TIDMFRF
FORESIGHT 5 VCT PLC
Summary
* Net asset value per Ordinary Share as at 31 March 2011 was 19.5p compared to
59.1p as at 30 September 2010.
* Net asset value per C Share as at 31 March 2011 was 70.8p compared to 85.2p
as at 30 September 2010.
* Six follow-on investments were made from the Ordinary Shares fund totalling
GBP3,125,000. These were The Fin Machine Company ( GBP1,250,000); Loseley Dairy
Ice Cream ( GBP950,000); Red Reef Media ( GBP350,000); Munro Global ( GBP300,000);
Future Noise ( GBP150,000) and Brand Acquisitions ( GBP125,000).
* One realisation was made from the Ordinary Shares fund: GBP4,340,000 for Amber
Taverns.
* A change of Investment Manager occurred on 24 February 2011 from Acuity
Capital Management Limited to Foresight Group CI Limited.
* There were no investments or disposals from the C Shares fund.
Chairman's Statement
Dear Shareholder
Your Company has experienced significant changes since 31 January 2011, the date
when the audited accounts for the financial year ended 30 September 2010 were
published. I consider it important as your new Chairman to highlight these
changes and so this Half-Yearly Financial Report is much longer than usual,
incorporating the following statement from myself and also a detailed report
from your Company's new investment manager, Foresight Group ('Foresight').
On 8 March 2011, Acuity Growth's name was changed to Foresight 5 VCT plc, a
change of name being required under the terms of the termination agreement with
the former investment manager, Acuity Capital Management.
Reduction in Net Asset Value, Change of Manager and Portfolio Review
Immediately prior to the Annual General Meeting on 10 March, an RNS announcement
was released to the Stock Exchange highlighting my statement at that meeting
that the Company's net asset value was expected to be substantially lower than
previously reported, following Foresight's initial review of the investment
portfolio and the Company's financial position. I regret to have to inform you
that, for the reasons explained more fully below, the net asset value of the
Ordinary Shares has fallen by 67% from GBP32.1m (59.1p per Ordinary Share) as at
30 September 2010 to GBP10.6m (19.5p per Ordinary Share) as at 31 March 2011. The
net asset value of the C Shares has fallen by 17% from GBP0.7m (85.2p per C Share)
as at 30 September 2010 to GBP0.6m (70.8p per C Share) as at 31 March 2011.
These particularly disappointing results reflect the poor performance of the
former investment manager. Although providing no consolation for shareholders,
this outcome clearly vindicates the Board's decision in late 2010 when the net
asset value fell significantly to replace the former investment manager, Acuity
Capital Management, through a competitive selection process which culminated in
the appointment of a new investment manager, Foresight, on 24 February 2011.
As explained more fully in their report below, Foresight found that your Company
had been left with insufficient funds to meet the urgent and substantial funding
requirements of several investee companies. This was despite GBP4.3m being
received in November 2010 from the successful sale of the investment in Amber
Taverns. In the period from 30 September 2010 to 24 February 2011, prior to
Foresight's appointment as investment manager, a further GBP3.1m was invested to
support existing portfolio companies, the largest of these being Fin Machine
Company ( GBP1.25m) and Loseley Dairy ( GBP0.95m). Based on Foresight's overall
assessment of the cash positions of Foresight 5, and its sister VCT, Acuity 3
VCT plc and, inter alia, the cash requirements, prospects, risks, potential
returns and exit timing for each investee company, it was decided to no longer
meet requests for further funding from Loseley Dairy, Munro Global, Brand
Acquisitions and Future Noise. The first three of these companies have
subsequently appointed administrators or are being liquidated and the
investments in all four companies have been written down to nil.
A combination of the continued disappointing performance of the portfolio, poor
investment strategy and management by the previous investment manager and the
use of different valuation methodologies in light of currently available
information has ultimately resulted in the fall in net asset value. Reductions
were unfortunately necessary in the valuations of all unquoted investee
companies. Of the overall reduction of GBP21.6m, 33% related to write-offs
following decisions by Foresight not to continue supporting the loss making
businesses described above and 67% resulted from applying different valuation
methodologies in light of currently available information. Major reductions in
valuations from those as at 30 September 2010 have occurred in the following
investments: Loseley Dairy ( GBP2.0m); Brand Acquisitions ( GBP2.3m); Future Noise
( GBP0.4m); and Munro Global ( GBP0.9m), all of which have been written down to nil.
Further related reductions totalling GBP2.7m have had to be made against
irrecoverable accrued interest of which GBP0.7m was in respect of Fin Machine and
GBP0.9m was in respect of Defaqto. A reduction of GBP3.4m has been made against the
investment in Fin Machine which experienced continuing liquidity problems. These
have been addressed by additional investment and further strengthening of the
management team through new appointments and changes instigated by Foresight.
Other substantial reductions in valuations were made against the investments in
Defaqto ( GBP2.0m), Red Reef Media ( GBP1.2m), Factory Media ( GBP1.2m), Financial News
Publishing ( GBP1.5m) and Connect2 Media ( GBP1.6m) reflecting changes in valuation
methodologies in light of currently available information. Foresight has
reviewed the strategy for each investee company with the Board and further
details on the investment portfolio are contained within the Investment
Manager's Report.
Corporate Strategy
Working in conjunction with Foresight, the Board has agreed a strategy for the
Company. As explained in more detail in the Investment Manager's Report, the
strategy for Foresight 5 is two-fold: (i) to raise up to approximately GBP760,000
through a pre-emptive offer of Ordinary Shares
of ten per cent of the issued share capital to existing shareholders (other than
overseas shareholders) at a discount to the 31 March 2011 net asset value per
Ordinary Share to contribute to the likely cash requirements of the existing
investee companies and (ii) to raise funds later in the year through a public
offer pursuant to a prospectus for further expansion and diversification of the
portfolio.
The pre-emptive shareholder offer will enable any shares not applied for by
shareholders under pre-emptive entitlements to be applied for by other
shareholders. The pre-emptive shareholder offer requires the approval of
shareholders of allotment authorities and a circular to shareholders convening a
general meeting to obtain these authorities will be posted shortly. Similar
authorities will be required for the public offer and approval of shareholders
will also be sought for these at the general meeting.
The Board is currently reviewing its other strategic options which will include
evaluating potential merger options for the Company.
Until the performance of the portfolio can be improved, there is no realistic
prospect of either dividends being paid or share buy backs being implemented for
the foreseeable future.
The Directors have agreed that, during 2011, their earned emoluments (net of
tax) will be invested in shares rather than paid in cash, thereby completely
aligning their interests with those of shareholders during this difficult time.
Review of Termination Fee to Former Investment Manager
Following the Annual General Meeting on 10 March and in response to
shareholders' requests, the Board took further legal advice on whether there
were any grounds on which the termination agreement with the former investment
manager could be rescinded. This legal review has since confirmed that there are
no grounds for any such action. The payment of a termination fee was necessary
in order to change the investment manager. As the Board had negotiated that
Foresight would forego any management fees for the first 18 months, the Board
wish to emphasise that the Company will only be paying one set (not two) of
arrangement fees during this period.
Outlook
As requested by your Board, Foresight has now completed their review of the
Company and each of the investments in the portfolio. Although the conclusions
make particularly uncomfortable reading, the Board believes that your Company is
now well managed and that a strategy has been established to take your Company
forward. Foresight has highlighted to the Board that the reduction in net asset
value has been compounded in the case of a number of portfolio companies by the
impact of shareholder and other debt within the capital structure of these
investee companies. This has led to a disproportionately large fall in the value
of certain of Foresight 5's investments when compared with the fall in the
overall value of these companies. The impact of shareholder and other debt also
has the potential to compound value increases if the trading and prospects of
the portfolio companies improve and bank debt is repaid. Foresight believe that
the investment portfolio includes a number of companies which have potential
over time to create value for shareholders significantly in excess of their
present valuations and that, with additional funds to make new investments, your
Company's net asset value should increase over time.
David Sebire
Chairman
1 June 2011
Investment Manager's Report
Introduction
This is Foresight Group's ('Foresight') first report since being appointed as
the new investment manager of Acuity Growth VCT Plc (renamed Foresight 5 VCT Plc
('Foresight 5' or the 'Company')) on 24 February 2011. Foresight was also
appointed as the new investment manager of Foresight 5's closely related sister
VCT, Acuity VCT 3 Plc ('Acuity 3'), on 1 April 2011. In both cases Foresight
replaced the former investment manager, Acuity Capital Management Ltd
('Acuity'). Foresight Fund Managers Ltd has similarly replaced Acuity as Company
Secretary of both VCTs with effect from these dates. This Investment Manager's
Report is rather more extensive than normal, as there is much to cover.
The investment portfolio is reviewed by individual investment in detail below.
At 31 March 2011, the Foresight 5 portfolio principally comprised eleven
unquoted investments, substantially all the value of the portfolio. The
portfolios of Foresight 5 and Acuity 3 largely overlap.
Reduction in Net Asset Value
In summary, but as explained in more detail below, at the time of Foresight's
appointment, Foresight 5 was left with insufficient funds to support the
continuing funding requirements of the existing portfolio while the quality of
various investments was appreciably poorer than expected. Combined with the use
of different valuation methodologies in light of currently available
information, this has resulted in a substantial reduction in the net asset
value.
The net asset value of the Ordinary Shares has fallen by 67% from GBP32.1m (59.1p
per Ordinary Share) as at 30 September 2010 to GBP10.6m (19.5p per Ordinary Share)
as at 31 March 2011. The net asset value of the C Shares has fallen by 17% from
GBP0.7m (85.2p per C Share) as at 30 September 2010 to GBP0.6m (70.8p per C Share as
at 31 March 2011.
Pre-Emptive Shareholder Offer
In the light of the limited cash resources, the Board proposes to raise up to
approximately GBP760,000 through a pre-emptive offer of Ordinary Shares of ten per
cent of the issued share capital to existing shareholders (other than overseas
shareholders) at a discount to the 31 March 2011 net asset value per Ordinary
Share to contribute to the likely cash requirements of the existing investee
companies. The offer will enable any shares not applied for by shareholders
under pre-emptive entitlements to be applied for by other shareholders. The pre-
emptive offer requires the approval of shareholders of allotment authorities and
a circular to shareholders convening a general meeting to obtain these
authorities will be posted shortly.
Income tax relief at the rate of 30% of the amount subscribed, tax-free
dividends and tax-free capital growth (subject to the investment limits for VCTs
and holding shares for the minimum qualifying holding period) should be
available to qualifying investors subscribing to new Ordinary Shares.
Corporate Strategy
The above pre-emptive issue is expected to provide Foresight 5 with sufficient
funds to contribute to the likely funding requirements of the existing
portfolio. However, the Company will still have insufficient funds to make any
new investments and is likely to remain small, with a highly concentrated
portfolio comprising only a few investments and with only limited prospects of
paying any significant or regular dividends for some time.
To raise further funds for expansion and diversification of the resultant
portfolio, Foresight has proposed to the Board that a public offer pursuant to a
prospectus is made to existing shareholders and the public later in the year.
The Board is currently reviewing its other strategic options which will include
evaluating potential merger options for the Company.
Recent Background
i. Selection of Foresight as Investment Manager
In preparation for and as part of a selection process for a new investment
manager instituted by the Boards of both Foresight 5 and Acuity 3 in late 2010,
Foresight carried out a detailed review of the two VCTs and also of each
individual investment in the portfolio, using information solely from public
sources. This review highlighted a number of potential issues within the VCTs
and certain investee companies.
Foresight was formally appointed as investment manager of Acuity Growth on 24
February and of Acuity 3 on 1 April 2011.
ii. Assessment of Foresight 5 and Investee Companies
As planned, and in order to report fully to the Foresight 5 Board and
shareholders at its Annual General Meeting on 10 March 2010, the Foresight team
rapidly embarked on a heavy programme of information and data gathering,
meetings and assessments of each investee company, covering, inter alia,
management, markets, business model and performance, cash requirements as well
as exit potential and timing. Subsequently, detailed research was then carried
out to arrive at appropriate valuations for all eleven unquoted investments.
Reductions have unfortunately been necessary in the valuations of all unquoted
investees, in part due to the additional information gathered by Foresight. In
most cases these reductions are substantial, particularly Loseley Dairy, Brand
Acquisitions, Future Noise and Munro Global, all of which have been written down
to nil, as well as Fin Machine, Defaqto and Red Reef Media. Further details are
set out in the portfolio review below.
iii. Cash Position
At 31 March 2011, Foresight 5 had cash and relatively realisable listed
investments of only around GBP1.0m, appreciably less cash than was required to
meet its likely commitments and expenses (most notably the termination payments
due to the former investment manager) and certainly insufficient to meet its
share of the urgent funding requirements of five portfolio companies,
representing a major part of the portfolio by value. These urgent requirements
totalled GBP2.5m, of which half was required from Foresight 5 and half from Acuity
3. These five investee companies also had other foreseeable funding requirements
totalling GBP2.8m, giving an overall total of GBP5.3m (again of which half was
required from Foresight 5 and half from Acuity 3).
Foresight had expected Foresight 5 to have more cash resources available to it
as GBP4.3m of cash had been realised by Foresight 5 from the successful sale of
the investment in Amber Taverns in November 2010, reflecting an exit multiple of
2.9 times. In the five months from October 2010 to February 2011, nearly all
these funds had been invested as follow on investments in six investee
companies. Five of these were the same five referred to above (and below) that
still left GBP5.3m of funding requirements which could not realistically be met.
As a consequence, neither of the two VCTs could provide further funds to some,
or possibly all, of these five investee companies and, if they did so, would
have little or no cash to pay their operating expenses. Based on Foresight's
overall assessment of inter alia cash requirements, prospects, risks, potential
returns and exit timing for each investee company, it was decided to no longer
meet requests for further funding from Loseley Dairy, Munro Global and Future
Noise, which were all significantly loss making and presented very challenging
investment cases. In early March, shortly following Foresight's appointment as
investment manager of Foresight 5, GBP75,000 was invested into Brand Acquisitions
from Foresight 5 (alongside GBP75,000 from Acuity 3), to fund working capital
while the company's situation was fully assessed. Having now reviewed the
company's position in detail, Foresight has decided to no longer support the
company with further investment.
These decisions thereby cast doubt on the continuing viability of some of these
companies and on their current valuations. During April and May 2011 following
extensive consideration of the strategic options for each business, Munro
Global, Loseley Dairy and Brand Acquisitions appointed
administrators/liquidators. The outlook for Future Noise is challenging.
The decision was made to provide urgent but limited funds to support the
turnaround of Fin Machine by investing GBP250,000 by way of loan stock from each
VCT on 8 April 2011.
The remaining six unquoted investee companies, mainly in the media sector, had
no immediate cash requirements and some are trading well. However, in most
cases, their valuations have been reduced materially as a result of applying
different valuation methodologies in light of currently available information.
This has led to a disproportionately large fall in Foresight 5's investment
value when compared with the fall in the overall value of certain companies. In
a number of cases these reductions have been compounded by the impact of
significant levels of shareholder and other debt within the capital structures
of the investee companies. As part of their assessment process, Foresight
reviewed whether or not any of the investments in these companies could be
realised quickly but concluded that this was impractical immediately at anything
other than 'fire sale' prices.
iv. Valuations of Investee Companies
Foresight's detailed assessments and proposed valuations of all investments as
at 31 March 2011, including the listed shareholdings and eleven unquoted
investee companies, have been discussed and agreed with the Board and also
discussed with (but not formally reviewed by) the auditors. The Boards of
Foresight 5 and Acuity 3 have agreed a consistent valuation approach and
methodology with respect to each investee company held in both VCTs. These
valuations are summarised in the table below, and are compared with the last
published valuations as at 30 September 2010, prepared by the former investment
manager.
FORESIGHT 5 INVESTMENT SUMMARY
31 March 2011 30 September 2010
----------------------- ----------------------
Additions/ Valuation
(Disposals) Movement
since 30 since 30
ORDINARY Amount September September Valuation Amount
SHARES FUND Invested Valuation 2010* 2010* Methodology Invested Valuation
GBP GBP GBP GBP GBP GBP
Investment
=----------------------------------------------------------------------------------------------
Defaqto Earnings
Group 3,852,125 3,212,545 - (1,958,790) multiple 3,852,125 5,171,335
Limited
Factory Earnings
Media 1,924,999 2,506,680 - (1,156,638) multiple 1,924,999 3,663,318
Limited
Hallmarq Earnings
Systems 1,177,000 1,168,160 - (91,681) multiple 1,177,000 1,259,841
Limited
Connect2 Earnings
Media 2,402,693 1,064,584 - (1,465,402) multiple 2,402,693 2,529,986
Limited
The Fin
Machine 7,006,296 820,400 1,250,000 (3,415,454) Earnings 5,756,296 2,985,854
Company multiple
Limited
Financial
News 1,374,250 545,896 - (1,477,925) Revenue 1,374,250 2,023,821
Publishing multiple
Limited
Keycom Plc 627,000 285,853 - (47,642) Bid price 627,000 333,495
Jelf Group 250,222 142,205 - 31,273 Bid price 250,222 110,932
Plc
Zamano Plc 750,000 124,687 - (15,938) Bid price 750,000 140,625
Red Reef Earnings
Media 1,777,242 61,362 350,000 (1,523,223) multiple 1,427,242 1,234,585
Limited
Managed
Support 887,584 55,293 - (82,273) Bid price 887,584 137,566
Services Plc
Connexion
Media 25,570 24,832 - (14,235) Bid price 25,570 39,067
Limited
1st Dental
Laboratories 81,250 - - - Bid price 81,250 -
Plc
Sport Media 516,166 - - (15,000) Discounted 516,166 15,000
Group Plc bid price
Future Noise 1,342,205 - 150,000 (556,555) Nil value 1,192,205 406,555
Limited
Munro Global 1,915,000 - 300,000 (1,183,292) Nil value 1,615,000 883,292
Limited
Brand
Acquisitions 2,914,000 - 125,000 (2,378,234) Nil value 2,789,000 2,253,234
Limited
Loseley
Dairy Ice 4,858,831 - 950,000 (2,942,036) Nil value 3,908,831 1,992,036
Cream
Limited
Amber
Taverns - - (3,261,433) (956,172) Sold 3,261,433 4,217,605
Limited**
-----------------------------------------------------------------------------------
33,682,433 10,012,497 (136,433) (19,249,217) 33,818,866 29,398,147
-----------------------------------------------------------------------------------
------------ -----------
Net current
assets less 611,812 2,740,253
liabilities
------------ -----------
------------ -----------
Net assets 10,624,309 32,138,400
------------ -----------
Number of
shares in 54,394,938 54,394,938
issue
Net asset
value per 19.5p 59.1p
share
=----------------------------------------------------------------------------------------------
31 March 2011 30 September 2010
----------------------- ----------------------
Additions/ Valuation
(Disposals) Movement
since 30 since 30
C SHARES Amount September September Valuation Amount
FUND Invested Valuation 2010 2010 Methodology Invested Valuation
GBP GBP GBP GBP GBP GBP
Investment
=----------------------------------------------------------------------------------------------
Electra
Private 96,800 133,040 - 23,600 Bid price 96,800 109,440
Equity Plc*
Connect2 Earnings
Media 200,000 88,600 - (131,344) multiple 200,000 219,944
Limited
-----------------------------------------------------------------------------------
296,800 221,640 - (107,744) 296,800 329,384
-----------------------------------------------------------------------------------
------------ -----------
Net current
assets less 329,100 333,509
liabilities
------------ -----------
------------ -----------
Net assets 550,740 662,893
------------ -----------
Number of
shares in 777,589 777,589
issue
Net asset
value per 70.8p 85.2p
share
=----------------------------------------------------------------------------------------------
31 March 2011 30 September 2010
----------------------- ----------------------
CONSOLIDATED Valuation Valuation
GBP GBP
------------ -----------
Ordinary 10,624,309 32,138,400
Shares fund
C Shares 550,740 662,893
fund
------------ -----------
11,175,049 32,801,293
=----------------------------------------------------------------------------------------------
These tables show the new valuations of the unquoted investments are lower in
all cases and, in most cases, appreciably lower than the valuations shown in the
audited accounts as at 30 September 2010. Of the GBP21.6m reduction, in net asset
value, 33% was because of write-offs following decisions by Foresight not to
continue to support certain loss making businesses and 67% resulted from
applying more appropriate valuation methodologies. While reviewing and assessing
each investee company, new information came to light on several of the companies
which had a material adverse bearing on their valuations.
Other information relating to the period after 30 September 2010 is now
reflected in the valuations as at 31 March 2011. An announcement was made at the
Foresight 5 AGM on 10 March 2011 that its net assets would be substantially
lower than the last published figures.
The net asset value of the Ordinary Shares has fallen by 67% from GBP32.1m (59.1p
per Ordinary Share) as at 30 September 2010 to GBP10.6m (19.5p per Ordinary Share)
as at 31 March 2011. The net asset value of the C Shares has fallen by 17% from
GBP0.7m (85.2p per C Share) as at 30 September 2010 to GBP0.6m (70.8p per C Share)
as at 31 March 2011.
A combination of the continued disappointing performance of the portfolio, poor
investment strategy and management by the previous investment manager, and the
use of different valuation methodologies in light of currently available
information has ultimately resulted in the above fall in net asset value. Major
reductions in valuations from those as at 30 September 2010 have occurred in the
following investments: Loseley Dairy ( GBP2.0m); Brand Acquisitions ( GBP2.3m); Future
Noise ( GBP0.4m) and Munro Global ( GBP0.9m), all of which have been written down to
nil. Further related reductions totalling GBP2.7m have had to be made against
irrecoverable accrued interest, of which GBP0.9m was in respect of Defaqto and
GBP0.7m was in respect of Fin Machine. A reduction of GBP2.2m has been made against
the investment in Fin Machine which experienced continuing liquidity problems.
These have been addressed by additional investment and further strengthening of
the management team through new appointments and changes instigated by
Foresight. Other major reductions in valuations have been made against the
investments in Defaqto, Connect2 Media, Factory Media, Financial News Publishing
and Red Reef Media, reflecting changes in valuation methodologies in light of
currently available information. Further details on the investment portfolio are
set out later in this report.
Recent Developments
On 19 April 2011, the principal trading subsidiary of Munro Global was sold to
SPA Future Thinking, a market research firm, for a nominal sum. Munro Global is
subsequently being liquidated. The sale followed an intensive review of the
strategic options for this loss making business.
In addition, during April and May, administrators were appointed to Loseley
Dairy and Brand Acquisitions. In both cases, the appointment of administrators
followed a detailed assessment of the strategic options and several failed
attempts to sell these companies.
On 24 May 2011 Electra Private Equity Plc published their Half-Yearly Financial
Report. Following this announcement the Company's holding in Electra Private
Equity Plc was sold realising GBP137,145 for Foresight 5, an uplift of 3.1% on the
valuation as at 31 March 2011.
Future Investment Strategy
With funds from a successful pre-emptive shareholder offer, Foresight believes
that the Company should have sufficient funds to contribute to the likely cash
requirements of the existing investee companies. However, it will still be
small, with a highly concentrated portfolio comprising only a few investments.
With funds from the public offer later in the year, Foresight believes that the
Company will be in a good position to invest in new opportunities generated from
Foresight's strong deal flow and so diversify its portfolio over time. These
will include growth capital opportunities, Management Buy Outs (MBOs) and
Management Buy Ins (MBIs) in a range of different sectors. Foresight recognises
that shareholders want to receive dividends and endeavours to pay where possible
regular, recurring dividends to shareholders in all its VCTs. Foresight will
endeavour to pay dividends as soon as practicable but given the current state of
the portfolio that is unlikely for the foreseeable future.
Foresight believes that the investment portfolio includes a number of companies
which have the potential over time to create value for shareholders
significantly in excess of their present valuations, and that with additional
funds to make new investments, Foresight believes that net asset values should
increase over time.
Portfolio Review
On 31 March, the Foresight 5 portfolio comprised two categories of investments,
namely seven listed shareholdings and eleven unquoted investments. There is
significant overlap between the holdings of Foresight 5 and its sister VCT,
Acuity 3.
Listed Shareholdings
The total valuation of the seven listed investments as at 31 March 2011 was
GBP765,911 a reduction of GBP120,214 compared to the valuation of GBP886,125 as at 30
September 2010. Of the listed investments, the largest holdings are in Keycom
( GBP285,853), Jelf Group ( GBP142,205), Zamano ( GBP124,687) and Electra Private Equity
( GBP133,040). The holding in Electra Private Equity Plc was sold in May 2011
realising GBP137,145, representing an uplift of 3.1% on the valuation on 31 March
2011. A number of the other holdings are relatively illiquid.
Before Foresight was able to set up trading accounts with stockbrokers in order
to be in a position to trade the listed shareholdings, on 1 April Sports Media
Group's shares were suspended from trading and the Company was placed into
administration resulting in a total write off of GBP9,240 post 31 March 2011.
Unquoted investments
BRAND ACQUISITIONS
Brand Acquisitions wholly owned the Peter Werth and Pink Soda clothing brands.
Peter Werth was the company's core brand, generating 94% of sales, and provided
a full range of casual wear to the men's market, primarily aimed at 25-35 year
olds. Pink Soda designed fashion items for the women's market.
Both brands designed two ranges a year, Spring/Summer and Autumn/Winter, and the
manufacture of the designs was out-sourced to 15 suppliers worldwide. Finished
products were shipped to England to the company's warehouse in Enfield and then
distributed to over 400 retailers across the UK, Ireland, Switzerland and
Germany. Products were also distributed to 35 concessions in House of Fraser
stores and the company's sole retail outlet in the Liverpool Met Centre. The
company undertook all sales and marketing activity in-house.
In addition to selling 'Full Price' ranges to retailers, the company sold an
'Off Price' range to large UK discount retailers TK Maxx and M&M Direct. In the
last financial year the 'Full Price' range accounted for 75% of sales at a 48%
gross margin and 'Off Price' sales accounted for 25% of sales at a 19% gross
margin.
Sales for the current financial year ending 31 January 2012 were behind forecast
and the Company requested further funding from Foresight 5 and Acuity 3. Having
reviewed the investment case, Foresight decided to no longer support the company
with further investment. Brand Acquisitions went into administration in May
2011.
Financial summary ( GBP000's)
Year ended 31 January 2011
=----------------------------------------------------
Turnover 10,834
=----------------------------------------------------
Gross profit 4,387
=----------------------------------------------------
EBITDA (1,252)
=----------------------------------------------------
EBIT (1,501)
=----------------------------------------------------
Net assets/(liabilities) (423)
=----------------------------------------------------
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=------------------------------------------------------------
% of fully diluted equity 32% 16% 48%
=------------------------------------------------------------
Investment since 30/09/10* 125 125 250
=------------------------------------------------------------
Total investment cost 2,914 2,025 4,939
=------------------------------------------------------------
=------------------------------------------------------------
Valuation at 30/09/10 2,253 1,621 3,874
=------------------------------------------------------------
Valuation at 31/03/11 - - -
=------------------------------------------------------------
Note:
* Includes Foresight approved GBP75,000 investment from Foresight 5 VCT on
03/03/11, immediately following transfer of investment management contract to
fund working capital while the situation was fully assessed.
CONNECT2 MEDIA
Connect2 Holdings, which trades as Connect2 Media, is a developer, publisher and
distributor of digital media entertainment on a range of devices including
mobile phones, portable games consoles, Blackberrys, Android, Windows Mobile,
iPhones, PCs and interactive TVs. The Company is headquartered in Manchester and
has offices in Europe, Middle East, Asia and the Americas. In 2010 Connect2
Media expanded its operations in North America with the acquisition of Sennari
which develops and distributes prize based incentivised games for mobile phones.
The Company has a highly experienced management team led by Executive Chairman
Nick Alexander and continues to grow its market share within the traditional
mobile gaming sector, distributing over 30 games annually to carriers in five
continents. Connect2 Media has a limited presence in the smartphone market,
having chosen not to compete in what is a highly fragmented, competitive but
fast growing sector.
The Company has started the current financial year in line with full year
forecasts and recently agreed a two year licence for the mobile rights to Jaws
Worldwide, excluding iOS/iPhone. Reflecting tighter control of costs, the
company is currently operating around breakeven EBITDA.
Financial summary ( GBP000's)
Year ended 31 December 2010
=---------------------------------------------
Turnover 5,382
=---------------------------------------------
Gross profit 2,343
=---------------------------------------------
EBITDA (532)
=---------------------------------------------
EBIT (499)
=---------------------------------------------
Net assets/(liabilities) 1,783
=---------------------------------------------
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=-------------------------------------------------------------
% of fully diluted equity 19% 14% 33%
=-------------------------------------------------------------
Investment since 30/09/10* - - -
=-------------------------------------------------------------
Total investment cost 2,602 2,250 4,852
=-------------------------------------------------------------
=-------------------------------------------------------------
Valuation at 30/09/10 2,750 2,450 5,200
=-------------------------------------------------------------
Valuation at 31/03/11 1,153 1,049 2,202
=-------------------------------------------------------------
Note:
*Consolidated for Ordinary Shares and C Shares
DEFAQTO GROUP
Defaqto is an independent financial research company specialising in rating,
comparing and analysing financial products. Since 1994, Defaqto has built the
largest, whole of market, retail financial product database and become one of
the leading providers of financial product data in the UK covering over 30,000
products across banking, life, pensions, investments and general insurance.
The company analyses the level of cover or benefits offered within a financial
product and awards a Star Rating from 1 to 5. Defaqto Star Ratings help
consumers and advisers decide which product suits their specific needs, rather
than comparing purely on price. Providers also use the ratings to ensure they
offer products to meet differing consumer demands.
The company sells access to this data to government agencies, financial product
providers, financial intermediaries and data aggregators through a number of
subscription-based online software products and data feeds.
The company has been making a substantial investment in product development over
the past two years.
Financial summary ( GBP000's)
Year ended 31 March 2010
=-------------------------------------------------
Sales 8,745
=-------------------------------------------------
EBITDA 913
=-------------------------------------------------
Profit/(loss) before tax (607)
=-------------------------------------------------
Net assets/(liabilities) (8,908)
=-------------------------------------------------
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=-------------------------------------------------------------
% of equity / voting rights 25.4% 8.1% 33.5%
=-------------------------------------------------------------
Investment since 30/09/10 - - -
=-------------------------------------------------------------
Total investment cost 3,852 1,285 5,137
=-------------------------------------------------------------
=-------------------------------------------------------------
Valuation at 30/09/10 5,171 1,765 6,936
=-------------------------------------------------------------
Valuation at 31/03/11 3,213 1,057 4,270
=-------------------------------------------------------------
FUTURE NOISE
Formed in January 2009 out of the administration of Acrobat Music Group, Future
Noise Music is a small music publishing company with three labels:
· Fantastic Voyage: focuses on re-releasing recordings from the twenties through
to the seventies, across a broad range of genres including blues, rockabilly and
soundtracks. This label releases around 3 to 4 compilations a month.
· Year Zero: a label focused on the 1980's onwards, across genres. 5 to 6
releases were made in 2010. Much of this output is in-licensed from third
parties.
· Future Noise Music: focuses on releasing newly recorded tracks. The first
release on this label will be the Generation Indigo album by Poly Styrene, a
comeback album for the 1980's punk artist. This was launched in the UK at the
end of March 2011. Sadly in April 2011 Poly Styrene passed away.
While management accounts for 2010 show some top line growth the company has
remained small scale and loss making. The outlook is challenging. The company is
reviewing various strategic options, including attempting to raise funds from
various sources. Having reviewed the investment case Foresight has decided not
to support the company with any further investment.
Financial summary ( GBP000's)
Period 1 December 2008 to 31 December 2009
=---------------------------------------------------------------
Sales 473
=---------------------------------------------------------------
Gross profit 230
=---------------------------------------------------------------
Operating profit/(loss) (426)
=---------------------------------------------------------------
Profit/(loss) before tax (426)
=---------------------------------------------------------------
Net assets/(liabilities) 222
=---------------------------------------------------------------
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=------------------------------------------------------------
% of equity/voting rights 38% 37% 75%
=------------------------------------------------------------
Investment since 30/09/10* 150 150 300
=------------------------------------------------------------
Total investment cost 1,342 1,398 2,740
=------------------------------------------------------------
=------------------------------------------------------------
Valuation at 30/09/10 407 684 1,090
=------------------------------------------------------------
Valuation at 31/03/11 - - -
=------------------------------------------------------------
Note:
*Investments made prior to transfer of management contract to Foresight
FACTORY MEDIA
Factory Media was formed in 2006 by the merger of three extreme sports
publishers and since then the company has bolted on a number of further titles
to its platform, most recently acquiring RoadCyclingUK.com, BikeMagic.com and
BMXTalk.com in early 2011, following various German acquisitions and the
purchase of Boardseeker and MotoX in the UK. Factory is now Europe's largest
action sports media owner, publishing 19 magazines (sold through news stands,
subscriptions and mobile devices such as the iPhone and iPad) and 25 websites.
Its titles cover all major cycling sectors, as well as major board sports,
skiing and motocross markets. Factory's online reach is particularly attractive
to brands and retailers as the online action sports market across Europe is
worth c. GBP3.5bn annually (Source: management calculation from industry data).
Factory has developed its own video and community network, MPORA, which reaches
around 2 million unique users monthly. Having successfully exploited content
generation through its media titles, the company is now looking to further
monetize its reach further, launching a lead generation operation in summer
2011.
Profitability has grown significantly, driven particularly by growth of high-
margin digital revenues, and further profitable growth is planned in 2011
through a number of avenues, in addition to developing lead generation revenues.
Financial summary ( GBP000's)
Year ended 31 December 2010*
=------------------------------------------------------
Sales 9,199
=------------------------------------------------------
Gross profit 3,145
=------------------------------------------------------
EBITDA 1,008
=------------------------------------------------------
Profit/(loss) before tax 73
=------------------------------------------------------
Net assets/(liabilities) 2,089**
=------------------------------------------------------
*Draft audited accounts;
**Note: during 2010 a partial balance sheet restructuring took place, in which
Acuity 3 and Foresight 5 converted GBP1m of institutional loan notes, together
with accrued interest and redemption premia, into C Ordinary Shares.
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=-------------------------------------------------------------
% of equity / voting rights 25% 25% 50%
=-------------------------------------------------------------
Investment since 30/09/10 - - -
=-------------------------------------------------------------
Total investment cost 1,925 1,925 3,850
=-------------------------------------------------------------
=-------------------------------------------------------------
Valuation at 30/09/10 3,663 3,663 7,326
=-------------------------------------------------------------
Valuation at 31/03/11 2,507 2,507 5,013
=-------------------------------------------------------------
THE FIN MACHINE COMPANY
Acuity backed the management buy in buyout of The Fin Machine Company ("Fin") in
November 2007, investing GBP5.5m alongside investment from the management team and
banking facilities from Clydesdale.
Fin designs, manufactures and distributes special purpose capital equipment that
is used to manufacture heat exchangers such as radiators, heaters, intercoolers,
evaporators and condensers, primarily for the automotive sector, although Fin
has also now entered the air conditioning market. Fin supplies a broad range of
blue chip OEMs globally, which in turn supply many of the automotive industry
majors. Fin operates manufacturing facilities in Seaham, County Durham and
Tianjin, China, as well as an assembly and service centre in Indiana, USA.
The global recession, and specifically the well publicised collapse in the
automotive industry during 2009/10, negatively impacted the company. The
downturn in trading, combined with the costs of opening a major facility in
China and entering the air conditioning market, in addition to significant
senior debt repayments, put severe strain on the company's working capital. The
company experienced liquidity problems which necessitated significant further
investment by shareholders, principally Acuity 3 and Foresight 5, during 2010
and early 2011.
The company has a number of remaining internal issues to work through, but the
automotive market has returned to growth, particularly in Asia, and Fin's order
book has been growing strongly since late 2010. The management team has recently
been strengthened by the appointment of Keith Jordan as Chairman. Keith has
extensive experience in the engineering sector and has worked successfully with
a number of private equity backed businesses. The company's management accounts
show c. GBP14m of sales and an operating loss for the 12 months ended 31 December
2010, but with the Company's position improving, it is projecting a return to
profits in 2011.
Financial summary ( GBP000's)
Year ended 30 September 2009
=-----------------------------------------------------
Sales 21,211
=-----------------------------------------------------
Gross profit 6,743
=-----------------------------------------------------
EBIT (1,257)
=-----------------------------------------------------
Profit before tax (2,147)
=-----------------------------------------------------
Net assets/(liabilities) (606)
=-----------------------------------------------------
Note:
During 2010 Fin altered its year ended 31 December in line with its Chinese
subsidiary (all Chinese businesses have a 31 December year end)
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=-------------------------------------------------------------
% of equity 33.5% 21.5% 55%
=-------------------------------------------------------------
Investment since 30/09/10* 1,250 750 2,000
=-------------------------------------------------------------
Total investment cost 7,006 4,010 11,016
=-------------------------------------------------------------
=-------------------------------------------------------------
Valuation at 30/09/10 2,986 2,794 5,780
=-------------------------------------------------------------
Valuation at 31/03/11 820 532 1,352
=-------------------------------------------------------------
Note:
*Excludes additional GBP250k from each of Foresight 5 and Acuity 3 invested in
early April 2011
FINANCIAL NEWS PUBLISHING
Financial News Publishing Limited ("FNP") is a publisher of monthly subscription
based newsletters and a provider of data, intelligence and analysis for more
than 1,300 customers in the global financial services market. The company
publishes material and organises events under the brand name VRL, which has an
audience equivalent to a controlled circulation of 1.2m, spanning 87 countries.
Today, the 50 employees, operating out of offices in London and Singapore, are
focused on providing in depth analysis of niches within FNP's chosen markets
including retail and private banking, card payments, leasing, life insurance and
accounting. Acuity originally backed the company in 2004. However after a number
of years of poor trading from 2006 onwards, the company was put into
administration mid 2009. A new management team was backed by Acuity and the
business was immediately bought out of administration in August of that year.
FNP is currently generating attractive gross margins on c. GBP3.6m of sales. The
management team has reduced costs appreciably and FNP is now making EBITDA
profits. Foresight is considering candidates for a replacement Chairman after
William Elliot's recent resignation.
Financial summary ( GBP000's)
Year ended 30 June 2010*
=-------------------------------------------------
Sales 2,267
=-------------------------------------------------
Operating profit/(loss) (1,079)
=-------------------------------------------------
Profit/(loss) before tax (1,147)
=-------------------------------------------------
Net assets/(liabilities) (1,037)
=-------------------------------------------------
*Draft audited accounts June 2010
Investment summary ( GBP000's)
Foresight 5 Total
=-----------------------------------------------------------------------
% of equity / voting rights 57.8% 57.8%
=-----------------------------------------------------------------------
Investment since administration (August '09) 310 310
=-----------------------------------------------------------------------
Investment since 30/09/10 - -
=-----------------------------------------------------------------------
Total investment cost* 1,374 1,374
=-----------------------------------------------------------------------
=-----------------------------------------------------------------------
Valuation at 30/09/10 2,024 2,024
=-----------------------------------------------------------------------
Valuation at 31/03/11 546 546
=-----------------------------------------------------------------------
Note:
*Total cost of investment including original investment and investment since
administration.
HALLMARQ VETERINARY IMAGING
Hallmarq Veterinary Imaging is the only manufacturer of MRI systems for the
standing equine market. One of the major benefits of the system is that the
horse is only lightly sedated, particularly advantageous as horses respond
poorly to general anaesthetic with fatalities in 0.5% of cases.
The small head office and factory are located in Guildford, where the systems
are designed and manufactured. Hallmarq has a sales and service office in Acton
in the United States and field service engineers based in other locations around
the world.
The team behind the development of the standing equine MRI system have man-
decades of experience in the design and manufacture of clinical, research and
industrial MRI systems and have installed over 150 systems worldwide. Amongst
the team are 6 PhD graduates focused on MRI research and development. Hallmarq's
stated goal is to make MRI cost effective while giving vets access to proven
high technology with a low initial investment.
The Company is trading ahead of budget for the current year ending 31 August
2011, generating high levels of recurring revenue and is planning to raise
additional capital from shareholders to repay expiring loan notes and to fund
development of a Companion Animal MRI system, principally for cats and dogs.
Financial summary ( GBP000's)
Year ended 31 August 2010
=-------------------------------------------
Turnover 2,724
=-------------------------------------------
Gross profit 1,265
=-------------------------------------------
EBITDA 488
=-------------------------------------------
Profit/(loss) after tax (90)
=-------------------------------------------
Net assets/(liabilities) 1,859
=-------------------------------------------
Investment summary ( GBP000's)
Foresight 5 Total
=----------------------------------------------------
% of fully diluted equity 7.5% 7.5%
=----------------------------------------------------
Investment since 30/09/10 - -
=----------------------------------------------------
Total investment cost 1,117 1,117
=----------------------------------------------------
=----------------------------------------------------
Valuation at 30/09/10 1,260 1,260
=----------------------------------------------------
Valuation at 31/03/11 1,168 1,168
=----------------------------------------------------
LOSELEY DAIRY
Loseley Dairy was a UK ice cream producer supplying own label and branded ice
cream products to many of the leading supermarkets and high street retailers as
well as theatres, pub chains, leisure centres, sporting venues, airlines and
smaller outlets. Customers included Hard Rock Cafe, Morrisons and Iceland,
amongst others. The company had a manufacturing facility in Cwmbran Wales which
was commissioned in February 2004 and included a production area of 90,000 sq
ft.
Formerly AIM listed under the name Hill Station, the assets and brands were
bought out of administration in October 2008 by an MBI team supported by Acuity.
The company was re-named Loseley Dairy and owned the perpetual licences to 5
separate ice cream brands: Loseley, Hill Station, Yorkshire Dales, Thayers and
Granelli. However, 85% of the company's revenues were derived not from its
brands but from the sale of low margin own label ice cream products to UK
supermarkets.
The company had an immediate funding requirement of GBP2.2m to meet overheads and
pay overdue creditors, with further funds likely to be required over the medium
term. Following the collapse in discussions with two parties regarding a
potential sale of the business, administrators were appointed in mid April.
Financial summary ( GBP000's)
Year ended 31 March 2010
=--------------------------------------------------
Turnover 8,723
=--------------------------------------------------
Gross profit 1,078
=--------------------------------------------------
EBITDA (3,886)
=--------------------------------------------------
EBIT (4,135)
=--------------------------------------------------
Net assets/(liabilities) (3,605)
=--------------------------------------------------
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=----------------------------------------------------------------------------
% of fully diluted equity 60% 38% 98%
=----------------------------------------------------------------------------
Investment since 30/09/10* 950 650 1,600
=----------------------------------------------------------------------------
Total investment cost 4,859 2,548 7,406
=----------------------------------------------------------------------------
=----------------------------------------------------------------------------
Valuation at 30/09/10 1,992 1,424 3,416
=----------------------------------------------------------------------------
Valuation at 31/03/11 - - -
=----------------------------------------------------------------------------
Note:
* Investment made prior to transfer of investment management contract to
Foresight
MUNRO GLOBAL
Munro Global ("Munro") was originally backed by Acuity to execute a buy and
build in the fragmented market research sector. Since 2007, Acuity supported
this strategy with the investment of GBP3.8m ( GBP1.9m from each of Foresight 5 and
Acuity VCT 3). The financial crisis in 2008/9 had an adverse impact on Munro,
which was forced to sell or shut down all but two divisions. FDS, one of the two
remaining divisions, is a provider of data collection, market research and
statistical analysis, primarily to a number of UK Government bodies and utility
companies. FDS was materially impacted by the British Government's austerity
measures and in October 2010 its research call centre in Newcastle, which
directly employed c.120 people, was shut down. Acuity helped to fund the cost of
this closure with an investment of GBP500k in October 2010 and a further GBP100k in
January 2011. Maven, the second remaining division, is a provider of data
collection, market research, value add IT portals and interfaces to automotive
groups, a number of UK police forces and other blue chip clients. Maven employs
45 people in its office in High Wycombe. This business generates approximately
GBP3m of revenue annually on a standalone basis.
Significant further capital would have been required to implement a
restructuring. Following careful consideration of the strategic options for the
company, the principal trading subsidiary of Munro Global was sold to SPA Future
Thinking, a market research firm, for a nominal sum. Munro Global is,
subsequently, being liquidated.
Financial summary ( GBP000's)
Year ended 31 July 2009
=--------------------------------------------------
Sales 9,443
=--------------------------------------------------
EBIT 192
=--------------------------------------------------
Profit / (loss) before tax (178)
=--------------------------------------------------
Net assets/(liabilities) 545
=--------------------------------------------------
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=-------------------------------------------------------------
% of equity / voting rights 24.7% 24.7% 49.4%
=-------------------------------------------------------------
Investment since 30/09/10* 300 300 600
=-------------------------------------------------------------
Total investment cost 1,915 1,915 3,830
=-------------------------------------------------------------
=-------------------------------------------------------------
Valuation at 30/09/10 883 883 1,766
=-------------------------------------------------------------
Valuation at 31/03/11 - - -
=-------------------------------------------------------------
Note:
* Investments made prior to transfer of investment management contract to
Foresight
RED REEF MEDIA
Red Reef Media was established in February 2008 to implement a buy and build
strategy by acquiring publishing assets with the aim of exploiting them through
the use of expertise in digital media. TNT Magazine was the company's first and
only material acquisition to date, though today Red Reef also runs a number of
TNT branded events and publishes other smaller magazines including South Africa
Magazine. TNT is a free magazine targeted at young international travellers
which generates its revenue from advertising. Following the acquisition of TNT
by Red Reef in 2008, a fall in advertising, particularly associated with
recruitment, significantly impacted both revenue and profits. The business was
highly leveraged and struggling to service all of its debt. Over the course of
2010 and early 2011, Red Reef was successfully turned around. The top management
team was replaced, the operations and strategy refocused, and the balance sheet
restructured. All of the Foresight 5 and Acuity VCT 3 loan stock was converted
into equity, which currently ranks behind approximately GBP2.3m of bank debt on
the balance sheet. The business is now generating operating profits and cash.
For the financial year to March 2011 Red Reef expects to achieve approximately
GBP500k of EBITDA on approximately GBP4m of revenue. The company is now making
progress and has the potential to grow revenue and profits while paying down
debt.
Financial summary ( GBP000's)
Year ended 31 March 2010
=-------------------------------------------------
Sales 3,661
=-------------------------------------------------
EBIT (152)
=-------------------------------------------------
Profit/(loss) before tax (911)
=-------------------------------------------------
Net assets/(liabilities) (1,488)
=-------------------------------------------------
Investment summary ( GBP000's)
Foresight 5 Acuity 3 Total
=-------------------------------------------------------------
% of equity / voting rights 40.9% 40.9% 81.8%
=-------------------------------------------------------------
Investment since 30/09/10* 350 350 700
=-------------------------------------------------------------
Total investment cost 1,777 1,838 3,615
=-------------------------------------------------------------
=-------------------------------------------------------------
Valuation at 30/09/10 1,235 1,248 2,482
=-------------------------------------------------------------
Valuation at 31/03/11 61 61 123
=-------------------------------------------------------------
Note:
*Investments made prior to transfer of management contract to Foresight
Unaudited Half-Yearly Results and Responsibility Statements
Principal Risks and Uncertainties
Since the Company is flexible with regard to those areas in which it invests, it
aims to achieve a significant degree of diversification and to spread risk by
investing in unquoted, PLUS traded and AIM quoted companies. The Company is
restricted to investing no more than 15% of the value of its total assets at the
time of investment in any one individual qualifying investment or non-qualifying
investment.
The key risks facing the Company include Market Risk, Interest Rate Risk, Credit
Risk and Liquidity Risk as further detailed in Note 19 of the Notes to the
Accounts of the Company's Annual Report and Accounts to 30 September 2010. In
addition the Company is also focused on Macroeconomic Risks, Long-term Strategic
Risk, Government Policy and Regulation Risk, Investment Risks and Operational
Risks as further detailed in the Report of the Directors in the Company's Annual
Report and Accounts to 30 September 2010. This Business Review also refers,
where appropriate, to specific risks and uncertainties and these should be
viewed in conjunction with the risks disclosed above.
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:
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 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);
c. the summarised set of financial statements gives 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 Annual
Review in the 30 September 2010 annual report. The financial position of the
Company, its cash flows, liquidity position and borrowing facilities are
described in the Chairman's Statement, Annual Review and Notes to the Accounts
of the 30 September 2010 annual report. In addition, the annual report 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 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 can 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
David Sebire
Chairman
1 June 2011
Unaudited Non-Statutory Analysis between the Ordinary Shares and C Shares Funds
Income Statements
for the six months ended 31 March 2011
Ordinary Shares Fund C Shares Fund
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment holding losses - (19,250) (19,250) - (107) (107)
Realised gains on investments - 1,079 1,079 - - -
Income (2,690) - (2,690) - - -
Investment management fees (171) (512) (683) (1) (2) (3)
Other expenses (238) 268 30 (5) 3 (2)
--------------------------------------------------
Loss on ordinary activities
before taxation (3,099) (18,415) (21,514) (6) (106) (112)
Taxation - - - - - -
--------------------------------------------------
Loss on ordinary activities
after taxation (3,099) (18,415) (21,514) (6) (106) (112)
--------------------------------------------------
Loss per share (5.7)p (33.9)p (39.6)p (0.8)p (13.6)p (14.4)p
--------------------------------------------------
Balance Sheets
at 31 March 2011
Ordinary Shares Fund C Shares Fund
GBP'000 GBP'000
Non-current assets
Investments held at fair value through profit 10,012 222
or loss
-----------------------------------
Current assets
Debtors 539 -
Cash 370 347
-----------------------------------
909 347
Creditors
Amounts falling due within one year (209) (11)
-----------------------------------
Net current assets 700 336
-----------------------------------
Creditors
Amounts falling due in more than one year (88) (7)
-----------------------------------
Net assets 10,624 551
-----------------------------------
Capital and reserves
Called-up share capital 544 8
Share premium account 19,339 702
Special reserve 29,089 -
Capital redemption reserve 25 -
Capital reserve (35,173) (121)
Revenue reserve (3,200) (38)
-----------------------------------
Equity shareholders' funds 10,624 551
-----------------------------------
Number of shares in issue 54,394,938 777,589
Net asset value per share 19.5p 70.8p
-----------------------------------
Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 March 2011
Called- Share Capital
Ordinary up share premium Special redemption Capital Revenue
Shares Fund capital account reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 544 19,339 29,089 25 (16,758) (101) 32,138
October 2010
Net realised
gain on - - - - 1,079 - 1,079
disposal of
investments
Investment
holding - - - - (19,250) - (19,250)
losses
Management
fees charged - - - - (512) - (512)
to capital
Re-estimation
of trail
commission - - - - 268 - 268
creditor
charged
Revenue loss
for the - - - - - (3,099) (3,099)
period
-------------------------------------------------------------------
As at 31 544 19,339 29,089 25 (35,173) (3,200) 10,624
March 2011
-------------------------------------------------------------------
Called- Share Capital
up share premium Special redemption Capital Revenue
C Shares Fund capital account reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 8 702 - - (15) (32) 663
October 2010
Investment
holding - - - - (107) - (107)
losses
Management
fees charged - - - - (2) - (2)
to capital
Re-estimation
of trail
commission - - - - 3 - 3
creditor
charged
Revenue loss
for the - - - - - (6) (6)
period
-------------------------------------------------------------------
As at 31 8 702 - - (121) (38) 551
March 2011
-------------------------------------------------------------------
Unaudited Income Statement
for the six months ended 31 March 2011
Six months ended Six months ended Year ended
31 March 2011 31 March 2010 30 September 2010
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment - (19,357) (19,357) - (230) (230) - (12,762) (12,762)
holding losses
Realised
gains/(losses) - 1,079 1,079 - 1,539 1,539 - (1,698) (1,698)
on investments
(Provision for
accrued (2,690) - (2,690) 27 - 27 221 - 221
income)/income
Investment
management (172) (514) (686) (121) (361) (482) (224) (673) (897)
fees
Other expenses (243) 271 28 (164) - (164) (469) 184 (285)
--------------------------------------------------------------------------
(Loss)/return
on ordinary
activities (3,105) (18,521) (21,626) (258) 948 690 (472) (14,949) (15,421)
before
taxation
Taxation - - - - - - -
--------------------------------------------------------------------------
(Loss)/return
on ordinary (3,105) (18,521) (21,626) (258) 948 690 (472) (14,949) (15,421)
activities
after taxation
--------------------------------------------------------------------------
(Loss)/return
per share
Ordinary Share (5.7)p (33.9)p (39.6)p (0.1)p 0.2p 0.1p (1.0)p (32.0)p (33.0)p
--------------------------------------------------------------------------
C Share (0.8)p (13.6)p (14.4)p (0.1)p 0.5p 0.4p (2.0)p 0.5p (1.5)p
--------------------------------------------------------------------------
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 March 2011
As at As at As at
31 March 2011 31 March 2010 30 September 2010
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Non-current assets
investments held at fair value 10,234 45,013 29,727
through profit or loss
----------------------------------------------
Current assets
Debtors 530 2,592 3,116
Cash 717 1,685 551
----------------------------------------------
1,247 4,277 3,667
Creditors
Amounts falling due within one (211) (170) (261)
year
----------------------------------------------
Net current assets 1,036 4,107 3,406
----------------------------------------------
Creditors
Amounts falling due in more than (95) (516) (332)
one year
----------------------------------------------
Net assets 11,175 48,604 32,801
----------------------------------------------
Capital and reserves
Called-up share capital 552 549 552
Share premium 20,041 19,451 20,041
Special reserve 29,089 29,089 29,089
Capital redemption reserve 25 25 25
Capital reserve (35,294) (917) (16,773)
Revenue reserve (3,238) 407 (133)
----------------------------------------------
Equity shareholders' funds 11,175 48,604 32,801
----------------------------------------------
Net asset value per share:
Ordinary Share 19.5 p 88.6 p 59.1 p
----------------------------------------------
C Share 70.8 p 90.7 p 85.2 p
----------------------------------------------
Unaudited Reconciliation of Movements in Shareholders' Funds
for the six months ended 31 March 2011
Called- Share Capital
up share premium Special redemption Capital Revenue
Company capital account reserve reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
As at 1 552 20,041 29,089 25 (16,773) (133) 32,801
October 2010
Net realised
gain on - - - - 1,079 - 1,079
disposal of
investments
Investment
holding - - - - (19,357) - (19,357)
losses
Management
fees charged - - - - (514) - (514)
to capital
Re-estimation
of trail
commission - - - - 271 - 271
creditor
charged
Revenue loss
for the - - - - - (3,105) (3,105)
period
-------------------------------------------------------------------
As at 31 552 20,041 29,089 25 (35,294) (3,238) 11,175
March 2011
-------------------------------------------------------------------
Unaudited Cash Flow Statement
for the six months ended 31 March 2011
Six months ended Six months ended Year ended
31 March 2011 31 March 2010 30 September 2010
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flow from operating
activities
Investment income received 19 47 92
Deposit and similar interest - - -
received
Investment management fees (1,010) (696) (1,426)
paid
Other cash payments (236) (188) (331)
----------------------------------------------------
Net cash (outflow)/inflow
from operating activities (1,227) (837) (1,665)
and returns on investment
Taxation - - -
----------------------------------------------------
Returns on investment and
servicing of finance
Purchase of investments (2,925) (800) (1,583)
Net proceeds on sale of 4,340 1,375 1,678
investments
Cash awaiting investment - - (200)
Repayment of loan stock to (22) - -
investors
----------------------------------------------------
Net capital (outflow)/inflow 1,393 575 (105)
from financial investment
Management of liquid
resources
Subscription to money market (3,000) - -
Redemption from money market 3,000 - -
----------------------------------------------------
- - -
Financing
Proceeds of fund raising - - 307
Cash acquired from merger - 1,325 1,329
Merger expenses - (238) (230)
Amounts received for shares - - 55
awaiting issue
----------------------------------------------------
- 1,087 1,461
----------------------------------------------------
Increase/(decrease) in cash 166 825 (309)
----------------------------------------------------
Notes to the Unaudited Half-Yearly Financial Report
1. The unaudited interim results have been prepared on the basis of the
accounting policies set out in the statutory accounts of the Company for the
year ended 30 September 2010. Unquoted investments have been valued in
accordance with IPEVC guidelines. Quoted investments are stated at bid
prices in accordance with the IPEVC guidelines and UK Generally Accepted
Accounting Practice.
2. These are not statutory accounts in accordance with S434 of the Companies
Act 2006 and the financial information for the six months ended 31 March
2011 and 31 March 2010 has been neither audited nor reviewed. Statutory
accounts in respect of the period to 30 September 2010 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 30 September
2010 have been reported on by the Company's auditors or delivered to the
Registrar of Companies.
3. Copies of the Interim Report will be sent to shareholders and will be
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 for the Ordinary Shares and the C Shares has been
calculated on the appropriate allocation of the Company's assets and
liabilities. From 1 October 2010, 98% of all joint costs incurred were allocated
to the Ordinary Shares Fund and 2% to the C Shares Fund, based on original funds
raised.
The net asset value per share is based on net assets at the end of the period
and on the number of shares in issue at the date.
Ordinary Shares Fund C Shares Fund
Net Assets Number of Shares Net Assets Number of Shares
GBP'000 in Issue GBP'000 in Issue
31 March 2011 10,624 54,394,938 551 777,589
31 March 2010 47,898 54,051,052 706 777,589
30 September 2010 32,138 54,394,938 663 777,589
--------------------------------------------------------
.
5. Return per share
The weighted average number of shares for the Ordinary Shares and C Shares funds
used to calculate the respective returns are shown in the table below.
Ordinary Shares Fund C Shares Fund
(shares) (shares)
Six months ended 31 March 2011 54,394,938 777,589
Six months ended 31 March 2010 39,183,826 777,589
Year ended 30 September 2010 46,679,064 777,589
---------------------------------------
.
Earnings for the period should not be taken as a guide to the results for the
full year.
6. Income
Six months ended Six months ended Year ended
31 March 2011 31 March 2010 30 September 2010
GBP'000 GBP'000 GBP'000
Deposit interest - -
Venture capital investments
- (net provision)/income* (2,690) 27 221
----------------------------------------------------
(2,690) 27 221
----------------------------------------------------
* As a result of a number of portfolio companies being put into administration
and the poor performance of a number of other portfolio companies, the
previously accrued loan stock interest has been fully provided against.
7. Investments held at fair value through profit or loss
Company Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost at 1 October 2010 3,234 30,881 34,115
Investment holding losses (2,348) (2,040) (4,388)
--------------------------------
Valuation at 1 October 2010 886 28,841 29,727
Movements in the period:
Purchases at cost - 3,125 3,125
Disposal proceeds - (4,340) (4,340)
Realised gains - 1,079 1,079
Investment holding losses (120) (19,237) (19,357)
--------------------------------
Valuation at 31 March 2011 766 9,468 10,234
--------------------------------
Book cost at 31 March 2011 3,234 30,745 33,979
Investment holding losses (2,468) (21,277) (23,745)
--------------------------------
Valuation at 31 March 2011 766 9,468 10,234
--------------------------------
Ordinary Shares Fund Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost at 1 October 2010 3,137 30,681 33,818
Investment holding losses (2,360) (2,060) (4,420)
--------------------------------
Valuation at 1 October 2010 777 28,621 29,398
Movements in the period:
Purchases at cost - 3,125 3,125
Disposal proceeds - (4,340) (4,340)
Realised gains - 1,079 1,079
Investment holding losses (144) (19,106) (19,250)
--------------------------------
Valuation at 31 March 2011 633 9,379 10,012
--------------------------------
Book cost at 31 March 2011 3,137 30,545 33,682
Investment holding losses (2,504) (21,166) (23,670)
--------------------------------
Valuation at 31 March 2011 633 9,379 10,012
--------------------------------
C Shares Fund Quoted Unquoted Total
GBP'000 GBP'000 GBP'000
Book cost at 1 October 2010 97 200 297
Investment holding gains 12 20 32
--------------------------------
Valuation at 1 October 2010 109 220 329
Movements in the period:
Investment holding gains/(losses) 24 (131) (107)
--------------------------------
Valuation at 31 March 2011 133 89 222
--------------------------------
Book cost at 31 March 2011 97 200 297
Investment holding gains/(losses) 36 (111) (75)
--------------------------------
Valuation at 31 March 2011 133 89 222
--------------------------------
8. Related Parties
The Board of the Company entered into a termination agreement with Acuity
Capital Management Limited ('Acuity Capital') on 24 February 2011 (the
'Termination Agreement'). On the same day Foresight Group CI Limited ('Foresight
Group') were appointed as the new Investment Manager. The terms of the new
investment management agreement with Foresight Group (the 'New Management
Agreement') are substantially similar to the Company's previous arrangements
with Acuity Capital (the 'Previous Management Agreement'). Foresight Group has
agreed to waive its management and administration fees for a period of 18
months, and thereafter will receive an annual management fee of 2.5% of the net
asset value of the Company payable quarterly based on the last announced net
asset value of the Company. Additionally it will receive an administration fee
of GBP71,000 per annum, which will rise in line with RPI.
Under the Previous Management Agreement, the Board was required to give in
excess of two years' notice to Acuity Capital to terminate the agreement,
pursuant to which the Company has agreed to pay Acuity Capital GBP1,187,855 in
phased payments and GBP25,000 per quarter for six quarters for its work to ensure
a smooth handover to Foresight Group and agreed to redeem the GBP21,465 of
outstanding loan notes issued to Acuity Capital's employees. The aggregate
amount payable is approximately equal to the management and administration fees
that would have been payable over an 18 month period, but calculated with
reference only to the 30 September 2010 audited net asset value of the Company.
Acuity Capital as the previous Investment Manager and Secretary of the Company
was considered to be a related party by virtue of its previous management
contract with the Company. During the period, services of a total value of
GBP721,516 (31 March 2010: GBP514,000; 30 September 2010: GBP1,089,000) were purchased
by the Company from Acuity Capital. At 31 March 2011, the amount due to Acuity
Capital, excluding termination payment, was GBPnil.
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 GBPnil (31 March 2010: GBPnil; 30 September
2010: GBPnil) were purchased by the Company from Foresight Group CI Limited. At
31 March 2011, the amount due to Foresight Group CI Limited was GBPnil.
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 GBPnil excluding VAT (31 March
2010: GBPnil; 30 September 2010: GBPnil) were purchased by the Company from
Foresight Fund Managers Limited. At 31 March 2011, the amount due to Foresight
Fund Managers Limited was GBPnil.
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
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Foresight 5 VCT PLC via Thomson Reuters ONE
[HUG#1520925]
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