager has prepared a series of site specific biodiversity enhancement and management plans to secure long-term gains for wildlife such as:

 

  • Management of grassland areas within the security fencing;
  • Management of hedgerows and associated hedge banks;
  • Management of field boundaries between security fencing and hedgerows;
  • Management of woodland blocks;
  • Installation of Herptile/Reptile hibernacula;
  • Installation of boxes for bats, owls and kestrels; and
  • Installation of bee hives.

 

As part of our EPC contracts, contractors are obliged to design plants in such a way that they allow for sheep grazing.

 

Social

The Investment Manager has actively sought to engage with the local communities of the solar assets. Open days have been arranged for local residents, businesses and schools to visit the sites where they can learn more about the benefits of solar and the need for more stable renewable policy support.

 

Outlook

Having focused on the consolidation and optimisation of the portfolio the Investment Manager has leveraged its experience in the sector to implement several value-enhancing strategies to the benefit of Shareholders.

 

As one of the largest solar asset managers in the UK, with over 620MW of UK solar assets under management, the Investment Manager is uniquely positioned to optimise these assets driving value for investors though increasing exit valuations.

 

The market dynamics will improve further if the recent recovery in UK wholesale power market continues as forecast. We believe the Company is well positioned through its floating PPA exposure to benefit from any additional upward movements resulting in increased revenue generation, further underpinning returns to Shareholders.

 

Whilst we do not expect the result of the EU referendum in June and the resulting dissolution of DECC to have an immediate impact on the Fund, we will continue to monitor developments carefully, and report to investors in due course.

 

Over the next twelve months, the Investment Manager will continue to focus on maximising the operational performance of the existing portfolio, whilst looking to maximise value on any exit.

 

 

 

Dan Wells

Partner

28 October 2016

 


Statement of Directors' Responsibilities

 

The Directors are responsible for preparing the Annual Report and the financial statements, in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice) including FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland.

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

 

In preparing these financial statements, the Directors are required to:

 

- select suitable accounting policies and then apply them consistently;

- make judgements and estimates that are reasonable and prudent;

- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

 

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (which is delegated to Foresight Group and incorporated into their website). Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

 

We confirm that to the best of our knowledge:

 

- the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;

- the Annual Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces; and

- the report and accounts, taken as a whole, are fair, balanced, and understandable and provide the necessary information for the shareholders to assess the company's performance, business model and strategy.

 

 

On behalf of the Board

 

 

 

David Hurst-Brown

Chairman

28 October 2016


Unaudited Non-Statutory Analysis of the Share Classes

 

Income Statements          
for the year ended 30 June 2016         
  Ordinary Shares Fund C Shares Fund D Shares Fund
  Revenue Capital Total Revenue Capital Total Revenue Capital Total
  £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment holding gains/losses-1,372 1,372 -(569) (569) -- -
Income827- 827 140- 140 6- 6
Investment management fees(153)(2,730) (2,883) (47)(141) (188) (2)(5) (7)
Other expenses(343)- (343) (131)- (131) (10)- (10)
Return/(loss) on ordinary activities before taxation 331(1,358) (1,027) (38)(710) (748) (6)(5) (11)
Taxation(66)66--- - -- -
Return/(loss) on ordinary activities after taxation 265(1,292) (1,027) (38)(710) (748) (6)(5) (11)
Return/(loss) per share 0.7p(3.4)p (2.7)p (0.3)p(5.7)p (6.0)p (0.3)p(0.3)p (0.6)p

 

 

 

Balance Sheets
       
at 30 June 2016       
     Ordinary Shares Fund   C Shares Fund D Shares Fund
     £'000   £'000 £'000
Fixed assets           
Investments held at fair value through profit or loss      40,121 9,9241,620
            
Current assets         
Debtors     408 1912,015
Money market securities and other deposits     9 --
Cash     1,867 4-
       2,284 1952,015
Creditors           
Amounts falling due within one year      (3,852) (52)(1,649)
Net current (liabilities)/assets       (1,568) 143366
Net assets       38,553   10,067 1,986
         
Capital and reserves            
Called-up share capital      383 12520
Share premium account      - 1,5721,977
Capital redemption reserve      2 --
Profit and loss account      38,168 8,370(11)
Equity shareholders' funds       38,553   10,067 1,986
Number of shares in issue       38,290,862   12,509,245 1,997,691
Net asset value per share       100.7p   80.5p 99.4p
               
               

 

At 30 June 2016 there was an inter-share debtor/creditor of £1,574,000 which has been eliminated on aggregation.

 


Reconciliations of Movements in Shareholders' Funds

for the year ended 30 June 2016

 

 

 

 

 

Ordinary Shares Fund
 

Called-up

share capital

£'000
Share

premium

account

£'000
Capital

redemption

reserve

£'000
Profit

and loss

account

£'000
 

 

Total

£'000
      
As at 1 July 2015383-241,72642,111
Expenses in relation to prior year share issues---(206)(206)
Repurchase of shares---(27)(27)
Dividends---(2,298)(2,298)
Loss for the year---(1,027)(1,027)
As at 30 June 2016 383 - 2 38,168 38,553
      
      
      
 

 

 

C Shares Fund
 

Called-up

share capital

£'000
Share

premium

account

£'000
Capital

redemption

reserve

£'000
Profit

and loss

account

£'000
 

 

Total

£'000
      
As at 1 July 20151251,609-9,74311,477
Expenses in relation to prior year share issues-(37)--(37)
Dividends---(625)(625)
Loss for the year---(748)(748)
As at 30 June 2016 125 1,572 - 8,370 10,067
           
           
           
 

 

 

D Shares Fund
 

Called-up

share capital

£'000
Share

premium

account

£'000
Capital

redemption

reserve

£'000
Profit

and loss

account

£'000
 

 

Total

£'000
           
As at 1 July 2015-----
Share issue in the year202,015--2,035
Expenses in relation to share issues-(38)--(38)
Loss for the year---(11)(11)
As at 30 June 2016 20 1,977 - (11) 1,986

                                                                               

 

 

 


Audited Income Statement

for the year ended 30 June 2016

 

  Year ended

30 June 2016
Year ended

30 June 2015
  Revenue

£'000
Capital

£'000
Total

£'000
Revenue

£'000
Capital

£'000
Total

£'000
Investment holding gains - 803 803 -5,5255,525
Income 973 - 973 1,155-1,155
Investment management fees (202) (2,876) (3,078) (205)(616)(821)
Gains on the value of derivatives - - - -154154
Other expenses (484) - (484) (433)-(433)
Return/(Loss) on ordinary activities before taxation 287 (2,073) (1,786) 5175,0635,580
Taxation (66) 66 - (107)107-
Return/(Loss) on ordinary activities after taxation 221 (2,007) (1,786) 4105,1705,580
Return/(Loss) per share:          
Ordinary Share 0.7p (3.4)p (2.7)p 1.0p13.9p14.9p
C Share (0.3)p (5.7)p (6.0)p 0.2p(1.2)p(1.0)p
D Share (0.3)p (0.3)p (0.6)p N/AN/AN/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 total recognised gains and losses has been presented.


Audited Reconciliation of Movements in Shareholders' Funds
 
 
 
 
Year ended 30 June 2016
Called-up

share

capital £'000
Share

premium

account £'000
Capital

redemption

reserve £'000
Profit

and loss

account £'000
 

 

Total £'000
           
As at 1 July 2015 508 1,609 2 51,469 53,588
Share issue in the year 20 2,015 - - 2,035
Expenses in relation to prior year share issues - (75) - (206) (281)
Repurchase of shares - - - (27) (27)
Dividends - - - (2,923) (2,923)
Loss for the year - - - (1,786) (1,786)
As at 30 June 2016 528 3,549 2 46,527 50,606
      
      
 
 
 
Year ended 30 June 2015
Called-up

share

capital £'000
Share

premium

account £'000
Capital

redemption

reserve £'000
Profit

and loss

account £'000
 

 

Total £'000
      
As at 1 July 201450812,336238,46651,312
Expenses in relation to prior year share issues-(27)-(336)(363)
Repurchase of shares---(16)(16)
Cancellation of share premium-(10,700)-10,700-
Dividends---(2,925)(2,925)
Loss for the year---5,5805,580
As at 30 June 20155081,609251,46953,588
 

 


Audited Balance Sheet

at 30 June 2016

 

Registered Number: 07289280

 

  As at

30 June

2016

£'000
As at

30 June

2015

£'000
     
Fixed assets    
Investments held at fair value through profit or loss 51,665 51,705
     
Current assets    
Debtors 1,040 720
Money market securities and other deposits 9 9
Cash 1,871 1,221
  2,920 1,950
Creditors    
Amounts falling due within one year (3,979) (67)
Net current (liabilities)/assets (1,059) 1,883
Net assets 50,606 53,588
     
Capital and reserves    
Called-up share capital 528 508
Share premium account 3,549 1,609
Capital redemption reserve 2 2
Profit and loss account 46,527 51,469
Equity shareholders' funds 50,606 53,588
     
     
Net asset value per share    
Ordinary Share 100.7p 109.9p
C Share 80.5p 91.7p
D Share 99.4p N/A

 

 

 


Audited Cash Flow Statement

for the year ended 30 June 2016

 

  Year

ended

30 June

2016

£'000
Year

ended

30 June

2015

£'000
Cash flow from operating activities    
Investment income received 1,098 686
Deposit and similar interest received 1 1
Investment management fees paid (808) (818)
Secretarial fees paid (170) (167)
Other cash payments (549) (289)
Net cash outflow from operating activities and returns on investment (428) (587)
     
Returns on investment and servicing of finance    
Purchase of investments* (1,361) (1,808)
Net proceeds on sale of investments 3,824 4,071
New proceeds on sale of financial assets-662
Net capital inflow from financial investment 2,463 2,925
     
Equity dividends paid (2,923) (2,925)
     
Financing    
Proceeds of fund raising** 1,642 -
Expenses of fund raising (61) (463)
Repurchase of own shares*** (43)  (36)
  1,538 (499)
Increase/(decrease) in cash 650 (1,086)
     
     
Reconciliation of net cash flow to movement in net funds    
Increase/(decrease) in cash and cash equivalents for the year 650 (1,086)
Net cash and cash equivalents at start of year 1,230 2,316
Net cash and cash equivalents at end of year 1,880 1,230

 

 

Analysis of changes in net cash    
  At

1 July

2015

£'000
Cash

flow

£'000
At

30 June

2016

£'000
    
Cash and cash equivalents****1,230650 1,880

 

 

* Cash of £1,620,000 for the investment in Shaftesbury Solar I limited is held in the Company's bank account and is therefore not included in the Company's cashflows
** This does not include £377,000 funds raised which remain receivable at 30 June 2016
*** £16,000 relates to the repurchase of own shares during the year ended 30 June 2015 and which were in creditors at that date.
**** including money market securities and other deposits

 

 


 

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 30 June 2016.  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.    These are not statutory accounts in accordance with S436 of the Companies Act 2006. The full audited accounts for the year ended 30 June 2016, 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 30 June 2016 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 £38,553,000 (2015: £42,111,000) and on 38,290,862 Ordinary Shares (2015: 38,316,956), being the number of Ordinary Shares in issue at that date.
 
Net asset value per C Share is based on net assets at the year end of £10,067,000 (2015: £11,477,000) and on 12,509,245 C Shares (2015: 12,509,245), being the number of C Shares in issue at that date.
 
Net asset value per D Share is based on net assets at the year end of £1,986,000 (2015: £N/A) and on 1,997,691 D Shares (2015: N/A), being the number of D Shares in issue at that date.
 

5.    Return per share

 

  Year ended 30 June 2016 Year ended 30 June 2015
  Ordinary

Shares

£'000
 

C Shares

£'000
D Shares
£'000
Ordinary

Shares

£'000
 

C Shares

£'000
D Shares
£'000
             
Total (loss)/return after taxation (1,027) (748) (11) 5,708(128)N/A
Total (loss)/return per share (note a) (2.7)p (6.0)p (0.6)p 14.9p(1.0)pN/A
Revenue return/(loss) from ordinary activities after taxation 265 (38) (6) 39119N/A
Revenue return/(loss) per share (note b) 0.7p (0.3)p (0.3)p 1.0p0.2pN/A
Capital (loss)/return from ordinary activities after taxation (1,292) (710) (5) 5,317(147)N/A
Capital (loss)/return per share (note c) (3.4)p (5.7)p (0.3)p 13.9p(1.2)pN/A
Weighted average number of shares in issue during the year 38,302,982 12,509,245 1,765,163 38,331,91512,509,245N/A

 

Notes:

a) Total return per share is total return after taxation divided by the weighted average number of shares in issue during the year.

b) Revenue return per share is revenue return after taxation divided by the weighted average number of shares in issue during the year.

c) Capital return per share is capital return after taxation divided by the weighted average number of shares in issue during the year.
 

6.    The Annual General Meeting will be held at 1.00pm on 8 December 2016 at the offices of Foresight Group LLP, The Shard, 32 London Bridge Street, London, SE1 9SG.

 

7.    Income

 

  Year ended

30 June

2016

£'000
Year ended

30 June

2015

£'000
     
Loan stock interest 972 1,153
Bank interest 1 2
  973 1,155

 

 


8.     Investments held at fair value through profit or loss

 

  2016

£'000
2015

£'000
     
Unquoted investments 51,665 51,705
  51,665 51,705
   
Company   Unquoted & Total

£'000
   
Book cost as at 1 July 2015 39,373
Opening investment holding gains 12,332
Valuation at 1 July 2015 51,705
Movements in the year:  
       Purchases at cost 2,981
       Disposal proceeds (3,824)
       Investment holding gains 803
Valuation at 30 June 2016   51,665
Book cost at 30 June 2016 38,530
Closing investment holding gains 13,135
Valuation at 30 June 2016   51,665
   
Ordinary Shares Fund   Unquoted & Total

£'000
   
Book cost as at 1 July 2015 29,373
Opening investment holding gains 12,324
Valuation at 1 July 2015 41,697
Movements in the year:  
       Purchases at cost 411
       Disposal proceeds (3,359)
Investment holding gains   1,372
Valuation at 30 June 2016   40,121
Book cost at 30 June 2016 26,425
Closing investment holding gains   13,696
Valuation at 30 June 2016   40,121
    
C Shares Fund   Unquoted & Total

£'000
   
Book cost as at 1 July 2015 10,000
Opening investment holding gains 8
Valuation at 1 July 2015 10,008
Movements in the year:  
       Purchases at cost 950
       Disposal proceeds (465)
       Investment holding losses (569)
Valuation at 30 June 2016   9,924
Book cost at 30 June 2016 10,485
Closing investment holding losses (561)
Valuation at 30 June 2016   9,924
     
D Shares Fund   Unquoted & Total

£'000
   
Book cost as at 1 July 2015 -
Opening investment holding gains -
Valuation at 1 July 2015 -
Movements in the year:  
       Purchases at cost 1,620
       Disposal proceeds -
       Investment holding gains -
Valuation at 30 June 2016   1,620
Book cost at 30 June 2016 1,620
Closing investment holding gains -
Valuation at 30 June 2016   1,620

 

 

9.    Transactions with the manager

 

Foresight Group, which acts as investment manager to the Company in respect of its venture capital investments earned fees of £808,000 in the year (2015: £821,000).

 

Foresight Fund Managers Limited provides administration services to the Company, and received fees of £170,000 during the year (2015: £167,000). The annual administration and accounting fee (which is payable together with any applicable VAT) is 0.3% of the net funds raised by the offer (subject to a minimum index-linked fee of £60,000 for each of the Ordinary, C Share and D Share funds).

 

At the balance sheet date there was £3,000 due from Foresight Group (2015: £3,000 due to Foresight Group).

 

Foresight Group is responsible for external costs such as legal and accounting fees, incurred on transactions that do not proceed to completion ('abort expenses'). In line with industry practice, Foresight Group retain the right to charge arrangement and syndication fees and Directors' or monitoring fees ('deal fees') to companies in which the Company invests. From this, Foresight Group received from investee companies arrangement fees of £49,000 in the year (2015: £579,000).

 

END




This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX Corporate Solutions clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.

Source: Foresight Solar & Infrastructure VCT plc via GlobeNewswire

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