Foresight VCT plc – Annual Financial Report

FORESIGHT VCT PLC
Final Results
31 December 2020
Foresight VCT plc, managed by Foresight Group LLP, today announces the final results for the year ended 31 December 2020.
These results were approved by the Board of Directors on 9 April 2021.
The Annual Report will shortly be available in full at�www.foresightgroup.eu. All other statutory information can also be found there.

Highlights

• Total net assets £151.8 million.
• The portfolio has seen an uplift in valuation of £4.8 million during the year.
• Net Asset Value per share decreased by 3.7% from 76.5p at 31 December 2019 to 73.7p. Including the payment of a 3.3p dividend made on 19 June 2020, NAV total return per share at 31 December 2020 was 77.0p, representing a positive total return of 0.7%.
• The offer for subscription launched in January 2020 was closed on 7 April 2020 and raised a total of £24.2 million after expenses.
• Three new investments totalling £4.6 million and three follow-on investments totalling £3.1 million made during the year.
• The Board is recommending a final dividend for the year ended 31 December 2020 of 3.7p per share, to be paid on 25 June 2021.

Chairman’s Statement

I am pleased to present the Company’s Audited Annual Report and Accounts for the year ended 31 December 2020.

The Continuing Impact of Covid-19
Before providing other details, I would like to draw attention to the continuing impact of Covid-19 on the Company and its investment portfolio.

The Covid-19 virus has presented the Company and the management of every one of the businesses in the Company’s portfolio with unprecedented challenges. For many of these companies, significant challenges will continue for some time to come. The Manager has been working closely with all the businesses, in order to minimise any adverse impact of the virus and it is a great credit to the quality of the management of the portfolio companies to be able to record that the fallout from the pandemic has not been more significant. Until the virus is brought under control, it is impossible to assess its full impact. However, it is clear that the value of all the businesses has been affected, a minority have benefitted but most have not.

At the end of last year, the Company held 13 investments in businesses involved in the travel, retail, entertainment and food and drink sectors; these investments amounted to some 22% by value of the Company’s investment portfolio. To date these sectors are amongst those most hard hit by the various lockdowns imposed by the UK Government in response to Covid-19. I am pleased to report that during the summer, when initial lockdown provisions were eased, all the Company’s investments in these sectors were continuing to trade and, with one possible exception, they were pursuing revised business strategies which hold the potential for a return to commercial viability when the current restrictions are eased. Inevitably the reimposition of a total lockdown after Christmas has placed further demands on these and other businesses within the portfolio, the full impact of which we will only be able to assess later this year.

The immediate impact of the Covid virus at the beginning of 2020 can be seen in the material fall in the valuation of the Company’s portfolio in March 2020. Since the end of the first lockdown the trading position of many of the businesses has improved, some quite significantly and the year-end valuations reflect this benefit. On behalf of the Board I would again like to thank the members of the Manager’s team for the considerable work which they have done and continue to do alongside the management teams at each of the companies in the portfolio.

Strategy
The Board and the Manager continue to pursue a strategy for the Company which includes the following four key objectives:

• further development of the net assets of the Company to maintain a level in excess of £150 million;
• payment of an annual dividend of at least 5% of the NAV per share and at the same time endeavouring to maintain the NAV per share at no less than its current level;
• the implementation of a significant number of new and follow on qualifying investments every year; and
• maintaining a programme of regular share buy backs at a discount in the region of 10% to the prevailing NAV per share.

The Board and the Manager believe that these key objectives remain appropriate and the Company’s performance in relation to each of them over the past year is reviewed more fully below.

Net Asset Value
At 31 December 2020 the NAV of the Company was £151.8 million (2019: £133.1 million), which is in line with the Board’s objective of developing the net assets of the Company to a level in excess of £150 million.

At the start of last year some 90% of the Company’s assets were already invested and the Board believed it would be in the Company’s best interest to raise further funds to provide liquidity for its activities over the coming year and beyond. Despite the difficulties created by Covid-19, the Board is pleased that the Company was successful in raising additional funds. The Company closed its offer for subscription on 7 April 2020 and raised £24.8 million before expenses. The majority of the funds received were subscribed in the final allotments totalling £18.6 million, which took place on 3 April and 14 April based on a NAV of 66.5p per share, which compared with the NAV on 31 December 2019 of 76.5p per share.

During the year the NAV per share decreased by 3.7% from 76.5p at 31 December 2019 to 73.7p at 31 December 2020. Including the payment of a 3.3p per share dividend made on 19 June 2020, which is detailed below, NAV total return per share for the 12 month period was 77.0p, representing a total return of 0.7%.

After the payment of a dividend of 5.0% of NAV which is detailed below, the Company has not met its objective of maintaining NAV per share at around its current level. On this occasion, the Company’s failure to achieve this most important objective was due to the impact of the Covid-19 lockdown on the Company’s portfolio. The Board and the Manager are working towards achieving this key objective in the medium term and the portfolio had already seen a significant recovery from its March 2020 valuation by the year end.

Dividends
The final dividend for the year ended 31 December 2019 of 3.3p per share was paid on 19 June 2020 based on an ex-dividend date of 4 June 2020, with a record date of 5 June 2020. The total cost of this dividend was £6.8 million, including shares allotted under the dividend reinvestment scheme.

The Board is recommending a final dividend for the year ended 31 December 2020 of 3.7p per share, to be paid on 25 June 2021 based on an ex-dividend date of 10 June 2021, with a record date of 11 June 2021. The Company continues to achieve its target dividend yield of 5% of NAV, which was set in the prior year in light of the change in portfolio towards earlier stage, higher risk companies, as required by the current VCT rules. The Board and the Manager hope that this performance may be enhanced by additional ‘special’ dividends as and when particularly successful portfolio disposals are achieved.

The total return per share from an investment made five years ago would be 17.7%, which is below the target return set by the Board of 5% per annum. It is the future achievement of this target that is at the centre of the Company’s current and future portfolio management strategy.

Investment performance and portfolio activity
A detailed analysis of the investment portfolio performance over the period is given in the Manager’s Review.

As mentioned earlier, the Company started 2020 with around 90% of its assets invested in a range of unquoted growth capital investments; the Board and the Manager believe that these investments will continue to mature and help improve the future rate of growth in NAV. During the year under review the Manager completed three new investments and three follow-on investments costing £4.6 million and £3.1 million respectively. This achievement was somewhat behind the Company’s objective of implementing a significant number of new and follow-on investments every year, however, due to Covid-19, the Manager has been focusing on supporting the existing portfolio through the various stages of the pandemic. The Board and the Manager are confident this objective can be achieved in the year ahead, particularly with the increased investment activity in the three months to 31 December 2020, which accounts for all of the new and follow on investments noted above. Details of each of these new portfolio companies can be found in the Manager’s Review.

The Company and Foresight 4 VCT plc have the same Manager and share similar investment policies. The Board closely monitors the extent and nature of the pipeline of investment opportunities and is reassured by the Manager’s confidence in being able to deploy funds without compromising quality during 2021 and beyond, so as to be in a position to satisfy the investment needs of both companies.

Buybacks
During the year the Company repurchased 4.3 million shares for cancellation at an average discount of 10.1%, achieving its objective of maintaining regular share buybacks at a discount of 10%, as noted above. The Board and the Manager consider that the ability to offer to buy back shares at a target discount of approximately 10% is fair to both continuing and selling shareholders and is an appropriate way to help underpin the discount to NAV at which the shares trade.

Share buybacks are timed to avoid the Company’s closed periods. Buybacks will generally take place, subject to demand, during the following times of year:
• April, after the Annual Report has been published;
• June, prior to the Half-Yearly reporting date of 30 June;
• September, after the Half-Yearly Report has been published; and
• December, prior to the end of the financial year.

Management charges, co-investment and incentive arrangements
The annual management fee is an amount equal to 2.0% of net assets, excluding cash balances above £20 million, which are charged at a reduced rate of 1.0%. This has resulted in ongoing charges for the year ended 31 December 2020 of 2.1% of net assets, which is at the lower end of the range when compared to competitor VCTs.

Since March 2017, co-investments made by the Manager and individual members of the Manager’s private equity team have totalled £0.8 million alongside the Company’s investments of £55.8 million. Under the terms of the Incentive Arrangements, as detailed in note 14 to the accounts, the ‘Total NAV Return Hurdle’, has not yet been achieved and no performance incentive payment is due. The Board believes it is prudent to record a contingent liability in relation to the performance incentive fee due to there being a possible future obligation. More detail on this is given in note 16 to the accounts.

Recognising the importance of protecting shareholder interests the Board and the Manager agreed that it was appropriate to update the Incentive Arrangements and from 27 January 2020 a change to provide for an annual increase to the Total Return Hurdle (originally 100p) by the greater of RPI or 3.5% was added to the requirements.

Board Composition
The Board continues to review its own performance and undertakes succession planning to maintain an appropriate level of independence, experience, diversity and skills in order to be in a position to discharge its responsibilities. The current year sees some planned changes to the composition of the Board.

The Board was delighted to announce recently that, following an independent professional search, Patricia (Patty) Dimond was appointed a non-executive director with effect from 1 February 2021. Patty is an experienced non-executive director currently on the Board of LXI REIT plc and English National Opera, she is a qualified chartered accountant and has a wide experience of investing in early stage technology businesses particularly those in FinTech and Consumer & Retail. Patty will be offering herself for election at the forthcoming AGM and if elected, will be appointed as a member of the Audit, Nomination, Management Engagement and Remuneration Committees.

After nearly 11 years as Chairman, I shall be retiring at the forthcoming AGM and I am especially pleased to be able to announce that Margaret Littlejohns has been invited by the Board to succeed me. Margaret has made an outstanding contribution since her appointment to the Board some 3 years ago and I wish her and her fellow Directors every success in the future.

Shareholder communication
As a result of the travel restrictions imposed due to Covid-19, the Manager’s popular investor forums have been temporarily put on hold. Once it is possible to do so, details of both a London event and regional events will be sent to shareholders resident in the locality as and when they are organised. The Manager held an investor webinar in August 2020 and it intends to hold further webinars in June and October of this year. Details of any future events will be communicated to investors.

Outlook
Continuing uncertainty over the full impact of Covid-19 and the impact of Brexit create exceptional challenges for every business. The Company invests primarily in developing businesses which by their nature need general economic expansion and stability; the current environment places considerable demands upon them and their management teams. The Manager’s private equity team is well aware of the management and business needs of each of the companies within the investment portfolio and is working closely with them to help them progress during these testing times. Until the pandemic is brought under worldwide control there will inevitably be further, mainly unhelpful, implications for many UK based businesses. Notwithstanding this, the Board and the Manager have been impressed by the resilience shown by the significant majority of the Company’s investments and are optimistic that the existing portfolio has potential to add value once the virus has been successfully contained.

Annual General Meeting
The Company’s Annual General Meeting will take place on 27 May 2021 at 1.00pm. Please refer to the formal notice on page 80 of the Annual Report and Accounts for further details in relation to the format of this year’s meeting and the request to observe social distancing guidelines in place.

Shareholders will note that it is proposed by resolution 14 to adopt new articles of association (“New Articles”). The key changes to the New Articles are to provide for the ability to hold virtual and hybrid general meetings. The Board wishes to note its preference is to hold AGMs by way of an open meeting and AGMs will only be held virtually where absolutely necessary.

John Gregory
Chairman
Telephone: 01296 682751
Email: j.greg@btconnect.com
9 April 2021

Manager’s Review

The Board has appointed Foresight Group LLP (“the Manager”) to provide investment management and administration services.

The investment management and administration arrangements were previously with Foresight Group CI Limited (the Manager’s parent undertaking), and Foresight Group CI Limited appointed the Manager as its investment adviser and delegated administration services to it. The investment management and administration arrangements were novated and amended to be directly with the Manager on 27 January 2020. References to the Manager’s activities in this report include those activities of Foresight Group CI Limited prior to the change in arrangements.

Portfolio Summary
As at 31 December 2020 the Company’s portfolio comprised 46 investments with a total cost of £97.3 million and a valuation of £132.7 million. The portfolio is diversified by sector, transaction type and maturity profile. Details of the ten largest investments by valuation, including an update on their performance, are provided on pages 14 to 18 of the Annual Report and Accounts.

During the year, the value of investments held rose by £12.2 million, driven by deployment of £7.7 million, an increase in the value of existing investments of £4.8 million offset by a realisation of £0.3m. After a sharp drop in portfolio value in the quarter to March 2020 at the peak of uncertainty around Covid-19, the Company’s portfolio, in aggregate, has seen a recovery, as many of the portfolio companies have successfully navigated the new economic landscape, with some performing extremely strongly and some continuing to be adversely impacted by Covid-19.

In line with the Board’s strategic objectives, the Manager remains focused on maintaining NAV at above £150 million whilst paying an annual dividend to shareholders of at least 5% of the NAV per share. Whilst the Company has made reasonable progress against these objectives in the year, it has not maintained the value of the NAV per share after the payment of the dividend. This objective remains the Manager’s focus in the coming year.

NEW INVESTMENTS
The Manager has taken a prudent approach to investing during 2020. Repeated lockdowns have made it challenging for the private equity team to meet prospective companies and their management teams face to face, an important part of assessing investments and developing relationships. The continued economic uncertainty has also made it difficult to assess the underlying value and progress within a business as everyone has been affected by the pandemic. For much of the year there were fewer opportunities coming to market, with management teams focused on steering their businesses through economic uncertainty. Despite these challenges, the Manager has continued to search for high quality businesses that have demonstrated resilience during Covid-19. As a result, three new investments were completed in December 2020, IMMJ Systems, a document management system serving the NHS and other healthcare providers, iMist, a manufacturer of fire suppression systems and Titania Group, a cybersecurity software business.

IMMJ SYSTEMS
In December 2020 the Company made a c.£1.7 million investment into IMMJ Systems Limited, an innovative, electronic document management solution for the healthcare sector, serving NHS Trusts and private providers. Founded in 2015 by a team experienced in enterprise IT and NHS technology distribution, IMMJ developed MediViewer, software that addresses the challenge of digitising patient records and providing a single, easy access interface for clinical caregivers. The investment will enable IMMJ to scale the business through new hires in key functions such as operations, technology and account management, to support the expanding deployment of MediViewer..

iMIST
In December 2020 the Company invested c.£1.6 million into iMist Holdings Limted, a manufacturer and installer of water mist fire protection systems for residential buildings. iMist was founded in 2015 by Tony Sims who has over 20 years’ engineering experience. iMist has developed its own range of high-pressure water mist fire suppression systems. The proprietary solution offers a number of benefits over traditional fire sprinkler and lower pressure water mist products including more efficient use of water, ease of installation and cost effectiveness. The investment will drive further growth and development activities across the UK, on the back of the current regulatory opportunity.

TITANIA
In December 2020, the Company invested c.£1.2 million into Titania Group Limited, a cybersecurity software business. Founded in 2009, Titania has grown substantially due to the success of its first product, Nipper, which automates the assessment of network devices to accurately identify vulnerabilities. The winner of multiple cybersecurity industry awards, Titania has over 1,000 customers globally. The investment will be used to enhance sales and marketing efforts for Titania’s current suite of products.

FOLLOW ON INVESTMENTS
The Manager had expected that more portfolio companies would need additional capital to support them through difficult trading conditions resulting from the various lockdowns, driving an increase in follow-on investment. However, the portfolio has remained relatively resilient, supported by the Manager, who has increased oversight of the portfolio and provided guidance to portfolio management teams throughout the pandemic. The Manager has made follow-on investments into three companies during 2020, totalling £3.1 million. Further details of each of these are provided below.

Many companies took advantage of Government support, such as the furlough scheme and the Coronavirus Business Interruption Loan Scheme, which reduced the need for additional equity injections in the period. However, as these schemes unwind and while the economic climate remains difficult, the Manager anticipates numerous requirements for follow-on investment in the coming months.

ROXY LEISURE
During December 2020 the Company made a c.£1.0 million follow-on investment into Roxy Leisure, an entertainment bar group offering customers a variety of games such as pool and bowling. Roxy Leisure was performing extremely strongly prior to Covid-19 but has been affected by the repeated lockdowns. The business will use funds to open new sites once restrictions ease, aiming to capitalise on increased consumer demand..

SPEKTRIX
In December 2020, Spektrix, a leading enterprise software solution for the UK and US arts sector encompassing ticketing, marketing, fundraising, analytics and customer relationship management, received a follow-on investment of c.£1.4 million from the Company. The investment will enable Spektrix to capitalise on new opportunities following the reopening of the arts sector.

ACCROSOFT
Also in December 2020, the Company made a £0.7 million follow-on investment into Accrosoft, a software as a service company with two core products focusing on recruitment and parent-teacher-student communication. The investment will support the commercialisation of the school communications platform, with strong demand seen in the market due to the increased role of such technology while schools were closed because of Covid-19 restrictions.

PIPELINE
At 31 December 2020, the Company had cash balances of £18.9 million, which will be used to fund new and follow-on investments, buybacks and running expenses. The Manager is seeing a recovery in the pipeline of potential investments and has a number of opportunities under exclusivity or in due diligence. The Company remains well positioned to continue pursuing these potential investment opportunities.

The onset of Covid-19 and the resulting economic downturn resulted in lower new investment activity in 2020. Depending on the length and severity of the Covid-19 outbreak and associated restrictions, the Manager expects to see a higher proportion of the Company’s deployment focused on follow-on investments in the short to medium term.

As the economy recovers from the worst effects of the virus, the Manager expects demand for funding to increase, driving some particularly interesting opportunities for investment.

REALISATIONS
Whilst the M&A climate has been challenging in the period, with most trade acquirers focused on their core business and private equity investors focused on their existing portfolios or on distressed acquisitions, the Manager is now seeing acquisition interest returning, particularly in the healthcare, technology and ecommerce sectors.

Fast casual and grab and go eateries have been particularly hard hit during the pandemic and to that end with the difficult market outlook as well as the remaining uncertainty around the business model, the Company realised its position in The Naked Deli, a healthy eating food chain, via an initial loan repayment of £0.2 million and the subsequent sale of share capital and loan note positions for £0.1 million to the Company. The Naked Deli closed all its stores in line with government guidance in March 2020 and the outlook for this sector remains extremely challenged. There is uncertainty about town centre footfall, particularly for lunchtime trade, while employees are still working from home. In aggregate, The Naked Deli returned to the Company 0.2x money invested.

In contrast, post-period end, the Company successfully realised its investment in FFX Group, one of the UK’s largest multi-channel independent suppliers of high-quality power tools, fixings and building supplies. The transaction generated proceeds of £11.1 million at completion and the Company will receive up to £0.3 million of deferred consideration after 18 months subject to certain conditions, implying a cash on cash return of 4.3x the initial investment of £2.7m made in October 2015, equivalent to an IRR of c.32%. During the investment period, FFX opened a new 60,000 sq ft distribution centre and a new head office in Kent, updated its brand and launched an extensive range of its own products. Since the Company’s investment, FFX more than tripled revenues and increased headcount by over 125.

DISPOSALS IN THE YEAR ENDED 31 DECEMBER 2020

Company	Detail		Accounting Cost at Date of Disposal (£)	Proceeds (£)	Realised Gain/(Loss) (£)	Valuation at 31 December 2019 (£)	Valuation at 30 September 2020 (£)
The Naked Deli	Full disposal		1,724,139	295,487	(1,428,652)	695,435	Nil
Total disposals			1,724,139	295,487	(1,428,652)	695,435	Nil

Deferred consideration of £13,000 was also received by the company from the sale of Idio Limited.  

KEY PORTFOLIO DEVELOPMENTS

Overall, the value of unquoted investments held rose by £12.2 million in the year, driven by deployment of £7.7 million, an increase in value of existing investments by £4.8 million and offset by the sale of The Naked Deli of £0.3 million.

A disciplined approach to investment valuations has been maintained in light of Covid-19. In the quarter to March 2020, the onset of the Covid-19 pandemic drove significant economic uncertainty and the portfolio initially saw a substantial decrease in value of £18.9 million. In the following quarters, as the businesses adapted to the new economic climate, fair values saw a recovery in aggregate. Material changes in valuation, defined as increasing or decreasing by £2.0 million or more since 31 December 2019, are detailed below. Updates on these companies are included below, or in the Top Ten Investments section on pages 14 to 18 of the Annual Report and Accounts.

Company	Valuation Methodology	Valuation Change (£)
Hospital Services Group Limited	Discounted earnings multiple	5,329,619
FFX Group Limited	Offer proceeds	3,439,036
Innovation Consulting Group Limited	Discounted earnings multiple	2,634,323
Mologic Ltd	Discounted revenue multiple	2,105,454
Biofortuna Limited	Discounted revenue multiple	2,089,201
Ixaris Group Holdings Limited	Discounted revenue multiple	(4,954,587)

BIOFORTUNA
Biofortuna, established in 2008, is a molecular diagnostics business based in the North West that manufactures freeze dried, stabilised DNA tests.

31 December 2020 Update
Biofortuna’s technical ability and freeze-drying capability allowed it to support several clients, manufacturing their Covid-19 testing kits, with over 30 million manufactured since April 2020. This has transformed the company’s financial performance, with material revenue growth and maiden profits generated. Biofortuna continues to explore new commercial opportunities unrelated to Covid-19.

IXARIS SYSTEMS LIMITED
Ixaris is a payments platform enabling efficient global payments, targeted in particular at the travel sector.

31 December 2020 Update
Ixaris has seen a severe downturn in trading due to the collapse of the travel sector in the wake of the pandemic. There remains significant uncertainty about when worldwide travel will resume.

OUTLOOK
On 22 February 2021, Prime Minister Boris Johnson outlined the planned route out of lockdown for businesses in England, culminating in the lifting of all social restrictions on 21 June 2021. Businesses of all sizes have faced a very testing 12 months, not least with the stop-start dynamic of multiple lockdowns. Therefore the Prime Minister’s political commitment to an ‘irreversible’ ending of lockdown is welcomed, along with the extended support of the Coronavirus Job Retention Scheme. It is vital that SMEs are supported through the full reopening of the UK’s economy in order to rebuild consumer and business confidence and to enable our retail, hospitality, cultural, leisure and tourism sectors to get back to business.

Most businesses in the portfolio had fully reopened by September, with the Manager supporting the portfolio through a transition to the ‘new normal’. During the November and current year lockdowns, the Manager acted quickly to administer the same ‘toolbox’ of support for the portfolio companies as in the first lockdown, to guide and prepare them for a prolonged period of uncertainty. The Manager has also been working with companies to revise business plans and budgets to manage creditor stretch and debt build-up, and to prepare them for a reduction of Government support. The Manager is ensuring that finance directors at the portfolio companies continue to manage overheads tightly, reduce capital expenditure and work through longer-term cost reduction plans given the uncertain macro environment. It is important that management teams and investors are well prepared for a sustained period of weaker consumer and business demand as consumers and businesses adapt to the ‘new normal’.

While Covid-19 has brought unprecedented disruption, it has also prompted many organisations to reassess their business models and take action to adapt to a new economic landscape. A number of the portfolio companies have used this as an opportunity to review their overall strategy, venture into a new market or launch a new product or service. For example, to supplement lost revenues from their core business some companies have procured and provided PPE or other protective equipment, such as hand sanitising stations or screens. Healthcare and life science investments have also contributed to national efforts to defeat the virus by manufacturing Covid-19 testing kits. An example of this is portfolio company Mologic, which received a grant of c.£1m to fund Covid related lateral flow diagnostics development. Fellow portfolio company Biofortuna, another diagnostics company, has successfully won contracts to manufacture millions of Covid-19 PCR testing kits for others.

Some of the portfolio companies used this time as an opportunity to improve online activity and have seen an uptick in revenues as a consequence. With the trend towardsecommerce accelerating during Covid-19, retail businesses will need to continue embracing this channel fully and make it a core part of the overall growth strategy. The Manager is working closely with portfolio companies to ensure they are well-positioned to capitalise on this opportunity.

A proportion of the portfolio companies are particularly at risk due to the sectors they operate in, such as travel, hospitality and leisure. Many of these businesses are now stuck in a prolonged period of closure with anticipated re-opening in the next few months. The Manager is working closely with these businesses, paying particular attention to managing creditors and cash preservation. It is important to highlight that some of the Company’s leisure investments demonstrated market leading site metrics pre-Covid and will have the ability to weather this temporary period of reduced trading. Once reopened, even with capacity limitations, the Manager expects several of these leisure businesses to return to profit and cash generation over time, thanks to a loyal customer base and favourable customer demographic.

Beyond Covid-19, another factor providing economic uncertainty was Brexit, with the Brexit transition period ending on 31 December 2020. The Manager has worked closely with portfolio companies to prepare them for this. Thanks to the diverse nature of businesses in the portfolio, most of which primarily focus on the domestic UK market and some that export and source worldwide, the Manager remains confident that the portfolio businesses are well-positioned to deal with any Brexit related difficulties.

Notwithstanding the uncertain economic backdrop, the Manager continues to see encouraging levels of activity from smaller UK companies seeking growth capital. The Manager expects this to increase as companies begin to recover from the impact of Covid-19, with requirements for permanent funding to working capital. VCTs are still viewed by many entrepreneurs as an attractive source of capital that provide scale-up funding to businesses at an early stage of their growth, when other sources of funding may not be readily available or alongside other sources of capital, including the government measures for supporting businesses during Covid-19. Despite the current challenges of Covid-19 in the medium and long term, the UK remains an excellent place to start, scale and sell a business, with broad pools of talent and an entrepreneurial culture.

Russell Healey

Head of Private Equity
Foresight Group LLP
9 April 2021

Audited Income Statement
for the year ended 31 December 2020

	Year ended 31 December 2020			Year ended 31 December 2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£’000	£’000	£’000	£’000	£’000	£’000
Realised losses on investments	—	(1,415)	(1,415)	—	(2,551)	(2,551)
Investment holding gains	—	6,250	6,250	—	10,258	10,258
Income	1,844	—	1,844	1,284	—	1,284
Investment management fees	(680)	(2,039)	(2,719)	(643)	(1,930)	(2,573)
Other expenses	(580)	—	(580)	(565)	—	(565)
Return on ordinary activities before taxation	584	2,796	3,380	76	5,777	5,853
Taxation	—	—	—	—	—	—
Return on ordinary activities after taxation	584	2,796	3,380	76	5,777	5,853
Return per share:	0.3p	1.4p	1.7p	0.0p	3.3p	3.3p

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
comprehensive income has been presented.

The Company has only one class of business and one reportable segment, the results of which are set out in the Income
Statement and Balance Sheet.

There are no potentially dilutive capital instruments in issue and, therefore, no diluted earnings per share figures are relevant.
The basic and diluted earnings per share are, therefore, identical.

Audited Reconciliation of Movements in Shareholders’ Funds

Year ended 31 December 2020	Called-up share capital £’000	Share premium account £’000	Capital redemption reserve £’000	Distributable Reserve^ £’000	Capital reserve^ £’000	Revaluation reserve £’000	Total £’000
As at 1 January 2020	1,740	78,841	951	23,799	(1,059)	28,847	133,119
Share issues in the year*	363	25,655	—	—	—	—	26,018
Expenses in relation to share issues**	—	(1,221)	—	—	—	—	(1,221)
Repurchase of shares	(43)	—	43	(2,674)	—	—	(2,674)
Cancellation of share premium	—	(35,641)	—	35,641	—	—	—
Realised losses on disposal of investments	—	—	—	—	(1,415)	—	(1,415)
Investment holding gains	—	—	—	—	—	6,250	6,250
Dividends paid	—	—	—	(6,804)	—	—	(6,804)
Management fees charged to capital	—	—	—	—	(2,039)	—	(2,039)
Revenue return for the year	—	—	—	584	—-	—	584
As at 31 December 2020	2,060	67,634	994	50,546	(4,513)	35,097	151,818
^Reserve is available for distribution, total distributable reserves at 31 December 2020 total £46,033,000 (2019: £22,740,000).   *Includes the dividend reinvestment scheme. **Expenses in relation to share issues includes trail commission for prior years’ fund raising.
Year ended 31 December 2019	Called-up share capital £’000	Share premium account £’000	Capital redemption reserve £’000	Distributable Reserve^ £’000	Capital reserve^ £’000	Revaluation reserve £’000	Total £’000
As at 1 January 2019	1,751	99,115	920	12,929	3,422	18,589	136,726
Share issues in the year*	20	1,425	—	—	—	—	1,445
Expenses in relation to share issues**	—	(92)	—	—	—	—	(92)
Repurchase of shares	(31)	—	31	(2,060)	—	—	(2,060)
Cancellation of share premium	—	(21,607)	—	21,607	—	—	—
Realised losses on disposal of investments	—	—	—	—	(2,551)	—	(2,551)
Investment holding gains	—	—	—	—	—	10,258	10,258
Dividends paid	—	—	—	(8,753)	—	—	(8,753)
Management fees charged to capital	—	—	—	—	(1,930)	—	(1,930)
Revenue return for the year	—	—	—	76	—-	—	76
As at 31 December 2019	1,740	78,841	951	23,799	(1,059)	28,847	133,119
*Relating to the dividend reinvestment scheme. **Expenses in relation to share issues relate to trail commission for prior years’ fund raising.

Audited Balance Sheet
at 31 December 2020

Registered Number: 03421340

			As at 31 December 2020 £’000	As at 31 December 2019 £’000
Fixed assets
Investments held at fair value through profit or loss			132,739	120,521
Current assets
Debtors			239	362
Cash and cash equivalents			18,939	12,324
			19,178	12,686
Creditors
Amounts falling due within one year			(99)	(88)
Net current assets			19,079	12,598
Net assets			151,818	133,119
Capital and reserves
Called-up share capital			2,060	1,740
Share premium account			67,634	78,841
Capital redemption reserve			994	951
Distributable reserve			50,546	23,799
Capital reserve			(4,513)	(1,059)
Revaluation reserve			35,097	28,847
Equity Shareholders’ funds			151,818	133,119
Net asset value per share:			73.7p	76.5p

The financial statements were approved by the Board of Directors and authorised for issue on 9 April 2021 and were signed on its behalf by:

John Gregory
Chairman

Audited Cash Flow Statement
for the year ended 31 December 2020

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
Cash flow from operating activities
Loan interest received from investments	478	733
Dividends received from investments	1,437	178
Deposit and similar interest received	34	186
Investment management fees paid	(2,719)	(2,573)
Secretarial fees paid	(120)	(122)
Other cash payments	(449)	(465)
Net cash outflow from operating activities	(1,339)	(2,063)
Cash flow from investing activities
Purchase of investments	(7,680)	(15,791)
Net proceeds on sale of investments	296	1,966
Net proceeds on deferred consideration	13	441
Net cash outflow from investing activities	(7,371)	(13,384)
Cash flow from financing activities
Proceeds of fund raising	24,203	–
Expenses of fund raising	(637)	(92)
Repurchase of own shares	(2,668)	(2,248)
Equity dividends paid	(5,573)	(7,308)
Net cash inflow/ (outflow) from financing activities	15,325	(9,648)
Net inflow/ (outflow) of cash in the year	6,615	(25,095)
Reconciliation of net cash flow to movement in net funds
Increase/ (decrease) in cash and cash equivalents for the year	6,615	(25,095)
Net cash and cash equivalents at start of year	12,324	37,419
Net cash and cash equivalents at end of year	18,939	12,324

Analysis of changes in net debt	At 1 January 2020	Cashflow	At 31 December 2020
	£’000	£’000	£’000
Cash and cash equivalents	12,324	6,615	18,939

Notes

1.     These are not statutory accounts in accordance with S436 of the Companies Act 2006. The full audited accounts for the year ended 31 December 2020, which were unqualified and did not contain statements under S498(2) of the Companies Act 2006 or S498(3) of the Companies Act 2006, will be lodged with the Registrar of Companies. Statutory accounts for the year ended 31 December 2020 including an unqualified audit report and containing no statements under the Companies Act 2006 will be delivered to the Registrar of Companies in due course. 

2.    The audited Annual Financial Report has been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 31 December 2020.  All investments held by the Company are classified as ‘fair value through the profit and loss’. Unquoted investments have been valued in accordance with IPEV guidelines. Quoted investments are stated at bid prices in accordance with the IPEV guidelines and Generally Accepted Accounting Practice.

3.   Copies of the Annual Report will be sent to shareholders and can be accessed on the following website: www.foresightvct.com.

4.    Net asset value per share

The net asset value per share is based on net assets at the end of the year and on the number of shares in issue at that date.

	31 December 2020	31 December 2019
Net assets	£151,818,000	£133,119,000
No. of shares at year end	205,954,017	173,959,405
Net asset value per share	73.7p	76.5p

5.    Return per share

	Year ended 31    December 2020	Year ended 31                                       December 2019
	£’000	£’000
Total return after taxation	3,380	5,853
Total return per share (note a)	1.7p	3.3p
Revenue return from ordinary activities after taxation	584	76
Revenue return per share (note b)	0.3p	0.0p
Capital return from ordinary shares after taxation	2,796	5,777
Capital return per share (note c)	1.4p	3.3p
Weighted average number of shares in issue in the year	199,164,754	175,090,865

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.    Annual General Meeting

The Annual General Meeting of the Company will be held at The Shard, 32 London Bridge Street, SE14 5QA on 27 May 2021 at 1.00 pm. Shareholders are encouraged to observe the social distancing and travel restrictions and are asked not to attend the Annual General Meeting which will be held by way of a ‘closed’ meeting. Shareholders will, however, be able to attend virtually, but will not be able to vote on the resolutions at the Annual General Meeting. Details on how to sign up and join the Annual General Meeting virtually will be published on both the Company’s and the Manager’s website at www.foresightvct.com.

7.    Income

	Year ended 31 December 2020 £’000	Year ended 31 December 2019 £’000
Loan stock interest	370	920
Dividends receivable	1,437	178
Deposit and similar interest received	34	186
Other Income	3	–
	1,844	1,284

8.    Investments held at fair value through profit or loss

		2020 £’000	2019 £’000
Unquoted investments		132,739	120,521

	Total
	£’000
Book cost as at 1 January 2020	91,360
Investment holding gains	29,161
Valuation at 1 January 2020	120,521
Movements in the year:
Purchases at cost	7,680
Disposal proceeds^	(296)
Realised losses*	(1,428)
Investment holding gains**	6,262
Valuation at 31 December 2020	132,739
Book cost at 31 December 2020	97,316
Investment holding gains	35,423
Valuation at 31 December 2020	132,739

^The Company received £296,000 (2019: £1,966,000) from the disposal of investments during the year. The book cost of these investments when they were purchased was £1,724,000 (2019: £4,957,000). These investments have been revalued over time and until they were sold any unrealised gains or losses were included in the fair value of the investments.

*Realised losses in the income statement includes deferred consideration of £13,000 received from Idio Limited in
the year.

**Investment holding gains in the income statement have been reduced by the offset in the deferred consideration
debtor of £12,000 (Idio Limited).

9.    Related party transactions

No Director has an interest in any contract to which the Company is a party other than their appointment as directors.

10.  Transactions with the manager

Foresight Group CI Limited, which acted as Manager to the Company until 27 January 2020, earned fees of £192,000 (2019: £2,573,000). Foresight Group LLP was appointed as Manager on 27 January 2020 and earned fees of £2,527,000 up to 31 December 2020 (2019: £nil).

During the year, services of a total cost of £120,000 (2019: £120,000) were delivered to the Company by Foresight Group LLP. At 31 December 2020, the amount due to Foresight Group LLP was £nil (2019: £nil).

No amounts have been written off in the year in respect of debts due to or from the Manager.

END