Foresight 3 VCT PLC : Half-yearly report

FORESIGHT 3 VCT PLC

Summary

• Net asset value per Ordinary Share for the six month period ended 30 September 2013 increased by 2.4%, represented by a net asset value of 77.0p compared to a net asset value of 75.2p at 31 March 2013. 

• Funding totalling £1.5 million was provided to eight companies.  

• Realisation proceeds and loan repayments totalling £0.35 million were received from four portfolio companies.  

• The Company raised gross proceeds of £0.34 million in the period and £0.82 million in the prior year in accordance with the terms of the offer for subscription dated 3 December 2012.  

Chairman's Statement

Performance

The six months under review has seen an improvement in the wider UK economic climate and general business confidence. These positive signs have been matched by a considerable increase in activity in the Mergers & Acquisitions market, which we hope will result in realisations from the current portfolio. Although stock markets in both the UK and US are trading near record levels and the IPO market has seen the largest number of new issues for several years, significant economic uncertainties remain, such as unresolved issues in the Eurozone and the overall level of Government debt.

The private equity portfolio benefited from the recent economic upturn both in the UK and in traditional export markets, resulting in a small but encouraging increase in net asset value per Ordinary share as at 30 September 2013 of 2.4% to 77.0p (31 March 2013: 75.2p).

The Ordinary Share portfolio benefited from the good performance of several investments, most notably Datapath Group Holdings and TFC Europe, both of which again achieved record sales and profits, as well as Alaric Systems and Ixaris Systems. Together these four companies generated a valuation increase of £3.3 million. Closed Loop Recycling also made progress, which was in contrast to the more difficult trading conditions experienced by Evance Wind Turbines and Autologic Diagnostics Group.

Encouragingly, some of the recent investments, such as Aerospace Tooling Corporation, Flowrite Refrigeration Holdings and Procam Television Holdings are already showing considerable promise. All of these investments are traditional private equity investments and are representative of the Board and Foresight Group's objective of focussing on private equity investments to drive future performance gains.

Full details of the portfolio and valuation changes are given in the Investment Manager's report.

Share issues and share buy-backs

The Company launched a small top-up offer on 3 December 2012. During the six month period ended 30 September 2013, 429,636 Ordinary Shares were allotted based on net asset values ranging from 76.0p to 83.0p per share, raising £0.34 million.

Valuation policy

Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines (December 2012) 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 ISDX Growth Market (formerly PLUS) are valued at the bid price as at 30 September 2013. The portfolio valuations are prepared by Foresight Group, reviewed and approved by the Board quarterly and subject to review by the auditors annually.

Outlook

The Board remains cautious about the general outlook, although it is encouraged by the recent signs of improvement in the UK economy, and the NAV improvement of the Company underpinned by the performance of the private equity portfolio.

The Company has limited cash resources at present, which reflects the reduced liquidity of the Company's existing assets. The first priority for that cash is to support the existing portfolio where prospects justify it, whilst awaiting the opportunity to realise gains from the disposal of successful investments. Our Managers are confident that in due course realisations can be achieved which will enable the Company to resume the payment of dividends, as well as making new investments. This in turn should improve the liquidity of the Company's shares, and reduce their discount to net asset value, which is currently at an unacceptable level.

Graham Ross Russell
Chairman
29 November 2013

Investment Manager's Report

Manager's commentary

Based on signs of generally improving trading conditions across the portfolio in recent months, Foresight Group believes that the economic climate and business confidence in the UK should continue to improve for the time being, as evidenced by the Stock Market trading at or near record levels and considerable activity in the Mergers & Acquisitions market. Significant economic uncertainties remain, however, such as unresolved issues in the Eurozone, the overall level of Government debt and eventual reversal of Quantitative Easing, any one of which could easily reverse this gradual improvement in sentiment. This improvement is now being generally reflected in the trading of a number of companies across the portfolio.

The overall performance of the portfolio during the six month period ended 30 September 2013 is in contrast to the performance of the portfolio for the full year to 31 March 2013. The net asset value per Ordinary Share increased by 2.4% to 77.0p from 75.2p per Ordinary Share as at 31 March 2013. Several investments continued to perform or trade well, most notably Datapath Group Holdings and TFC Europe, both of which again achieved record sales and profits. Alaric Systems and Ixaris Systems also performed well. Together these four companies generated an increase in valuation of £3.3 million. Encouragingly, some of the recent investments, such as Aerospace Tooling Corporation, Flowrite Refrigeration Holdings and Procam Television Holdings are already showing considerable promise as is Closed Loop Recycling. In contrast more difficult trading conditions were experienced by Evance Wind Turbines and Autologic Diagnostics Group. Following the termination of on-going sale and merger discussions, 2K Manufacturing was placed into administration on 18 November 2013. A full provision of £2,002,057 has been made against the cost of this investment.

While working to increase net asset and shareholder value, Foresight Group is also, where appropriate, endeavouring to realise existing investments to generate cash for shareholder distributions and new investments. Portfolio company highlights are summarised below.

Portfolio review

1. Follow-on funding

Company

The Bunker Secure Hosting                                                             £104,161
Biofortuna                                                                                         £99,066
Autologic Diagnostics Group (Capitalised Interest)                          £52,225
Flowrite Refrigeration Holdings (Capitalised Interest)                      £4,534

2. New investments
Company

Procam Television Holdings                                                             £250,000

3. Exits

The entire holding of 612,158 ordinary shares in AiM listed Corero Network Services was sold during the period,realising £74,298.

4.Realisations

In May 2013, £140,187 was received from Alaric Systems, comprising a redemption premium (£105,140) and repayment of loan principal (£35,047).

In May 2013, Meridian Technique effected a capital reorganisation (subsequently being renamed Orthoview Holdings), following which £283,304 of accrued preference share dividends was received along with £43,900 by way of ordinary share and loan stock repayments of capital. A further £157,255 was received in October after the period end, comprising repayment of loan principal (£150,794) and interest (£6,461).

A total of 237,500 ordinary shares in AiM listed Probability were sold during the period, realising proceeds of £92,125. A further 297,500 such shares were sold after the period end, realising a further £139,363.

After the period end, the investment of £233,250 6% Unsecured Convertible Redeemable Loan notes in AiM listed Zoo Digital Group was sold for £177,313 plus interest of £5,831.

5. Material provisions to a level below cost

2K Manufacturing                                                                            £2,002,057
Evance Wind Turbines                                                                    £153,609

Performance summary

During the six month period ended 30 September 2013, several investments continued to perform or trade well, most notably Datapath Group Holdings and TFC Europe, both of which again achieved record sales and profits, as well as Alaric Systems and Ixaris Systems, all of which together generated an increase in valuation of £3.3 million. Encouragingly, some of the recent investments, such as Aerospace Tooling Corporation, Flowrite Refrigeration Holdings and Procam Television Holdings are already showing considerable promise. Closed Loop Recycling also made good progress, which was in contrast to the more difficult trading conditions experienced by Evance Wind Turbines and Autologic Diagnostics Group.

During the period, three follow on investments totalling £703,227 were made, in 2K Manufacturing (£500,000), The Bunker Secure Hosting (£104,161) and Biofortuna (£99,066). Two new investments totalling £750,000 were made during the period in Aerospace Tooling Corporation and Procam Television Holdings. In June, £500,000 was invested alongside other Foresight VCTs in a shareholder recapitalisation of Dundee based Aerospace Tooling Corporation. This company is a well established specialist engineering business providing repair, refurbishment and remanufacturing services to large international companies for components in high specification aerospace and turbine engines. A number of recent orders have underpinned growth and profitability for the current financial year. In April, £250,000 was invested alongside other Foresight VCTs in a management buy-out of Battersea based Procam Television Holdings. Procam Television Holdings is one of the UK's leading broadcast hire companies, supplying equipment and crews for location TV production. In September, Procam Television Holdings acquired one of its competitors, Hammerhead with facilities in London, Manchester, Edinburgh and Glasgow. This strategic acquisition will not only broaden the customer base and provide national coverage but also give synergistic and profitability benefits.

Other investments made good progress, including Closed Loop Recycling, Flowrite Refrigeration Holdings and Ixaris Systems. In February 2013, Closed Loop Recycling raised loans totalling £12.8 million which will enable it to double its production capacity to meet demand from customers under long term supply contracts. New sorting and production equipment has now been commissioned and full scale production utilising this additional capacity commenced in November, which is expected to substantially increase sales and profits. The investment in Flowrite Refrigeration Holdings was made in May 2012 and the company is now trading at twice its budgeted level, having won a number of significant orders nationally for its refrigeration maintenance services. Ixaris Systems, which provides a range of pre-paid electronic payment services integrated with the VISA network, continues to trade ahead of budget, reflecting the recent launch of its Opn platform and customer diversification away from the gaming sector. O-Gen Acme Trek has recently put in a full planning application to redevelop its Stoke site as an 8MW power plant.

Although making substantial profits, sales growth slowed during the period at The Bunker Secure Hosting, which provides ultra secure managed hosting services from two data centres, reflecting increased competition. Further shares were acquired during the period from two minority shareholders for £104,161. Evance Wind Turbines, which designs and manufactures small wind turbines, has performed poorly, reflecting the reduction in the small wind Feed in Tariff in late 2012. Consequently, a further provision of £153,609 was made against the cost of this investment.

As explained below, 2K Manufacturing experienced difficulties in raising capital to expand production facilities and with ongoing sale and merger discussions. On 18 November 2013, these discussions ended, resulting in an administrator then being appointed. A full provision of £2,002,057 has been made against the cost of this investment. Where provisions have been made against the value of underlying investments, we have also provided against the income due from such investments.

Outlook

Foresight Group believes that the gradual improvement in business confidence is now being reflected in the trading of a number of companies across the portfolio and considers that the portfolio is now well positioned to generate growth.

Although Foresight Group is seeing a number of high quality investment opportunities, the Company has limited cash resources at present with which to make new investments. Foresight Group is endeavouring to realise existing investments, where appropriate, to generate cash for shareholder distributions and funds for such new investments.

Portfolio company highlights

In June 2013, the Company invested £500,000 alongside other Foresight VCTs in a £3.5 million shareholder recapitalisation of Dundee based Aerospace Tooling Corporation, a well established specialist engineering company providing repair, refurbishment and remanufacturing services to large international companies for components in high-specification aerospace and turbine engines. The company was founded in 2007 by the former CEO, John Seaton, who, following the transaction, has assumed the role of Executive Chairman. John Green, formerly General Manager of the Dundee facility, became Operations Director, alongside a newly appointed Finance Director and Business Development Director. With a heavy focus on quality assurance, the company enjoys high quality relationships with companies serving the aerospace, military, marine and industrial markets. A number of recent orders have underpinned growth and profitability in the current financial year with profits anticipated to show a strong increase.

Alaric Systems, which develops and sells credit card authorisation and credit card antifraud software to major financial institutions and retailers worldwide, achieved an audited PBIT of £1.3 million on sales of £9.8 million for the year to 31 March 2013 (PBIT of £1.5 million on sales of £8.7 million in 2012). A number of significant orders have been won recently while a number of large contracts are also in prospect which supports achievement of the demanding budget for the current year. Capacity to satisfy these orders and further develop the product range is being met through continuing expansion of offices in Kuala Lumpur, Rome and London. In May 2013, £140,187 was received from the company, comprising a redemption premium (£105,140) and repayment of loan principal (£35,047).

AtFutsal Group provides facilities in three arenas for futsal, a fast growing type of indoor football with 30 million participants worldwide and the only type of indoor football recognised by the Football Association. The business has evolved so that its core focus is now running education programmes for 16 to 18 year olds in conjunction with Football League clubs, educational establishments and training organisations. It has also developed its own education software platform so that it can provide a number of educational services previously outsourced. For the current student year, which commenced in September 2013, the company had registered 1,200 students on its futsal related courses, nearly double the number of students in the previous student year. The Birmingham and Swindon arenas achieved targeted trading levels while the Leeds arena, which opened in August 2012, continues to underperform. Management are focused on developing new strategies for improving utilisation of the arenas to ensure that all are operating at cash break even or better.

Following the £48 million secondary buy-out by ISIS Private Equity in January 2012, investments in equity and loan stock valued at £1.98 million were retained in Autologic Diagnostics Group. Autologic Diagnostics Group continues to generate strong profits and for the year to December 2012 generated an EBITDA of £5.9 million on revenues of £17.2 million. As at 30 September 2013, the company had a healthy cash balance of more than £6 million. In recent months, Autologic Diagnostics Group has strengthened its management team. John Conoley has replaced Peter Toland as CEO and has been joined by new Operations and Marketing directors. The company is underperforming budget for 2013, however, in large part reflecting a slowing in the sales of one-off hardware into the UK and European markets. The UK market is maturing and Europe has suffered from a relative lack of sales focus. The USA continues to perform well, largely driven by a well-structured sales effort. The new management team believes long term value creation will be driven by transitioning to a subscription based business model with a greater proportion of recurring revenues. Such a move would likely see revenues and earnings dip before growth recovers. In the long term the quality of earnings should improve, helping to drive value. In September 2013, interest of £52,225 deferred under the terms of the loan agreement with Autologic Diagnostics Group was capitalised.

Biofortuna, a molecular diagnostics business based in the Wirral, has developed unique expertise in the important area of enzyme stabilisation, effectively hi-tech freeze drying. Its first range of products, SSPGo, is a series of genetic compatibility tests for organ transplant recipients, although the breadth of application of the technology is extremely wide. Because of the company's stabilisation and freeze-drying technology, its products can be transported easily (in the post if needed) and stored at room temperature for up to two years. In August 2013, £99,066 was invested as part of a £1.3 million funding round to fund capital expenditure and working capital. The company is progressing in a number of areas, including broadening its product range, increasing manufacturing capacity and improving internal processes. Following the success of FDA trials for its SSPGo product range, needed to make sales in the USA, Biofortuna is now making progress in obtaining FDA approval in the USA for this genetic testing product range. A recent manufacturing issue is being successfully addressed but has delayed output. The freeze-dried kit manufacturing service shows promise, with paid for feasibility studies and contract discussions occuring with a number of parties.

In February 2013, Closed Loop Recycling concluded a major new supply contract and new customer contracts worth £17 million per annum. A total of £12.8 million in loan finance (of which £6 million was provided by the Foresight Environmental Fund), will be used to double production capacity at the Dagenham plant. In consequence, annual revenues are expected to double, principally through long-term supply contracts, and future profits are expected to increase substantially. Facilities provided by Allied Irish Bank, the incumbent bank, were placed onto a term basis. The new facility and production equipment has now been commissioned and full scale production utilising this additional capacity commenced in November. Management are examining a number of avenues to improve profitability further.

Derby based Datapath Group Holdings is a world leading innovator in the field of computer graphics and video-wall display technology utilised in a number of international markets. The company is increasing its market share in control rooms, betting shops and signage and is entering new markets. For the year ended 31 March 2013, an unaudited record operating profit of £5.1 million was achieved on sales of £14.1 million (£4.5 million on sales of £12.1 million in 2012). The company is continuing its strong growth in the current year to 31 March 2014, with record profits and sales being achieved to date, supporting an increase in valuation of £2.3 million during the period.

Evance Wind Turbines, which manufactures 5kW tree sized (up to 50 feet) wind turbines, enjoyed strong sales growth during 2012, driven primarily by the introduction of the UK Feed in Tariff regime. Both sales and profits grew well in the year to 31 March 2013, the company delivering its 1,500th machine and achieving an operating profit of £354,000 on sales of £8.6 million (£222,000 on sales of £7.25 million in 2012, over three times the level of sales in the previous year). The reduction in the Feed in Tariff, however, from 1 October 2012, combined with a noticeable tightening and lengthening of the planning permission process nationally, has adversely affected orders and sales, such that the company is currently making significant losses. To redress this, costs have been reduced substantially with sales efforts now focused overseas and in the UK corporate market.

In May 2012, £200,000 was invested in Flowrite Refrigeration Holdings alongside other Foresight VCTs to finance the £3.2 million management buyout of Kent based Flowrite Services Limited, which provides refrigeration and air conditioning maintenance services nationally, principally to leisure and commercial businesses such as hotels, clubs, pubs and restaurants. For the year to 31 October 2012, the company achieved an operating profit of £852,000 on sales of £7.9 million. Management has accelerated sales efforts, won a number of significant new contracts and customers and also reviewed several potential acquisitions with the aim of broadening its national coverage. In the year to 31 October 2013, reflecting a particularly busy summer, the company traded well ahead of budget and has already repaid much of the buyout debt finance.

Ixaris Systems has developed and operates Entropay, a global prepaid payment service using the VISA network, as well as offering its new Opn product on a 'Platform as a Service' basis that enables enterprises to develop their own customised global applications for payments over various payment networks. Sales of Opn are strong with a growing pipeline, Ixaris Systems charging a small percentage of each transaction on the platform, thereby reducing reliance on the gaming sector. This platform is being used by companies in the affiliate marketing and travel sectors and sales efforts are being focussed on the international e-commerce and financial services sectors. In the year to 31 December 2012, an operating loss of £293,000 was incurred on sales of £8.4 million, reflecting continuing investment in software and systems. Trading in the current year to date is ahead of budget and the management team has been strengthened by the appointments of a new Chief Operating Officer, Marketing Director and Sales Director.

Meridian Technique (renamed Orthoview Holdings), which develops and supplies surgery planning software to hospitals and surgeries principally in the UK and USA, completed a capital reorganisation in May 2013, following which £283,304 of accrued preference share dividends was received along with £43,900 by way of Ordinary Share and loan stock repayments of capital. Having achieved an EBITDA of £0.6 million on sales of £3.0 million for the year to 31 March 2013, the company is enjoying stronger trading in the current year and continues to be highly cash generative. A further £157,255 was received in October after the period end, comprising repayment of loan principal (£150,794) and interest (£6,461). New partnerships have been established in Asia, further enhancing prospects.

In order to focus on its technology division, Mplsystems (previously named The Message Pad) sold its call centre outsourcing division in June 2013. The sale proceeds will be used to further develop the technology division, which offers contact centre and customer service software on a SaaS (Software as a Service) basis to improve the efficiency of its customers' call centres and customers' experience. For the year to 30 June 2013, a small operating profit of £85,000 was achieved on sales of £5.86 million. Following the above disposal, the company is incurring small losses but the sales pipeline remains strong and, as a result of new contracts, the level of contracted recurring SaaS revenues is growing. The company was recently accredited within the G Cloud framework enabling it to provide contact centre services over the Cloud to all government departments and the wider public sector.

Following a detailed strategic review in December 2011, the decision was made to mothball O-Gen Acme Trek's advanced gasification 3MW waste wood to energy plant in Stoke until the similar 3.8MW plant in Plymouth built by MITIE had validated this technology. Following a change in the ROC subsidy regime, O-Gen UK is currently working to redevelop the Stoke facility into an 8MW plant using alternative, well established standard gasification technology through a partnership with the selected technology provider and a major EPC contractor. Discussions are being held with potential funders. A full planning application was made to the Local Authority in October 2013 for this new plant. As a consequence, the 3MW plant has been decommissioned.

O-Gen UK is a leading developer of waste wood gasification facilities in the UK and is near to financial close on the development of a £45 million project in Birmingham, having received planning permission and signed the relevant project documents. The company has developed a growing pipeline of similar opportunities at various stages of maturity, including three projects forecast during 2014 (including O-Gen Acme Trek's Stoke plant above). The company continues to develop relationships with a number of technology providers and major EPC contractors. O-Gen UK will not finance the construction of these plants but will benefit from project management fees, equity shareholdings and fuel, operation and maintenance contracts.

A total of 237,500 ordinary shares in AiM listed Probability were sold during the period, realising proceeds of £92,125. A further 297,500 such shares were sold after the period end, realising a further £139,363.

In April 2013, the Company invested £250,000 alongside other Foresight VCTs in a £1.8 million round to finance a management buy-out of Procam Television Holdings. Procam Television Holdings is one of the UK's leading broadcast hire companies, supplying equipment and crews for UK location TV production to broadcasters, production companies and corporates for over 20 years. Headquartered in Battersea, London, with additional facilities in Manchester, Procam Television Holdings employs 70 people and has supported shows including Made in Chelsea, ITV's Splash, Watch's The Incredible Mr Goodwin, BBC2's The Great British Sewing Bee, Derren Brown and The Great British Bake Off. It is a preferred supplier to BSkyB and an approved supplier for BBC and ITV. Over the last four years revenues have doubled, following the introduction of new camera formats. The management buy-out team was led by current Managing Director John Brennan. The former CEO of Carlton Television, Clive Jones, has been appointed as Chairman. The company plans to gain greater market share by launching new facilities and services in the coming months. In September 2013, Procam Television Holdings acquired one of its competitors, Hammerhead, with facilities in London, Manchester, Edinburgh and Glasgow. This strategic acquisition will not only broaden the customer base and national coverage but also realise various synergistic benefits, and is expected to improve profits substantially.

TFC Europe, a leading distributor of technical fasteners in the UK and Germany, performed well during the year to 31 March 2013, achieving record operating profits of £2.45 million on sales of £18.1 million (an operating profit of £2.35 million on sales of £16.6 million in 2012). Trading to date in the current year continues to be strong, ahead of budget. In September, a small Scottish distribution business was acquired, thereby improving national coverage. A new warehouse has been established near Dusseldorf which is expected to result in increased sales and improved service to customers in Germany. Further possible acquisition opportunities are also being evaluated to complement the existing business.

Although The Bunker Secure Hosting, which operates two ultra secure data centres, continues to win new orders and generate substantial profits, sales growth has slowed, reflecting increased competition and higher than expected contract attrition rates. For the year to 31 December 2012, an EBITDA of £1.77 million was achieved on sales of £8.5 million, at which date recurring annual revenues were running at £8.8 million. In the current year, a slightly better performance is expected. To strengthen sales efforts, a number of new Cloud based services have recently been launched and the sales and marketing strategy is being reassessed. Investment continues in upgrading the existing infrastructure. In April 2013, further shares were purchased from two minority shareholders for £104,161.

From its fully automated Luton factory, 2K Manufacturing produced high quality Ecosheet boards made from recycled waste plastic. Despite orders and a sales pipeline, limited production capacity constrained output and losses continued to be incurred. To meet working capital requirements, a further £500,000 was invested in loans during the period. Up to £10 million had been sought for some time to increase production capacity but efforts proved to be unsuccessful, as did protracted sale and merger discussions. On 18 November 2013, these discussions ended, resulting in an administrator then being appointed. A full provision of £2,002,057 has accordingly been made against the cost of this investment.

Post the period end, on 31 October, the investment of £233,250 6% Unsecured Convertible Redeemable Loan note in AiM listed Zoo Digital Group was sold for £177,313 plus interest of £5,831.

David Hughes
Foresight Group
Chief Investment Officer
29 November 2013

Unaudited Half-Yearly Financial Report 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 year ended 31 March 2013. A detailed explanation can be on found on page 21 of the Annual Report and Accounts which is available at www.foresightgroup.eu or by writing to Foresight Group at ECA Court, 24-26 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 Unaudited Half-Yearly Financial Report for the six month period ended 30 September 2013.

The Directors confirm to the best of their knowledge that:

(a) the summarised set of financial statements has been prepared in accordance with the pronouncement on interim reporting issued by the Accounting Standards Board;

(b) the Unaudited Half-Yearly Financial Report for the six month period ended 30 September 2013 includes a fair review of the information required by DTR 4.2.7R (indication of important events during the six months of the year and a description of principal risks and uncertainties that the Company faces for the remaining six months of the year);

(c) 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

(d) 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 on page 20 of the 31 March 2013 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 31 March 2013 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 across a variety of industries and sectors. 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 for the six month period ended 30 September 2013 has not been audited or reviewed by the auditors.

On behalf of the Board

Graham Ross Russell
Chairman
29 November 2013

Unaudited Income Statement
for the six month period ended 30 September 2013

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 period.

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 30 September 2013

Unaudited Reconciliation of Movements in Shareholders' Funds
for the six month period ended 30 September 2013

Unaudited Cash Flow Statement
for the six month period ended 30 September 2013

Notes to the Unaudited Half-Yearly Financial Report
for the six month period ended 30 September 2013

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 year ended 31 March 2013. Unquoted investments have been valued in accordance with IPEVC guidelines. Quoted investments are stated at bid prices in accordance with IPEVC guidelines and UK Generally Accepted Accounting Practice. 

2. These are not statutory accounts in accordance with S436 of the Companies Act 2006 and the Unaudited Half-Yearly Financial Reports for the six months ended 30 September 2013 and 30 September 2012 have been neither audited nor reviewed. Statutory accounts in respect of the period to 31 March 2013 have been audited and reported on by the Company's auditors and delivered to the Registrar of Companies and included the report of the auditors 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 31 March 2013 have been reported on by the Company's auditors or delivered to the Registrar of Companies. 

3. Copies of the Unaudited Half-Yearly Financial Report for the six month period ended 30 September 2013 have been sent to shareholders and are available for inspection at the Registered Office of the Company at ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU. 

Copies of the Unaudited Half-Yearly Financial Report for the sixth month period ended 30 September 2013 are also available electronically at www.foresightgroup.eu.

4. Net asset value per Ordinary Share 

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

5. Return/(loss) per Ordinary Share 

6. Income/(interest expense) 

*The interest expense for the six month period ended 30 September 2012 arose because of provisions made against loan stock interest receivable from investee companies.

7. Investments held at fair value through profit or loss 

*Capitalised interest of £57,000 was recognized in the period and is included within purchases at cost.

8. Transactions with the manager 

Foresight Group, acting as investment manager to the Company in respect of its venture capital investments, earned fees of £491,000 during the period (30 September 2012: £487,000; 31 March 2013: £983,000). Fees excluding VAT of £62,000 (30 September 2012: £60,000; 31 March 2013: £123,000) were received during the period for company secretarial, administrative and custodian services to the Company.

At the balance sheet date, there was £nil due to or from Foresight Group (30 September 2012: £nil; 31 March 2013: £25,000 ) and £nil due to Foresight Fund Managers Limited (30 September 2012: £nil; 31 March 2013: £nil). No amounts have been written off in the period in respect of debts due to or from the related parties.

END