Foresight Solar VCT PLC : Half-yearly report

FORESIGHT SOLAR VCT PLC

Summary

• Net asset value per Ordinary Share as at 31 December 2011 was 92.9p compared to 93.6p at 30 June 2011. 

• 38,470,762 Ordinary Shares had been allotted at 100.0p per share by 31 December 2011. 

• Following the year ended 30 June 2011, a further 5,408,320 Ordinary Shares were allotted at 100.0p per share. 

• New investments totalling £26.7 million were completed in the period ended 31 December 2011. 

Chairman's Statement

Results

I am pleased to be able to report sound progress in the construction of the Company's portfolio of solar investments, both before and following the period end, which are more fully described in the Investment Manager's Report. In addition, the offer for subscription to raise up to £40,000,000 by issues of Ordinary Shares pursuant to the prospectus originally published by Foresight Solar VCT plc on 31 August 2010 ("the Offer") proved attractive to investors with some £38.5 million having been raised by the time the offer closed in November 2011.

Dividend Policy

The Board plans to pay dividends of 5.0p per Share each year throughout the life of Foresight Solar VCT plc, except in respect of the first year from the closing date of the Offer when it is intended that no dividend will be paid. Dividends are expected to be paid bi-annually at or close to the end of April and October in each year, commencing in October 2012. The level of dividends is not, however, guaranteed.

Share Issues

During the period from 1 July 2011 to 31 December 2011, the Board allotted 5,408,320 Ordinary Shares at 100.0p per share and repurchased 83,510 Ordinary Shares for cancellation at a cost of £78,083. A total of 38,387,252 Ordinary Shares were in issue at 31 December 2011.

Valuation Policy

Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital (IPEVC) valuation guidelines (August 2010) developed by the British Venture Capital Association and other organisations. Through these guidelines, investments are valued as defined at
'fair value'. Ordinarily, unquoted investments will be valued at cost for a limited period following the date of acquisition, being the most suitable approximation of fair value unless there is an impairment or significant accretion in value during the period. Quoted investments and investments traded on AIM and PLUS (formerly OFEX) are valued at the bid price as at 31 December 2011. The portfolio valuations are prepared by Foresight Group, reviewed and approved by the Board quarterly and subject to audit annually.

Outlook

The Board and Foresight Group, the Investment Manager, are satisfied with the progress made towards the full investment of funds raised under the Offer and the quality of the returns expected from those projects, which gives us confidence in achieving the original objectives of the Company.

Although wider economic conditions are still fragile and the Government has confirmed its intention to reduce the availability of feed-in tariffs (FiTs) to VCTs after March 2012, the Board and Investment Manager believe that a combination of the investments made to date and the pipeline of opportunities currently being completed will provide attractive returns to shareholders over the longer term.

Lord Maples
Chairman
28 February 2012
Investment Manager's Report

Foresight Group is pleased with the final level of total funds raised for the VCT, which has enabled a number of investments to be made creating a diversified portfolio. The final allotment for Foresight Solar VCT took place on 9 November, at which point the offer closed having raised, in total, £38.5 million. Of net funds raised, 78% had been invested at the period end. The VCT will co-invest with the Foresight Solar EIS Fund ("the EIS fund") which means that a larger number of investments can be made across both funds to optimise the level of diversification.

The UK photovoltaic ('PV') solar market grew to more than 800 megawatts by the end of 2011, exceeding the UK Government's initial expectations and providing real momentum in its target of reaching 20% of electricity generation from Renewable sources by 2020. This growth was achieved despite the uncertain regulatory climate that affected the rate of feed-in tariff ("FiT") subsidy payable for projects based on timing of connection to the electricity grid. The Fund has completed investments only where the rate of feed-in tariff has been locked in and the returns can therefore be predicted more accurately.

The focus during the period has been on completing investments whilst managing the risks arising from rapidly changing government policy impacting the sector.

Portfolio Review

Investments were completed during the period in operational ground-based PV projects in Kent (£16.1 million in aggregate) and Wiltshire (£7.5 million in aggregate). The PV projects were all connected to the electricity grid before 1 August 2011 and therefore benefit from the highest level of FiT that has been available for larger scale PV projects.

Since the period end, the Kent projects have subsequently been re-financed by the EIS Fund to release funds to enable the Solar VCT to invest in further projects for more diversification. This reduced the VCT's commitment to the Kent projects to £9 million.

Investments in the Somerset based operational ground-based PV projects (£10 million in aggregate) were completed following the period end. A small amount of capacity in relation to these projects was connected prior to 1 August 2011 and the bulk of the capacity was connected in October 2011, before the grid
connection deadline, imposed by the Department of Energy and Climate Change ('DECC') in July 2011, by which extensions to the initial capacity had to be completed. Ofgen has confirmed that the extended capacity benefits from the pre 1 August 2011 FiT rate. A number of other projects in the market were built during this period which resulted, overall, in more larger scale groundbased capacity being constructed than was expected immediately before the July 2011 announcement by DECC.

This will result in the VCT having investments in approximately £28 million of UK PV projects. The £28 million will be restructured after the period end and before 31 March 2012 in order to meet HMRC criteria for qualifying investments.

Further amounts were invested in ForVEI (the joint venture with VEI Capital, an Italian investment fund) during the period. A further Italian investment fund, Quercus, also became a joint venture partner in ForVEI contributing more funds and therefore scale to the vehicle. As a result, ForVEI now owns 30 megawatts of operating solar PV plants in Italy. The VCT's total investment in ForVEI at the period end is £4,012,158.

The conditions that we imposed for our proposed £10 million investment in a UK residential rooftop programme with German energy company E.ON were not satisfied and as a result no investments have been made in this opportunity.

Outlook

Foresight Group continues to expect to complete the investment period of the VCT by April 2012. This is likely to result in a PV portfolio that should deliver the cash flow for the target dividend payments to shareholders. The cash flow will be predictable given the nature of PV projects and the indexed 25 year feed-in tariff in place. Where possible, we will consider re-financing projects with debt if the level of returns to shareholders can be enhanced.

Jamie Richards
Head of Infrastructure
Foresight Group
28 February 2012

Unaudited Half-Yearly Results and Responsibility Statements

Principal Risks and Uncertainties

The principal risks faced by the Company can be divided into various areas as follows:

• Performance 

• Regulatory 

• Operational; and 

• Financial 

The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Accounts for the period ended 30 June 2011. A detailed explanation can be on found on page 7 of the Annual Report and Accounts which is available on www.foresightgroup.eu or by writing to Foresight Group at ECA Court, South Park, Sevenoaks, Kent, TN13 1DU.

In the view of the Board, there have been no changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review.

Directors' Responsibility Statement:

The Disclosure and Transparency Rules ('DTR') of the UK Listing Authority require the Directors to confirm their responsibilities in relation
to the preparation and publication of the Interim Report and financial statements.

The Directors confirm to the best of their knowledge that:

1. the summarised set of financial statements has been prepared in accordance with the pronouncement on interim reporting issue by the Accounting Standards Board; 

2. the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); 

3. the summarised set of financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.2.4R; and 

4. the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related parties' transactions and changes therein). 

Going Concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review in the 30 June 2011 Annual Report and Accounts. The financial position of the Company, its cash flows, liquidity position and borrowing facilities are described in the Chairman's Statement, Business Review and Notes to the Accounts of the 30 June 2011 Annual Report and Accounts. In addition, the Annual Report and Accounts includes the Company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The Company has considerable financial resources together with investments and income generated therefrom, which benefit from Feed-in-Tariffs guaranteed by the UK Government. As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The Directors have reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

The half-yearly Financial Report has not been audited or reviewed by the auditors.

On behalf of the Board

Lord Maples
Chairman
28 February 2012
Unaudited Income Statement
for the six months ended 31 December 2011

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.

Unaudited Balance Sheet
at 31 December 2011

        Registered Number: 07289280

Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 December 2011

Unaudited Summary Cash Flow Statement
for the six months ended 31 December 2011

Notes to the Unaudited Half-Yearly Financial Report

1. The unaudited half-yearly results have been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the period ended 30 June 2011. Unquoted investments have been valued in accordance with IPEVC guidelines. Quoted investments are stated at bid prices in accordance with UK Generally Accepted Accounting Practice. 

2. These are not statutory accounts in accordance with S436 of the Companies Act 2006 and the financial information for the six months ended 31 December 2011 and period ended 31 December 2010 has been neither audited nor reviewed. Statutory accounts in respect of the period to 30 June 2011 have been audited and reported on by the Company's auditor and delivered to the Registrar of Companies and included the report of the auditor which was unqualified and did not contain a statement under S498(2) or S498(3) of the Companies Act 2006. No statutory accounts in respect of any period after 30 June 2011 have been reported on by the Company's auditor or delivered to the Registrar of Companies. 

3. Copies of the Half-yearly Financial Report have been sent to shareholders and are available for inspection at the Registered Office of the Company at ECA Court, South Park, Sevenoaks, Kent, TN13 1DU. 

                 Copies of the Half-yearly Financial Report are also available electronically at www.foresightgroup.eu.

4.    Net asset value per share

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

5. Return per share 

Notes:

1. Total return per Ordinary Share is total return after taxation divided by the weighted average number of shares in issue during the period. 

2. Revenue return per Ordinary Share is revenue return after taxation divided by the weighted average number of shares in issue during the period. 

3. Capital return per Ordinary Share is capital return after taxation divided by the weighted average number of shares in issue during the period. 

5. Income 

5. Investments held at fair value through profit or loss 

5. Related Parties 

Foresight Group, as Investment Manager of the Company, is considered to be a related party by virtue of its management contract with the Company. During the period, services of a total value of £255,000 (31 December 2010: £19,000; 30 June 2011:£179,000) were purchased by the Company from Foresight Group. At 31 December 2011, the amount due to Foresight Group was £116,250.

Foresight Fund Managers Limited, as Secretary of the Company and as a subsidiary of Foresight Group, is also considered to be a related party of the Company. During the period, services of a total value of £51,000 excluding VAT (31 December 2010: £10,000; 30 June 2011: £40,000) were purchased by the Company from Foresight Fund Managers Limited. At 31 December 2011, the amount due to Foresight Fund Managers was £54,000.

No Director has, or during the period had, a contract of service with the Company. No Director was party to, or had an interest in, any contract or arrangement (with the exception of Directors' fees) with the Company at any time during the period under review or as at the date of this report.

END