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plc<br />
Annual Report and Accounts<br />
30 September 2011<br />
Annual Report and Accounts 30 September 2009<br />
1
<strong>Foresight</strong> 2 VCT plc<br />
Objective<br />
Ordinary Shares<br />
To provide private investors with attractive returns from a portfolio of investments in fast-growing unquoted companies in the United<br />
Kingdom. It is the intention to maximise tax-free income available to investors from a combination of dividends and interest received on<br />
investments and the distribution of capital gains arising from trade sales or flotations.<br />
C Shares<br />
To provide investors with attractive returns from venture capital investments in companies that are already profitable or which are<br />
expected to become so in the near term.<br />
Planned Exit Shares<br />
To combine greater security of capital than is normal within a VCT with the enhancement of investor returns created by the VCT tax<br />
benefits — income tax relief of 30% of the amount invested, and tax-free distribution of income and capital gains. The key objective of<br />
the Planned Exit Shares is to distribute a minimum of 110p per share through a combination of tax-free income, buy-backs and tender<br />
offers before the sixth anniversary of the closing date of the original offer.<br />
VCT Tax Benefit for Shareholders beyond 6 April 2006<br />
To obtain VCT tax reliefs on subscriptions up to £200,000 per annum, a VCT investor must be a ‘qualifying’ individual over the age of 18<br />
with UK taxable income. The tax reliefs for subscriptions from 6 April 2006 are:<br />
l Income tax relief of 30% on subscription into new shares, which is retained by shareholders if the shares are held for more than<br />
five years.<br />
l VCT dividends (including capital distributions of realised gains on investments) are not subject to income tax.<br />
l Capital gains on disposal of VCT shares are tax-free, whenever the disposal occurs.<br />
Website: www.foresightgroup.eu<br />
Contents<br />
Summary and Financial Highlights 01<br />
Chairman’s Statement 02<br />
Investment Manager’s Report 03<br />
Investment Summary 06<br />
Board of Directors 17<br />
Directors’ Report 18<br />
Directors’ Remuneration Report<br />
Statement of Directors’ Responsibilities in<br />
respect of the Annual Financial Report and<br />
26<br />
the Financial Statements<br />
Unaudited Non-Statutory Analysis of the<br />
Ordinary Shares, C Shares and<br />
28<br />
Planned Exit Shares Funds 29<br />
Independent Auditor’s Report 31<br />
Income Statement 32<br />
Reconciliation of Movements in Shareholders’ Funds 33<br />
Balance Sheet 34<br />
Cash Flow Statement 35<br />
Notes to the Accounts 36<br />
Shareholder Information 53<br />
Notice of Annual General Meeting 54<br />
Notice of Separate Meeting of Ordinary Shareholders 57<br />
Notice of Separate Meeting of C Shareholders<br />
Notice of Separate Meeting of Planned<br />
58<br />
Exit Shareholders 59
Summary<br />
Venture Capital Trust Status<br />
Financial Highlights<br />
l The net asset value per Ordinary Share at 30 September 2011 was 97.9p (2010: 88.5p).<br />
l The net asset value per C Share at 30 September 2011 was 103.3p (2010: 105.0p).<br />
l The net asset value per Planned Exit Share as at 30 September 2011 was 89.5p (2010: 95.0p).<br />
l Final dividends of 0.5p per Ordinary Share and 2.0p per C Share are due to be paid on 4 May 2012.<br />
l The Ordinary Shares fund provided follow-on funding totalling £1,264,413 for ten portfolio companies.<br />
Annual Report and Accounts 30 September 2011<br />
<strong>Foresight</strong> 2 VCT plc has been granted approval as a Venture Capital Trust (VCT) under S274–S280A of the Income Tax Act 2007 for the<br />
year ended 30 September 2010 and the next complete review will be carried out for the year ended 30 September 2011. It is intended<br />
that the business of the Company be carried on so as to maintain its VCT status.<br />
l The Ordinary Shares fund realised £856,813 comprising £702,093 by way of loan repayments from three companies and £154,720<br />
from the sale of shares in two companies.<br />
l Twelve follow-on investments were made by the C Shares fund totalling £3,416,551 and one new investment for £800,096.<br />
l The C Shares fund realised £579,595 by way of loan repayments from two companies.<br />
l Four new investments were made by the Planned Exit fund totalling £2,314,952 and one follow-on investment for £240,610.<br />
l The Planned Exit Shares fund realised £1,000,000 from the sale of one investment.<br />
Year ended<br />
30 September 2011<br />
C Planned Exit<br />
Shares Shares<br />
Year ended<br />
30 September 2010<br />
C Planned Exit<br />
Shares Shares<br />
Ordinary<br />
Ordinary<br />
Shares<br />
Shares<br />
Earnings per share 10.2p 1.5p (2.2)p 12.8p 5.7p 0.5p<br />
Net asset value per share 97.9p 103.3p 89.5p 88.5p 105.0p 95.0p<br />
Dividends paid* 9.1p 9.0p 3.0p 8.6p 6.0p 0.0p<br />
Net asset value total return* 107.0p 112.3p 92.5p 97.1p 111.0p 95.0p<br />
Share price 77.8p 98.5p 93.5p 73.0p 97.0p 103.0p<br />
Share price total return* 86.9p 107.5p 96.5p 81.6p 103.0p 103.0p<br />
* From inception to 30 September 2011.<br />
01
<strong>Foresight</strong> 2 VCT plc<br />
02<br />
Chairman’s Statement<br />
I Performance<br />
The year under review was a period of high uncertainty, market<br />
volatility and extreme concern about the state of government<br />
finances in many parts of Europe. In the UK, economic activity<br />
was patchy and bank lending to SMEs was severely constrained.<br />
These factors affected portfolio companies in a variety of ways.<br />
Some companies that needed to maintain or increase their borrowing<br />
to pursue development projects or to expand their activities had<br />
difficulty in doing so; others, with more established businesses were<br />
able to find growth opportunities, particularly in exports.<br />
Against this background, the net asset value of the Ordinary Share<br />
portfolio, which is generally made up of more mature companies,<br />
increased in value and the net asset value per share rose by<br />
10.6% to 97.9p. Companies in the C share portfolio, fared less<br />
well and net asset value fell by 1.6% to 103.3p per share, whilst<br />
the net asset value of the Planned Exit Shares declined by 5.8%<br />
to 89.5p per share.<br />
The Ordinary Share portfolio benefited from the strong<br />
performance of four investments: Autologic Diagnostics; Infrared<br />
Integrated Systems; Ixaris and Trilogy Communications, all of<br />
which saw a substantial increase in valuation. A sharp decline in<br />
the share price of Zoo Digital, the write-off of Skills Market and<br />
provisions against Silvigen, i-plas <strong>Group</strong> and a number of other<br />
investments reduced the overall gain but the outcome for this<br />
portfolio was nonetheless positive.<br />
The C Share portfolio holds Autologic Diagnostic and its<br />
investment in Datapath also performed very strongly during the<br />
year. Several other investments fell behind plan and provisions<br />
were made against the valuation of 2K Manufacturing, Crumb<br />
Rubber, i-plas <strong>Group</strong>, O-Gen Acme Trek, Silvigen and Vertal,<br />
all of which operate in the environmental sector. Many of these<br />
companies are making progress but have encountered delays in<br />
project implementation and in building their businesses in what<br />
has been a very difficult environment. The valuation of Global<br />
Immersion also fell and the investment in Heritage House was<br />
written down to a nominal sum. However despite the relatively<br />
cautious approach that has been taken to valuation in many<br />
cases, if account is taken of the 3.0p dividend paid during the<br />
year the overall value attributable to investors increased a little.<br />
The Planned Exit Share portfolio is still at an early stage and<br />
there were no mark-ups in valuation. The investment in <strong>Foresight</strong><br />
Luxembourg Solar was sold at its approximate cost. A provision<br />
was made against i-plas <strong>Group</strong> and this was the principal reason<br />
for a fall in the net asset value of this portfolio.<br />
Details of the principal investments in each of the portfolios are<br />
given in the Investment Manager’s report.<br />
As the Ordinary and C Share portfolios are currently fully invested,<br />
the Investment Manager is concentrating on achieving profitable<br />
realisations and is not actively looking for new investments for<br />
them at present. Although nearly fully invested, the Planned Exit<br />
portfolio is still open to suitable new opportunities.<br />
I Dividends<br />
In the light of the results the Board is recommending that for the<br />
year ended 30 September 2011 final dividends of 0.5p per Ordinary<br />
Share be paid to the Ordinary shareholders on 4 May 2012 and<br />
2.0p per C Share be paid to the C shareholders on the same day.<br />
These dividends will have an ex-date of 11 April 2012 and a record<br />
date of 13 April 2012. It continues to be the Company’s policy to<br />
provide a steady flow of tax-free dividends, generated from income<br />
or from capital profits realised on the sale of investments.<br />
The dividend for the Planned Exit Shares will be decided at the<br />
time of the interim results to 31 March 2012.<br />
I Infrastructure Shares<br />
As you will be aware we launched an offer for a new class of<br />
Infrastructure shares on 7 October 2011. Although this will add<br />
some complication to the capital structure we believe that it does<br />
represent an attractive opportunity for shareholders to invest in a<br />
different asset class with the benefit of VCT tax reliefs particularly<br />
taking into account the special discounts agreed for investments<br />
made by existing shareholders. It also enables us to spread the<br />
fixed running costs of the Company over a larger asset base.<br />
I Valuation Policy<br />
Investments held by the Company have been valued in accordance<br />
with the International Private Equity and Venture Capital (IPEVC)<br />
valuation guidelines (August 2010) developed by the British Venture<br />
Capital Association and other organisations. Through these guidelines,<br />
investments are valued as defined at ‘fair value’. Ordinarily, unquoted<br />
investments will be valued at cost for a limited period following the<br />
date of acquisition, being the most suitable approximation of fair value<br />
unless there is an impairment or significant accretion in value during<br />
the period. Quoted investments and investments traded on AIM and<br />
PLUS (formerly OFEX) are valued at the bid price as at 30 September<br />
2011. The portfolio valuations are prepared by <strong>Foresight</strong> <strong>Group</strong> LLP<br />
(“<strong>Foresight</strong> <strong>Group</strong>”), reviewed and approved by the Board quarterly<br />
and are reviewed by the auditors as part of the statutory audit process<br />
annually.<br />
I Performance Incentive<br />
As a result of the dividend of 3.0p per C Share paid in May 2011<br />
and the total return of the C Shares fund remaining in excess<br />
of 100p per share, <strong>Foresight</strong> <strong>Group</strong> became entitled to receive<br />
a performance fee of 15% of the total dividend paid on these<br />
shares, equivalent to £110,000. The performance fee was settled<br />
in accordance with the carried interest agreement, through<br />
101,771 C Shares being issued.<br />
I Top Up Share Issues and Share Buy-backs<br />
The Company launched two small top-up offers for its Ordinary<br />
and C Shares funds on 21 February 2011, which raised £166,500<br />
of gross proceeds for the Ordinary Share fund and £230,000 for<br />
the C Share fund.<br />
It continues to be the Board’s policy to consider buying back shares<br />
at an appropriate discount when they are offered in the market in<br />
order to provide a degree of liquidity for those who may wish to<br />
realise their investment. During the year, the Company repurchased<br />
129,000 Ordinary Shares for cancellation at a cost of £99,000 and<br />
142,780 C Shares for cancellation at a cost of £135,000.<br />
I Annual General Meeting<br />
The Company’s Annual General Meeting will take place on 20 February<br />
2012. I look forward to welcoming you to the meeting, which will be<br />
held in London.<br />
I Outlook<br />
Stock market sentiment remains volatile, with significant<br />
macroeconomic uncertainties and there are difficult trading and credit<br />
conditions throughout the economy. However, in recent months our<br />
Investment Manager has seen trade buyers looking to acquire high<br />
growth and innovative companies. If this trend continues despite<br />
the recent increase in market volatility, we hope to see a number of<br />
portfolio realisations in the coming months. <strong>Foresight</strong> <strong>Group</strong> is also<br />
seeing sufficient deal flow of new investment opportunities but we<br />
remain cautious about the economic outlook and they are being<br />
extremely selective in their approach to proposals received. We are<br />
hoping that despite the difficult economic environment the hard work<br />
being put into all companies in the portfolio by the team at <strong>Foresight</strong><br />
<strong>Group</strong> will be rewarded and result in increasing valuations leading to<br />
attractive realisations over the medium term and further distributions<br />
to investors.<br />
Jocelin Harris<br />
Chairman<br />
20 January 2012
Investment Manager’s Report<br />
The Company has three classes of shares (Ordinary Shares, C<br />
Shares and Planned Exit Shares) and each class of share has<br />
its own segregated portfolio of investments, the performance<br />
of which is more fully described below. The Ordinary and C<br />
Share portfolios are currently fully invested, and our emphasis is<br />
on achieving profitable realisations rather than looking for new<br />
investments. Although nearly fully invested, the Planned Exit<br />
portfolio is still open to suitable new opportunities.<br />
The performance of each of the portfolios during the period has<br />
been affected by a combination of both positive and negative<br />
factors, resulting overall in the net asset value of the Ordinary<br />
Shares increasing by 10.6% to 97.9p per share, the C shares<br />
decreasing by 1.6% to 103.3p per share and the Planned Exit<br />
Shares declining by 5.8% to 89.5p per share. The continuing<br />
strong trading performance of a number of companies in<br />
the portfolios, and reasonable levels of current mergers and<br />
acquisition activity give cause for optimism for realisations.<br />
Markets have displayed high levels of volatility and uncertainty<br />
during the period, with a consequent impact on the valuations<br />
of certain portfolio companies, with lower multiples having to be<br />
applied to their earnings despite a reasonably good performance.<br />
With regard to the environmental investments which are<br />
concentrated in the C shares fund, their plants are generally<br />
operating well with consistent and reliable production but the need<br />
is to build market traction and increase sales. These investments<br />
are now in the critical late development stage where it is vital for<br />
them to generate meaningful sales to start paying for the substantial<br />
capital investment they have received and the associated overhead<br />
they have taken on. Current economic conditions have slowed<br />
customer decision making and led to caution in the adoption of<br />
new products. In some cases, lack of available finance has delayed<br />
investment and expansion plans. Reflecting slower than expected<br />
growth in sales at i-plas and Crumb Rubber, further provisions<br />
needed to be made against these investments. O-Gen UK is<br />
experiencing growing demand for its biomass-energy technology<br />
as evidenced by its agreement with a major UK outsourcing group<br />
to build up to five biomass-energy facilities in South West England,<br />
all of which will be fully funded by this major partner. It also has a<br />
separate agreement with Withion Power to build a facility in Derby<br />
which is expected to come on stream in early 2012. Despite<br />
achieving periods of extended electricity production at O-Gen Acme<br />
Trek’s Stoke facility, a provision of £1.0 million has been made<br />
against the previous carrying value of this investment as a result of<br />
a series of technical problems, none of which are insuperable but<br />
which have taken longer to address than we had hoped.<br />
Where provisions have been made against the value of underlying<br />
investments, we have also provided against the income due<br />
from such investments and this is reflected in the lower income<br />
amounts in the Income Statement of the Company.<br />
I Portfolio Review — Ordinary Shares Fund<br />
Over the last two years, as a result of tougher trading and credit<br />
conditions, the number of follow-on investments made by the<br />
Company has increased. This has reflected the need for additional<br />
working capital arising as a result of trading conditions and<br />
reduced bank credit lines and overdrafts but has also included<br />
funding for growth.<br />
The Ordinary Shares fund provided follow-on funding totalling<br />
£1,264,413 for ten portfolio companies: The Bunker Secure<br />
Hosting (£412,485), alwaysON <strong>Group</strong> (£200,000), Evance Wind<br />
Turbines (£199,127), SkillsMarket (£116,372), 2K Manufacturing<br />
Annual Report and Accounts 30 September 2011<br />
(£110,825), Crumb Rubber (£79,150) Silvigen (£74,279),<br />
Land Energy (£28,170), TFC Europe (£22,804) and Autologic<br />
Diagnostics Holdings (£21,201).<br />
The performance highlights during the last year were as follows:<br />
Autologic Diagnostics (formerly Diagnos Holdings) develops and sells<br />
sophisticated automotive diagnostic software and hardware to<br />
independent mechanics and garages to allow them to service and<br />
repair vehicles. In the year ended 31 December 2010, an operating<br />
profit of £2.7 million was achieved on sales of £9.3 million. This<br />
compares with an operating profit of £1.5 million on sales of<br />
£5.5 million for the period from 20 February 2009 to 31 December<br />
2009. The company is continuing to grow sales and profits in its<br />
current financial year. On 1 July 2011, a recapitalisation was<br />
completed which yielded proceeds of £586,667 (£146,668 for the<br />
Ordinary Shares fund and £439,999 for the C Shares fund) on the<br />
equity shares held by <strong>Foresight</strong> 2, against cost of £106,667. The<br />
Ordinary and C Shares funds have maintained their equity shares in<br />
Autologic Diagnostics at an undiluted level. As part of the<br />
recapitalisation, £84,805 of loan interest (£21,201 Ordinary Shares.<br />
£63,604 C Shares) was capitalised.<br />
TFC Europe, which distributes technical fasteners, reported<br />
an operating profit of £1.3 million (after an amortisation charge of<br />
£0.5 million), on sales of £13.5 million for the year ended<br />
31 March 2011. This compares with an operating profit of<br />
£1.0 million on sales of £10.1 million for the year ended<br />
31 March 2010.<br />
Closed Loop Recycling continues to make solid operational,<br />
commercial and revenue progress with production rates at record<br />
levels and significantly improved plant reliability and consistency.<br />
An investment of £130,000 was made by the C Shares fund in<br />
the period to further upgrade the company’s conveyor system<br />
although the ordinary fund did not participate because it had<br />
limited cash available. Product quality is high and there is strong<br />
demand for all the recycled material produced. The company<br />
continues to be affected by raw material quality which restricts<br />
throughput and yield, but is able to operate reliably within the<br />
consequent capacity constraints. Major investment is planned at<br />
the Dagenham site to increase capacity to meet the substantial<br />
demand for the cleaned and sorted output, which should<br />
generate significant contribution and drive profitability. Closed<br />
Loop Recycling is currently profitable at the EBITDA level and<br />
generating revenues in excess of £1.3 million per month.<br />
Trilogy Communications is making strong progress, particularly<br />
within the defence sector where it announced a number of<br />
contract wins through partners such as Northrop Grumman<br />
and Raytheon. During 2010, Trilogy was awarded the Queen’s<br />
Award for Enterprise for International Trade and was also selected<br />
by UK Trade and Investment as an Exporter of the Year. The<br />
company’s sales are growing strongly and the company repaid<br />
loans to the Ordinary Shares fund of £249,388 including a<br />
redemption premium of £31,250. The outlook for the current year<br />
is positive, with record trading results to date. To support recent<br />
contract wins, the company raised a further £1.5 million from its<br />
management and <strong>Foresight</strong> funds in November 2011.<br />
For the period to 30 September 2011, The Bunker Secure<br />
Hosting continued to win new orders, grow revenues and<br />
generate substantial profits. For the year to 31 December 2010,<br />
an EBITDA of £1.5 million was achieved on sales of £6.2 million<br />
compared with an EBITDA of £0.8 million on sales of £5.2 million<br />
for the year ended 31 December 2009. Following the upgrade<br />
of the Ash data centre electrical infrastructure in 2010/11, The<br />
03
<strong>Foresight</strong> 2 VCT plc<br />
04<br />
Investment Manager’s Report<br />
Bunker has continued to invest heavily in increasing the capacity<br />
of its fibre network and in filling out additional space at Ash and<br />
Newbury, supporting the company’s growth in providing high<br />
value managed hosting services. A follow-on investment of<br />
£412,485 was made in the year.<br />
A further £200,000 was invested in alwaysON as part of a<br />
restructuring which involved senior management changes. <strong>Foresight</strong><br />
2 has significantly increased its equity holding in the business, which<br />
is starting to see signs of recovery in its underlying core operations.<br />
Evance Wind Turbines made progress in developing its distribution<br />
channels and is now selling turbines across Europe. The Ordinary<br />
Shares fund provided £199,127 and the C Shares fund provided<br />
£59,752 as part of an overall funding round of £1.1 million for<br />
additional working capital. Evance has recently seen strong<br />
demand for its 5kW turbines and is currently operating profitably.<br />
Silvigen received further funding of £148,558 (£74,279 Ordinary<br />
Shares fund, £74,279 C Shares fund) to finance additional capital<br />
expenditure for its waste wood processing facility which will enable<br />
increased production as well as provide additional working capital as<br />
the company builds its sales pipeline in the animal bedding market.<br />
Land Energy made good progress over the last six months,<br />
achieving positive EBITDA at a plant level for the period January to<br />
March 2011. Demand continues to exceed supply at its Bridgend<br />
wood pelleting plant – the further financing of £394,418 (£28,170<br />
Ordinary Shares fund, £366,248 C Shares fund) invested into<br />
Land Energy has funded capital expenditure and working capital<br />
at Bridgend to increase production as well as group working<br />
capital prior to the proposed merger with Silvigen. These two<br />
businesses both now operate in the same markets. It is expected<br />
that the merger will provide the enlarged group with a strong<br />
geographical footprint in the UK with access to a substantial<br />
volume of sales and waste wood feedstock suppliers.<br />
2K Manufacturing continued to experience strong demand for its<br />
Ecosheet recycled board made from waste plastics for various<br />
applications in the construction sector. The moulding systems are<br />
operating well but at a restricted rate of 120 boards per day due<br />
to a shortage of production capacity, which is being addressed<br />
through additional equipment and third party toll processing.<br />
The prospects for the company remain strong, although delays in<br />
the move to full capacity led to the company seeking additional<br />
equity financing during the period, with the Ordinary Shares fund<br />
investing £110,825 and the C fund investing £125,000 pro-rata<br />
alongside the management and other equity investors.<br />
AtFutsal <strong>Group</strong> has further developed its flagship Birmingham indoor<br />
football arena which hosted a number of Football Association events<br />
over the summer. The education arm of the business is developing<br />
with several hundred children now taking sports related courses<br />
within AtFutsal <strong>Group</strong>’s arenas. However, sales growth is behind<br />
original expectations, with UK consumer spending under pressure,<br />
and progress towards profitability has been impacted as a result.<br />
i-plas <strong>Group</strong> raised a further £3 million which was required to<br />
enable the business to increase its capacity and product range,<br />
in order to take advantage of the opportunities available to it and<br />
to deliver its sales forecast. Although i-plas successfully increased<br />
its production capacity by investing in additional plastic moulding<br />
equipment, sales growth was slower than expected, partly due to<br />
the impact of the current economic climate and uncertainties in<br />
the construction sector. Reflecting this continuing slow progress, a<br />
provision has been made against the cost of this investment. The<br />
Ordinary Shares fund did not participate in this funding round.<br />
Crumb Rubber continued to manufacture high grade products<br />
successfully at its Plymouth facility, but whilst the long-term<br />
prospects may be attractive, growth in customer demand remains<br />
frustratingly slow due to protracted decision making cycles.<br />
<strong>Foresight</strong> is working with the management team to minimise<br />
costs and to drive new business development and sales but at<br />
this stage the business continues to be loss making. <strong>Foresight</strong> 2<br />
invested £316,650 (£79,150 Ordinary Shares fund, £237,500 C<br />
Shares fund) during the year. Reflecting continuing slow progress,<br />
a provision has been made against the cost of this investment.<br />
Infrared Integrated Systems has continued to grow strongly<br />
and profitably, having won a significant contract in the US to<br />
provide its queue monitoring solution across the estate of a major<br />
supermarket group. The company is the market leader in retail<br />
queue monitoring and people counting markets. This strong<br />
performance has been a result of the significant investment in<br />
R&D which resulted in the development of its next generation<br />
infrared devices which include internet connectivity and dual<br />
optical and thermal sensors, and ongoing research into devices<br />
targeting the security and healthcare markets.<br />
Ixaris has continued to develop Opn, its platform that enables<br />
enterprises to develop custom applications for payments. This<br />
platform is being used by companies in the affiliate marketing and<br />
travel sectors. Revenues in the year to December 2010 increased<br />
to £8.5 million from £4.8 million in prior year, and the Company<br />
reported a profit.<br />
During the period under review Zoo Digital repaid £405,000 of<br />
loan stock following a wider fundraising and restructuring of its<br />
convertible loan note instrument, which places the business on<br />
a considerably firmer footing for its future development. Whilst<br />
the business is making progress in the provision of software<br />
for the authoring of home entertainment products for Blu-ray<br />
and Electronic Sell Through platforms, including the emerging<br />
eBook market where Zoo Digital has developed a suite of tools<br />
particularly applicable to the creation of graphic rich eBooks (for<br />
genres such as children’s’ books for example), the business has<br />
been negatively impacted by the wider turbulence in the home<br />
entertainment industry. Specifically, the company has seen a<br />
reduction in the number of episodic TV titles being released on<br />
DVD, impacting the company’s financial progress. The company<br />
has responded by reducing fixed overhead significantly and<br />
investing in products serving growth media platforms to improve<br />
the predictability and resilience of the business model.<br />
I Portfolio Review — C Shares Fund<br />
The C Shares fund made one new investment in the period in<br />
Withion Power (£800,096). Withion Power has a biomass energy<br />
project in Derby and aims to generate 3.0 MW of electricity using<br />
gasification. The plant is being built in three phases starting with<br />
0.5 MW using waste wood as its feedstock. The first electricity is<br />
expected to be produced in early 2012.<br />
Twelve follow-on investments were made from the C Shares fund<br />
during the period totalling £3,416,551: Vertal (£1,531,916), O-Gen<br />
Acme Trek (£463,384), Land Energy (£366,248), i-plas <strong>Group</strong><br />
(£288,730), Crumb Rubber (£237,500), Closed Loop Recycling<br />
(£130,000), 2K Manufacturing (£125,000), Silvigen (£74,279),<br />
Autologic Diagnostics Holdings (£63,604), Heritage House Media<br />
(£59,850), Evance (£59,752) and TFC Europe (£16,288).<br />
The C Shares fund has a number of investments in common with<br />
the Ordinary Shares fund, details of which are given above. The<br />
most notable of the other investments are:
Investment Manager’s Report<br />
Datapath is a world leading innovator in the field of computer<br />
graphics and video wall display technology. An operating profit<br />
of £3.1 million (after an amortisation charge of £0.4 million),<br />
was achieved on sales of £10.3 million in the year ended<br />
31 March 2011. This compares with an operating profit of £1.5<br />
million on sales of £7.6 million for the year ended 31 March 2010.<br />
An investment of £1,531,916 was made into Vertal during the<br />
period to support investments in further processing equipment at<br />
its first plant in Mitcham and to cover a working capital requirement.<br />
An extensive review of all operational and processing issues<br />
has been concluded with the resulting actions implemented or<br />
planned to be implemented in the quarter ended 31 March 2012.<br />
Following a number of changes to the senior management team,<br />
the company is well positioned to deliver on its new business plan<br />
through increasing waste volumes into the plant and additional<br />
disposal outlets including processed material being sold as an<br />
organic fuel to Anaerobic Digestion facilities. Volumes processed<br />
are now up to 1,000 tonnes per week, compared with a capacity<br />
of 1,400 tonnes. The company is still incurring operating losses but<br />
projects operating profit in the first quarter of 2012.<br />
Global Immersion, which provides visualisation systems for immersive<br />
theatres and planetariums, generated revenues of £8.1 million and<br />
operating profit of £0.5 million for the twelve months to 30 June 2011.<br />
This compares with revenues of £4.2 million and operating profit of<br />
£0.2 million for the twelve months to 30 June 2010. The business<br />
started the financial year with a record order book and delivered on a<br />
number of prestigious planetarium projects during the year, including<br />
projects in Chicago, Moscow and Taiwan. The company also installed<br />
its first Zorro projection theatres. Zorro is a market leading technology<br />
which enables the projection of unmatched levels of picture quality.<br />
Trading has been relatively weak during the first few months of the<br />
new financial year, but the pipeline remains strong and the company’s<br />
reference sites are opening the door to potential opportunities in the<br />
entertainment and big screen cinema markets.<br />
An investment of £59,850 was made in Heritage House Media<br />
to provide additional working capital to the business. Despite<br />
increased numbers of visitors to stately homes and attractions<br />
where many of Heritage’s products, such as guides and souvenirs<br />
are sold, trading through 2010 and 2011 was adversely impacted<br />
by the recession as visitors spent considerably less than in prior<br />
years. The company’s publishing activity was also adversely<br />
affected by reduced advertising revenues. The combination of these<br />
factors meant that the company continued to incur operating losses<br />
and the shareholding was sold for a nominal sum after the year end.<br />
Additional investment of £463,384 was required in O-Gen Acme Trek<br />
because of delays in achieving full commissioning of the plant and<br />
to provide ongoing working capital. The plant has been generating<br />
electricity periodically but has made slow progress towards bringing<br />
its facility fully on stream, largely because of poor original engineering<br />
in key support systems. The company is seeking a funding partner<br />
to work with in addressing these issues. In the meantime, reflecting<br />
slower than expected progress, a further provision of £1.0 million has<br />
been made against the value of this investment.<br />
The C Shares fund invested a further £288,730 into i-plas <strong>Group</strong>,<br />
details of which are shown under the Ordinary Shares portfolio above.<br />
I Portfolio Review — Planned Exit Shares Fund<br />
The Planned Exit Shares fund made four new investments totalling<br />
£2,314,952 during the year under review:<br />
DCG <strong>Group</strong> Limited (£750,000) designs, sources, implements and<br />
maintains data storage solutions for companies and provides them<br />
as a managed service. Managed service contracts typically run<br />
Annual Report and Accounts 30 September 2011<br />
for an initial term of three years and the company has a very high<br />
level of customer retention. The investment was used to re-finance<br />
existing loans and to provide additional working capital to enable<br />
the company to continue the growth of its managed services.<br />
A one year £625,000 loan was advanced to Portchester Equity<br />
Limited, a privately owned investment company with eight subsidiaries.<br />
Each subsidiary is long established in their respective industries. The<br />
funding provided to the investment company is to cover the short term<br />
working capital requirements of one of the subsidiaries.<br />
In December 2010 the Planned Exit Shares fund backed a<br />
management buy-in of Channel Safety Systems with £565,000.<br />
Channel designs and distributes fire safety systems and<br />
emergency lighting, as well as providing associated services. From<br />
its base in the South East of England Channel Safety has been<br />
operating for 35 years. The company traded profitably through the<br />
recession and the management team are exploring several growth<br />
strategies, including energy efficient LED emergency lighting.<br />
Withion Power (£374,952) is described under the C Shares fund<br />
above.<br />
i-plas <strong>Group</strong> (£240,610) is described under the Ordinary Shares<br />
fund above<br />
I Realisations<br />
Proceeds of £856,813 were received by the Ordinary Shares<br />
fund from five investments. Loan repayments were received from<br />
Zoo Digital (£405,000), Trilogy Communications (£249,388) and<br />
SkillsMarket (£47,705) following a refinancing, £146,668 was<br />
received from the refinancing of Autologic Diagnostics and £8,052<br />
was received from the partial disposal of Sarantel.<br />
Proceeds of £579,595 were received by the C Shares fund from two<br />
investments. A total of £439,999 was received from the refinancing<br />
of Autologic Diagnostics and a loan repayment of £139,596 was<br />
received from O-Gen Acme Trek following a further funding round.<br />
Proceeds of £1,000,000 were received by the Planned Exit Shares<br />
fund from the disposal of <strong>Foresight</strong> Luxembourg Solar 2 S.a.r.l at cost.<br />
I Outlook<br />
During the year, trading in a number of the portfolio companies<br />
benefited from the positive export conditions and from better<br />
than expected growth in target markets, particularly in the Far<br />
East. Conversely, some of the investments in the environmental<br />
portfolio suffered from operational delays in bringing their facilities<br />
to optimum production capability, as well as longer lead times<br />
for product acceptance by their customers. Overall, we remain<br />
reasonably optimistic about current prospects and with regard<br />
to the outlook for many portfolio companies, which continue to<br />
display good order books and revenue and profit growth. Our<br />
view is tempered by concerns about challenging economic<br />
fundamentals and uncertainties that could lead to a prolonged<br />
period of low growth. Across all the portfolio companies, we have,<br />
where appropriate, ensured that management are focused on cash<br />
conservation, cost containment, and appropriate risk management.<br />
<strong>Foresight</strong> is actively pursuing a number of potential portfolio<br />
realisations in several market sectors to generate value and<br />
distributions for shareholders but M&A activity at the smaller<br />
company level is still inconsistent and we remain concerned that<br />
if there is a return to the economic volatility of 2008/2009 it may<br />
lead to a significant fall in M&A activity.<br />
David Hughes<br />
Chief Investment Officer, <strong>Foresight</strong> <strong>Group</strong><br />
05
<strong>Foresight</strong> 2 VCT plc<br />
06<br />
Investment Summary<br />
ORDINARY SHARES FUND<br />
30 September 2011 30 September 2010<br />
Amount Amount<br />
invested Valuation Valuation Methodology invested Valuation<br />
Investment £ £ £ £<br />
Trilogy Communications Limited 1,603,431 4,301,122 * Discounted price/earnings multiple 1,775,000 3,120,562<br />
Closed Loop Recycling Limited 2,480,833 2,439,166 * Price of recent funding round 2,480,833 2,439,166<br />
The Bunker Secure Hosting Limited 1,112,521 2,317,960 * Discounted revenue multiple 700,036 1,825,940<br />
Infrared Integrated Systems Limited 749,985 1,843,451 * Discounted price/earnings multiple 749,985 720,267<br />
TFC Europe Limited 547,804 1,483,699 * Discounted price/earnings multiple 525,000 1,422,191<br />
Ixaris Systems Limited 700,000 1,310,580 * Price of recent funding round 700,000 655,604<br />
Autologic Diagnostics Holdings Limited<br />
(formerly Diagnos Holdings Limited)<br />
271,201 1,292,205 * Discounted price/earnings multiple 250,000 689,748<br />
alwaysON <strong>Group</strong> Limited 1,350,448 1,012,836 * Price of recent funding round less 1,150,448<br />
impairment<br />
862,836<br />
2K Manufacturing Limited 610,825 610,825 * Price of recent funding round 500,000 500,000<br />
Evance Wind Turbines Limited 1,163,877 581,939 * Price of recent funding round less<br />
impairment<br />
964,750 482,375<br />
AtFutsal <strong>Group</strong> Limited 473,765 355,324 Price of recent funding round less<br />
impairment<br />
473,765 473,765<br />
Sindicatum Carbon Capital Limited 125,006 328,100 Price of recent funding round 125,006 328,100<br />
ICA Limited 250,000 298,507 Discounted price/earnings multiple 250,000 272,191<br />
i-plas <strong>Group</strong> Limited 576,287 288,144 Price of recent funding round less<br />
impairment<br />
576,287 496,287<br />
Silvigen Limited 567,339 283,670 Price of recent funding round less<br />
impairment<br />
493,060 439,288<br />
ZOO Digital <strong>Group</strong> plc (AIM listed) 195,000 247,500 Bid price 600,000 986,192<br />
Aigis Blast Protection Limited 1,262,636 236,277 Discounted revenue multiple 1,262,636 211,877<br />
Probability plc (AIM listed) 250,000 219,572 Bid price 250,000 138,980<br />
Crumb Rubber Limited 387,480 193,740 Price of recent funding round less<br />
impairment<br />
308,330 308,330<br />
Land Energy Limited 144,439 144,439 Price of recent funding round 116,269 116,269<br />
Sarantel <strong>Group</strong> plc (AIM listed) 567,413 48,372 Bid price 668,002 155,871<br />
Oxonica plc 1,181,473 19,080 Net assets basis 1,181,473 38,160<br />
Nanotecture <strong>Group</strong> plc 500,000 — Nil value 500,000 62,500<br />
SkillsMarket Limited 886,656 — Nil value 817,989 159,811<br />
* Top ten investments by value shown on pages 8 to 10.<br />
17,958,419 19,856,506 17,418,869 16,906,310
Investment Summary<br />
Annual Report and Accounts 30 September 2011<br />
C SHARES FUND<br />
30 September 2011 30 September 2010<br />
Amount Amount<br />
invested Valuation Valuation Methodology invested Valuation<br />
Investment £ £ £ £<br />
Datapath Holdings Limited 100,000 4,459,830 * Discounted price/earnings multiple 100,000 2,368,307<br />
Autologic Diagnostics Holdings Limited<br />
(formerly Diagnos Holdings Limited)<br />
813,604 3,877,711 * Discounted price/earnings multiple 750,000 2,069,244<br />
Vertal Limited 3,550,501 2,662,876 * Price of recent funding round less 2,018,585<br />
impairment<br />
2,018,585<br />
Closed Loop Recycling Limited 2,375,834 2,367,502 * Price of recent funding round 2,245,834 2,237,502<br />
Land Energy Limited 1,877,767 1,877,767 * Price of recent funding round 1,511,519 1,511,519<br />
2K Manufacturing Limited 1,125,000 1,125,000 * Price of recent funding round 1,000,000 1,000,000<br />
AtFutsal <strong>Group</strong> Limited 1,421,293 1,065,970 * Price of recent funding round less 1,421,293<br />
impairment<br />
1,421,293<br />
TFC Europe Limited 391,288 1,059,797 * Discounted price/earnings multiple 375,000 1,015,876<br />
ICA Limited 750,000 894,008 * Discounted price/earnings multiple 750,000 815,493<br />
O-Gen Acme Trek Limited 1,679,851 839,926 * Price of recent funding round less 1,356,063<br />
impairment<br />
1,413,519<br />
Withion Power Limited 800,096 800,096 Price of recent funding round — —<br />
O-Gen UK Limited 530,007 678,409 Discounted cashflow 530,007 530,007<br />
Crumb Rubber Limited 1,162,500 581,250 Price of recent funding round less<br />
impairment<br />
925,000 925,000<br />
i-plas <strong>Group</strong> Limited 959,327 479,664 Price of recent funding round less<br />
impairment<br />
670,597 603,930<br />
Global Immersion Limited 333,330 333,330 Discounted price/earnings multiple 333,330 622,042<br />
Silvigen Limited 567,339 283,670 Price of recent funding round less<br />
impairment<br />
493,060 439,288<br />
Evance Wind Turbines Limited 349,246 174,623 Price of recent funding round less<br />
impairment<br />
289,494 144,747<br />
Heritage House Media Limited 759,537 4,267 Offer proceeds 699,687 174,922<br />
AWP Environmental Limited 500,000 — Nil value 500,000 —<br />
* Top ten investments by value shown on pages 11 to 13.<br />
20,046,520 23,565,696 15,969,469 19,311,274<br />
PLANNED EXIT SHARES FUND<br />
30 September 2011 30 September 2010<br />
Amount Amount<br />
invested Valuation Valuation Methodology invested Valuation<br />
Investment £ £ £ £<br />
DCG <strong>Group</strong> Limited 750,000 750,000 * Cost — —<br />
Portchester Equity Limited 625,000 625,000 * Cost — —<br />
Closed Loop Recycling Limited 566,667 566,667 * Cost 566,667 566,667<br />
Channel Safety Systems Limited 565,000 565,000 * Cost — —<br />
Withion Power Limited 374,952 374,952 * Cost — —<br />
i-plas <strong>Group</strong> Limited 524,030 262,015 * Cost less impairment 283,420 283,420<br />
<strong>Foresight</strong> Luxembourg Solar 2 S.à r.l. — — Sold 1,000,000 903,316<br />
* All investments shown on pages 14 to 15.<br />
3,405,649 3,143,634 1,850,087 1,753,403<br />
07
<strong>Foresight</strong> 2 VCT plc<br />
08<br />
Investment Summary — Ordinary Shares Portfolio<br />
Top ten investments by value at 30 September 2011 are detailed below:<br />
Trilogy Communications Limited<br />
is a world class supplier of audio communications to the defence, emergency management, industrial and broadcast<br />
sectors. Trilogy counts some of the world’s best known names in broadcast and defence among its customer base<br />
including the BBC, Sony, Radio France, Raytheon, Northrop Grumman and BAE. Trilogy’s Mercury IP system continues<br />
to make good progress in the defence market, especially in the US.<br />
First investment: September 2005<br />
Year ended: 28 February 2011<br />
% Equity/Voting Rights 24.4% £’000<br />
Income received and receivable in the year £56,117 Sales 8,624<br />
Equity at cost £410,094 Profit before Tax 864<br />
Loan stock at cost £1,193,337 Retained Profit 877<br />
Net Liabilities (1,320)<br />
Closed Loop Recycling Limited<br />
is the first plant in the UK to recycle waste PET and HDPE plastic bottles into food grade packaging material. The<br />
company continues to make solid operational, commercial and revenue progress with production rates at record levels<br />
and significantly improved plant reliability and consistency. Product quality remains high and there is strong demand<br />
for all the recycled material it produces. The company continues to be affected by raw material quality which restricts<br />
throughput and yield, but is making progress in addressing this problem. It is also planning significant investment at the<br />
Dagenham site to increase capacity to meet the substantial demand for the cleaned and sorted output, which should<br />
be possible without adding significantly to its fixed overhead costs. Closed Loop Recycling is currently profitable and<br />
generating revenues in excess of £1.3 million per month.<br />
First investment: February 2007<br />
Year ended: 30 June 2010<br />
% Equity/Voting Rights 9.7% £’000<br />
Income received and receivable in the year £65,054 Sales 6,727<br />
Equity at cost £437,500 Loss before Tax (6,491)<br />
Loan stock at cost £2,043,333 Retained Loss (6,491)<br />
Net Liabilities (11,417)<br />
The Bunker Secure Hosting Limited<br />
provides ultra secure IT data centre and managed services to companies from owned and leased facilities totalling<br />
41,500 square feet in bunkers previously constructed for military use at Ash, Kent and Greenham Common, Berkshire.<br />
With particular expertise in Open Source and Microsoft software and systems, web and digital security, The Bunker<br />
builds, hosts and manages ultra secure, high availability IT infrastructure platforms for its customers and provides secure<br />
co-location services to host customers’ servers or back-up servers. The Bunker is highly regarded for its technical skills<br />
by its customers, which include top financial, telecoms and web-based businesses, concerned with data security which<br />
have made the decision to outsource their mission critical IT systems. The Bunker continues to make good progress<br />
in increasing revenues from existing customers and winning new customers under term contracts which generate high<br />
visibility of future revenues. Sales increased to £6.2 million in 2010 and have grown significantly during 2011, generating<br />
substantial profits. To handle growing demand and increase capacity, major capital investment programmes to increase<br />
power availability and connectivity were completed in 2010/11, as well as considerable additional space fitted out<br />
at both Ash and Greenham Common. The Bunker was confirmed as one of the UK’s fastest growing technology<br />
companies in The Sunday Times Microsoft Tech Track 100 in September 2010.<br />
First investment: May 2006<br />
Year ended: 31 December 2010<br />
% Equity/Voting Rights 7.3% £’000<br />
Income received and receivable in the year — Sales 6,177<br />
Equity at cost £278,122 Profit before Tax 425<br />
Loan stock at cost £834,399 Retained Profit 425<br />
Net Assets 1,646
Annual Report and Accounts 30 September 2011<br />
Investment Summary — Ordinary Shares Portfolio<br />
Infrared Integrated Systems Limited<br />
manufactures infra-red arrays and sells cameras and thermal imagers incorporating these arrays. The company’s<br />
products are focused on three markets: queue management, people counting and thermal imaging. The queue<br />
management product, which combines the infra-red arrays with a software package, is targeted at major supermarket<br />
chains. The system improves the customer experience, reducing queue lengths, as well as enabling the supermarket<br />
to optimise staff deployment. The people counting products enable accurate measurement of flows of people, and are<br />
sold through a network of partners into a number of industries, including retail, leisure, transport and hospitality. The<br />
thermal imaging products, sold through a network of distributors, are used primarily for preventative maintenance. The<br />
company has made good progress in the US market.<br />
First investment: December 2005<br />
Year ended: 31 December 2010<br />
% Equity/Voting Rights 3.9% £’000<br />
Income received and receivable in the year — Sales 18,762<br />
Equity at cost £749,985 Profit before Tax 4,081<br />
Loan stock at cost — Retained Profit 5,205<br />
Net Assets 12,014<br />
TFC Europe Limited<br />
is one of Europe’s leading technically based suppliers of fixing and fastening products. It supplies injection moulded<br />
technical fasteners and ring and spring products to customers across a wide range of industries, including aerospace,<br />
automotive, hydraulics and petrochemicals and works with some of the leading manufacturers of technical products<br />
such as Smalley® Steel Ring Company.<br />
First investment: March 2007<br />
Year ended: 31 March 2011<br />
% Equity/Voting Rights 12.5% £’000<br />
Income received and receivable in the year £35,068 Sales 13,497<br />
Equity at cost £109,459 Profit before Tax 879<br />
Loan stock at cost £438,345 Retained Profit 473<br />
Net Assets 1,598<br />
Ixaris Systems Limited<br />
operates a prepaid electronic payment service integrated with the Visa network. Consumers deposit funds by credit<br />
card, cash at Post Offices and similar payment points or via normal bank transfers. The company has made inroads into<br />
the affiliates payment market, enabling affiliate networks to make payments to their members cost-effectively wherever<br />
they are in the world. The company has launched its OPN platform that enables developers to create and run their own<br />
global payment applications under the Visa and MasterCard schemes.<br />
First investment: March 2006<br />
Year ended: 31 December 2010<br />
% Equity/Voting Rights 7.6% £’000<br />
Income received and receivable in the year — Sales 8,476<br />
Equity at cost £700,000 Profit before Tax 158<br />
Loan stock at cost — Retained Profit 158<br />
Net Assets 1,587<br />
09
<strong>Foresight</strong> 2 VCT plc<br />
10<br />
Investment Summary — Ordinary Shares Portfolio<br />
Autologic Diagnostics Holdings Limited (formerly Diagnos Holdings Limited)<br />
was founded in 1999 and develops and sells sophisticated automotive diagnostic software and hardware that enables<br />
independent mechanics, dealerships and garages to service and repair vehicles. As cars have become increasingly<br />
sophisticated and more reliant on electronic systems. Mechanics need to be able to communicate to the in-car<br />
computer running the process or system, which in turn requires a diagnostic tool. Autologic Diagnostics supplies its<br />
‘Autologic’ product for use with well-known car brands including Land Rover, BMW, Mercedes, Jaguar, VAG (VW, Audi,<br />
Skoda) and Porsche.<br />
First investment: February 2009<br />
Year ended 31 December 2010<br />
% Equity/Voting Rights 2.6% £’000<br />
Income received and receivable in the year £27,289 Sales 9,266<br />
Equity at cost £26,667 Profit before Tax 1,943<br />
Loan stock at cost £244,534 Retained Profit 1,574<br />
Net Assets 3,371<br />
alwaysON <strong>Group</strong> Limited<br />
is a provider of data VPNs and voice over IP (VOIP) services to SMEs and public sector organisations. The company’s<br />
infrastructure is extremely secure and can be rapidly rolled out to customers. The company has developed managed<br />
services around unified communications, in particular the Microsoft Lync product, and sells direct as well a through<br />
resellers.<br />
First investment: June 2005<br />
Year ended: 30 June 2010<br />
% Equity/Voting Rights 43.7% £’000<br />
Income received and receivable in the year £12,575 Sales 2,981<br />
Equity at cost £1,050,350 Loss before Tax (285)<br />
Loan stock at cost £200,000 Retained Loss (285)<br />
Preference shares at cost £100,098 Net Assets 37<br />
2K Manufacturing Limited<br />
operates from a facility in Luton and manufactures boards known as EcoSheet from waste plastic to replace plywood in<br />
the construction field, notably building site hoarding and shuttering works and agricultural applications. The EcoSheet<br />
is cost competitive to plywood, offers significant lifetime savings through reuse, and can be recycled at the end of life.<br />
The company is experiencing strong demand from the construction sector both directly and through major building<br />
products distributors.<br />
First investment: September 2009<br />
Year ended: 30 September 2010<br />
% Equity/Voting Rights 3.2% £’000<br />
Income received and receivable in the year £25,000 Sales 15<br />
Equity at cost £250,000 Loss before Tax (1,480)<br />
Loan stock at cost £360,825 Retained Loss (1,423)<br />
Net Assets 1,574<br />
Evance Wind Turbines Limited (formerly Iskra Wind Turbines Limited)<br />
is a manufacturer of high efficiency tree-sized wind turbines, suitable for volume manufacture, which have the best<br />
price/performance combination of any tree-sized turbine currently commercially available. The company continues to<br />
expand its distribution network and is seeing strong demand following the introduction of the feed-in tariffs for smallscale<br />
low carbon electricity.<br />
First investment: March 2007<br />
Year ended: 31 March 2011<br />
% Equity/Voting Rights 4.8% £’000<br />
Income received and receivable in the year £1,503 Sales 2,815<br />
Equity at cost £131,366 Loss before Tax (1,472)<br />
Loan stock at cost £1,032,511 Retained Loss (1,340)<br />
Net Liabilities (3,552)
Investment Summary — C Shares Portfolio<br />
Top ten investments by value at 30 September 2011 are detailed below:<br />
Datapath Holdings Limited<br />
is a UK manufacturer of PC-based multi-screen computer graphics cards and video capture hardware, specialising<br />
in video wall and data wall technology. Established in 1982, it has provided solutions for wide-ranging and varied<br />
applications across the world including control rooms, financial dealing rooms, CCTV, distance learning, digital signage<br />
and business presentations.<br />
First investment: September 2007<br />
Vertal Limited<br />
converts food waste into a liquid fertilizer for use in agriculture and in energy production as an organic fuel for anaerobic<br />
digestion plants. Vertal’s process is low cost and energy efficient. The company provides an alternative disposal route<br />
for food waste at a cost that is becoming increasingly attractive compared to the cost of landfill. Vertal operates a first<br />
facility in Mitcham, South East London.<br />
First investment: February 2009<br />
Annual Report and Accounts 30 September 2011<br />
Year ended: 31 March 2011<br />
% Equity/Voting Rights 12.5% £’000<br />
Income received and receivable in the year £197 Sales 10,286<br />
Equity at cost £100,000 Profit before Tax 2,963<br />
Loan stock at cost — Retained Profit 2,208<br />
Net Assets 6,155<br />
Autologic Diagnostics Holdings Limited (formerly Diagnos Holdings Limited)<br />
was founded in 1999 and develops and sells sophisticated automotive diagnostic software and hardware that enables<br />
independent mechanics, dealerships and garages to service and repair vehicles. As cars have become increasingly<br />
sophisticated and more reliant on electronic systems. Mechanics need to be able to communicate to the in-car<br />
computer running the process or system, which in turn requires a diagnostic tool. Autologic Diagnostics supplies its<br />
‘Autologic’ product for use with well-known car brands including Land Rover, BMW, Mercedes, Jaguar, VAG (VW, Audi,<br />
Skoda) and Porsche.<br />
First investment: February 2009<br />
Year ended 31 December 2010<br />
% Equity/Voting Rights 7.8% £’000<br />
Income received and receivable in the year £81,869 Sales 9,266<br />
Equity at cost £80,000 Profit before Tax 1,943<br />
Loan stock at cost £733,604 Retained Profit 1,574<br />
Net Assets 3,371<br />
Year ended: 30 November 2010<br />
% Equity/Voting Rights 12.8% £’000<br />
Income received and receivable in the year £152,648 Sales 805<br />
Equity at cost £276,701 Loss before Tax (2,763)<br />
Loan stock at cost £3,273,800 Retained Loss (2,763)<br />
Net Liabilities (692)<br />
Closed Loop Recycling Limited<br />
is the first plant in the UK to recycle waste PET and HDPE plastic bottles into food grade packaging material. The<br />
company continues to make solid operational, commercial and revenue progress with production rates at record levels<br />
and significantly improved plant reliability and consistency. Product quality remains high and there is strong demand<br />
for all the recycled material it produces. The company continues to be affected by raw material quality which restricts<br />
throughput and yield, but is making progress in addressing this problem. It is also planning significant investment at the<br />
Dagenham site to increase capacity to meet the substantial demand for the cleaned and sorted output, which should<br />
be possible without adding significantly to its fixed overhead costs. Closed Loop Recycling is currently profitable and<br />
generating revenues in excess of £1.3 million per month.<br />
First investment: February 2007<br />
Year ended: 30 June 2010<br />
% Equity/Voting Rights 3.4% £’000<br />
Income received and receivable in the year £97,892 Sales 6,727<br />
Equity at cost £145,834 Loss before Tax (6,491)<br />
Loan stock at cost £2,230,000 Retained Loss (6,491)<br />
Net Liabilities (11,417)<br />
11
<strong>Foresight</strong> 2 VCT plc<br />
12<br />
Investment Summary — C Shares Portfolio<br />
Land Energy Limited<br />
was set up to generate renewable power from virgin wood, and to exploit the growing demand for wood pellets as<br />
a renewable fuel and as animal bedding. The company operates a facility in Bridgend and a £23 million pellet/energy<br />
facility is under construction at Girvan (Scotland).<br />
First investment: March 2008<br />
Year ended: 31 December 2010<br />
% Equity/Voting Rights 12.3% £’000<br />
Income received and receivable in the year £122,821 Sales Not disclosed<br />
Equity at cost £208,074 Profit before Tax Not disclosed<br />
Loan stock at cost £1,669,693 Retained Profit Not disclosed<br />
Net Assets 1,113<br />
2K Manufacturing Limited<br />
operates from a facility in Luton and manufactures boards known as EcoSheet from waste plastic to replace plywood in<br />
the construction field, notably building site hoarding and shuttering works and agricultural applications. The EcoSheet<br />
is cost competitive to plywood, offers significant lifetime savings through reuse, and can be recycled at the end of life.<br />
The company is experiencing strong demand from the construction sector both directly and through major building<br />
products distributors.<br />
First investment: January 2009<br />
Year ended: 30 September 2010<br />
% Equity/Voting Rights 6.4% £’000<br />
Income received and receivable in the year £50,000 Sales 15<br />
Equity at cost £500,000 Loss before Tax (1,480)<br />
Loan stock at cost £625,000 Retained Loss (1,423)<br />
Net Assets 1,574<br />
AtFutsal <strong>Group</strong> Limited<br />
operates indoor sports arenas for Futsal, one of the fastest growing indoor sports in the world, and the only smallsided<br />
football format to be officially recognised by UEFA and FIFA. The investment reunites <strong>Foresight</strong> with the former<br />
management team of Covion, a facilities management business backed by <strong>Foresight</strong> which was sold to Balfour Beatty<br />
in 2007 for £33 million. The first arena opened in January 2009 in Swindon, a second opened in Cardiff in Q3 2009 and<br />
the company opened its third arena, a super arena facility, in Birmingham in October 2010. Plans are advanced to open<br />
another super arena facility in northern England to enhance national coverage. Reflecting current economic conditions,<br />
revenues have built up more slowly than expected.<br />
First investment: January 2009<br />
Year ended 30 June 2010<br />
% Equity/Voting Rights 16.8% £’000<br />
Income received and receivable in the year £73,559 Sales 410<br />
Equity at cost £174,069 Loss before Tax (972)<br />
Loan stock at cost £1,247,224 Retained Loss (972)<br />
Net Liabilities (881)<br />
TFC Europe Limited<br />
is one of Europe’s leading technically based suppliers of fixing and fastening products. It supplies injection moulded<br />
technical fasteners and ring and spring products to customers across a wide range of industries, including aerospace,<br />
automotive, hydraulics and petrochemicals and works with some of the leading manufacturers of technical products<br />
such as Smalley® Steel Ring Company.<br />
First investment: March 2007<br />
Year ended: 31 March 2011<br />
% Equity/Voting Rights 8.9% £’000<br />
Income received and receivable in the year £25,048 Sales 13,497<br />
Equity at cost £78,185 Profit before Tax 879<br />
Loan stock at cost £313,103 Retained Profit 473<br />
Net Assets 1,598
Investment Summary — C Shares Portfolio<br />
ICA <strong>Group</strong> Limited<br />
is a leading document management solutions provider in the South East of England. Its core business is reselling and<br />
maintaining Ricoh, Toshiba and Kyocera office printing equipment to customers in both the commercial and public<br />
sectors. Management’s plans include identifying small acquisitions in the South East to expand the customer base as<br />
well as generate organic sales growth.<br />
First investment: February 2009<br />
Annual Report and Accounts 30 September 2011<br />
Year ended: 31 January 2011<br />
% Equity/Voting Rights 21.0% £’000<br />
Income received and receivable in the year — Sales Not disclosed<br />
Equity at cost £131,250 Profit before Tax Not disclosed<br />
Loan stock at cost £618,750 Retained Profit Not disclosed<br />
Net Assets 2,656<br />
O-Gen Acme Trek Limited<br />
operates a biomass-to-energy facility at Stoke-on-Trent. The market for such facilities is driven by regulation and<br />
incentives associated with diversion from landfill and ROCs (Renewable Obligation Certificates) for renewable energy.<br />
The facility is one of the leading such assets in the UK benefiting from both waste gate fees and double-ROC status;<br />
however, it has experienced delay in achieving full output due to technical challenges.<br />
First investment: May 2007<br />
Year ended: 31 December 2010<br />
% Equity/Voting Rights 14.9% £’000<br />
Income received and receivable in the year £17,140 Sales Not disclosed<br />
Equity at cost £156,669 Profit before Tax Not disclosed<br />
Loan stock at cost £1,523,182 Retained Profit Not disclosed<br />
Net Liabilities (4,381)<br />
13
<strong>Foresight</strong> 2 VCT plc<br />
14<br />
Investment Summary — Planned Exit Shares Portfolio<br />
All investments at 30 September 2011 are detailed below:<br />
DCG <strong>Group</strong> Limited<br />
is a provider of data storage and back-up solutions to corporates either remotely as a managed service or at customers’<br />
premises. The demand for DCG’s services is driven by greater compliance requirements for retention and retrieval of<br />
data and the ever growing volume of electronic data produced by organisations. The company continues to build its<br />
managed service customer base and its recurring revenues. A mid-range service with multi-tenanted capability has<br />
been launched for re-sale by channel partners and the company will soon provide a virtualised disaster recovery service.<br />
First investment: November 2010<br />
Year ended: 31 March 2011<br />
% Equity/Voting Rights 2.6% £’000<br />
Income received and receivable in the year £58,993 Sales 5,918<br />
Equity at cost £75,000 Loss before Tax (497)<br />
Loan stock at cost £675,000 Retained Loss (454)<br />
Net Liabilities (1,647)<br />
Portchester Equity Limited<br />
is a family owned investment company with majority stake holdings in eight separate businesses. The investment is a short<br />
term (12 month) working capital loan facility providing an attractive yield and strong security.<br />
First investment: August 2011<br />
Year ended: 30 September 2010<br />
% Equity/Voting Rights 0.0% £’000<br />
Income received and receivable in the year £9,147 Sales 68,696<br />
Equity at cost — Profit before Tax 1,183<br />
Loan stock at cost £625,000 Retained Profit 204<br />
Net Assets 29,138<br />
Closed Loop Recycling Limited<br />
is the first plant in the UK to recycle waste PET and HDPE plastic bottles into food grade packaging material. The<br />
company continues to make solid operational, commercial and revenue progress with production rates at record levels<br />
and significantly improved plant reliability and consistency. Product quality remains high and there is strong demand<br />
for all the recycled material it produces. The company continues to be affected by raw material quality which restricts<br />
throughput and yield, but is making progress in addressing this problem. It is also planning significant investment at the<br />
Dagenham site to increase capacity to meet the substantial demand for the cleaned and sorted output, which should<br />
be possible without adding significantly to its fixed overhead costs. Closed Loop Recycling is currently profitable and<br />
generating revenues in excess of £1.3 million per month.<br />
First investment: April 2010<br />
Year ended: 30 June 2010<br />
% Equity/Voting Rights 0.0% £’000<br />
Income received and receivable in the year £42,384 Sales 6,727<br />
Equity at cost — Loss before Tax (6,491)<br />
Loan stock at cost £566,667 Retained Loss (6,491)<br />
Net Liabilities (11,417)<br />
Channel Safety Systems <strong>Group</strong> Limited<br />
specialises in the design, distribution, installation and service of fire detection systems, emergency lighting, Disability<br />
Discrimination Act (“DDA”) products and nurse call systems. Demand for most of Channel Safety Systems’ products<br />
and systems is driven by health and safety regulation and, increasingly, carbon reduction initiatives and legislation,<br />
which Channel Safety Systems addresses with its low energy LED emergency lighting range. <strong>Foresight</strong> backed an MBI<br />
of Channel Safety Systems in December 2010 with a total investment of £1.1 million from the Planned Exit fund. During<br />
2011, the company has traded ahead of the previous year, is introducing a range of new products and is focusing on<br />
increasing its sales to both new and existing customers. The budget for 2012 show the expected benefits from these<br />
actions.<br />
First investment: December 2010<br />
No accounts filed since the<br />
% Equity/Voting Rights 12.6% investment was made<br />
Income received and receivable in the year £45,469<br />
Equity at cost £57,000<br />
Loan stock at cost £508,000
Annual Report and Accounts 30 September 2011<br />
Investment Summary — Planned Exit Shares Portfolio<br />
Withion Power Limited<br />
is carrying out its first project in Derby. This project is targeting 3.0MW of electricity generation from waste wood<br />
sourced from local suppliers. The project is being built in three phases with phase 1 currently under construction<br />
and expected to commence generation of electricity (up to 0.5MW) in early 2012, with the remaining two phases<br />
expected to be commissioned over the 12 month period post successful commissioning of phase 1. This project is<br />
being developed in conjunction with O-Gen UK Limited.<br />
First investment: December 2010<br />
No accounts filed since the<br />
% Equity/Voting Rights 5.2% investment was made<br />
Income received and receivable in the year £32,067<br />
Equity at cost £37,452<br />
Loan stock at cost £337,500<br />
i-plas <strong>Group</strong> Limited<br />
is a well-established manufacturer of consumer and industrial products from recycled and waste plastics. It is well<br />
positioned in a growing market for recycled and sustainable goods that offer economic and environmental advantages.<br />
<strong>Foresight</strong> funds have invested/committed £7.9 million to date, including £2.7 million in the last three months of 2010,<br />
which will significantly increase the company’s capacity. This will enable it to meet the increasing demand for its<br />
industrial products in particular.<br />
First investment: September 2010<br />
Year ended: 31 March 2011<br />
% Equity/Voting Rights 1.7% £’000<br />
Income received and receivable in the year £22,036 Sales 4,619<br />
Equity at cost £39,903 Loss before Tax (3,031)<br />
Loan stock at cost £484,127 Retained Loss (3,031)<br />
Net Liabilities (5,789)<br />
The results of these companies have not been consolidated with the results of <strong>Foresight</strong> 2 VCT plc. Unless stated to the contrary, all<br />
classes of ordinary shares and none of the classes of preference shares have voting rights.<br />
The principal activity of the Company is to select and hold a portfolio of investments. The investments are not treated as associates nor<br />
subsidiaries as there is no controlling interest in these entities.<br />
15
<strong>Foresight</strong> 2 VCT plc<br />
16<br />
Investment Summary<br />
at 30 September 2011<br />
I CO-INVESTING FUNDS<br />
<strong>Foresight</strong> <strong>Group</strong> also manages or advises <strong>Foresight</strong> VCT plc, <strong>Foresight</strong> 3 VCT plc, <strong>Foresight</strong> 4 VCT plc, <strong>Foresight</strong> 5 VCT plc, Acuity VCT<br />
3 plc, <strong>Foresight</strong> Solar VCT plc, <strong>Foresight</strong> Clearwater VCT plc, <strong>Foresight</strong> European Solar Fund GP Limited and <strong>Foresight</strong> Sustainable UK<br />
Investment Fund (‘<strong>Foresight</strong> Sustainable’). Investments have been made by the funds that <strong>Foresight</strong> <strong>Group</strong> advises and manages, as<br />
follows:<br />
<strong>Foresight</strong> VCT <strong>Foresight</strong> 2 Total<br />
O & PE O, C & PE <strong>Foresight</strong> managed by<br />
Shares Shares <strong>Foresight</strong> 3 <strong>Foresight</strong> 4 Sustainable <strong>Foresight</strong><br />
Investee £ £ £ £ £ %<br />
2K Manufacturing Limited — 1,735,825 862,114 — 2,500,000 28.8%<br />
Aigis Blast Protection Limited 860,325 1,262,636 — 347,226 — 25.8%<br />
alwaysON <strong>Group</strong> Limited 405,306 1,350,448 — 270,090 — 77.8%<br />
AtFutsal <strong>Group</strong> Limited 270,988 1,895,058 541,977 541,977 — 45.5%<br />
Autologic Diagnostics Holdings Limited 813,604 1,084,805 1,084,805 1,084,805 — 39.0%<br />
Channel Safety Systems Limited 565,000 565,000 — — — 25.2%<br />
Closed Loop Recycling Limited 2,122,917 5,423,334 5,110,000 3,443,750 2,944,127 58.1%<br />
Crumb Rubber Limited — 1,549,980 150,000 150,000 2,000,000 42.9%<br />
Datapath Holdings Limited — 100,000 100,000 100,000 — 37.4%<br />
DCG <strong>Group</strong> Limited 999,970 750,000 — — — 37.4%<br />
Evance Wind Turbines Limited — 1,513,123 1,396,728 1,745,910 603,448 34.6%<br />
Global Immersion Limited — 333,330 1,133,332 533,338 — 60.0%<br />
Heritage House Media Limited — 759,537 1,910,463 — — 35.0%<br />
ICA Limited — 1,000,000 1,000,000 — — 56.0%<br />
Infrared Integrated Systems Limited 250,005 749,985 — 250,005 — 6.5%<br />
i-plas <strong>Group</strong> Limited 1,004,392 2,059,644 2,248,934 891,210 1,733,332 66.6%<br />
Ixaris Systems Limited — 700,000 550,000 750,000 — 21.7%<br />
Land Energy Limited 288,882 2,022,206 — 433,519 2,400,436 38.6%<br />
O-Gen Acme Trek Limited — 1,679,851 3,435,719 3,798,684 1,315,000 84.0%<br />
O-Gen UK Limited — 530,007 310,012 345,014 1,291,667 69.3%<br />
Oxonica plc 2,804,473 1,181,473 — — — 14.7%<br />
Portchester Equity Limited 625,000 625,000 — — — 0.0%<br />
Probability plc (AIM listed) — 250,000 299,999 450,000 — 4.9%<br />
Sarantel <strong>Group</strong> plc (AIM listed) 3,134,493 567,413 885,943 — — 4.0%<br />
Silvigen Limited 711,094 1,134,678 1,422,164 711,094 796,184 80.7%<br />
Sindicatum Carbon Capital Limited — 125,006 174,993 200,063 — 1.0%<br />
TFC Europe Limited — 939,092 626,061 782,577 — 53.5%<br />
The Bunker Secure Hosting Limited — 1,112,521 1,314,773 1,618,248 — 26.8%<br />
Trilogy Communications Limited 801,715 1,603,431 — 801,705 — 48.7%<br />
Vertal Limited — 3,550,501 2,469,842 650,000 2,449,995 66.6%<br />
Withion Power Limited† 12,828,102 1,175,048 — — — 64.5%<br />
ZOO Digital <strong>Group</strong> plc (AIM listed) — 195,000 1,396,625 1,102,000 — 18.3%<br />
Companies in liquidation and valued at £nil have been excluded from the table above.<br />
† <strong>Foresight</strong> VCT plc’s investment in Withion Power Limited includes £12,453,150 that was invested by Keydata Income VCT 1 plc and<br />
Keydata Income VCT 2 plc before they merged with <strong>Foresight</strong> VCT plc on 28 February 2011.
Board of Directors<br />
I Jocelin Harris (66) (Chairman)<br />
is a qualified solicitor and since 1986 has run Durrington<br />
Corporation which provides finance and advice for small<br />
businesses. Before this he was a Director of private bank Rea<br />
Brothers for 7 years. He has personally invested in over 40<br />
development stage companies over the last 25 years and is<br />
currently Chairman or Non-Executive Director of a number of them<br />
in the UK and the USA. He is also a Director of Unicorn AIM VCT<br />
plc and Vice Chairman of the Governing Body of Queen Mary<br />
University of London.<br />
I Peter Frederick Dicks (69)<br />
was a founder Director of Abingworth plc in 1973, a successful<br />
venture capital company. He is currently a Director of a number<br />
of quoted and unquoted companies, including Private Equity<br />
Investor plc where he is Chairman, Polar Capital Technology Trust<br />
plc, Graphite Enterprise Trust plc and Standard Microsystems<br />
Inc, a US NASDAQ quoted company. In addition, he has been<br />
a Director of <strong>Foresight</strong> VCT plc since its launch in 1997 and is<br />
a Director of <strong>Foresight</strong> 3 VCT plc, <strong>Foresight</strong> Clearwater VCT<br />
plc, <strong>Foresight</strong> 4 VCT plc, and <strong>Foresight</strong> 5 VCT plc. He is also<br />
Chairman of Unicorn AIM VCT plc.<br />
Annual Report and Accounts 30 September 2011<br />
I David William Quysner CBE (65)<br />
has more than 40 years’ experience of venture capital and SME<br />
finance. He spent 13 years with 3i before joining the venture<br />
capital firm Abingworth in 1982, becoming its Managing Director<br />
in 1994 and its Chairman in 2001. He is also Chairman of<br />
Capital for Enterprise Limited, which manages and delivers HM<br />
Government schemes that provide financial support for SMEs<br />
and Chairman of RCM Technology Trust plc. He is a Director of<br />
ANGLE plc, Private Equity Investor plc and Medical Research<br />
Council Technology Limited. He was Chairman of the British<br />
Venture Capital Association in 1996/97.<br />
17
<strong>Foresight</strong> 2 VCT plc<br />
18<br />
Directors’ Report<br />
The Directors present their report and the audited accounts of the<br />
Company for the year ended 30 September 2011.<br />
I Activities and status<br />
The principal activity of the Company during the period was the<br />
making of investments in quoted and unquoted companies in the<br />
United Kingdom. The Company is not an investment company<br />
within the meaning of Section 833 of the Companies Act 2006.<br />
It has been granted approval by HM Revenue & Customs under<br />
sections 274–280A of the Income Tax Act 2007 as a Venture Capital<br />
Trust for the year ended 30 September 2010 and the Directors have<br />
managed and intend to continue to manage the Company’s affairs in<br />
such a manner as to comply with these regulations.<br />
I Results and dividends<br />
The total return attributable to equity shareholders for the period<br />
amounted to £2,404,000 (2010: £4,166,000). The Board is<br />
recommending final dividends of 0.5p per Ordinary Share and<br />
2.0p per C Share, both payable on 4 May 2012.<br />
The dividend for the Planned Exit Shares will be decided at the<br />
time of the interim results to 31 March 2012.<br />
I Business Review<br />
The purpose of this review is to provide shareholders with a<br />
snapshot summary setting out the business objectives of the<br />
Company, the Board’s strategy to achieve those objectives, the<br />
risks faced, the regulatory environment and the key performance<br />
indicators (KPIs) used to measure performance.<br />
I Net Asset Value Total Return<br />
During the year ended 30 September 2011 the Company’s principal<br />
indicator of performance, net asset value total return (including<br />
dividends paid since launch), increased 10.3% from 97.1p per<br />
Ordinary Share as at 30 September 2010 to 107.0p per Ordinary<br />
Share as at 30 September 2011 and increased 1.2% from 111.0p<br />
per C Share as at 30 September 2010 to 112.3p per C Share as<br />
at 30 September 2011. The net asset value total return (including<br />
dividends paid since launch) per Planned Exit Share has decreased<br />
2.6% to 92.5p per share at 30 September 2011 from 95.0p per<br />
share at 30 September 2010.<br />
Details of the proposed final dividends for the Ordinary and C<br />
Shares are mentioned within Results and dividends above.<br />
I Nature of the Company<br />
<strong>Foresight</strong> 2 VCT plc is a Venture Capital Trust listed on The<br />
London Stock Exchange.<br />
I Investment objective<br />
Ordinary Shares<br />
The investment objective of the Ordinary Shares fund is to<br />
provide private investors with attractive returns from a portfolio of<br />
investments in fast-growing unquoted companies in the United<br />
Kingdom. It is the intention to maximise tax-free income available<br />
to investors from a combination of dividends and interest received<br />
on investments and the distribution of capital gains arising from<br />
trade sales or flotations.<br />
C Shares<br />
The investment objective of the C Shares fund is to provide<br />
investors with attractive returns from Venture Capital Investments<br />
in companies that are already profitable or are expected to<br />
become so in the near term.<br />
Planned Exit Shares<br />
The investment objective of the Planned Exit Shares fund is to<br />
combine greater security of capital than is normal within a VCT<br />
with the enhancement of investor returns created by the VCT tax<br />
benefits — income tax relief of 30% of the amount invested, and<br />
tax-free distribution of income and capital gains. The key objective<br />
of the Planned Exit Fund is to distribute a minimum of 110p per<br />
share issued through a combination of tax-free income, buybacks<br />
and tender offers before the sixth anniversary of the closing<br />
date of the offer.<br />
I Dividend policy<br />
A proportion of realised gains will normally be retained for<br />
reinvestment and to meet future costs. Subject to this, the<br />
Company will endeavour to maintain a steady stream of dividend<br />
payments of the order of 5p per share although a greater or<br />
lesser sum may be paid in any year. It is the intention to maximise<br />
the Company’s tax-free income available to investors from a<br />
combination of dividends and interest received on investments<br />
and the distribution of capital gains arising from trade sales or<br />
flotations.<br />
I Investment policy<br />
The Investment Manager (<strong>Foresight</strong> <strong>Group</strong>) will target UK<br />
unquoted companies which they believe will achieve the<br />
objective of producing attractive return for shareholders.<br />
Investment securities<br />
The Company invests in a range of securities including, but not<br />
limited to, ordinary and preference shares, loan stocks, convertible<br />
securities, and fixed-interest securities as well as cash. Unquoted<br />
investments are usually structured as a combination of ordinary<br />
shares and loan stocks, while AIM investments are primarily held<br />
in ordinary shares. Pending investment in unquoted and AIM listed<br />
securities, cash is primarily held in interest bearing money market<br />
open ended investment companies (OEICs).<br />
UK companies<br />
Investments are primarily made in companies which are<br />
substantially based in the UK, although many will trade overseas.<br />
The companies in which investments are made must have no<br />
more than £7 million of gross assets at the time of investment (or<br />
£15 million if the funds being invested were raised on or before<br />
5 April 2006) to be classed as a VCT qualifying holding.<br />
Asset mix<br />
The Company aims to be at least significantly invested in<br />
growth businesses subject always to the quality of investment<br />
opportunities and the timing of realisations. Any uninvested funds<br />
are held in cash, interest bearing securities and a range of nonqualifying<br />
investments. It is intended that the significant majority<br />
of any funds raised by the Company will be invested in VCT<br />
qualifying investments.
Directors’ Report<br />
Risk diversification and maximum exposures<br />
Risk is spread by investing in a number of different businesses within<br />
different industry sectors using a mixture of securities. The maximum<br />
amount invested in any one company is limited to 15% of the VCT<br />
Value of the Company (as defined by HM Revenue & Customs<br />
regulations and relevant legislation) at the time of investment.<br />
Investment style<br />
Investments are selected in the expectation that the application<br />
of private equity disciplines including an active management style<br />
for unquoted companies through the placement of an Investor<br />
Director on investee company boards will enhance value.<br />
Borrowing powers<br />
The Company’s Articles of Association permit borrowing to give a<br />
degree of investment flexibility. The Company’s Memorandum of<br />
Association restricts borrowing to an amount not exceeding the<br />
adjusted capital and reserves being the aggregate of the amount<br />
paid up on the issued share capital of the Company and the<br />
amount standing to the credit of the reserves. The Company does<br />
not currently have any borrowings.<br />
I Management<br />
The Board has engaged <strong>Foresight</strong> <strong>Group</strong> as discretionary<br />
Investment Manager. <strong>Foresight</strong> Fund Managers Limited (“<strong>Foresight</strong><br />
Fund Managers”) also provides or procures the provision of<br />
company secretarial, accounting and custodian services to the<br />
Company.<br />
<strong>Foresight</strong> <strong>Group</strong> prefers to take a lead role in the companies in which<br />
it invests. Larger investments may be syndicated with other investing<br />
institutions, and/or form part of a co-investment with other <strong>Foresight</strong><br />
VCTs or strategic partners with similar investment criteria.<br />
In considering a prospective investment in a company, particular<br />
regard will be paid to:<br />
Ordinary Shares<br />
l Evidence of high-margin products or services capable of<br />
addressing fast-growing markets<br />
l The company’s ability to sustain a competitive advantage<br />
l The strength of the management team<br />
l The existence of proprietary technology<br />
l The company’s prospects of being sold or achieving a<br />
flotation within 3–5 years<br />
C Shares<br />
l The level of sustainable profitability and prospects for<br />
increasing profits<br />
l The strength of the management team<br />
l The company’s ability to provide an attractive yield to the fund<br />
l The prospects of achieving a capital profit through a trade<br />
sale or stock market flotation within 3–5 years<br />
Planned Exit Shares<br />
l Security of income and capital<br />
l Asset backed<br />
l The company’s ability to provide an attractive yield to the fund<br />
l The prospects of achieving an exit within 5 years<br />
l The strength of the management team<br />
Annual Report and Accounts 30 September 2011<br />
A review of the investment portfolio and of market conditions<br />
during the period is included within the Investment Manager’s<br />
Report.<br />
I Principal risks, risk management and regulatory<br />
environment<br />
The Board believes that the principal risks faced by the Company are:<br />
l Economic risk — events such as an economic recession and<br />
movement in interest rates could affect smaller companies’<br />
performance and valuations.<br />
l Loss of approval as a Venture Capital Trust — the Company<br />
must comply with Section 274 of the Income Tax Act 2007<br />
which allows it to be exempted from corporation tax on<br />
investment gains. Any breach of these rules may lead to: the<br />
Company losing its approval as a VCT; qualifying shareholders<br />
who have not held their shares for the designated holding<br />
period having to repay the income tax relief they obtained; and<br />
future dividends paid by the Company becoming subject to<br />
tax. The Company would, as a result, lose its exemption from<br />
corporation tax on capital gains referred to above.<br />
l Investment and strategic — inappropriate strategy, poor asset<br />
allocation or consistently weak stock selection might lead to<br />
under performance and poor returns to shareholders.<br />
l Regulatory — the Company is required to comply with the<br />
Companies Acts 2006, the rules of the UK Listing Authority<br />
and United Kingdom Accounting Standards. Breach of any<br />
of these might lead to suspension of the Company’s Stock<br />
Exchange listing, financial penalties or a qualified audit report.<br />
l Reputational — inadequate or failed controls might result in<br />
breaches of regulations or loss of shareholder trust.<br />
l Operational — failure of the Manager’s or Company<br />
Secretary’s accounting systems or disruption to its business<br />
might lead to an inability to provide accurate reporting and<br />
monitoring.<br />
l Financial — inadequate controls might lead to<br />
misappropriation of assets. Inappropriate accounting policies<br />
might lead to misreporting or breaches of regulations.<br />
Additional financial risks, including interest rate, credit, market<br />
price and currency, are detailed in note 16 to the accounts.<br />
l Market risk — investment in AIM traded, PLUS traded and<br />
unquoted companies by its nature involves a higher degree of<br />
risk than investment in companies traded on the main market.<br />
In particular, smaller companies often have limited product<br />
lines, markets or financial resources and may be dependent<br />
for their management on a small number of key individuals. In<br />
addition, the market for stock in smaller companies is often<br />
less liquid than that for stock in larger companies, bringing<br />
with it potential difficulties in acquiring, valuing and disposing<br />
of such stock.<br />
l Liquidity risk — the Company’s investments, both unquoted<br />
and quoted, may be difficult to realise. Furthermore, the fact<br />
that a share is traded on AIM or PLUS Markets does not<br />
guarantee its liquidity. The spread between the buying and<br />
selling price of such shares may be wide and thus the price<br />
used for valuation may not be achievable.<br />
19
<strong>Foresight</strong> 2 VCT plc<br />
20<br />
Directors’ Report<br />
The Board seeks to mitigate the internal risks by setting policy,<br />
regular review of performance, enforcement of contractual<br />
obligations and monitoring progress and compliance. In the<br />
mitigation and management of these risks, the Board applies the<br />
principles detailed in the UK Corporate Governance Code. Details<br />
of the Company’s internal controls are contained in the Corporate<br />
Governance and Internal Control sections.<br />
I Performance and key performance indicators (KPIs)<br />
The Board expects the Manager to deliver a performance which<br />
meets the twin objectives of providing investors with attractive<br />
returns from a portfolio of investments in fast-growing unquoted<br />
companies and maximising tax-free income for shareholders.<br />
The key performance indicators in meeting these objectives<br />
are net asset value performance and dividends paid, which<br />
when combined give net asset value total return. Additional<br />
key performance indicators reviewed by the Board include the<br />
discount of the share price relative to the net asset value and total<br />
expenses as a proportion of shareholders’ funds.<br />
A record of some of these indicators is contained on page 1 entitled<br />
‘Financial Highlights’. Additional comments are provided in the<br />
Chairman’s Statement discussing the performance of the Company<br />
over the year under review. The total expense ratio in the period<br />
was 2.9%, significantly below the annual limit of 3.6%. Combined,<br />
these KPIs compare favourably with the wider VCT marketplace<br />
based on independently published information.<br />
A review of the Company’s performance during the financial period,<br />
the position of the Company at the period end and the outlook<br />
for the coming year is contained within the Investment Manager’s<br />
Report.<br />
The Board assesses the performance of the Manager in meeting<br />
the Company’s objective against the primary KPIs highlighted.<br />
Clearly, some investments in unquoted companies at an early stage<br />
of their development are likely to disappoint, but investing the funds<br />
raised in high growth companies with the potential to become<br />
I Directors<br />
market leaders creates an opportunity for enhanced returns to<br />
shareholders. The growth of some of these companies is, however,<br />
largely dependent on the continuing level of expenditure on relevant<br />
products and services by larger corporations.<br />
<strong>Foresight</strong> 2 is a venture capital trust and contracts-out its<br />
investment activities to its investment manager, <strong>Foresight</strong> <strong>Group</strong>;<br />
it has three Non-Executive Directors but no employees. The<br />
Manager is currently enjoying strong dealflow, including a number<br />
of opportunities in clean energy and environmental infrastructure.<br />
Both clean energy and environmental infrastructure projects have<br />
clear environmental benefits and include projects concentrating<br />
on reducing the amount of carbon emissions polluting the<br />
atmosphere, clean generation of electricity and efficient recycling<br />
of waste materials.<br />
I Share issues<br />
The Company launched two small top-up offers for its Ordinary<br />
and C Shares funds on 21 February 2011, which raised £166,500<br />
of gross proceeds for the Ordinary Share Fund and £230,500<br />
for the C Share fund. Under this offer, 166,685 Ordinary Shares<br />
were issued at prices ranging from 99.0p to 102.0p per share and<br />
199,228 C Shares were issued at prices ranging from 116.0p to<br />
118.0p per share.<br />
72,633 C Shares were issued under the Dividend Reinvestment<br />
Scheme at a price of 107.7p per share. Additionally, 101,771 C<br />
Shares were issued to <strong>Foresight</strong> <strong>Group</strong> at 109.0p per share under<br />
the Performance Related Incentive.<br />
At 30 September 2011 the Company had 21,088,348 Ordinary<br />
Shares, 24,699,440 C Shares and 6,179,833 Planned Exit Shares in<br />
issue. There are no restrictions on the transfer of any class of share.<br />
The Directors who held office during the year and their interests in the issued Ordinary Shares, C Shares and Planned Exit Shares of 1p<br />
each of the Company were as follows:<br />
30 September 30 September 30 September 1 October 1 October 1 October<br />
2011 2011 2011 2010 2010 2010<br />
Number of Number of Number of Number of Number of Number of<br />
Ordinary Shares C Shares Planned Exit Shares Ordinary Shares C Shares Planned Exit Shares<br />
Jocelin Harris (Chairman) 14,729 — — 14,729 — —<br />
Peter Dicks 41,100 25,750 — 41,100 25,750 —<br />
David Quysner 25,562 25,500 — 25,562 25,500 —<br />
All the Directors’ share interests shown above were held beneficially.<br />
There have been no changes in the Directors’ share interests between 30 September 2011 and the date of this report.<br />
In accordance with the Articles of Association, Mr Dicks and Mr Harris retire through rotation and, being eligible, offer themselves for reelection.<br />
Biographical notes on the Directors are given on page 17. The Board believes that Mr Dicks' and Mr Harris’s skills, experience<br />
and knowledge continue to complement each other and add value to the Company and recommends their re-election to<br />
the Board.
Directors’ Report<br />
I Share buy-backs<br />
During the period, the Company repurchased 129,000 Ordinary<br />
Shares for cancellation at a cost of £99,000 and 142,780 C<br />
shares at a cost of £135,000. No shares brought back by the<br />
Company are held in treasury. The Ordinary Share buy-back was<br />
completed at a discount of 13.0% to net asset value and the C<br />
Share buyback at a discount of 14.6% to net asset value.<br />
I Management<br />
<strong>Foresight</strong> <strong>Group</strong> (“the Manager”) is the Investment Manager of<br />
the Company and provides investment management and other<br />
administrative services.<br />
<strong>Foresight</strong> Fund Managers is the Secretary of the Company. The<br />
principal terms of the investment management and secretarial<br />
services agreement are set out in note 3 to the accounts.<br />
Since the end of the year, the Remuneration Committee has<br />
reviewed the appropriateness of the Manager’s appointment. In<br />
carrying out its review, the Remuneration Committee considered<br />
the investment performance of the Company and the ability of<br />
the Manager to produce satisfactory investment performance<br />
in the future. It also considered the length of the notice period of<br />
the investment management contract and fees payable to the<br />
Manager, together with the standard of other services provided<br />
which include Company Secretarial and accounting services.<br />
Following this review, it is the Directors’ opinion that the continuing<br />
appointment of the Manager on the terms agreed is in the<br />
interests of shareholders as a whole.<br />
No Director has an interest in any contract to which the Company is<br />
a party. <strong>Foresight</strong> <strong>Group</strong> which acts as investment manager to the<br />
Company in respect of its venture capital investments earned fees<br />
of £984,669 (2010: £877,628) during the year. <strong>Foresight</strong> <strong>Group</strong><br />
also received performance fees of £109,913 (2010: £108,219).<br />
<strong>Foresight</strong> Fund Managers, a subsidiary of <strong>Foresight</strong> <strong>Group</strong>, received<br />
£117,859 (2010: £112,433) during the year in respect of Company<br />
Secretarial and accounting fees. In accordance with general market<br />
practice, <strong>Foresight</strong> <strong>Group</strong> received from investee companies<br />
arrangement fees of £43,000 (2010: £59,000) as a result of<br />
investments made by the Ordinary Shares fund, £131,000 (2010:<br />
£118,000) as a result of investments made by the C Shares fund<br />
and £64,000 (2010: £26,000) as a result of investments made by<br />
the Planned Exit Shares Fund.<br />
VCF Partners, an associate of <strong>Foresight</strong> <strong>Group</strong>, received fees<br />
of £243,000 (2010: £218,000) for supplying Directors and<br />
monitoring services to 28 portfolio companies during the year.<br />
All amounts are stated, where applicable, net of Value Added Tax.<br />
I VCT status monitoring<br />
<strong>Foresight</strong> 2 VCT plc has retained SGH Martineau LLP (London<br />
and Birmingham based solicitors) as legal advisers on, inter alia,<br />
compliance with legislative requirements. The Directors monitor<br />
the Company’s VCT status at meetings of the Board.<br />
I Substantial shareholdings<br />
So far as the Directors are aware, there were no individual<br />
shareholdings representing 3% or more of the Company’s issued<br />
share capital at the date of this report.<br />
I Financial instruments<br />
Details of all financial instruments used by the Company during<br />
the year are given in note 16 to the accounts.<br />
Annual Report and Accounts 30 September 2011<br />
I Annual General Meeting<br />
A formal notice convening the Annual General Meeting on<br />
20 February 2012 can be found on pages 54 and 55. Resolutions<br />
1 to 8 will be proposed as ordinary resolutions meaning that for<br />
each resolution to be passed more than half of the votes cast<br />
at the meeting must be in favour of the resolution. Resolutions<br />
9 and 10 will be proposed as special resolutions meaning that<br />
for each resolution to be passed at least 75% of the votes cast<br />
at the meeting must be in favour of the resolution. Resolutions<br />
8 to 10 renew share issue and buyback authorities for the<br />
Ordinary Shares, C Shares and Planned Exit Shares as equivalent<br />
authorities in respect of the Infrastructure Shares will not expire<br />
until the Annual General Meeting to be held in 2013.<br />
I Resolution 8<br />
Resolution 8 will authorise the Directors to allot relevant securities<br />
generally, in accordance with Section 551 of the Companies Act<br />
2006, up to a nominal amount of £500,000 (representing 96.2%<br />
of the current issued share capital of the Company) and will be<br />
used for the purposes listed under the authority requested under<br />
Resolution 9. This includes authority to issue shares pursuant<br />
to the dividend investment scheme, performance incentive<br />
fee arrangements with <strong>Foresight</strong> <strong>Group</strong> and top-up offers for<br />
subscription to raise new funds for the Company if the Board<br />
believes this to be in the best interests of the Company. Any offer<br />
is intended to be at an offer price linked to NAV. The authority<br />
conferred by Resolution 8 will expire on the fifth anniversary of<br />
the passing of the resolution, and will be in addition to authorities<br />
taken at the general meeting and separate class meetings held on<br />
30 September 2011 and 3 October 2011 respectively.<br />
I Resolution 9<br />
Resolution 9 will sanction, in a limited manner, the disapplication of<br />
pre-emption rights in respect of the allotment of equity securities<br />
(i) with an aggregate nominal value of up to £100,000 in each<br />
class of share in the Company (other than Infrastructure Shares)<br />
pursuant to offer(s) for subscription, (ii) with an aggregate nominal<br />
value of up to 10% of the issued Ordinary Share capital and/or C<br />
Share capital pursuant to the dividend investment scheme, (iii) with<br />
an aggregate nominal value of up to £100,000 in each class of<br />
share in the Company (other than Infrastructure Shares) pursuant<br />
to performance incentive arrangements with <strong>Foresight</strong> <strong>Group</strong> and<br />
(iv) with an aggregate nominal value of up to 10% of the issued<br />
share capital of each class of share in the Company (other than<br />
Infrastructure Shares) for general purposes, in each case where the<br />
proceeds of such issue may be used in whole or part to purchase<br />
the Company’s shares. This authority will expire at the conclusion of<br />
the Annual General Meeting to be held in 2013.<br />
I Resolution 10<br />
It is proposed by Resolution 10 that the Company be authorised<br />
to make market purchases of the Company’s own shares. Under<br />
this authority the Directors may purchase up to 3,161,143<br />
Ordinary Shares, 3,702,446 C Shares and 926,356 Planned Exit<br />
Shares representing approximately 14.99% of each share class.<br />
When buying shares, the Company cannot pay a price per share<br />
which is more than 105% of the average of the middle market<br />
quotations for an Ordinary Share, C Share or Planned Exit Share<br />
(as relevant) taken from the London Stock Exchange daily official<br />
list of the five business days immediately before the day on which<br />
shares are purchased or, if greater, the amount stipulated by<br />
Buyback and Stabilisation Regulation 2003. This authority will<br />
expire at the conclusion of the Annual General Meeting to be held<br />
21
<strong>Foresight</strong> 2 VCT plc<br />
22<br />
Directors’ Report<br />
in 2013 and will be in addition to authorities taken at the general<br />
meeting and separate class meetings held on 30 September 2011<br />
and 3 October 2011 respectively.<br />
Whilst, generally, the Company does not expect shareholders<br />
will want to sell their shares within five years of acquiring them<br />
because this may lead to a loss of tax relief, the Directors<br />
anticipate that from time to time a shareholder may need to sell<br />
shares within this period. Front end VCT income tax relief is only<br />
obtainable by an investor who makes an investment in the new<br />
shares issued by the Company. This means that an investor may<br />
be willing to pay more for new shares issued by the Company<br />
than he would pay to buy shares from an existing shareholder.<br />
Therefore, in the interest of shareholders who may need to sell<br />
shares from time to time, the Company proposes to renew the<br />
authority to buy-in shares. This authority, when coupled with<br />
the ability to issue new shares for the purposes of financing<br />
a purchase of shares in the market, enables the Company to<br />
purchase shares from a shareholder and effectively to sell on<br />
those shares through the Company to a new investor with<br />
the potential benefit of full VCT tax relief. In making purchases<br />
the Company will deal only with member firms of the London<br />
Stock Exchange at a discount to the then prevailing net asset<br />
value per share of the Company’s shares to ensure that existing<br />
shareholders interests are protected.<br />
I Separate Meetings of the Ordinary Shareholders,<br />
C Shareholders and Planned Exit Shareholders<br />
Formal notices convening separate meetings of Ordinary<br />
Shareholders, C Shareholders and Planned Exit Shareholders<br />
also to be held on 20 February 2012, can be found on pages 57<br />
to 59. The resolutions proposed at these meetings, if passed, will<br />
approve the passing of Resolutions 8 and 10 to be proposed at<br />
the Annual General Meeting and will sanction any modification of<br />
the rights attaching to Ordinary Shares, C Shares and Planned<br />
Exit Shares resulting therefrom.<br />
The resolutions to be proposed at the separate meetings will be<br />
proposed as special resolutions meaning that for each resolution<br />
to be passed at least 75% of the votes cast at the meeting must<br />
be in favour of the resolution.<br />
I Payment to suppliers<br />
It is the Company’s payment policy to obtain the best possible<br />
terms for all business and therefore there is no consistent policy as<br />
to the terms used. The Company contracts with its suppliers the<br />
terms on which business will take place and seeks to abide by such<br />
terms. The average number of creditor days at 30 September 2011<br />
was 17 days (2010: 15 days).<br />
I Audit Information<br />
Pursuant to s418(2) of the Companies Act 2006, each of the<br />
Directors confirms that (a) so far as they are aware, there is no<br />
relevant audit information of which the Company’s auditors are<br />
unaware; and (b) they have taken all steps they ought to have taken<br />
to make themselves aware of any relevant audit information and to<br />
establish that the Company’s auditors are aware of such information.<br />
I Section 992 of the Companies Act<br />
The following disclosures are made in accordance with Section<br />
992 of the Companies Act 2006.<br />
Capital Structure<br />
The Company’s issued share capital as at 20 January 2012<br />
was 21,088,348 Ordinary Shares, 24,699,440 C Shares and<br />
6,179,833 Planned Exit Shares.<br />
Voting Rights in the Company’s shares<br />
Details of the voting rights in the Company’s shares at the date<br />
of this report are given in note 5 in the Notice of Annual General<br />
Meeting on page 56.<br />
I Auditor<br />
In accordance with Section 485 of the Companies Act 2006, a<br />
resolution to appoint KPMG Audit Plc as the Company’s auditors<br />
will be put to the forthcoming Annual General Meeting.<br />
I CORPORATE GOVERNANCE<br />
The Directors of <strong>Foresight</strong> 2 VCT confirm that the Company<br />
has taken the appropriate steps to enable it to comply with the<br />
Principles set out in Section 1 of the UK Corporate Governance<br />
Code on Corporate Governance (‘ UK Corporate Governance<br />
Code’) issued by the Financial Reporting Council in June 2010, as<br />
appropriate for a Venture Capital Trust.<br />
As a Venture Capital Trust, the Company’s day-to-day<br />
responsibilities are delegated to third parties and the Directors<br />
are all Non-Executive. Thus not all the procedures of the UK<br />
Corporate Governance Code are directly applicable to the<br />
Company. Unless noted as an exception below, the requirements<br />
of the UK Corporate Governance Code were complied with<br />
throughout the year ended 30 September 2011.<br />
I The Board<br />
The Company has a Board of three Non-Executive Directors,<br />
all of whom (other than Peter Dicks who is considered nonindependent<br />
under the listing rules by virtue of being a director of<br />
several <strong>Foresight</strong> VCTs which are all managed by <strong>Foresight</strong> <strong>Group</strong>)<br />
are considered to be independent.<br />
Peter Dicks is also a Director of <strong>Foresight</strong> VCT plc, <strong>Foresight</strong> 3<br />
VCT plc, <strong>Foresight</strong> 4 VCT plc, <strong>Foresight</strong> 5 VCT plc and <strong>Foresight</strong><br />
Clearwater VCT plc. The Board believes, having regard to the<br />
specialist nature of VCTs and the fact that the Manager advises a<br />
number of VCTs, that it is in the best interests of shareholders if,<br />
on each of the boards of the VCTs advised by the Manager, there<br />
are certain Directors who are common. That is to say, a common<br />
Director is able to assess how the Manager performs in respect of<br />
one fund with the valuable background knowledge of how well or<br />
badly the Manager is performing in relation to other funds for which<br />
he is also a Director. Where conflicts of interest arise between the<br />
different funds then the common Director would seek to act fairly<br />
and equitably between different groups of shareholders. Where this<br />
is difficult or others might perceive that it was so, then decisions<br />
would be taken by the Directors who are not common Directors.<br />
The most likely source of potential conflicts would normally be the<br />
allocation of investment opportunities but as these are allocated by<br />
the Manager pro rata to the cash raised by each fund, subject to<br />
the availability of funds, in practice such conflicts should not arise.<br />
Additionally, ‘specialist funds’ may be allocated investments specific<br />
to their investment policy in priority to more generalist funds.
Directors’ Report<br />
The Board is responsible to shareholders for the proper<br />
management of the Company and meets at least quarterly<br />
and on an ad hoc basis as required. It has formally adopted<br />
a schedule of matters that are required to be brought to it for<br />
decision, thus ensuring that it maintains full and effective control<br />
over appropriate strategic, financial, operational and compliance<br />
issues. A management agreement between the Company<br />
and its Manager sets out the matters over which the Manager<br />
has authority, including monitoring and managing the existing<br />
investment portfolio and the limits above which Board approval<br />
must be sought. All other matters are reserved for the approval<br />
of the Board of Directors. The Manager, in the absence of explicit<br />
instruction from the Board, is empowered to exercise discretion in<br />
the use of the Company’s voting rights.<br />
Individual Directors may, at the expense of the Company, seek<br />
independent professional advice on any matter that concerns them in<br />
the furtherance of their duties. In view of its Non-Executive nature and<br />
the requirements of the Articles of Association that all Directors retire<br />
by rotation at the Annual General Meeting, the Board considers that<br />
it is not appropriate for the Directors to be appointed for a specific<br />
term as recommended by provision B.2.3 of the UK Corporate<br />
Governance Code. However, the Board has agreed that each<br />
Director will retire and, if appropriate, may seek re-election after three<br />
years’ service and annually after serving on the Board for more than<br />
nine years. Non-independent Directors are required to retire annually.<br />
Full details of duties and obligations are provided at the time<br />
of appointment and are supplemented by further details as<br />
requirements change, although there is no formal induction<br />
programme for the Directors as recommended by provision B.4.1.<br />
The Board has access to the officers of the Company Secretary<br />
who also attend all Board Meetings. The Manager attends all<br />
formal Board Meetings although the Directors may meet without<br />
the Manager being present. Informal meetings with the Manager<br />
are also held between Board Meetings as required. The Company<br />
Secretary provides full information on the Company’s assets,<br />
liabilities and other relevant information to the Board in advance<br />
of each Board Meeting. Attendance by Directors at Board and<br />
Committee meetings is detailed in the table below.<br />
In the light of the responsibilities retained by the Board and its<br />
committees and of the responsibilities delegated to <strong>Foresight</strong> <strong>Group</strong>,<br />
<strong>Foresight</strong> Fund Managers, SGH Martineau LLP and the Company<br />
Secretary, the Company has not appointed a chief executive officer,<br />
deputy Chairman or a senior independent non-executive Director as<br />
recommended by provision A.4.1 of the UK Corporate Governance<br />
Code. The provisions of the UK Corporate Governance Code<br />
which relate to the division of responsibilities between a chairman<br />
and a chief executive officer are, accordingly, not applicable to the<br />
Company.<br />
Annual Report and Accounts 30 September 2011<br />
I Directors indemnification and insurance<br />
The Directors have the benefit of indemnities under the articles<br />
of association of the Company against, to the extent only as<br />
permitted by law, liabilities they may incur in relation to the<br />
Company.<br />
An insurance policy is maintained by the Company which<br />
indemnifies the Directors of the Company against certain liabilities<br />
arising in the conduct of their duties. There is no cover against<br />
fraudulent or dishonest actions.<br />
I Board committees<br />
The Board has adopted formal terms of reference, which are<br />
available to view by writing to the Company Secretary at the<br />
registered office, for three standing committees which make<br />
recommendations to the Board in specific areas.<br />
The Audit Committee comprises David Quysner (Chairman), Peter<br />
Dicks and Jocelin Harris, all of whom are considered to have<br />
sufficient recent and relevant financial experience to discharge<br />
the role, and meets at least twice a year, amongst other things, to<br />
consider the following:<br />
l Monitor the integrity of the financial statements of the<br />
Company and approve the accounts<br />
l Review the Company’s internal control and risk management<br />
systems<br />
l Make recommendations to the Board in relation to the<br />
appointment of the external auditors<br />
l Review and monitor the external auditors’ independence<br />
l Implement and review the Company’s policy on the<br />
engagement of the external auditors to supply non-audit<br />
services<br />
Meeting attendance<br />
Board Audit Nomination Remuneration<br />
Jocelin Harris 4/4 2/2 1/1 1/1<br />
Peter Dicks 4/4 2/2 1/1 1/1<br />
David Quysner 4/4 2/2 1/1 1/1<br />
As a result of a tender process carried out in October 2010, the<br />
Board appointed KPMG Audit Plc as the Company's auditors from<br />
2011.<br />
23
<strong>Foresight</strong> 2 VCT plc<br />
24<br />
Directors’ Report<br />
KPMG Audit Plc prepares the Company’s tax returns in addition to<br />
carrying out the Company’s external audit. This is completed after<br />
signing off on the annual accounts. The Audit Committee is of the<br />
opinion that KPMG are best placed to prepare these returns. These<br />
non-audit services are non-material in value compared to the audit,<br />
and the Audit Committee believes that they do not compromise the<br />
objectivity or independence of the external auditors.<br />
The Nomination Committee comprises David Quysner (Chairman),<br />
Peter Dicks and Jocelin Harris and meets at least annually to<br />
consider the composition and balance of skills, knowledge and<br />
experience of the Board and to make nominations to the Board<br />
in the event of a vacancy. New Directors are required to resign at<br />
the Annual General Meeting following appointment and then seek<br />
re-election thereafter every three years.<br />
The Remuneration Committee (which has responsibility for reviewing<br />
the remuneration of the Directors) comprises Jocelin Harris<br />
(Chairman), Peter Dicks and David Quysner and meets at least<br />
annually to consider the levels of remuneration of the Directors,<br />
specifically reflecting the time commitment and responsibilities of<br />
the role. The Remuneration Committee also undertakes external<br />
comparisons and reviews to ensure that the levels of remuneration<br />
paid are broadly in line with industry standards. The Remuneration<br />
Committee also reviews the appointment and terms of engagement<br />
of the Manager.<br />
I Board evaluation<br />
The Board undertakes a formal annual evaluation of its own<br />
performance and that of its committees. There is no formal<br />
annual evaluation of individual Directors as recommended by<br />
provision B.6 of the UK Corporate Governance Code. Initially, the<br />
evaluation takes the form of a questionnaire for the Board (and its<br />
committees). The Chairman then discusses the results with the<br />
Board (and its committees) and following completion of this stage<br />
of the evaluation, the Chairman will take appropriate action to<br />
address any issues arising from the process.<br />
I Relations with Shareholders<br />
The Company communicates with shareholders and solicits their<br />
views where it is appropriate to do so. Individual shareholders are<br />
made welcome at the Annual General Meeting where they have<br />
the opportunity to ask questions of the Directors, including the<br />
Chairman, as well as the Chairman of the Audit, Remuneration<br />
and Nomination Committees. The Board also seeks feedback<br />
through shareholder questionnaires, workshops and an open<br />
invitation for shareholders to meet the Investment Manager. The<br />
Company is not aware of any institutional shareholders in the<br />
share capital of the Company.<br />
I Internal control<br />
The Directors of <strong>Foresight</strong> 2 VCT plc have overall responsibility<br />
for the Company’s system of internal control and for reviewing its<br />
effectiveness.<br />
The Board’s appointment of <strong>Foresight</strong> Fund Managers as<br />
Company accountant has delegated much of the financial<br />
administration to <strong>Foresight</strong> Fund Managers. <strong>Foresight</strong> Fund<br />
Managers has an established system of financial control, including<br />
internal financial controls, to ensure that proper accounting<br />
records are maintained and that financial information for use within<br />
the business and for reporting to shareholders is accurate and<br />
reliable and that the Company’s assets are safeguarded.<br />
SGH Martineau LLP provide legal advice and assistance in<br />
relation to the maintenance of VCT tax status, the operation of the<br />
agreements entered into with <strong>Foresight</strong> <strong>Group</strong> and the application<br />
of the venture capital trust legislation to any company in which the<br />
Company is proposing to invest.<br />
<strong>Foresight</strong> Fund Managers is appointed by the Board as Company<br />
Secretary with responsibilities relating to the administration of the<br />
non-financial systems of internal control. All Directors have access<br />
to the advice and services of the Company Secretary, who is<br />
responsible to the Board for ensuring that Board procedures and<br />
applicable rules and regulations are complied with.<br />
Pursuant to the terms of its appointment, <strong>Foresight</strong> <strong>Group</strong> advises<br />
the Company on venture capital investments. <strong>Foresight</strong> Fund<br />
Managers, in its capacity as Company Secretary, has physical<br />
custody of documents of title relating to equity investments.<br />
Following publication of Internal Control: Guidance for Directors<br />
on the UK Corporate Governance Code (the Turnbull guidance),<br />
the Board confirms that there is an ongoing process for<br />
identifying, evaluating and managing the significant risks faced<br />
by the Company, that has been in place for the year under review<br />
and up to the date of approval of the annual report and financial<br />
statements, and that this process is regularly reviewed by the<br />
Board and accords with the guidance. The process is based<br />
principally on the Manager’s existing risk-based approach to<br />
internal control whereby a test matrix is created that identifies<br />
the key functions carried out by the Manager and other service<br />
providers, the individual activities undertaken within those<br />
functions, the risks associated with each activity and the controls<br />
employed to minimise those risks. A residual risk rating is then<br />
applied. The Board is provided with reports highlighting all material<br />
changes to the risk ratings and confirming the action, which has<br />
been, or is being, taken. This process covers consideration of the<br />
key business, operational, compliance and financial risks facing<br />
the Company and includes consideration of the risks associated<br />
with the Company’s arrangements with <strong>Foresight</strong> <strong>Group</strong>, <strong>Foresight</strong><br />
Fund Managers and SGH Martineau LLP.
Directors’ Report<br />
Such review procedures have been in place throughout the full<br />
financial year and up to the date of approval of the accounts, and<br />
the Board is satisfied with their effectiveness. These procedures<br />
are designed to manage, rather than eliminate, risk and, by their<br />
nature, can only provide reasonable, but not absolute, assurance<br />
against material misstatement or loss. The Board monitors the<br />
investment performance of the Company in comparison to its<br />
objective at each Board meeting. The Board also reviews the<br />
Company’s activities since the last Board meeting to ensure<br />
that the Manager adheres to the agreed investment policy and<br />
approved investment guidelines and, if necessary, approves<br />
changes to such policy and guidelines.<br />
The Board has reviewed the need for an internal audit function.<br />
The Audit Committee has carried out a review of the effectiveness<br />
of the system of internal control, together with a review of the<br />
operational and compliance controls and risk management, as<br />
they operated during the year and reported its conclusions to<br />
the Board which was satisfied with the outcome of the review.<br />
It has decided that the systems and procedures employed by<br />
the Manager, the Audit Committee and other third party advisers<br />
provide sufficient assurance that a sound system of internal<br />
control, which safeguards shareholders’ investment and the<br />
Company's assets, is maintained. In addition, the Company's<br />
financial statements are audited by external auditors. An internal<br />
audit function, specific to the Company, is therefore considered<br />
unnecessary.<br />
I Going concern<br />
Annual Report and Accounts 30 September 2011<br />
The Company’s business activities, together with the factors likely<br />
to affect its future development, performance and position are<br />
set out in the Business Review on page 18. The financial position<br />
of the Company, its cash flows, liquidity position and borrowing<br />
facilities are described in the Chairman’s Statement, Business<br />
Review and Notes to the Accounts. In addition, the financial<br />
statements include the Company’s objectives, policies and<br />
processes for managing its capital; its financial risk management<br />
objectives; details of its financial instruments and hedging<br />
activities; and its exposures to credit risk and liquidity risk.<br />
The Company has sufficient financial resources together with<br />
investments and income generated therefrom across a variety of<br />
industries and sectors. As a consequence, the Directors believe<br />
that the Company is well placed to manage its business risks<br />
successfully despite the current uncertain economic outlook.<br />
The Directors have reasonable expectation that the Company<br />
has adequate resources to continue in operational existence for<br />
the foreseeable future. Thus they continue to adopt the going<br />
concern basis of accounting in preparing the annual financial<br />
statements.<br />
By order of the Board<br />
<strong>Foresight</strong> Fund Managers Limited<br />
Secretary<br />
20 January 2012<br />
25
<strong>Foresight</strong> 2 VCT plc<br />
26<br />
Directors’ Remuneration Report<br />
I Introduction<br />
The Board has prepared this report, in accordance with the<br />
requirements of Schedule 8 of the Large and Medium Sized<br />
Companies and <strong>Group</strong>s (Accounts and Reports) Regulations<br />
2008. An ordinary resolution for the approval of this report will be<br />
put to the members at the forthcoming Annual General Meeting.<br />
The law requires the Company's auditor, KPMG Audit Plc, to<br />
audit certain of the disclosures provided. Where disclosures have<br />
been audited, they are indicated as such. The auditor’s opinion is<br />
included in the ‘Independent Auditor’s Report.’<br />
I Consideration by the Directors of matters relating to<br />
Directors’ Remuneration<br />
The Remuneration Committee comprises three Directors: Jocelin<br />
Harris (Chairman), Peter Dicks and David Quysner.<br />
The Remuneration Committee has responsibility for reviewing<br />
the remuneration of the Directors, specifically reflecting the time<br />
commitment and responsibilities of the role, and meets at least<br />
annually. The Remuneration Committee also undertakes external<br />
comparisons and reviews to ensure that the levels of remuneration<br />
paid are broadly in line with industry standards and members have<br />
access to independent advice where they consider it appropriate.<br />
During the year neither the Board nor the Remuneration<br />
Committee has been provided with advice or services by any<br />
person in respect of consideration of the Directors’ remuneration.<br />
The remuneration policy set by the Board is described below.<br />
Individual remuneration packages are determined by the<br />
Remuneration Committee within the framework of this policy.<br />
No Director is involved in deciding his own remuneration.<br />
I Remuneration policy<br />
The Board’s policy is that the remuneration of Non-Executive<br />
Directors should reflect time spent and the responsibilities borne<br />
by the Directors for the Company’s affairs and should be sufficient<br />
to enable candidates of high calibre to be recruited. The levels<br />
of Directors’ fees paid by the Company for the year ended<br />
30 September 2011 were agreed during the year.<br />
It is considered appropriate that no aspect of Directors’<br />
remuneration should be performance related in light of the<br />
Directors’ Non-Executive status, and Directors are not eligible for<br />
bonuses or other benefits.<br />
The Company’s policy is to pay the Directors monthly in arrears,<br />
to the Directors personally or to a third party as requested by any<br />
Director; however, no Directors’ fees are paid to third parties.<br />
It is the intention of the Board that the above remuneration<br />
policy will continue to apply in the forthcoming financial year and<br />
subsequent years.<br />
I Service contracts<br />
None of the Directors has a service contract but, under letters<br />
of appointment dated 14 September 2004 for Peter Dicks and<br />
David Quysner and 5 December 2008 for Jocelin Harris, may<br />
resign by giving six months’ notice in writing to the Board or by<br />
mutual consent. All Directors are subject to retirement by rotation.<br />
No compensation is payable to Directors on leaving office. As the<br />
Directors are not appointed for a fixed length of time there is no<br />
unexpired term to their appointment. However, the Directors will<br />
retire by rotation as follows:<br />
P Dicks, J Harris AGM 2012<br />
P Dicks AGM 2013<br />
P Dicks, D Quysner AGM 2014<br />
I Total shareholder return<br />
The graph on the following page charts the total shareholder<br />
return to 30 September 2011, on the hypothetical value of<br />
£100, invested by an Ordinary Shareholder since 30 September<br />
2006 or a C Shareholder since 4 January 2007 or a Planned<br />
Exit Shareholder since 3 March 2010. The return is compared<br />
to the total shareholder return on a notional investment of £100<br />
in the FTSE Techmark All-Share Index, which is considered an<br />
appropriate broad index against which to measure the Company’s<br />
performance.<br />
I Details of individual emoluments and compensation<br />
The emoluments in respect of qualifying services and compensation<br />
of each person who served as a Director during the year were as<br />
shown on page 27. No Director has waived or agreed to waive any<br />
emoluments from the Company in either the current or previous year.<br />
No other remuneration was paid or payable by the Company<br />
during the current or previous year nor were any expenses<br />
claimed or paid to them other than for expenses incurred wholly,<br />
necessarily and exclusively in furtherance of their duties as<br />
Directors of the Company.<br />
Directors’ liability insurance is held by the Company in respect of<br />
the Directors.
Directors’ Remuneration Report<br />
Total Return (p) (rebased)<br />
180.00<br />
160.00<br />
140.00<br />
120.00<br />
100.00<br />
80.00<br />
60.00<br />
40.00<br />
20.00<br />
0<br />
30/09/2006<br />
I Audited Information<br />
Only the information below has been audited. See the Independent Auditors' Report on page 31.<br />
Annual Report and Accounts 30 September 2011<br />
Audited Audited<br />
Directors’ fees Directors’ fees<br />
(£) (£)<br />
year ended year ended<br />
30 September 30 September<br />
2011 2010<br />
Jocelin Harris (Chairman appointed 30 July 2010) 22,500 15,833<br />
Peter Dicks 17,500 19,167<br />
David Quysner 17,500 15,000<br />
Total 57,500 50,000<br />
* Amounts paid to third parties.<br />
The Directors are not eligible for pension benefits, share options or long-term incentive schemes.<br />
I Approval of report<br />
An ordinary resolution for the approval of this Directors’ Remuneration Report will be put to shareholders at the forthcoming Annual<br />
General Meeting.<br />
This Directors’ Remuneration Report was approved by the Board on 20 January 2012 and is signed on its behalf by Jocelin Harris<br />
(Director).<br />
On behalf of the Board<br />
Jocelin Harris<br />
Director<br />
20 January 2012<br />
30/01/2007<br />
30/05/2007<br />
30/09/2007<br />
30/01/2008<br />
30/05/2008<br />
30/09/2008<br />
Total Shareholder Return<br />
30/01/2009<br />
30/05/2009<br />
Date<br />
30/09/2009<br />
30/01/2010<br />
30/05/2010<br />
30/09/2010<br />
30/01/2011<br />
30/05/2011<br />
30/09/2011<br />
27<br />
F2 “O” Shares<br />
SP Total Return<br />
F2 “C” Shares<br />
SP Total Return<br />
F2 “PE” Shares<br />
SP Total Return<br />
FTSE Techmark<br />
Total Return
<strong>Foresight</strong> 2 VCT plc<br />
28<br />
Statement of Directors’ Responsibilities in respect of the<br />
Annual Report and the Financial Statements<br />
The directors are responsible for preparing the Annual Report and<br />
the financial statements in accordance with applicable law and<br />
regulations.<br />
Company law requires the directors to prepare financial<br />
statements for each financial year. Under that law they have<br />
elected to prepare the financial statements in accordance with UK<br />
Accounting Standards and applicable law (UK Generally Accepted<br />
Accounting Practice).<br />
Under company law the directors must not approve the financial<br />
statements unless they are satisfied that they give a true and fair<br />
view of the state of affairs of the company and of the profit or<br />
loss of the company for that period. In preparing these financial<br />
statements, the directors are required to:<br />
— select suitable accounting policies and then apply them<br />
consistently;<br />
— make judgements and estimates that are reasonable and<br />
prudent;<br />
— state whether applicable UK Accounting Standards have been<br />
followed, subject to any material departures disclosed and<br />
explained in the financial statements; and<br />
— prepare the financial statements on the going concern basis<br />
unless it is inappropriate to presume that the company will<br />
continue in business.<br />
The directors are responsible for keeping adequate accounting<br />
records that are sufficient to show and explain the company’s<br />
transactions and disclose with reasonable accuracy at any time<br />
the financial position of the company and enable them to ensure<br />
that the financial statements comply with the Companies Act<br />
2006. They have general responsibility for taking such steps<br />
as are reasonably open to them to safeguard the assets of the<br />
company and to prevent and detect fraud and other irregularities.<br />
Under applicable law and regulations, the directors are also<br />
responsible for preparing a Directors’ Report, Directors’<br />
Remuneration Report and Corporate Governance Statement that<br />
complies with that law and those regulations.<br />
The directors are responsible for the maintenance and integrity of<br />
the corporate and financial information included on the company’s<br />
website (which is delegated to <strong>Foresight</strong> <strong>Group</strong> and incorporated<br />
into their website). Legislation in the UK governing the preparation<br />
and dissemination of financial statements may differ from<br />
legislation in other jurisdictions.<br />
We confirm that to the best of our knowledge:<br />
— the financial statements, prepared in accordance with the<br />
applicable accounting standards, give a true and fair view of<br />
the assets, liabilities, financial position and profit or loss of the<br />
Company; and<br />
— the Directors’ Report includes a fair review of the development<br />
and performance of the business and the position of the<br />
Company, together with a description of the principal risks<br />
and uncertainties that the Company faces.<br />
On behalf of the Board<br />
Jocelin Harris<br />
Chairman<br />
20 January 2012
Annual Report and Accounts 30 September 2011<br />
Unaudited Non-Statutory Analysis of the<br />
Ordinary Shares, C Shares and Planned Exit Shares Funds<br />
Income Statements<br />
Ordinary Shares Fund C Shares Fund Planned Exit Shares Fund<br />
Revenue Capital Total Revenue Capital Total Revenue Capital Total<br />
£’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
Realised gains on<br />
investments — 132 132 — 440 440 — — —<br />
Investment holding<br />
gains/(losses) — 2,412 2,412 — 178 178 — (165) (165)<br />
Realised losses on the<br />
value of derivatives — — — — — — — (64) (64)<br />
Income 136 — 136 588 — 588 228 — 228<br />
Investment<br />
management fees (98) (295) (393) (134) (512) (646) (14) (42) (56)<br />
Other expenses (139) — (139) (204) — (204) (62) — (62)<br />
(Loss)/return on ordinary<br />
activities before taxation (101) 2,249 2,148 250 106 356 152 (271) (119)<br />
Taxation 27 (12) 15 (5) 26 21 (24) 7 (17)<br />
(Loss)/return on ordinary<br />
activities after taxation (74) 2,237 2,163 245 132 377 128 (264) (136)<br />
(Loss)/return per share (0.4)p 10.6p 10.2p 1.0p 0.5p 1.5p 2.1p (4.3)p (2.2)p<br />
Balance Sheets<br />
Ordinary C Shares Planned Exit<br />
Shares Fund Fund Shares Fund<br />
£’000 £’000 £’000<br />
Fixed assets<br />
Investments held at fair value through profit or loss 19,857 23,566 3,144<br />
Current assets<br />
Debtors 806 1,936 371<br />
Money market securities and other deposits 98 1 1,638<br />
Cash 282 225 467<br />
1,186 2,162 2,476<br />
Creditors<br />
Amounts falling due within one year (391) (220) (86)<br />
Net current assets 795 1,942 2,390<br />
Net assets 20,652 25,508 5,534<br />
Capital and reserves<br />
Called-up share capital 211 247 62<br />
Share premium account 3,361 446 5,770<br />
Capital reserve — realised (57) (1,036) (52)<br />
Capital reserve — investment holding gains/(losses) 1,901 3,518 (251)<br />
Distributable reserve 15,212 22,332 5<br />
Capital redemption reserve 24 1 —<br />
Equity shareholders’ funds 20,652 25,508 5,534<br />
Number of shares in issue 21,088,348 24,699,440 6,179,833<br />
Net asset value per share 97.9p 103.3p 89.5p<br />
29
<strong>Foresight</strong> 2 VCT plc<br />
30<br />
Unaudited Non-Statutory Analysis of the<br />
Ordinary Shares, C Shares and Planned Exit Shares Funds<br />
Reconciliation of Movements in Shareholders’ Funds<br />
Called-up Share Capital<br />
Capital<br />
reserve —<br />
investment<br />
holding Capital<br />
share premium reserve — (losses)/ Distributable redemption<br />
capital account realised gains reserve reserve Total<br />
£’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
Ordinary Shares Fund<br />
As at 1 October 2010 211 3,284 118 (511) 15,495 23 18,620<br />
Share issues in the year<br />
Expenses in relation to share issues<br />
1 168 — — — — 169<br />
(including trail commission) — (91) — — — — (91)<br />
Repurchase of shares<br />
Net realised gains on<br />
(1) — — — (103) 1 (103)<br />
disposal of investments — — 132 — — — 132<br />
Investment holding gains — — — 2,412 — — 2,412<br />
Dividends paid<br />
Management fees charged<br />
— — — — (106) — (106)<br />
to capital — — (295) — — — (295)<br />
Tax charged to capital — — (12) — — — (12)<br />
Revenue loss for the period — — — — (74) — (74)<br />
As at 30 September 2011 211 3,361 (57) 1,901 15,212 24 20,652<br />
Called-up Share Capital<br />
Capital<br />
reserve —<br />
investment Capital<br />
share premium reserve — holding Distributable redemption<br />
capital account realised gains reserve reserve Total<br />
£’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
C Shares Fund<br />
As at 1 October 2010 245 126 (990) 3,340 22,962 — 25,683<br />
Share issues in the year<br />
Expenses in relation to share issues<br />
3 420 — — — — 423<br />
(including trail commission) — (100) — — — — (100)<br />
Repurchase of shares<br />
Net realised gains on<br />
(1) — — — (135) 1 (135)<br />
disposal of investments — — 440 — — — 440<br />
Investment holding gains — — — 178 — — 178<br />
Dividends paid — — — — (740) — (740)<br />
Management fees charged to capital — — (512) — — — (512)<br />
Tax credited to capital — — 26 — — — 26<br />
Revenue return for the period — — — — 245 — 245<br />
As at 30 September 2011 247 446 (1,036) 3,518 22,332 1 25,508<br />
Called-up Share Capital<br />
Capital<br />
reserve —<br />
investment Capital<br />
share premium reserve — holding Distributable redemption<br />
capital account realised losses reserve reserve Total<br />
£’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
Planned Exit Shares Fund<br />
As at 1 October 2010<br />
Expenses in relation to share issues<br />
62 5,784 (17) (22) 62 — 5,869<br />
(including trail commission) — (14) — — — — (14)<br />
Investment holding losses — — — (165) — — (165)<br />
Realised losses on the value of derivatives — — — (64) — — (64)<br />
Dividends paid — — — — (185) — (185)<br />
Management fees charged to capital — — (42) — — — (42)<br />
Tax credited to capital — — 7 — — — 7<br />
Revenue return for the period — — — — 128 — 128<br />
As at 30 September 2011 62 5,770 (52) (251) 5 — 5,534
Independent Auditor’s Report<br />
I To the Members of <strong>Foresight</strong> 2 VCT plc<br />
We have audited the financial statements of <strong>Foresight</strong> 2 VCT plc<br />
for the period ended 30 September 2011 set out on pages 32<br />
to 52. The financial reporting framework that has been applied in<br />
their preparation is applicable law and UK Accounting Standards<br />
(UK Generally Accepted Accounting Practice).<br />
This report is made solely to the company’s members, as a body,<br />
in accordance with Chapter 3 of Part 16 of the Companies Act<br />
2006. Our audit work has been undertaken so that we might<br />
state to the company’s members those matters we are required<br />
to state to them in an auditor’s report and for no other purpose.<br />
To the fullest extent permitted by law, we do not accept or<br />
assume responsibility to anyone other than the company and the<br />
company’s members, as a body, for our audit work, for this report,<br />
or for the opinions we have formed.<br />
I Respective responsibilities of Directors and auditor<br />
As explained more fully in the Statement of Directors’<br />
Responsibilities in respect of the Annual Report and the Financial<br />
Statements set out on page 28, the directors are responsible for<br />
the preparation of the financial statements and for being satisfied<br />
that they give a true and fair view. Our responsibility is to audit,<br />
and express an opinion on, the financial statements in accordance<br />
with applicable law and International Standards on Auditing (UK<br />
and Ireland). Those standards require us to comply with the<br />
Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.<br />
I Scope of the audit of the financial statements<br />
A description of the scope of an audit of financial statements is<br />
provided on the APB’s website at www.frc.org.uk/apb/scope/<br />
private.cfm.<br />
I Opinion on financial statements<br />
In our opinion the financial statements:<br />
l give a true and fair view of the state of the company’s affairs<br />
as at 30 September 2011 and of its profit for the year then<br />
ended;<br />
l have been properly prepared in accordance with UK Generally<br />
Accepted Accounting Practice; and<br />
l have been prepared in accordance with the requirements of<br />
the Companies Act 2006.<br />
Annual Report and Accounts 30 September 2011<br />
I Opinion on other matters prescribed by the<br />
Companies Act 2006<br />
In our opinion:<br />
l the part of the Directors’ Remuneration Report to be<br />
audited has been properly prepared in accordance with the<br />
Companies Act 2006; and<br />
l the information given in the Directors’ Report for the financial<br />
year for which the financial statements are prepared is<br />
consistent with the financial statements; and<br />
l the information given in the Corporate Governance Statement<br />
set out on page 22 with respect to internal control and<br />
risk management systems in relation to financial reporting<br />
processes and about share capital structures is consistent<br />
with the financial statements-.<br />
I Matters on which we are required to report by exception<br />
We have nothing to report in respect of the following:<br />
Under the Companies Act 2006 we are required to report to you<br />
if, in our opinion:<br />
l adequate accounting records have not been kept, or returns<br />
adequate for our audit have not been received from branches<br />
not visited by us; or<br />
l the financial statements and the part of the Directors’<br />
Remuneration Report to be audited are not in agreement with<br />
the accounting records and returns; or<br />
l certain disclosures of directors’ remuneration specified by law<br />
are not made; or<br />
l we have not received all the information and explanations we<br />
require for our audit; or<br />
l a Corporate Governance Statement has not been prepared<br />
by the company.<br />
Under the Listing Rules we are required to review:<br />
l the directors’ statement, set out on page 25, in relation to<br />
going concern;<br />
l the part of the Corporate Governance Statement on page 22<br />
relating to the company’s compliance with the nine provisions<br />
of the June 2010 UK Corporate Governance Code for our<br />
review; and<br />
l certain elements of the report to shareholders by the Board<br />
on directors’ remuneration.<br />
Gareth Horner (Senior Statutory Auditor)<br />
for and on behalf of<br />
KPMG Audit Plc<br />
Statutory Auditor<br />
Chartered Accountants<br />
Edinburgh<br />
20 January 2012<br />
31
<strong>Foresight</strong> 2 VCT plc<br />
32<br />
Income Statement<br />
for the year ended 30 September 2011<br />
Year ended Year ended<br />
30 September 2011 30 September 2010<br />
Revenue Capital Total Revenue Capital Total<br />
Notes £’000 £’000 £’000 £’000 £’000 £’000<br />
Realised gains/(losses)<br />
on investments — 572 572 — (2,512) (2,512)<br />
Investment holding gains — 2,425 2,425 — 6,327 6,327<br />
Realised (losses)/gains on the<br />
value of derivatives — (64) (64) — 74 74<br />
Income 2 952 — 952 1,752 — 1,752<br />
Investment management fees 3 (246) (849) (1,095) (220) (766) (986)<br />
Other expenses 4 (405) — (405) (381) — (381)<br />
Return on ordinary activities<br />
before taxation 301 2,084 2,385 1,151 3,123 4,274<br />
Taxation 6 (2) 21 19 (322) 214 (108)<br />
Return on ordinary activities<br />
after taxation 299 2,105 2,404 829 3,337 4,166<br />
Return/(loss) per share:<br />
Ordinary Share 8 (0.4)p 10.6p 10.2p 1.0p 11.8p 12.8p<br />
C Share 8 1.0p 0.5p 1.5p 2.3p 3.4p 5.7p<br />
Planned Exit Share 8 2.1p (4.3)p (2.2)p 1.2p (0.7)p 0.5p<br />
The total column of this statement is the profit and loss account of the Company and the revenue and capital columns represent<br />
supplementary information.<br />
All revenue and capital items in the above Income Statement are derived from continuing operations. No operations were acquired or<br />
discontinued in the year.<br />
The Company has no recognised gains or losses other than those shown above, therefore no separate statement of total recognised<br />
gains and losses has been presented.<br />
The notes on pages 36 to 52 form part of these accounts.
Annual Report and Accounts 30 September 2011<br />
Reconciliation of Movements in Shareholders’ Funds<br />
for the years ended 30 September 2010 and 2011<br />
Capital<br />
reserve<br />
Called-up Share Capital — investment Capital<br />
share premium reserve holding Distributable redemption<br />
capital account — realised (losses)/gains reserve reserve Total<br />
Company £’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
As at 1 October 2009 460 3,333 2,175 (3,594) 39,108 16 41,498<br />
Share issues in the year 65 6,345 — — — — 6,410<br />
Expenses in relation to share<br />
issues (including trail commission) — (484) — — — — (484)<br />
Repurchase of shares (7) — — — (475) 7 (475)<br />
Net realised losses on disposal<br />
of investments — — (2,512) — — — (2,512)<br />
Investment holding gains — — — 6,327 — — 6,327<br />
Unrealised gains on the value<br />
of derivatives — — — 74 — — 74<br />
Dividends paid — — — — (943) — (943)<br />
Management fees charged<br />
to capital — — (766) — — — (766)<br />
Tax credited to capital — — 214 — — — 214<br />
Revenue return for<br />
the year — — — — 829 — 829<br />
As at 30 September 2010 518 9,194 (889) 2,807 38,519 23 50,172<br />
Capital<br />
reserve<br />
Called-up Share Capital — investment Capital<br />
share premium reserve holding Distributable redemption<br />
capital account — realised gains/(losses) reserve reserve Total<br />
Company £’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
As at 1 October 2010 518 9,194 (889) 2,807 38,519 23 50,172<br />
Share issues in the year 4 588 — — — — 592<br />
Expenses in relation to share<br />
issues (including trail commission) — (205) — — — — (205)<br />
Repurchase of shares (2) — — — (238) 2 (238)<br />
Net realised gains on<br />
disposal of investments — — 572 — — — 572<br />
Investment holding gains — — — 2,425 — — 2,425<br />
Realised losses on the value<br />
of derivatives — — — (64) — — (64)<br />
Dividends paid — — — — (1,031) — (1,031)<br />
Management fees charged<br />
to capital — — (849) — — — (849)<br />
Tax credited to capital — — 21 — — — 21<br />
Revenue return for<br />
the year — — — — 299 — 299<br />
As at 30 September 2011 520 9,577 (1,145) 5,168 37,549 25 51,694<br />
The notes on pages 36 to 52 form part of these accounts.<br />
33
<strong>Foresight</strong> 2 VCT plc<br />
34<br />
Balance Sheet<br />
at 30 September 2011 Registered Number: 05200494<br />
As at As at<br />
30 September 30 September<br />
2011 2010<br />
Notes £’000 £’000<br />
Fixed assets<br />
Investments held at fair value through profit or loss 9 46,567 37,970<br />
Current assets<br />
Debtors 10 3,007 2,784<br />
Derivative financial instruments — 74<br />
Money market securities and other deposits 1,737 8,712<br />
Cash 974 1,434<br />
5,718 13,004<br />
Creditors<br />
Amounts falling due within one year 11 (591) (802)<br />
Net current assets 5,127 12,202<br />
Net assets 51,694 50,172<br />
Capital and reserves<br />
Called-up share capital 12 520 518<br />
Share premium account 9,577 9,194<br />
Capital reserve — realised (1,145) (889)<br />
Capital reserve — investment holding gains 5,168 2,807<br />
Distributable reserves 37,549 38,519<br />
Capital redemption reserve 25 23<br />
Equity shareholders’ funds 51,694 50,172<br />
Net asset value per share:<br />
Ordinary Share 13 97.9p 88.5p<br />
C Share 13 103.3p 105.0p<br />
Planned Exit Share 13 89.5p 95.0p<br />
The financial statements on pages 32 to 52 were approved by the Board of Directors and authorised for issue on 20 January 2012 and<br />
were signed on its behalf by:<br />
Jocelin Harris<br />
Director<br />
The notes on pages 36 to 52 form part of these accounts.
Cash Flow Statement<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
Year ended Year ended<br />
30 September 30 September<br />
2011 2010<br />
£’000 £’000<br />
Cash flow from operating activities<br />
Investment income received 507 392<br />
Deposit and similar interest received 24 56<br />
Investment management fees paid (992) (903)<br />
Secretarial fees paid (138) (113)<br />
Other cash payments (230) (260)<br />
Net cash outflow from operating activities and returns on investment (829) (828)<br />
Returns on investment and servicing of finance<br />
Purchase of unquoted investments and investments quoted on AIM (7,952) (7,041)<br />
Net proceeds on sale of unquoted investments 2,024 885<br />
Net proceeds on sale of quoted investments 413 —<br />
Net proceeds from deferred consideration — 12<br />
Net proceeds of derivative transactions 49 —<br />
Net capital outflow from financial investment (5,466) (6,144)<br />
Taxation (90) (34)<br />
Equity dividends paid (1,031) (943)<br />
Management of liquid resources<br />
Movement in money market funds 6,975 4,878<br />
6,975 4,878<br />
Financing<br />
Issue of shares 457 4,649<br />
Expenses arising from the issue of shares (185) (207)<br />
Dividends reinvested 78 121<br />
Repurchase of own shares (369) (343)<br />
35<br />
(19) 4,220<br />
(Decrease)/increase in cash (460) 1,149<br />
Reconciliation of net cash flow to movement in net funds<br />
(Decrease)/increase in cash for the year (460) 1,149<br />
Net cash at start of year 1,434 285<br />
Net cash at end of year 974 1,434<br />
Analysis of changes in net debt<br />
At At<br />
1 October Cash 30 September<br />
2010 flow 2011<br />
£’000 £’000 £’000<br />
Cash and cash equivalents 1,434 (460) 974<br />
The notes on pages 36 to 52 form part of these accounts.
<strong>Foresight</strong> 2 VCT plc<br />
36<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
1 Accounting policies<br />
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, are set out below:<br />
a) Basis of accounting<br />
The financial statements have been prepared under the Companies Act 2006, and in accordance with United Kingdom Generally<br />
Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice (SORP): Financial Statements of<br />
Investment Trust Companies and Venture Capital Trusts issued in January 2009.<br />
The Company presents its Income Statement in a three column format to give shareholders additional detail of the performance of<br />
the Company split between items of a revenue or capital nature.<br />
b) Assets held at fair value through profit or loss — investments<br />
All investments held by the Company are classified as “fair value through profit and loss”. The Directors value investments in<br />
accordance with the International Private Equity and Venture Capital Valuation (“IPEVCV”) guidelines, as updated in August 2010.<br />
This classification is followed as the Company’s business is to invest in financial assets with a view to profiting from their total return<br />
in the form of capital growth and income.<br />
For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange<br />
market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are<br />
recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the<br />
relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes<br />
unconditional.<br />
Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the<br />
IPEVCV guidelines:<br />
All investments are held at cost for an appropriate period where there is considered to have been no change in fair value. Where<br />
such a basis is no longer considered appropriate, the following factors will be considered:<br />
(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a<br />
company, this value will be used.<br />
(ii) In the absence of i), and depending upon both the subsequent trading performance and investment structure of an<br />
investee company, the valuation basis will usually move to either:<br />
a) an earnings multiple basis. The shares may be valued by applying a suitable price-earnings ratio to that<br />
company’s historic, current or forecast post-tax earnings before interest and amortisation (the ratio used being<br />
based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by<br />
the Investment Manager compared to the sector including, inter alia, a lack of marketability);<br />
or<br />
b) where a company’s underperformance against plan indicates a diminution in the value of the investment,<br />
provision against cost is made, as appropriate. Where the value of an investment has fallen permanently below<br />
cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still<br />
held. The Board assesses the portfolio for such investments and, after discussion with the Investment Manager,<br />
will agree the values that reflect the extent to which a realised loss should be recognised. This is based upon an<br />
assessment of objective evidence of that investment’s future prospects, to determine whether there is potential<br />
for the investment to recover in value.<br />
(iii) Premiums on loan stock investments are accrued at fair value when the Company has the right to receive the<br />
premium and expects to do so.<br />
(iv) Where an earnings multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted<br />
cash flow, a net asset valuation, or industry specific valuation benchmarks may be applied. An example of an industry<br />
specific valuation benchmark would be the application of a multiple to that company’s historic, current or forecast<br />
turnover (the multiple being based on data from comparable companies in the sector but with the resulting value<br />
being adjusted to reflect points of difference identified by the Investment Manager including, inter alia, a lack of<br />
marketability).
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
1 Accounting policies (continued)<br />
c) Income<br />
Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted<br />
equity shares are brought into account when the Company’s rights to receive payment are established and there is no reasonable<br />
doubt that payment will be received. Other income such as loan or deposit interest is included on an accruals basis using the<br />
effective interest basis. Redemption premiums are recognised on an effective interest rate basis where there is reasonable certainty<br />
that the redemption premiums will be paid. Where uncertainty exists they will be recognised on realisation of investment.<br />
d) Expenses<br />
All expenses (inclusive of VAT) are accounted for on an accruals basis. Expenses are charged through the revenue column of the<br />
Income Statement, with the exception that 75% of the fees payable to <strong>Foresight</strong> <strong>Group</strong> for management fees are allocated against<br />
the capital column of the Income Statement. The basis of the allocation of management fees is expected to reflect the revenue and<br />
capital split of long-term returns in the portfolio.<br />
Performance incentive payments will relate predominantly to the capital performance of the portfolio and will therefore be charged<br />
100% to capital. The liability is recognised when the related distribution to shareholders is made.<br />
e) Financial instruments<br />
During the course of the year the Company held fixed assets, shares in OEICs (‘Open Ended Investment Companies’), moneymarket<br />
funds and cash balances and derivatives. The Company holds financial assets that comprise investments in unlisted<br />
companies, qualifying loans, and shares in companies on the Alternative Investment Market. The carrying value for all financial<br />
assets and liabilities is fair value.<br />
f) Taxation<br />
Any tax relief obtained in respect of management fees allocated to capital is reflected in the capital column of the Income Statement<br />
and a corresponding amount is charged against the revenue column. The tax relief is the amount by which corporation tax payable<br />
is reduced as a result of these capital expenses.<br />
g) Deferred taxation<br />
Provision is made for corporation tax at the current rates on the excess of taxable income over allowable expenses. In accordance<br />
with FRS 19 ‘Deferred Tax’, a provision is made on all material timing differences arising from the different treatment of items for<br />
accounting and tax purposes.<br />
h) Investment recognition and derecognition<br />
Investments are recognised at the trade date, being the date that the risks and rewards of ownership are transferred to the Company.<br />
Upon initial recognition, investments are held at the fair value of the consideration payable. Transaction costs in respect of acquisitions<br />
made are recognised directly in the income statement. Investments are derecognised when the risks and rewards of ownership are<br />
deemed to have transferred to a third party. Upon realisation, the gain or loss on disposal is recognised in the Income Statement.<br />
i) Cash and liquid resources<br />
Cash, for the purposes of the cash flow statement, comprises cash in hand and deposits repayable on demand. Liquid resources are<br />
current asset investments which are disposable without curtailing or disrupting the business and are readily convertible into known<br />
amounts of cash at their carrying values. Liquid resources comprise money market funds.<br />
2 Income<br />
37<br />
Year ended Year ended<br />
30 September 30 September<br />
2011 2010<br />
£’000 £’000<br />
Venture capital investments 922 1,750<br />
Deposit interest 1 2<br />
Dividend income 19 —<br />
Other income 10 —<br />
952 1,752<br />
The Directors are of the opinion that the Company is engaged in a single segment of business and therefore no segmental<br />
reporting is provided.
<strong>Foresight</strong> 2 VCT plc<br />
38<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
3 Investment management fees<br />
Year ended Year ended<br />
30 September 30 September<br />
2011 2010<br />
£’000 £’000<br />
Investment management fees charged to the revenue account<br />
— Gross 246 220<br />
246 220<br />
Investment management fees charged to the capital account<br />
— Gross 739 658<br />
— Carried interest on dividend payment 110 108<br />
849 766<br />
1,095 986<br />
<strong>Foresight</strong> <strong>Group</strong> provides investment management services to the Company under an agreement dated 23 September 2004<br />
and receives management fees, paid quarterly in advance, of 2.0% of net assets per annum from the Ordinary Shares Fund and<br />
C Shares Fund, and 1.0% of net assets per annum, paid quarterly in advance from the Planned Exit Shares Fund. If the annual<br />
expenses of the Company exceed 3.6% of the Company’s total assets less current liabilities, the Company is entitled to reduce the<br />
fees paid to the Investment Manager by the amount of the excess.<br />
This agreement may be terminated by either party giving to the other not less than twelve months’ notice: at any time after the fifth<br />
anniversary of first admission of the Company’s Ordinary Shares to trading on the London Stock Exchange, which was on<br />
24 December 2004; any time after the fifth anniversary of the first admission of the C Shares to trading on the London Stock<br />
Exchange, which was on 4 January 2007; any time after the second anniversary of the closing date of the Planned Exit Shares<br />
fundraising offer on 30 June 2010.<br />
<strong>Foresight</strong> Fund Managers Limited is the Company Secretary and received annual fees, paid quarterly in arrears, for the services<br />
provided of £117,859 (2010: £112,433). The annual secretarial fee (which is payable together with any applicable VAT) is<br />
calculated on a quarterly basis as the greater of 0.075% of the gross proceeds of the Ordinary Share, C Share and Planned Exit<br />
Share offers and £100,000 (but annually uplifted for RPI) at the previous quarter end.<br />
A performance incentive fee of £110,000 was paid in shares during the year by the C Share Fund. Details of how the performance<br />
fee is calculated is in note 14 to these accounts.<br />
4 Other expenses<br />
Year ended Year ended<br />
30 September 30 September<br />
2011 2010<br />
£’000 £’000<br />
Secretarial services excluding VAT 118 112<br />
Directors’ remuneration including employer’s National Insurance contributions 63 54<br />
Auditors’ remuneration excluding VAT<br />
— audit services — KPMG (2010: Ernst & Young) 22 31<br />
— other services — interim review — KPMG (2010: Ernst & Young) — 5<br />
— taxation services — KPMG (2010: Ernst & Young) 4 5<br />
Other 198 174<br />
5 Directors’ remuneration<br />
405 381<br />
Year ended Year ended<br />
30 September 30 September<br />
2011 2010<br />
£’000 £’000<br />
Fees paid to Directors (excluding Employers’ National Insurance Contributions) 58 50<br />
58 50<br />
The remuneration of Mr Harris, who was appointed Chairman on 30 July 2010, was £22,500 (2010: £15,833). Mr Dicks, who<br />
resigned as Chairman on 30 July 2010, received remuneration of £17,500 (2010: £19,167). The remuneration of Mr Quysner was<br />
£17,500 (2010: £15,000).
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
6 Tax on ordinary activities<br />
a) Year ended Year ended<br />
30 September 2011 30 September 2010<br />
Revenue Capital Total Revenue Capital Total<br />
£’000 £’000 £’000 £’000 £’000 £’000<br />
Current tax<br />
Corporation tax (2) 21 19 (322) 214 (108)<br />
Total current tax (note (a)) (2) 21 19 (322) 214 (108)<br />
Deferred tax — — — — — —<br />
Total tax (2) 21 19 (322) 214 (108)<br />
b) Factors affecting current tax charge for the period:<br />
The tax assessed for the period is lower than the standard rate of corporation tax in the UK for a venture capital trust (27%)<br />
during the year. The differences are explained below:<br />
2011 2010<br />
£’000 £’000<br />
Total return on ordinary activities before taxation 2,385 4,274<br />
Corporation tax at 27% (2010: 28%) 644 1,197<br />
Gains on investments not chargeable (809) (1,067)<br />
Loss on derivative not relievable 17 (20)<br />
Costs not relievable 14 13<br />
Income not chargeable (6) (15)<br />
Losses not relievable in current year 140 —<br />
Prior year adjustment (19) —<br />
Current tax charge for the year (19) 108<br />
c) The Company has an unrecognised deferred tax asset of £nil (2010: £nil). A deferred tax asset is recognised only to the<br />
extent that there will be taxable profits in the future against which the asset can be offset. It is considered too uncertain that<br />
this will occur and, therefore, no deferred tax asset has been recognised.<br />
7 Dividends<br />
Year ended Year ended<br />
30 September 30 September<br />
2011 2010<br />
£’000 £’000<br />
Ordinary Shares<br />
Dividends — paid in the period 106 215<br />
C Shares<br />
Dividends — paid in the period 740 728<br />
Planed Exit Shares<br />
Dividends — paid in the period 185 —<br />
The Board is recommending a final dividend of 0.5p per Ordinary Share (2010: 0.5p) for the year ended 30 September 2011. If<br />
approved at the Annual General Meeting, these payments will be made on 4 May 2012. The dividend will have an ex-date of<br />
11 April 2012 and a record date of 13 April 2012.<br />
The Board is also recommending a final dividend of 2.0p per C Share (2010: 3.0p) for the year ended 30 September 2011. If<br />
approved at the Annual General Meeting, these payments will be made on 4 May 2012. The dividend will have an ex-date of<br />
11 April 2012 and a record date of 13 April 2012.<br />
Dividend cover: the total cost of the proposed final Ordinary Share dividend is £105,442 (2010: £105,253 to the Ordinary Share<br />
Fund). The total cost of the proposed final C Share dividend is £493,989 (2010: £734,058). At 30 September 2011 the Company<br />
had distributable reserves of £37,549,000 from which to pay the dividend.<br />
In accordance with S.259 of the Income Tax Act 2007, a Venture Capital Trust may not retain more than 15% of its qualifying<br />
income in any one accounting period. The payment of the proposed final dividends satisfies this requirement.<br />
39
<strong>Foresight</strong> 2 VCT plc<br />
40<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
8 Return per share<br />
Year ended Year ended<br />
30 September 2011 30 September 2010<br />
Planned Exit Planned Exit<br />
Ordinary Share C Share Share Ordinary Share C Share Share<br />
£’000 £’000 £’000 £’000 £’000 £’000<br />
Total return/(loss) after taxation 2,163 377 (136) 2,754 1,389 23<br />
Basic return/(loss) per share<br />
(note a) 10.2p 1.5p (2.2)p 12.8p 5.7p 0.5p<br />
Revenue (loss)/return from<br />
ordinary activities after taxation (74) 245 128 215 552 62<br />
Revenue return/(loss) per share<br />
(note b) (0.4)p 1.0p 2.1p 1.0p 2.3p 1.2p<br />
Capital return/(loss) from<br />
ordinary shares after taxation 2,237 132 (264) 2,539 837 (39)<br />
Capital return/(loss) per share<br />
(note c) 10.6p 0.5p (4.3)p 11.8p 3.4p (0.7)p<br />
Weighted average number of<br />
shares in issue in the period 21,116,882 24,532,674 6,179,833 21,443,613 24,351,537 5,070,947<br />
The total return of the Ordinary Shares (£2,163,000), total return of the C Shares (£377,000) and total loss of the Planned Exit<br />
Shares (£136,000) combine to form the return of £2,404,000 in the income statement.<br />
Notes:<br />
a) Total return per share is total return after taxation divided by the weighted average number of shares in issue during<br />
the year.<br />
b) Revenue return per share is revenue return after taxation divided by the weighted average number of shares in issue during<br />
the year.<br />
c) Capital return per share is capital return after taxation divided by the weighted average number of shares in issue during<br />
the year.<br />
9 Investments<br />
2011 2010<br />
£’000 £’000<br />
Quoted investments 515 1,281<br />
Unquoted investments 46,052 36,689<br />
46,567 37,970<br />
Quoted Unquoted Total<br />
£’000 £’000 £’000<br />
Company<br />
Book cost as at 1 October 2010 1,517 33,720 35,237<br />
Investment holding (losses)/gains (236) 2,969 2,733<br />
Valuation at 1 October 2010 1,281 36,689 37,970<br />
Movements in the period:<br />
Purchases at cost — 8,037 8,037<br />
Disposal proceeds (413) (2,024) (2,437)<br />
Realised (losses)/gains (93) 665 572<br />
Investment holding (losses)/gains (260) 2,685 2,425<br />
Valuation at 30 September 2011 515 46,052 46,567<br />
Book cost at 30 September 2011 1,011 40,398 41,409<br />
Investment holding (losses)/gains (496) 5,654 5,158<br />
Valuation at 30 September 2011 515 46,052 46,567
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
9 Investments (continued)<br />
Quoted Unquoted Total<br />
£’000 £’000 £’000<br />
Ordinary Shares Fund<br />
Book cost as at 1 October 2010 1,517 15,900 17,417<br />
Investment holding losses (236) (275) (511)<br />
Valuation at 1 October 2010 1,281 15,625 16,906<br />
Movements in the period:<br />
Purchases at cost — 1,264 1,264<br />
Disposal proceeds (413) (444) (857)<br />
Realised (losses)/gains (93) 225 132<br />
Investment holding (losses)/gains (260) 2,672 2,412<br />
Valuation at 30 September 2011 515 19,342 19,857<br />
Book cost at 30 September 2011 1,011 16,945 17,956<br />
Investment holding (losses)/gains (496) 2,397 1,901<br />
Valuation at 30 September 2011 515 19,342 19,857<br />
Quoted Unquoted Total<br />
£’000 £’000 £’000<br />
C Shares Fund<br />
Book cost as at 1 October 2010 — 15,971 15,971<br />
Investment holding gains — 3,340 3,340<br />
Valuation at 1 October 2010 — 19,311 19,311<br />
Movements in the period:<br />
Purchases at cost — 4,217 4,217<br />
Disposal proceeds — (580) (580)<br />
Realised gains — 440 440<br />
Investment holding gains — 178 178<br />
Valuation at 30 September 2011 — 23,566 23,566<br />
Book cost at 30 September 2011 — 20,048 20,048<br />
Investment holding gains — 3,518 3,518<br />
Valuation at 30 September 2011 — 23,566 23,566<br />
Quoted Unquoted Total<br />
£’000 £’000 £’000<br />
Planned Exit Shares Fund<br />
Book cost as at 1 October 2010 — 1,849 1,849<br />
Investment holding losses — (96) (96)<br />
Valuation at 1 October 2010 — 1,753 1,753<br />
Movements in the period:<br />
Purchases at cost — 2,556 2,556<br />
Disposal proceeds — (1,000) (1,000)<br />
Investment holding losses — (165) (165)<br />
Valuation at 30 September 2011 — 3,144 3,144<br />
Book cost at 30 September 2011 — 3,405 3,405<br />
Investment holding losses — (261) (261)<br />
Valuation at 30 September 2011 — 3,144 3,144<br />
41
<strong>Foresight</strong> 2 VCT plc<br />
42<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
10 Debtors<br />
2011 2010<br />
£’000 £’000<br />
Loan stock interest receivable 2,723 2,399<br />
Prepayments 258 240<br />
Other debtors 26 60<br />
Deferred consideration — 85<br />
11 Creditors: amounts falling due within one year<br />
3,007 2,784<br />
2011 2010<br />
£’000 £’000<br />
Accruals and other creditors 591 694<br />
Corporation tax payable — 108<br />
591 802<br />
12 Called-up share capital<br />
2011 2010<br />
£’000 £’000<br />
Allotted, called up and fully paid:<br />
21,088,348 Ordinary Shares of 1p each (2010: 21,050,663) 211 211<br />
24,699,440 C Share of 1p each (2010: 24,468,588) 247 245<br />
6,179,833 Planned Exit of 1p each (2010: 6,179,833) 62 62<br />
The Company launched top-up offers for its Ordinary and C Shares funds on 21 February 2011, which raised £166,500 of gross<br />
proceeds for the Ordinary Share Fund and £230,500 for the C Share fund. Under this offer, 166,685 Ordinary Shares were issued<br />
at prices ranging from 99.0p to 102.0p per share and 199,228 C Shares were issued at prices ranging from 116.0p to 118.0p per<br />
share.<br />
72,633 C Shares were issued under the Dividend Reinvestment Scheme at a price of 107.7p per share. Additionally, 101,771<br />
C Shares were issued at 109.0p per share under the Performance Related Incentive.<br />
All shares carry one vote each and have rights to the asset pools, dividends and distributions on winding up of the individual share<br />
class only.
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
13 Net asset value per share<br />
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 that date.<br />
30 September 2011 30 September 2010<br />
Number of Net asset Number of Net asset<br />
Net assets shares value Net assets shares value<br />
£’000 in issue per share £’000 in issue per share<br />
Ordinary Shares Fund 20,652 21,088,348 97.9p 18,620 21,050,663 88.5p<br />
C Shares Fund 25,508 24,699,440 103.3p 25,683 24,468,588 105.0p<br />
Planned Exit Shares Fund 5,534 6,179,833 89.5p 5,869 6,179,833 95.0p<br />
14 Performance-related incentive — Ordinary Shares<br />
<strong>Foresight</strong> <strong>Group</strong> has a performance-related incentive subject to achieving certain defined targets under a ‘carried interest’<br />
agreement dated 23 September 2004 (‘Carried Interest Agreement’). Under this agreement, <strong>Foresight</strong> <strong>Group</strong> has been granted<br />
an option (‘the Option’) to subscribe for 3,906,866 Ordinary Shares at par if all distributions (whether in cash or otherwise) paid<br />
or declared by the Company pro rata to all holders of Ordinary Shares is not less than 60p per share prior to 23 September 2011<br />
or 90p per share thereafter, and the net asset value attributable to the Ordinary Shares issued is not less than the total amount<br />
subscribed (including by way of premium, less issue costs for Ordinary Shares), less the total amount paid (including by way of<br />
premium) by the Company in purchasing its own Ordinary Shares. The Carried Interest Agreement provides that if the Company<br />
issues shares otherwise than pursuant to the Option at a time when the Option remains outstanding and unexercised the<br />
agreement shall be amended to such extent as may be necessary to ensure that the benefit of the Option after that further issue of<br />
shares is equal to the benefit existing prior to that further issue of shares.<br />
No performance-related incentives were earned during the period.<br />
At 30 September 2011 cumulative dividends paid (including the related tax credits where applicable) amounted to 9.1p per<br />
Ordinary Share.<br />
C Share incentive<br />
<strong>Foresight</strong> <strong>Group</strong> is entitled to be issued with such number of C Shares at a subscription price of par value as represents 15% (at<br />
the then prevailing net asset value per C Share adjusted to take into account the relevant distribution) of each revenue or capital<br />
distribution paid to C Shareholders. Such C Shares will only be issued to <strong>Foresight</strong> <strong>Group</strong> if the Total Return of the C Shares fund<br />
exceeds, both immediately before and immediately after the issue of C Shares, the C Shares’ original subscription price of £1. By<br />
way of example C Shares will need to show a base NAV Total Return of 100p or more before <strong>Foresight</strong> <strong>Group</strong> will be entitled to<br />
receive 15% of any distributions made by the Company to C Shareholders following such issue. The base NAV Total Return will<br />
increase after each performance incentive payment by an amount based on the dividend payment to shareholders. A performance<br />
incentive fee of £110,000 was paid by way of the issue of 101,771 C Shares at 109.0p during the year.<br />
Planned Exit Share Incentive<br />
<strong>Foresight</strong> <strong>Group</strong> will be entitled to a performance incentive which is conditional on distributions of a minimum of 110p per Planned<br />
Exit Share issued under the offer and remaining in issue at the date of calculation. The performance incentive is equivalent to the<br />
next 15p of Distributions above this hurdle of 110p plus 20% of any Distributions above 125p. The performance incentive may be<br />
satisfied in cash or by the issue of new Planned Exit Shares to <strong>Foresight</strong>, at the discretion of the Board.<br />
15 Capital commitments and contingent liabilities<br />
The Company had no capital commitments or contingent liabilities at 30 September 2011 (2010: £nil).<br />
43
<strong>Foresight</strong> 2 VCT plc<br />
44<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
16 Financial instrument risk management<br />
The Company’s financial instruments comprise:<br />
l Equity shares, debt securities and fixed interest securities that are held in accordance with the Company’s investment<br />
objective as set out in the Directors’ Report.<br />
l Cash, liquid resources, short-term debtors, creditors and derivatives that arise directly from the Company’s operations.<br />
Classification of financial instruments<br />
The Company held the following categories of financial instruments, all of which are included in the balance sheet at fair value, at<br />
30 September 2011:<br />
Ordinary Shares C Shares Planned Exit Shares<br />
2011 2010 2011 2010 2011 2010<br />
(Fair value) (Fair value) (Fair value) (Fair value) (Fair value) (Fair value)<br />
£’000 £’000 £’000 £’000 £’000 £’000<br />
Assets at fair value through<br />
profit and loss<br />
Investment portfolio 19,857 16,906 23,566 19,311 3,144 1,753<br />
Current asset investments (money<br />
market funds) 98 1,232 1 4,425 1,638 3,055<br />
Cash at bank 282 38 225 613 467 783<br />
Derivative financial instruments — — — — — 74<br />
20,237 18,176 23,792 24,349 5,249 5,665<br />
Receivables<br />
Prepayments and other debtors 806 1,004 1,936 1,642 371 264<br />
21,043 19,180 25,728 25,991 5,620 5,929<br />
Liabilities at amortised cost<br />
or equivalent<br />
Creditors (391) (560) (220) (308) (86) (60)<br />
20,652 18,620 25,508 25,683 5,534 5,869<br />
Loans to investee companies are treated as fair value through profit and loss and are included in the investment portfolio.<br />
The investment portfolio principally consists of unquoted investments, AIM quoted investments and qualifying loan stock valued at<br />
fair value. AIM quoted investments are valued at bid price. Current asset investments are money market funds, discussed under<br />
credit risk management below.<br />
The investment portfolio has a high concentration of risk towards small UK-based companies, the majority being unquoted sterling<br />
denominated equity and loan stock holdings (93.7% of net assets for the Ordinary Shares Fund, 92.4% for the C Shares Fund<br />
and 56.8% for the Planned Exit Shares Fund) or quoted on the sterling denominated UK AIM market (2.5% of net assets for the<br />
Ordinary Shares Fund, 0% for the C Shares Fund and 0% for the Planned Exit Shares Fund).<br />
An analysis of the maturity of the assets of the Company above, where this is relevant, is provided on the next page. These are<br />
assets subject to interest rate risk. There are no liabilities of significance to these accounts that mature beyond one month from the<br />
balance sheet date.<br />
The main risks arising from the Company’s financial instruments are interest rate risk, credit risk and market price risk. The Board<br />
regularly reviews and agrees policies for managing each of these risks and they are summarised below.<br />
Detailed below is a summary of the financial risks to which the Company is exposed.<br />
Interest rate risk<br />
The fair value of the Company’s fixed rate securities and the net revenue generated from the Company’s floating rate securities may<br />
be affected by interest rate movements. Investments are often in early stage businesses, which are relatively high risk investments<br />
sensitive to interest rate fluctuations. Due to the short time to maturity of some of the Company’s fixed rate investments, it may not<br />
be possible to reinvest in assets which provide the same rates as those currently held. When making investments of an equity and<br />
debt nature, consideration is given during the structuring process to the potential implications of interest rate risk and the resulting<br />
investment is structured accordingly. The maximum exposure to interest rate risk for the Ordinary Shares fund was £7,922,000<br />
at 30 September 2011 (30 September 2010: £9,350,000), for the C Shares fund was £13,819,000 at 30 September 2011<br />
(30 September 2010: £18,141,000) and for the Planned Exit Shares fund was £5,079,000 (30 September 2010: £4,672,000).
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
16 Financial instrument risk management (continued)<br />
Weighted average Weighted average time<br />
Total portfolio interest rate for which rate is fixed<br />
30 September 30 September 30 September 30 September 30 September 30 September<br />
2011 2010 2011 2010 2011 2010<br />
Ordinary Shares Portfolio<br />
Short-term fixed interest securities<br />
— exposed to fair value<br />
£’000 £’000 % % Days Days<br />
interest rate risk<br />
Loan stock<br />
— exposed to fair value<br />
98 1,232 0.6 0.5 — —<br />
interest rate risk<br />
Loan stock<br />
— exposed to cash flow<br />
3,658 3,925 10.8 11.1 939 1,028<br />
interest rate risk 3,884 4,155 4.7 5.1 — —<br />
Cash 282 38 — — — —<br />
Total exposed to interest<br />
rate risk 7,922 9,350<br />
Total portfolio<br />
30 September 30 September<br />
2011 2010<br />
Maturity analysis: £’000 £’000<br />
— in one year or less 1,353 2,895<br />
— in more than one year but<br />
no more than two years 3,267 1,914<br />
— in more than two years but<br />
no more than three years 1,691 1,352<br />
— in more than three years but<br />
no more than four years 559 1,938<br />
— in more than four years but<br />
no more than five years 1,052 1,068<br />
— in more than five years — 183<br />
Total 7,922 9,350<br />
45
<strong>Foresight</strong> 2 VCT plc<br />
46<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
16 Financial instrument risk management (continued)<br />
Weighted average Weighted average time<br />
Total portfolio interest rate for which rate is fixed<br />
30 September 30 September 30 September 30 September 30 September 30 September<br />
2011 2010 2011 2010 2011 2010<br />
C Shares Portfolio<br />
Short-term fixed interest securities<br />
— exposed to fair value<br />
£’000 £’000 % % Days Days<br />
interest rate risk<br />
Loan stock<br />
— exposed to fair value<br />
1 4,425 0.7 0.5 — —<br />
interest rate risk<br />
Loan stock<br />
— exposed to cash flow<br />
9,212 7,310 10.8 11.2 935 1,243<br />
interest rate risk 4,381 5,793 7.5 8.1 — —<br />
Cash 225 613 — — — —<br />
Total exposed to interest<br />
rate risk 13,819 18,141<br />
Total portfolio<br />
30 September 30 September<br />
2011 2010<br />
Maturity analysis: £’000 £’000<br />
— in one year or less 2,541 5,403<br />
— in more than one year but<br />
no more than two years 1,421 930<br />
— in more than two years but<br />
no more than three years 4,396 1,421<br />
— in more than three years but<br />
no more than four years 2,870 6,614<br />
— in more than four years but<br />
no more than five years 2,591 3,606<br />
— in more than five years — 167<br />
Total 13,819 18,141
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
16 Financial instrument risk management (continued)<br />
Weighted average Weighted average time<br />
Total fixed portfolio interest rate for which rate is fixed<br />
30 September 30 September 30 September 30 September 30 September 30 September<br />
2011 2010 2011 2010 2011 2010<br />
Planned Exit Shares Portfolio<br />
Short-term fixed interest securities<br />
— exposed to fair value<br />
£’000 £’000 % % Days Days<br />
interest rate risk<br />
Loan stock<br />
— exposed to fair value<br />
1,638 3,055 0.7 0.6% — —<br />
interest rate risk 2,974 834 11.4 14.2% 1,172 1,698<br />
Cash 467 783 — — — —<br />
Total exposed to interest<br />
rate risk 5,079 4,672<br />
Total portfolio<br />
30 September 30 September<br />
2011 2010<br />
Maturity analysis: £’000 £’000<br />
— in one year or less 2,730 3,838<br />
— in more than four years but<br />
no more than five years 828 792<br />
— in more than five years 1,521 42<br />
Total 5,079 4,672<br />
During the course of the year the Company also held cash balances. The benchmark rate, which determines the interest payments<br />
received on cash and loan balances held, is the Bank of England base rate which was 0.5% at 30 September 2011 (0.5% at<br />
30 September 2010).<br />
Credit risk<br />
Credit risk is the risk of failure by counterparties to deliver securities which the Company has paid for, or the failure by<br />
counterparties to pay for securities which the Company has delivered. The Company has exposure to credit risk in respect of the<br />
loan stock investments it has made into investee companies, most of which have no security attached to them, and where they<br />
do, such security ranks beneath any bank debt that an investee company may owe. The Board manages credit risk in respect of<br />
the current asset investments and cash by ensuring a spread of such investments in separate money market funds such that none<br />
exceed 15% of the Company’s total investment assets. These money market funds are all triple A rated funds, and so credit risk<br />
is considered to be low. The Manager receives management accounts from portfolio companies, and members of the investment<br />
management team often sit on the boards of unquoted portfolio companies; this enables the close identification, monitoring and<br />
management of investment-specific credit risk. The maximum exposure to credit risk at 30 September 2011 was £8,728,000<br />
(30 September 2010: £10,354,000) for the Ordinary Shares fund, £15,755,000 (30 September 2010: £19,783,000) for the C<br />
Shares fund and £5,450,000 (30 September 2010: £5,010,000) for the Planned Exit Shares fund based on cash, money market<br />
funds and other receivables (amounts due on investments, dividends and interest). The majority of the Company’s assets are held<br />
in its own name in certificated form and therefore custodian default risk is negligible. Several small AIM holdings held by a third<br />
party custodian in CREST are ring fenced from the assets of the custodian or other client companies.<br />
47
<strong>Foresight</strong> 2 VCT plc<br />
48<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
16 Financial instrument risk management (continued)<br />
An analysis of the Company’s assets exposed to credit risk is provided in the table below:<br />
Ordinary Shares C Shares Planned Exit Shares<br />
2011 2010 2011 2010 2011 2010<br />
£’000 £’000 £’000 £’000 £’000 £’000<br />
Loan stocks 7,542 8,080 13,593 13,103 2,974 834<br />
Current asset investments<br />
(money market funds) 98 1,232 1 4,425 1,638 3,055<br />
Other debtors 806 1,004 1,936 1,642 371 264<br />
Derivative financial instruments — — — — — 74<br />
Cash at bank 282 38 225 613 467 783<br />
Total 8,728 10,354 15,755 19,783 5,450 5,010<br />
Market price risk<br />
Market price risk arises from uncertainty about the future prices of financial instruments held in accordance with the Company’s<br />
investment objectives. It represents the potential loss that the Company might suffer through holding market positions in the face<br />
of market movements. The Board manages market price risk through the application of venture capital techniques and investment<br />
structuring delegated to its Manager, <strong>Foresight</strong> <strong>Group</strong>.<br />
The investments in equity and fixed interest stocks of unquoted companies are rarely traded (and AIM listed companies which the<br />
Company holds are thinly traded) and as such the prices are more volatile than those of more widely traded securities. In addition,<br />
the Company may not be able to realise the investments at their carrying value at times if there are no willing purchasers. The<br />
ability of the Company to purchase or sell investments is also constrained by the requirements set down for Venture Capital Trusts.<br />
The potential maximum exposure to market price risk, being the value of the investment portfolio as at 30 September 2011 is:<br />
£19,856,506 for the Ordinary Shares fund (30 September 2010: £16,906,310) £23,565,696 for the C Shares fund (30 September<br />
2010: £19,311,274) and £3,143,634 for the Planned Exit Shares fund (30 September 2010: £1,753,403).<br />
Liquidity risk<br />
The investments in equity and fixed interest stocks of unquoted companies that the Company holds are not traded and they<br />
are not readily realisable. The Company may not be able to realise the investments at their carrying value at times if there are no<br />
willing purchasers. The Company’s ability to sell investments may also be constrained by the requirements set down for VCTs. The<br />
maturity profile of the Company’s loan stock investments disclosed within the consideration of credit risk above indicates that these<br />
assets are also not readily realisable until dates up to five years from the year-end.<br />
To counter these risks to the Company’s liquidity, the Investment Manager maintains sufficient cash and money market funds to<br />
meet running costs and other commitments. The Company invests its surplus funds in high quality money market funds which are<br />
all accessible on an immediate basis.<br />
Sensitivity analysis<br />
Equity price sensitivity<br />
The Board believes that the Company’s assets are mainly exposed to equity price risk, as the Company holds most of its assets in<br />
the form of sterling denominated investments in small companies.<br />
Although some of these assets are quoted on AIM, the majority of these assets are unquoted. All of the investments made by the<br />
Investment Manager in unquoted companies, irrespective of the instruments the Company actually holds (whether shares or loan<br />
stock), carry a full equity risk, even though some of the loan stocks may be secured on assets (as they will be behind any prior<br />
ranking bank debt in the investee company).<br />
The Board considers that even the loan stocks are ‘quasi-equity’ in nature, as the value of the loan stocks is determined by<br />
reference to the enterprise value of the investee company. Such value is considered to be sensitive to changes in quoted share<br />
prices, in so far as such changes eventually affect the enterprise value of unquoted companies. The table below shows the impact<br />
on profit and net assets if there were to be a 15% (2010: 15%) movement in overall share prices, which might in part be caused by<br />
changes in interest rate levels, but it is not considered possible to evaluate separately the impact of changes in interest rates upon<br />
the value of the Company’s portfolios of investments in small, unquoted companies.<br />
The sensitivity analysis below assumes that each of these sub categories of investments (shares and loan stocks) held by the<br />
Company produces an overall movement of 15%, and that the actual portfolio of investments held by the Company is perfectly<br />
correlated to this overall movement in share prices. However, shareholders should note that this level of correlation would not be<br />
the case in reality.
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
16 Financial instrument risk management (continued)<br />
2011 2010<br />
Return and Return and<br />
Ordinary Shares net assets net assets<br />
If overall share prices fell by 15% (2010: 15%), with all other variables<br />
held constant — decrease (£’000) (2,978) (2,536)<br />
Decrease in earnings, and net asset value, per Ordinary Share (in pence) (14.13)p (12.05)p<br />
2011 2010<br />
Return and Return and<br />
net assets net assets<br />
If overall share prices increase by 15% (2010: 15%), with all other variables<br />
held constant — increase (£’000) 2,978 2,536<br />
Increase in earnings, and net asset value, per Ordinary Share (in pence) 14.13p 12.05p<br />
2011 2010<br />
Return and Return and<br />
C Shares net assets net assets<br />
If overall share prices fell by 15% (2010: 15%), with all other variables<br />
held constant — decrease (£’000) (3,535) (2,897)<br />
Decrease in earnings, and net asset value, per C Share (in pence) (14.31)p (11.84)p<br />
2011 2010<br />
Return and Return and<br />
net assets net assets<br />
If overall share prices increase by 15% (2010: 15%), with all other variables<br />
held constant — increase (£’000) 3,535 2,897<br />
Increase in earnings, and net asset value, per C Share (in pence) 14.31p 11.84p<br />
2011 2010<br />
Return and Return and<br />
Planned Exit Shares net assets net assets<br />
If overall share prices fell by 15% (2010: 15%), with all other variables<br />
held constant — decrease (£’000) (472) (263)<br />
Decrease in earnings, and net asset value, per Planned Exit Share (in pence) (7.64)p (4.26)p<br />
2011 2010<br />
Return and Return and<br />
net assets net assets<br />
If overall share prices increase by 15% (2010: 15%), with all other variables<br />
held constant — increase (£’000) 472 263<br />
Increase in earnings, and net asset value, per Planned Exit Share (in pence) 7.64p 4.26p<br />
The impact of a change of 15% has been selected as this is considered reasonable given the current level of volatility observed<br />
both on a historical basis and market expectations for future movement. The range in equity prices is considered reasonable given<br />
the historic changes that have been observed.<br />
49
<strong>Foresight</strong> 2 VCT plc<br />
50<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
16 Financial instrument risk management (continued)<br />
Interest rate sensitivity<br />
Although the Company holds investments in loan stocks that pay interest, the Board does not believe that the value of these<br />
instruments is interest rate sensitive. This is because the Board does not consider that the impact of interest rate changes<br />
materially affects the value of the portfolio in isolation, other than the consequent impact that interest rate changes have upon<br />
movements in share prices, discussed under equity price risk above. The table below shows the sensitivity of income earned to<br />
changes in interest rates.<br />
2011 2010<br />
Profit and Profit and<br />
Ordinary Shares net assets net assets<br />
If interest rates were 1% lower, with all other variables held constant — decrease (£’000) (39) (42)<br />
Decrease in earnings, and net asset value, per Ordinary Share (in pence) (0.18)p (0.20)p<br />
If interest rates were 1% higher, with all other variables held constant — increase (£’000) 39 42<br />
Increase in earnings, and net asset value, per Ordinary Share (in pence) 0.18p 0.20p<br />
2011 2010<br />
Profit and Profit and<br />
C Shares net assets net assets<br />
If interest rates were 1% lower, with all other variables held constant — decrease (£’000) (44) (58)<br />
Decrease in earnings, and net asset value, per C Share (in pence) (0.18)p (0.24)p<br />
If interest rates were 1% higher, with all other variables held constant — increase (£’000) 44 58<br />
Increase in earnings, and net asset value, per C Share (in pence) 0.18p 0.24p<br />
2011 2010<br />
Profit and Profit and<br />
Planned Exit Shares net assets net assets<br />
If interest rates were 1% lower, with all other variables held constant — decrease (£’000) — —<br />
Decrease in earnings, and net asset value, per Planned Exit Share (in pence) —p —p<br />
If interest rates were 1% higher, with all other variables held constant — increase (£’000) — —<br />
Increase in earnings, and net asset value, per Planned Exit Share (in pence) —p —p<br />
The impact of a change of 1% has been selected as this is considered reasonable, given the current level of the Bank of England<br />
base rates and market expectations for future movement.
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
Annual Report and Accounts 30 September 2011<br />
16 Financial instrument risk management (continued)<br />
Fair value hierarchy<br />
In accordance with amendments to FRS 29, the following table shows financial instruments recognised at fair value, analysed<br />
between those whose fair value is based on:<br />
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);<br />
• Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either<br />
directly (as prices) or indirectly (derived from prices) (Level 2); and<br />
• Inputs for the instrument that are not based on observable market data (unobservable inputs) (Level 3).<br />
Ordinary Shares Fund<br />
As at 30 September 2011<br />
Level 1 Level 2 Level 3 Total<br />
£’000 £’000 £’000 £’000<br />
Quoted investments 515 — — 515<br />
Unquoted investments — — 19,342 19,342<br />
Current asset investments (money market funds) 98 — — 98<br />
Financial assets 613 — 19,342 19,955<br />
C Shares Fund<br />
As at 30 September 2011<br />
Level 1 Level 2 Level 3 Total<br />
£’000 £’000 £’000 £’000<br />
Quoted investments — — — —<br />
Unquoted investments — — 23,566 23,566<br />
Current asset investments (money market funds) 1 — — 1<br />
Financial assets 1 — 23,566 23,567<br />
Planned Exit Shares Fund<br />
As at 30 September 2011<br />
Level 1 Level 2 Level 3 Total<br />
£’000 £’000 £’000 £’000<br />
Quoted investments — — — —<br />
Unquoted investments — — 3,144 3,144<br />
Current asset investments (money market funds) 1,638 — — 1,638<br />
Financial assets 1,638 — 3,144 4,782<br />
Comparative information has not been presented as permitted by the transitional provisions of the amendment to FRS 29.<br />
The Company primarily invests in private equity via unquoted equity and loan securities. The <strong>Group</strong>’s investment portfolio is<br />
recognised in the balance sheet at fair value, in accordance with IPEVC Valuation Guidelines.<br />
Year to 30 September 2011<br />
Ordinary Planned<br />
Shares C Shares Exit Shares<br />
fund fund fund<br />
Level 3 Level 3 Level 3<br />
£’000 £’000 £’000<br />
Valuation brought forward at 1 October 2010 15,625 19,311 1,753<br />
Purchases 1,264 4,217 2,556<br />
Disposal proceeds (444) (580) (1,000)<br />
Realised gains 225 440 —<br />
Investment holding gains/(losses) 2,672 178 (165)<br />
Valuation carried forward at 30 September 2011 19,342 23,566 3,144<br />
Transfers<br />
During the year there were no transfers between levels 1, 2 or 3.<br />
51
<strong>Foresight</strong> 2 VCT plc<br />
52<br />
Notes to the Accounts<br />
for the year ended 30 September 2011<br />
17 Management of Capital<br />
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern, so that it<br />
can continue to provide returns for shareholders and to provide an adequate return to shareholders by allocating its capital to assets<br />
commensurately with the level of risk.<br />
In accordance with VCT requirements, the Company must invest at least 70% of its capital (as measured under the tax legislation),<br />
and must thereafter maintain that percentage level investment, in the relatively high risk asset class of small UK companies within<br />
three years of that capital being subscribed. The Company accordingly has limited scope to manage its capital structure in the<br />
light of changes in economic conditions and the risk characteristics of the underlying assets. Subject to this overall constraint upon<br />
changing the capital structure, the <strong>Group</strong> may adjust the amount of dividends paid to shareholders, return capital to shareholders,<br />
issue new shares, or sell assets if so required to maintain a level of liquidity to remain a going concern.<br />
Although, as the Investment Policy implies, the Board would consider borrowing, there are no current plans to do so. It regards the<br />
net assets of the Company as the Company’s capital, as the level of liabilities is small and the management of them is not directly<br />
related to managing the return to shareholders. There has been no change in this approach from the previous year.<br />
18 Post-balance sheet events<br />
On 7 October 2011, the Company launched a joint offer with <strong>Foresight</strong> VCT plc to raise £30 million through the issue of<br />
Infrastructure Shares, a new share class. No Infrastructure Shares had been allotted at the date of these accounts.<br />
On 2 November 2011, the Company cancelled its share premium account of £9,746,580 and transferred it to distributable<br />
reserves.<br />
19 Related party transactions<br />
No Director has an interest in any contract to which the Company is a party. <strong>Foresight</strong> <strong>Group</strong> which acts as investment manager to<br />
the Company in respect of its venture capital investments earned fees of £984,669 (2010: £877,628) during the year. <strong>Foresight</strong> <strong>Group</strong><br />
also received a performance fee of £109,913 (2010: £108,219). <strong>Foresight</strong> Fund Managers, a subsidiary of <strong>Foresight</strong> <strong>Group</strong>, received<br />
£117,859 (2010: £112,433) during the year in respect of Company Secretarial and accounting fees.<br />
At the balance sheet date, there was £2,402 due from <strong>Foresight</strong> <strong>Group</strong> (2010: £6,348 due to <strong>Foresight</strong> <strong>Group</strong>) and £35,358<br />
(2010: £33,098) due to <strong>Foresight</strong> Fund Managers, a 100% subsidiary of <strong>Foresight</strong> <strong>Group</strong>. No amounts have been written off in the<br />
year in respect of debts due to or from the related parties.<br />
Further details on payments to <strong>Foresight</strong> <strong>Group</strong> are given in the Directors’ report.
Shareholder Information<br />
Annual Report and Accounts 30 September 2011<br />
Dividends<br />
Final dividends are ordinarily paid to Ordinary and C shareholders in May. Shareholders who wish to have dividends paid directly into<br />
their bank account rather than by cheque to their registered address can complete a Mandate Form for this purpose. Mandates can be<br />
obtained by telephoning the Company’s registrar, Computershare Investor Services plc (please see details on the back cover).<br />
Share price<br />
The Company’s Ordinary Shares, C Shares and Planned Exit Shares are listed on the London Stock Exchange. The mid-prices of the<br />
Company’s Ordinary Shares and C Shares are given daily in the Financial Times in the Investment Companies section of the London<br />
Share Service. Share price information can also be obtained from many financial websites. Due to the fact that Planned Exit Shares are<br />
bought back at net asset value, and in order to keep costs down, it has been decided not to list the Planned Exit Shares in the Financial<br />
Times.<br />
Notification of change of address<br />
Communications with shareholders are mailed to the registered address held on the share register. In the event of a change of address<br />
or other amendment this should be notified to the Company’s registrar, Computershare Investor Services plc, under the signature of the<br />
registered holder.<br />
Trading shares<br />
The Company’s Ordinary Shares, C Shares and Planned Exit Shares can be bought and sold in the same way as any other quoted<br />
company on the London Stock Exchange via a stockbroker. The primary market maker for <strong>Foresight</strong> 2 VCT plc is Singer Capital Markets.<br />
Investment in VCTs should be seen as a long-term investment and shareholders selling their shares within five years of original purchase<br />
may lose any tax reliefs claimed. Investors who are in any doubt about selling their shares should consult their independent financial<br />
adviser.<br />
Please call <strong>Foresight</strong> <strong>Group</strong> (see details below) if you or your adviser have any questions about this process.<br />
Indicative financial calendar<br />
May 2012 Announcement of half-yearly financial results for the six months ended 31 March 2012<br />
January 2013 Announcement of annual results for the year ended 30 September 2012<br />
January 2013 Posting of the Annual Report for the year ended 30 September 2012<br />
February 2013 Annual General Meeting<br />
Open invitation to meet the Investment Manager<br />
As part of our investor communications policy, shareholders can arrange a mutually convenient time to come and meet the Company’s<br />
investment management team at <strong>Foresight</strong> <strong>Group</strong>. If you are interested please call <strong>Foresight</strong> <strong>Group</strong> (see details below).<br />
Enquiries<br />
Contact <strong>Foresight</strong> <strong>Group</strong> for <strong>Foresight</strong> 2 VCT plc:<br />
Telephone: 01732 471803<br />
Fax: 01732 471810<br />
e-mail: info@foresightgroup.eu<br />
website: www.foresightgroup.eu<br />
<strong>Foresight</strong> 2 VCT plc is managed by <strong>Foresight</strong> <strong>Group</strong>, which is Authorised and regulated by the Financial Services Authority. Past<br />
performance is not necessarily a guide to future performance. Stock markets and currency movements may cause the value of investments<br />
and the income from them to fall as well as rise and investors may not get back the amount they originally invested. Where investments are<br />
made in unquoted securities and smaller companies, their potential volatility may increase the risk to the value of, and the income from, the<br />
investment.<br />
53
<strong>Foresight</strong> 2 VCT plc<br />
54<br />
Notice of Annual General Meeting<br />
Notice is hereby given that the Annual General Meeting of <strong>Foresight</strong> 2 VCT plc (“the Company”) will be held on 20 February 2012 at<br />
12 pm at the offices of SGH Martineau LLP, One America Square, Crosswall, London, EC3N 2SG for the purpose of considering and, if<br />
thought fit, passing the following resolutions, of which resolutions 1 to 8 will be proposed as ordinary resolutions and resolutions 9 to 10<br />
will be proposed as special resolutions.<br />
1. To receive the Report and Accounts for the year ended 30 September 2011.<br />
2. To approve the Directors’ Remuneration Report.<br />
3. To approve the payment of a final dividend for the year ended 30 September 2011 of 0.5p per ordinary share of 1p each in the<br />
capital of the Company (“Ordinary Share”).<br />
4. To approve the payment of a final dividend for the year ended 30 September 2011 of 2.0p per C ordinary share of 1p each in the<br />
capital of the Company (“C Share”).<br />
5. To re-elect Peter Dicks as a director.<br />
6. To re-elect Jocelin Harris as a director.<br />
7. To appoint KPMG Audit Plc as auditors and to authorise the directors to fix the auditors’ remuneration.<br />
Resolution 8 That, in addition to the existing authorities obtained at the general meeting of the Company held on 30 September<br />
2011 (“General Meeting”) but in substitution for all other existing authorities, the directors be and they are generally and<br />
unconditionally authorised in accordance with section 551 of the Companies Act 2006 to exercise all the powers of the<br />
Company to allot shares in the Company and to grant rights to subscribe for, or to convert any security into, shares in<br />
the Company (“Rights”) up to an aggregate nominal amount of £500,000 provided that this authority shall expire on<br />
the fifth anniversary of the date of passing of this resolution, save that the Company shall be entitled to make offers<br />
or agreements before the expiry of such authority which would or might require shares to be allotted or Rights to be<br />
granted after such expiry and the directors shall be entitled to allot shares and grant Rights pursuant to any such offer<br />
or agreement as if this authority had not expired.<br />
Resolution 9 That, in addition to the existing authorities obtained at the General Meeting but in substitution for all other existing<br />
authorities, the directors be and they are empowered pursuant to section 570 and section 573 of the Companies Act<br />
2006 to allot equity securities (within the meaning of section 560 of that Act) for cash either pursuant to the authority<br />
conferred by Resolution 8 above or by way of a sale of treasury shares as if section 561(1) of that Act did not apply to<br />
any such allotment, provided that this power shall be limited to:<br />
(a) the allotment of equity securities with an aggregate nominal amount of up to but not exceeding £100,000 by way of<br />
an issue of Ordinary Shares and/or £100,000 by way of an issue of C Shares and/or £100,000 by way of an issue of<br />
Planned Exit Shares, in each case pursuant to offer(s) for subscription;<br />
(b) the allotment of equity securities with an aggregate nominal amount of up to but not exceeding an amount equal<br />
to 10% of the issued Ordinary Share capital of the Company from time to time and/or 10% of the issued C Share<br />
capital from time to time, in each case pursuant to dividend investment schemes operated by the Company;<br />
(c) the allotment of equity securities with an aggregate nominal amount of up to but not exceeding £100,000 by way of<br />
an issue of Ordinary Shares and/or £100,000 by way of an issue of C Shares and/or £100,000 by way of an issue<br />
of Planned Exit Shares, in each case pursuant to performance incentive arrangements with <strong>Foresight</strong> <strong>Group</strong> LLP;<br />
and<br />
(d) the allotment (otherwise than pursuant to sub-paragraphs (a) to (c) of this resolution) to any person or persons of<br />
equity securities up to an aggregate nominal amount of up to but not exceeding 10% of the issued Ordinary Share<br />
capital from time to time and/or 10% of the issued C Share capital from time to time and/or 10% of the issued<br />
Planned Exit Share capital from time to time<br />
in each case where the proceeds may be used in whole or part to purchase shares in the capital of the Company and<br />
shall expire on the conclusion of the annual general meeting of the Company to be held in the year 2013, save that the<br />
Company shall be entitled to make offers or agreements before the expiry of such power which would or might require<br />
equity securities to be allotted after such expiry and the directors shall be entitled to allot equity securities pursuant to<br />
any such offer or agreements as if the power conferred hereby had not expired.
Notice of Annual General Meeting<br />
Annual Report and Accounts 30 September 2011<br />
Resolution 10 That, in addition to the existing authorities obtained at the General Meeting but in substitution for all other existing<br />
authorities, the Company be empowered to make market purchases (within the meaning of Section 693(4) of the<br />
Companies Act 2006) of its own shares provided that:<br />
(i) the aggregate number of shares to be purchased shall not exceed 3,161,143 Ordinary Shares and/or 3,702,446<br />
C Shares and/or 926,356 Planned Exit Shares;<br />
(ii) the minimum price which may be paid for a share is 1 pence (the nominal value thereof);<br />
(iii) the maximum price which may be paid for Ordinary Shares, C Shares or Planned Exit Shares is the higher of (1) an<br />
amount equal to 105% of the average of the middle market quotation for Ordinary Shares, C Shares or Planned<br />
Exit Shares (as the case may be) taken from the London Stock Exchange daily official list for the five business days<br />
immediately preceding the day on which the Ordinary Shares, C Shares or Planned Exit Shares (as the case may be)<br />
are purchased, and (2) the amount stipulated by Article 5(1) of the BuyBack and Stabilisation Regulation 2003;<br />
(iv) the authority conferred by this resolution shall expire on the conclusion of the annual general meeting of the Company<br />
to be held in the year 2013 unless such authority is renewed prior to such time; and<br />
(v) the Company may make a contract to purchase Ordinary Shares, C Shares or Planned Exit Shares (as the case may<br />
be) under the authority conferred by this resolution prior to the expiry of such authority which will or may be executed<br />
wholly or partly after the expiration of such authority and may make a purchase of Ordinary Shares, C Shares or<br />
Planned Exit Shares (as the case may be) pursuant to such contract.<br />
By order of the Board ECA Court<br />
24-26 South Park<br />
<strong>Foresight</strong> Fund Managers Limited Sevenoaks<br />
Company Secretary Kent<br />
TN13 1DU<br />
20 January 2012<br />
55
<strong>Foresight</strong> 2 VCT plc<br />
56<br />
Notice of Annual General Meeting<br />
Notes:<br />
1. No Director has a service contract with the Company. Directors’ appointment letters with the Company will be available for inspection<br />
at the registered office of the Company until the time of the meeting and from 15 minutes before the meeting at the location of the<br />
meeting, as well as at the meeting.<br />
2. To be entitled to attend and vote at the meeting (and for the purposes of the determination by the Company of the votes they may<br />
cast), members must be registered in the Register of Members of the Company at 6.00 pm on 18 February 2012 (or, in the event<br />
of any adjournment, 6.00 pm on the date which is two days before the time of the adjourned meeting). Changes to the Register of<br />
Members of the Company after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote<br />
at the meeting.<br />
3. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote on his or her<br />
behalf. A proxy need not also be a member but must attend the meeting to represent you. Details of how to appoint the chairman of<br />
the meeting or another person as your proxy using the form of proxy are set out in the notes on the form of proxy which is enclosed. If<br />
you wish your proxy to speak on your behalf at the meeting, you will need to appoint your own choice of proxy (not the chairman) and<br />
give your instructions directly to them.<br />
4. You may appoint more than one proxy, provided each proxy is appointed to exercise rights attached to different shares. You may not<br />
appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, (an) additional form(s) of<br />
proxy may be obtained by contacting Computershare Investor Services plc on 0870 703 6385. Please indicate in the box next to the<br />
proxy holder’s name the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking<br />
the box provided if the proxy instruction is one of multiple instructions being given. All forms must be signed and returned together in<br />
the same envelope.<br />
5. As at 20 January 2012 (being the last business day prior to the publication of this notice), the Company’s issued share capital was<br />
51,967,621 shares, comprising 21,088,348 Ordinary Shares, 24,699,440 C Shares and 6,179,833 Planned Exit Shares carrying one<br />
vote each. Therefore, the total voting rights in the Company as at 20 January 2011 was 51,967,621.<br />
6. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy<br />
information rights (a “Nominated Person”) may, under an agreement between him/her and the member by whom he/she was<br />
nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the meeting. If a Nominated Person<br />
has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give<br />
instructions to the shareholder as to the exercise of voting rights.<br />
7. The statement of the rights of members in relation to the appointment of proxies in paragraphs 3 to 5 above does not apply to<br />
Nominated Persons. The rights described in these paragraphs can only be exercised by members of the Company.<br />
8. Appointment of a proxy will not preclude a member from subsequently attending and voting at the meeting should he or she<br />
subsequently decide to do so. You can only appoint a proxy using the procedures set out in these notes and the notes to the form<br />
of proxy.<br />
9. The Register of Directors’ Interests will be available for inspection at the meeting.<br />
10. Information regarding the meeting, including the information required by section 311A of the Companies Act 2006, is available from<br />
www.foresightgroup.eu.<br />
11. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the<br />
resolution. If you either select the ‘Discretionary’ option or if no voting indication is given, your proxy will vote or abstain from voting<br />
at his or her discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put<br />
before the meeting.<br />
12. A form of proxy and reply-paid envelope is enclosed. To be valid, it should be lodged with the Company’s Registrar, Computershare<br />
Investor Services plc, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY or the proxy must be registered electronically at<br />
www.eproxyappointment.com, in each case, so as to be received no later than 48 hours before the time appointed for holding the<br />
meeting or any adjourned meeting. To vote electronically, you will be asked to provide your Control Number, Shareholder Reference<br />
Number and PIN which are detailed on your proxy form. This is the only acceptable means by which proxy instructions may be<br />
submitted electronically.<br />
13. Under section 319A of the Companies Act 2006, the Company must answer any question you ask relating to the business being<br />
dealt with at the meeting unless answering the question would interfere unduly with the preparation for the meeting or involve the<br />
disclosure of confidential information or the answer has already been given on a website in the form of an answer to a question or it is<br />
undesirable in the interests of the Company or the good order of the meeting that the question be answered.<br />
14. Pursuant to Chapter 5 of Part 16 of the Companies Act 2006 (sections 527 to 531), where requested by a members or members<br />
meeting the qualification criteria the Company must publish on its website, a statement setting out any matter that such members<br />
propose to raise at the meeting relating to the audit of the Company’s accounts (including the auditors’ report and the conduct of<br />
the audit) that are to be laid before the meeting. Where the Company is required to publish such a statement on its website it may<br />
not require the members making the request to pay any expenses incurred by the Company in complying with the request, it must<br />
forward the statement to the Company’s auditors no later than the time the statement is made available on the Company’s website<br />
and the statement may be dealt with as part of the business of the meeting.
Annual Report and Accounts 30 September 2011<br />
Notice of Separate Meeting of Ordinary Shareholders<br />
Notice is hereby given that a separate meeting of the holders of ordinary shares of 1p each in the capital of <strong>Foresight</strong> 2 VCT plc (“the<br />
Company”) will be held on 20 February 2012 at 12.10 pm at the offices of SGH Martineau LLP, One America Square, Crosswall, London,<br />
EC3N 2SG (or as soon thereafter as the annual general meeting of the Company convened for 12.00 pm on that day has been concluded<br />
or adjourned) for the purpose of considering and, if thought fit, passing the following resolution which will be proposed as a special<br />
resolution.<br />
The holders of the ordinary shares of 1p each in the capital of the Company (“Ordinary Shares”) hereby sanction, approve and consent to:<br />
a) the passing and carrying into effect of resolutions 8 and 10 (as ordinary and special resolutions of the Company, as applicable) set out<br />
in the notice of annual general meeting of the Company convened for 12.00 pm on 20 February 2012 (a copy of which is produced to<br />
the meeting and signed by the Chairman for the purposes of identification); and<br />
b) any effect on, variation, abrogation, dealing with and/or deemed variation or abrogation of the rights and privileges attached to the<br />
Ordinary Shares which will, or may, result from the passing and carrying into effect of the said resolutions and notwithstanding that the<br />
passing and carrying into effect of such resolutions may affect the rights and privileges.<br />
By order of the Board ECA Court<br />
24-26 South Park<br />
<strong>Foresight</strong> Fund Managers Limited Sevenoaks<br />
Company Secretary Kent<br />
TN13 1DU<br />
20 January 2012<br />
Notes:<br />
1. To be entitled to attend and vote at the meeting (and for the purposes of the determination by the Company of the votes they may<br />
cast), members must be registered in the Register of Members of the Company at 6.00 pm on 18 February 2012 (or, in the event of any<br />
adjournment, 6.00 pm on the date which is two days before the time of the adjourned meeting). Changes to the Register of Members of<br />
the Company after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.<br />
2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote on his or her<br />
behalf. A proxy need not also be a member but must attend the meeting to represent you. Details of how to appoint the chairman of<br />
the meeting or another person as your proxy using the form of proxy are set out in the notes on the form of proxy which is enclosed. If<br />
you wish your proxy to speak on your behalf at the meeting, you will need to appoint your own choice of proxy (not the chairman) and<br />
give your instructions directly to them.<br />
3. You may appoint more than one proxy, provided each proxy is appointed to exercise rights attached to different shares. You may not<br />
appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, (an) additional form(s) of<br />
proxy may be obtained by contacting Computershare Investor Services plc on 0870 703 6385. Please indicate in the box next to the<br />
proxy holder’s name the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking<br />
the box provided if the proxy instruction is one of multiple instructions being given. All forms must be signed and returned together in<br />
the same envelope.<br />
4. A reply-paid form of proxy for your use is enclosed (Form of Proxy — Separate Meeting of Ordinary Shareholders). To be valid it<br />
should be completed, signed and sent, together with a power of attorney or other authority (if any) under which it is signed or a<br />
notarially certified copy of such power or authority, to the Company’s Registrars, Computershare Investor Services plc, The Pavilions,<br />
Bridgwater Road, Bristol, BS13 8FA so as to be received not later than 48 hours before the time appointed for holding the meeting or<br />
adjourned meeting or (in the case of a poll taken subsequently to the date of the meeting or adjourned meeting) so as to be received<br />
no later than 24 hours before the time appointed for taking the poll.<br />
5. As at 20 January 2012 (being the last business day prior to the publication of this notice), the issued Ordinary Share capital was<br />
21,088,348 shares, carrying one vote each. Therefore, the total voting rights attributable to the Ordinary Shares fund as at 20 January<br />
2012 was 21,088,348 Ordinary Shares.<br />
6. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy<br />
information rights (a ‘Nominated Person’) may, under an agreement between him/her and the member by whom he/she was<br />
nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the meeting. If a Nominated Person<br />
has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give<br />
instructions to the shareholder as to the exercise of voting rights.<br />
7. The statement of the rights of members in relation to the appointment of proxies in paragraphs 3 to 5 above does not apply to<br />
Nominated Persons. The rights described in these paragraphs can only be exercised by members of the Company.<br />
8. Appointment of a proxy will not preclude a member from subsequently attending and voting at the meeting should he or she<br />
subsequently decide to do so. You can only appoint a proxy using the procedures set out in these notes and the notes to the form<br />
of proxy.<br />
9. Notice is hereby further given that the necessary quorum for the above meeting shall be holders of Ordinary Shares present in person<br />
or by proxy holding not less than one-third of the paid up Ordinary Share capital and that if within half an hour from the time appointed<br />
for the above meeting a quorum is not present it shall be adjourned to 21 February 2012 at 9.00 am at ECA Court, South Park,<br />
Sevenoaks, Kent, TN13 1DU or as soon thereafter as may be arranged and that at such adjourned meeting the holders of Ordinary<br />
Shares present in person or by proxy shall be a quorum regardless of the number of Ordinary Shares held.<br />
57
<strong>Foresight</strong> 2 VCT plc<br />
58<br />
Notice of Separate Meeting of C Shareholders<br />
Notice is hereby given that a separate meeting of the holders of C ordinary shares of 1p each in the capital of <strong>Foresight</strong> 2 VCT plc (“the<br />
Company”) will be held on 20 February 2012 at 12.15 pm at the offices of SGH Martineau LLP, One America Square, Crosswall, London,<br />
EC3N 2SG (or as soon thereafter as the separate meeting of the holders of ordinary shares of 1p each in the capital of the Company<br />
convened for 12.10 pm on that day has been concluded or adjourned) for the purpose of considering and, if thought fit, passing the<br />
following resolution which will be proposed as a special resolution.<br />
The holders of the C ordinary shares of 1p each in the capital of the Company (“C Shares”) hereby sanction, approve and consent to:<br />
a) the passing and carrying into effect of resolutions 8 and 10 (as ordinary and special resolutions of the Company, as applicable set out<br />
in the notice of annual general meeting of the Company convened for 12.00 pm on 20 February 2012 (a copy of which is produced to<br />
the meeting and signed by the Chairman for the purposes of identification); and<br />
b) any effect on, variation, abrogation, dealing with and/or deemed variation or abrogation of the rights and privileges attached to the<br />
C Shares which will, or may, result from the passing and carrying into effect of the said resolutions and notwithstanding that the passing<br />
and carrying into effect of such resolutions may affect the rights and privileges attached to such C Shares.<br />
By order of the Board ECA Court<br />
24-26 South Park<br />
<strong>Foresight</strong> Fund Managers Limited Sevenoaks<br />
Company Secretary Kent<br />
TN13 1DU<br />
20 January 2012<br />
Notes:<br />
1. To be entitled to attend and vote at the meeting (and for the purposes of the determination by the Company of the votes they may<br />
cast), members must be registered in the Register of Members of the Company at 6.00 pm on 18 February 2012 (or, in the event of any<br />
adjournment, 6.00 pm on the date which is two days before the time of the adjourned meeting). Changes to the Register of Members of<br />
the Company after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.<br />
2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote on his or her<br />
behalf. A proxy need not also be a member but must attend the meeting to represent you. Details of how to appoint the chairman of<br />
the meeting or another person as your proxy using the form of proxy are set out in the notes on the form of proxy which is enclosed. If<br />
you wish your proxy to speak on your behalf at the meeting, you will need to appoint your own choice of proxy (not the chairman) and<br />
give your instructions directly to them.<br />
3. You may appoint more than one proxy, provided each proxy is appointed to exercise rights attached to different shares. You may not<br />
appoint more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, (an) additional form(s) of<br />
proxy may be obtained by contacting Computershare Investor Services plc on 0870 703 6385. Please indicate in the box next to the<br />
proxy holder’s name the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking<br />
the box provided if the proxy instruction is one of multiple instructions being given. All forms must be signed and returned together in<br />
the same envelope.<br />
4. A reply-paid form of proxy for your use is enclosed (Form of Proxy — Separate Meeting of C Shareholders). To be valid it should<br />
be completed, signed and sent, together with a power of attorney or other authority (if any) under which it is signed or a notarially<br />
certified copy of such power or authority, to the Company’s Registrars, Computershare Investor Services plc, The Pavilions,<br />
Bridgwater Road, Bristol, BS13 8FA so as to be received not later than 48 hours before the time appointed for holding the meeting or<br />
adjourned meeting or (in the case of a poll taken subsequently to the date of the meeting or adjourned meeting) so as to be received<br />
no later than 24 hours before the time appointed for taking a poll.<br />
5. As at 20 January 2012 (being the last business day prior to the publication of this notice), the issued C Share capital was 24,699,440<br />
shares, carrying one vote each. Therefore, the total voting rights attributable to the C Shares fund as at 20 January 2012 was<br />
24,699,440 C Shares.<br />
6. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy<br />
information rights (a ‘Nominated Person’) may, under an agreement between him/her and the member by whom he/she was<br />
nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the meeting. If a Nominated Person<br />
has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give<br />
instructions to the shareholder as to the exercise of voting rights.<br />
7. The statement of the rights of members in relation to the appointment of proxies in paragraphs 3 to 5 above does not apply to<br />
Nominated Persons. The rights described in these paragraphs can only be exercised by members of the Company.<br />
8. Appointment of a proxy will not preclude a member from subsequently attending and voting at the meeting should he or she<br />
subsequently decide to do so. You can only appoint a proxy using the procedures set out in these notes and the notes to the form<br />
of proxy.<br />
9. Notice is hereby further given that the necessary quorum for the above meeting shall be holders of C Shares present in person or<br />
by proxy holding not less than one-third of the paid up C Share capital and that if within half an hour from the time appointed for the<br />
above meeting a quorum is not present it shall be adjourned to 21 February 2012 at 9.05 am at ECA Court, South Park, Sevenoaks,<br />
Kent, TN13 1DU or as soon thereafter as may be arranged and that at such adjourned meeting the holders of C Shares present in<br />
person or by proxy shall be a quorum regardless of the number of C Shares held.
Annual Report and Accounts 30 September 2011<br />
Notice of Separate Meeting of Planned Exit Shareholders<br />
Notice is hereby given that a separate meeting of the holders of planned exit ordinary shares of 1p each in the capital of <strong>Foresight</strong> 2 VCT<br />
plc (“the Company”) will be held on 20 February 2012 at 12.20 pm at the offices of SGH Martineau LLP, One America Square, Crosswall,<br />
London, EC3N 2SG (or as soon thereafter as the separate meeting of the holders of C ordinary shares of 1p each in the capital of the<br />
Company convened for 12.15 pm on that day has been concluded or adjourned) for the purpose of considering and, if thought fit, passing<br />
the following resolution which will be proposed as a special resolution.<br />
The holders of the planned exit ordinary shares of 1p each in the capital of the Company (“Planned Exit Shares”) hereby sanction, approve<br />
and consent to:<br />
a) the passing and carrying into effect of resolutions 8 and 10 (as ordinary and special resolutions of the Company, as applicable set out<br />
in the notice of annual general meeting of the Company convened for 12.00 pm on 20 February 2012 (a copy of which is produced to<br />
the meeting and signed by the Chairman for the purposes of identification); and<br />
b) any effect on, variation, abrogation, dealing with and/or deemed variation or abrogation of the rights and privileges attached to the<br />
Planned Exit Shares which will, or may, result from the passing and carrying into effect of the said resolutions and notwithstanding that<br />
the passing and carrying into effect of such resolutions may affect the rights and privileges attached to such Planned Exit Shares.<br />
By order of the Board ECA Court<br />
24-26 South Park<br />
<strong>Foresight</strong> Fund Managers Limited Sevenoaks<br />
Company Secretary Kent<br />
TN13 1DU<br />
20 January 2012<br />
Notes:<br />
1. To be entitled to attend and vote at the meeting (and for the purposes of the determination by the Company of the votes they may<br />
cast), members must be registered in the Register of Members of the Company at 6.00 pm on 18 February 2012 (or, in the event of any<br />
adjournment, 6.00 pm on the date which is two days before the time of the adjourned meeting). Changes to the Register of Members of<br />
the Company after the relevant deadline shall be disregarded in determining the rights of any person to attend and vote at the meeting.<br />
2. A member entitled to attend and vote at the meeting is entitled to appoint a proxy or proxies to attend, speak and vote on his or her<br />
behalf. A proxy need not also be a member but must attend the meeting to represent you. Details of how to appoint the chairman of<br />
the meeting or another person as your proxy using the form of proxy are set out in the notes on the form of proxy which is enclosed. If<br />
you wish your proxy to speak on your behalf at the meeting, you will need to appoint your own choice of proxy (not the chairman) and<br />
give your instructions directly to them.<br />
3. You may appoint more than one proxy, provided each proxy is appointed to exercise rights attached to different shares. You may not appoint<br />
more than one proxy to exercise rights attached to any one share. To appoint more than one proxy, (an) additional form(s) of proxy may be<br />
obtained by contacting Computershare Investor Services plc on 0870 703 6385. Please indicate in the box next to the proxy holder’s name<br />
the number of shares in relation to which they are authorised to act as your proxy. Please also indicate by ticking the box provided if the proxy<br />
instruction is one of multiple instructions being given. All forms must be signed and returned together in the same envelope.<br />
4. A reply-paid form of proxy for your use is enclosed (Form of Proxy — Separate Meeting of Planned Exit Shareholders). To be valid<br />
it should be completed, signed and sent, together with a power of attorney or other authority (if any) under which it is signed or a<br />
notarially certified copy of such power or authority, to the Company’s Registrars, Computershare Investor Services plc, The Pavilions,<br />
Bridgwater Road, Bristol, BS13 8FA so as to be received not later than 48 hours before the time appointed for holding the meeting or<br />
adjourned meeting or (in the case of a poll taken subsequently to the date of the meeting or adjourned meeting) so as to be received<br />
no later than 24 hours before the time appointed for taking a poll.<br />
5. As at 20 January 2012 (being the last business day prior to the publication of this notice), the issued Planned Exit Share capital<br />
was 6,179,833 shares, carrying one vote each. Therefore, the total voting rights attributable to the Planned Exit Shares fund as at<br />
20 January 2012 was 6,179,833 Planned Exit Shares.<br />
6. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy<br />
information rights (a ‘Nominated Person’) may, under an agreement between him/her and the member by whom he/she was<br />
nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the meeting. If a Nominated Person<br />
has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give<br />
instructions to the shareholder as to the exercise of voting rights.<br />
7. The statement of the rights of members in relation to the appointment of proxies in paragraphs 3 to 5 above does not apply to<br />
Nominated Persons. The rights described in these paragraphs can only be exercised by members of the Company.<br />
8. Appointment of a proxy will not preclude a member from subsequently attending and voting at the meeting should he or she subsequently<br />
decide to do so. You can only appoint a proxy using the procedures set out in these notes and the notes to the form of proxy.<br />
9. Notice is hereby further given that the necessary quorum for the above meeting shall be holders of Planned Exit Shares present in<br />
person or by proxy holding not less than one-third of the paid up Planned Exit Share capital and that if within half an hour from the<br />
time appointed for the above meeting a quorum is not present it shall be adjourned to 21 February 2012 at 9.10 am at ECA Court,<br />
South Park, Sevenoaks, Kent, TN13 1DU or as soon thereafter as may be arranged and that at such adjourned meeting the holders<br />
of Planned Exit Shares present in person or by proxy shall be a quorum regardless of the number of Planned Exit Shares held.<br />
59
<strong>Foresight</strong> 2 VCT plc<br />
60
Annual Report and Accounts 30 September 2011<br />
61
Corporate Information<br />
Directors<br />
Jocelin Harris (Chairman)<br />
Peter Dicks<br />
David Quysner<br />
Secretary<br />
<strong>Foresight</strong> Fund Managers Limited<br />
ECA Court<br />
24–26 South Park<br />
Sevenoaks<br />
Kent<br />
TN13 1DU<br />
Solicitors and VCT Status Adviser<br />
SGH Martineau LLP<br />
No.1 Colmore Square<br />
Birmingham<br />
B4 6AA<br />
Registered Office and Investment Manager<br />
<strong>Foresight</strong> <strong>Group</strong> LLP<br />
ECA Court<br />
24–26 South Park<br />
Sevenoaks<br />
Kent<br />
TN13 1DU<br />
Auditors<br />
KPMG Audit Plc<br />
Saltire Court<br />
20 Castle Terrace<br />
Edinburgh<br />
EH1 2EG<br />
<strong>Foresight</strong> VCT plc<br />
ECA Court<br />
South Park<br />
Sevenoaks<br />
Kent<br />
TN13 1DU<br />
Registrar<br />
Computershare Investor Services plc<br />
P.O. Box 859<br />
The Pavilions<br />
Bridgwater Road<br />
Bristol<br />
BS99 1XZ<br />
Registrar’s Shareholder Helpline: 0870 703 6292<br />
Broker<br />
Singer Capital Markets Limited<br />
One Hanover Street<br />
London<br />
W1S 1YZ