Foresight 3 VCT PLC : Annual Financial Report

FORESIGHT 3 VCT PLC

2015 Highlights

Net asset value per Ordinary Share at 31 March 2015 was 66.8p (31 March 2014: 74.2p) after deducting the 2.0p per share dividend paid in March 2015.
An interim dividend for the year ended 31 March 2015 of 2.0p per Ordinary Share was paid on 27 March 2015.
The fund provided follow-on funding totalling £1.6 million to seven portfolio companies and £1 million to two new investments.
The fund realised £4.6 million from sales and loan redemptions from 12 portfolio companies.

Chairman's Statement

Directorate Changes

The Board announced on 3 October 2014 that I, Raymond Abbott, joined the Board as a Director of the Company and on 1 January 2015 assumed the role of Chairman, replacing Graham Ross Russell. I look forward to a period of success following the change of strategy by the Board a few years ago.

I was previously the Managing Director of Alliance Trust Equity Partners and was a Director of Foresight 4 VCT plc and Enterprise VCT plc (which was merged into Foresight 3 VCT plc in 2008). I am currently a non-executive director of The Scottish Building Society, Galleria Holdings Limited and Essex Services Group plc.

On behalf of the Board I would like to thank Graham for all of his hard work in the past 18 years and wish him well in his retirement.

Performance

During the year to 31 March 2015, the net asset value per Ordinary Share decreased by 7.3% to 66.8p from 74.2p at 31 March 2014, after deducting the 2.0p per share dividend paid in March 2015.

The main reason for the disappointing fall in NAV resulted from the Board's decision to write down the value of it's holding in Closed Loop Recycling from £5.8 million to zero. This decision was taken following continued trading difficulties and the failure of efforts to achieve a sale of the business. The company entered administration on 30 April 2015. Following this write down the portfolio does not have material exposure to environmental type investments with the remaining portfolio now comprising private equity investments in a range of sectors. The majority of these investments are profitable at EBITDA level and increases in the valuation of these investments have partially offset the final provision made against Closed Loop Recycling.

Many of the private equity investments performed well, particularly Aerospace Tooling Corporation, Orthoview Holdings, Procam Television Holdings, TFC Europe and O-Gen UK which together generated an increase in net asset value of £3.58 million.

As explained in more detail in the Manager's Report, although the Closed Loop failure is very disappointing given the time, effort and investment that went into the business, the Board and Foresight Group, as Investment Manager, are now focussed on achieving success from the private equity portfolio which, as noted above, predominantly comprises profitable companies. This strategy change, which took place several years ago is now showing good progress as noted in more detail in the Investment Manager's Report of these accounts.

Dividends

An interim dividend of 2.0p per Ordinary Share for the year ended 31 March 2015 was paid on 27 March 2015. The shares were quoted ex dividend on 12 March 2015 and the record date for payment was 13 March 2015. It continues to be the Company's policy to provide a flow of tax-free dividends, generated from income and from capital profits realised on the sale of investments. Distributions will, however, inevitably be dependent largely on successful realisations, refinancings and other forms of cash generation.

The recent success in generating cash from portfolio investments within the fund gives the Board confidence that it will be able to at least maintain the same level of dividend and grow future payments of dividends to Shareholders.

Top-up Share Issues and Share Buy-backs

During the period under review 856,000 Ordinary Shares were repurchased for cancellation at a cost of £490,000.

There were no shares issued during the year.

Alternative Investment Fund Management Registration

The Board has considered the impact on the Company of the EU directive regulating Alternative Investment Fund Managers (AIFM) which applies to most UK investment funds including the Company. To minimise the regulatory and financial cost of compliance as a 'full scope UK AIFM', with this legislation, the decision was made for the Company to register as a 'small registered UK AIFM' directly with the Financial Conduct Authority as permitted by the rules. The application process was completed in June 2014 and approval confirmed in early August 2014. This will not affect the current arrangements with the Manager which will continue to report to the Board and manage the Company's investments on a discretionary basis.

VCT Legislation

VCTs, as tax efficient investment vehicles, are periodically subject to new rules which the Government and/or the European Commission consider appropriate for achieving the scheme's objectives and to comply with the rules relating to state aid to promote risk finance investments.

These proposed new rules were announced in the Chancellor's Budget on 8 July and, in summary, are as follows:

Introducing an 'age of company' restriction of 7 years
Introducing a lifetime investment limit of £12 million
Restricting VCT investments in buyouts
All investments to be made with intention to grow and develop a business

These rules are expected to become effective from Royal Assent of the Finance Bill in 2015.

Annual General Meeting

Prior to the Annual General Meeting at 1.30pm on 3 September 2015, Foresight Group, the investment Manager and two investee companies will give presentations between 1.00pm and 1.30pm.

The Company's Annual General Meeting will take place after the presentations at 1.30pm. I look forward to welcoming you to the Meeting, which will be held at the offices of Shakespeare Martineau in London. Details can be found on page 60 of the Annual Report and Accounts.

Outlook

Although there is still considerable uncertainty in continental Europe as a result of stresses within the Euro area, the UK economy is in reasonable health and many businesses are making steady progress. Many of the familiar risks, both financial and political, remain and there can be no grounds for complacency as all of our investments operate in competitive environments.

The improvement in the economy has had a noticeable effect in the performance of the private equity part of the portfolio. Within the portfolio, a series of realisations, refinancings and loan repayments has generated significant cash balances, which underpins the Board's dividend commitment to Shareholders and also provides capacity for several new investments to be made over the medium term, which we anticipate will further enhance Shareholder returns. New investments may, however, be impacted by the proposed changes in VCT legislation noted earlier and as the impact of the changes to the company become clearer, we will report on these to Shareholders.

Raymond Abbott

Chairman

30 July 2015

Strategic Report

Introduction

This Strategic Report, on pages 5 to 10 of the Annual Report and Accounts, has been prepared in accordance with the requirements of Section 414 of the Companies Act 2006 and best practice. Its purpose is to inform the members of the Company and help them to assess how the Directors have performed their duty to promote the success of the Company, in accordance with Section 172 of the Companies Act 2006.

Foresight 3 VCT plc

Foresight Group was appointed manager of Advent VCT plc on 30 July 2004 and the fund was renamed Foresight 3 VCT plc.

Foresight Group was appointed manager of Noble VCT plc (formerly Enterprise VCT plc) on 1 April 2008 and the Company temporarily reverted to its former name of Enterprise VCT plc. On 10 September 2008 Foresight 3 VCT plc acquired the assets and liabilities of Enterprise VCT plc and the Company was partially merged into Foresight 3 VCT plc as a separate C Share class. On 24 July 2009 the Foresight 3 VCT plc Ordinary and C Shares were merged together to create new Ordinary shares.

The number of Ordinary Shares in issue at 31 March 2015 was 50,370,401.

Investment Policy

The Manager (Foresight Group) will target UK unquoted companies which depend to a significant extent on the application of scientific and technological skills or knowledge as a major source of competitive advantage. A proportion of realised gains will normally be retained for re-investment and to meet future costs. Subject to this, the Company will endeavour to maintain a flow of dividend payments.

Investment Objective

The investment objective of the Company is to provide private investors with attractive returns from a portfolio of investments in fast-growing unquoted companies in the United Kingdom.

It is the intention to maximise tax free income available to investors from a combination of dividends and interest received on investments and distribution of capital gains arising from trade sales or flotations.

Performance and key performance indicators (KPIs)

The Board expects the Manager to deliver a performance which meets the objectives of the fund. The KPIs covering these objectives are net asset value performance and dividends paid, which, when combined, give net asset value total return. Additional key performance indicators reviewed by the Board include the discount of the share price relative to the net asset value and total expenses as a proportion of shareholders' funds.

A record of some of these indicators is contained below and on the following page. The on-going charges ratio in the period was 2.8%. Share buy-backs, (excluding enhanced buybacks), have been completed at discounts ranging from 16.1% to 32.3%. The level of these KPIs are then compared with the wider VCT marketplace, based on independent published information, for reasonableness.

A review of the Company's performance during the financial period, the position of the Company at the period end and the outlook for the coming year is contained within the Manager's Report. The Board assesses the performance of the Manager in meeting the Company's objective against the primary KPIs highlighted.

Performance over 1, 3 and 5 years

	31 March 2015	31 March 2014	31 March 2012	31 March 2010
	Ordinary	Ordinary	Ordinary	Ordinary
	Shares	Shares	Shares	Shares
Net asset value per share	66.8p	74.2p	77.5p	95.1p
Cumulative Dividends Paid per Share since year ended	-	2.0p	4.0p	11.5p
Net asset value total return at 31 March 2015	-	68.8p	70.8p	78.3p
plus cumulative dividends paid
Performance (%) NAV Total Return	-	(7.3%)	(8.7%)	(17.7%)

	Ordinary	Ordinary	Ordinary	Ordinary
	Shares	Shares	Shares	Shares
Share price	47.3p	62.5p	73.3p	84.5p
Share price total return at 31 March 2015 plus cumulative dividends paid	-	49.3p	51.3p	58.8p
Performance (%) Share Price Total Return	-	(21.2%)	(30.1%)	(30.4%)

Ordinary Shares

	31 March 2015	31 March 2014
Share price discount to NAV stood at:	29.2%	15.7%
Shares bought back during the year under review:	856,000	675,000
Decrease in net asset value during year:	10.0%	1.3%
Ongoing charges ratio:	2.8%	2.7%

Strategies for achieving objectives

Investment securities

The Company invests in a range of securities including, but not limited to, ordinary and preference shares, loan stock, convertible securities, and fixed-interest securities as well as cash. Unquoted investments are usually structured as a combination of ordinary shares and loan stock, while AIM investments are primarily held in ordinary shares. Pending investment in unquoted and AIM listed securities, cash is primarily held in interest bearing money market open ended investment companies (OEICs).

UK companies

Investments are primarily made in companies which are based in the UK, although many will trade overseas. The companies in which investments are made must have no more than £15 million of gross assets at the time of investment (or £7 million depending on when the funds being invested were raised) to be classed as a VCT qualifying holding.

Asset mix

The Company aims to be invested significantly in growth businesses subject always to the quality of investment opportunities and the timing of realisations. Any uninvested funds are held in cash, interest bearing securities and a range of non-qualifying investments. It is intended that the significant majority of any funds raised by the Company will be invested in VCT qualifying investments.

Risk diversification and maximum exposures

Risk is spread by investing in a number of different businesses within different industry sectors using a mixture of securities. The maximum amount invested in any one company is generally limited to £1 million in a fiscal year (or, if lower, 15% of the portfolio at the time of investment) and generally no more than £2.5 million over time (at cost) is invested in the same company (or, if lower, 15% of the portfolio at the time of investment). The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale.

Investment style

Investments are selected in the expectation that the application of private equity disciplines, including an active management style for unquoted companies through the appointment of an Investor Director to investee company boards, will enhance value.

Borrowing powers

The Company's Articles of Association permit gearing to give a degree of investment flexibility. The Board's current policy is not to use gearing.

Co-investment

The Company aims to invest in larger, more mature, unquoted and AIM companies and, in order to achieve this, often invests alongside the other Foresight funds. Consequently, at the time of initial investment, the combined investment can currently total up to a maximum of £5.0 million per annum for unquoted and for AIM investees.

VCT regulation

The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue & Customs. Amongst other conditions, the Company may not invest more than 15% of its investments (by VCT value at the time of investment) in a single company and must have at least 70% by value of its investments throughout the period in shares or securities in qualifying holdings, of which 30% by VCT value (70% for funds raised after 5 April 2011) in aggregate must be in ordinary shares which carry no preferential rights (although only 10% of any individual investment needs to be in the ordinary shares of that company).

Management

The Board has engaged Foresight Group as discretionary investment manager. Foresight Group also provides or procures the provision of company secretarial, administration and custodian services to the Company. Foresight Group prefers to take a lead role in the companies in which it invests. Larger investments may be syndicated with other investing institutions or strategic partners with similar investment criteria. In considering a prospective investment in a company, particular regard will be paid to:

Evidence of high-margin products or services capable of addressing fast-growing markets;
The company's ability to sustain a competitive advantage;
The strength of the management team;
The existence of proprietary technology; and
The company's prospects of being sold or achieving a flotation within three to five years.

A review of the investment portfolio and of market conditions during the period is included within the Investment Manager's Report.

Environmental, Human Rights, Employee, Social and Community Issues

The Board recognises the requirement under Section 414 of the Act to provide information about environmental matters (including the impact of the Company's business on the environment), employee, human rights, social and community issues; including information about any policies it has in relation to these matters and effectiveness of these policies. As the Company has no employees or policies in these matters this requirement does not apply.

Gender diversity

The Board comprises three male Directors, however, the Board is conscious of the need for diversity and will consider both male and female candidates when appointing new Directors.

The Manager has an equal opportunities policy and currently employs 62 men and 39 women.

Dividend policy

A proportion of realised gains will normally be retained for reinvestment and to meet future costs. Subject to this, the Company will endeavour to maintain a flow of dividend payments. It is the intention to maximise the Company's tax-free income available to investors from a combination of dividends and interest received on investments and the distribution of capital gains arising from trade sales or flotations.

Purchase of own shares

It is the Company's policy, subject to adequate cash availability, to consider repurchasing shares when they become available in order to help provide liquidity to the market in the Company's shares.

Principal risks, risk management and regulatory environment

The Board believes that the principal risks faced by the Company are:

Economic risk
Loss of approval as a Venture Capital Trust
Investment and strategic
Regulatory
Reputational
Operational
Financial
Market risk
Liquidity risk

Further detail on these principal risks is given in note 15 on page 51 of the Annual Report and Accounts.

The Directors have adopted a framework of internal controls which is designed to monitor the principal risks and uncertainties facing the Company and to provide a monitoring system to enable the Directors to mitigate these risks as far as possible. Details of the Company's internal controls are contained in the Corporate Governance and Internal Control sections.

Performance-related incentives

Foresight Group is entitled to receive performance incentive fees representing 15% of dividends paid to shareholders, providing certain performance conditions are achieved.

The performance-related incentive fee is payable to Foresight Group if the total return (comprising net asset value plus dividends paid) exceeds 100 pence per Share, both before and immediately after the performance-related incentive fee is paid. After each distribution is made to shareholders, the total return required to be achieved to trigger a performance-related incentive fee will be amended to take account of the cumulative dividends (net of the performance incentive fee payments made to Foresight Group) paid.

The performance incentive fee may be satisfied by either a cash payment or the issue of Shares in the same class as the distribution being made (or by a combination of both) at the Board's discretion. Any new Shares to be issued to Foresight Group would be calculated by dividing the amount to be satisfied by the issue of the Shares by the latest net asset value per share.

No performance-related incentives were earned during the year (2014: nil).

Valuation Policy

Investments held by the Company have been valued in accordance with the International Private Equity and Venture Capital Valuation ("IPEVCV") guidelines (December 2012) developed by the British Venture Capital Association and other organisations. Through these guidelines, investments are valued as defined at 'fair value'. Ordinarily, unquoted investments will be valued at cost for a limited period following the date of acquisition, being the most suitable approximation of fair value unless there is an impairment or significant accretion in value during the period. Quoted investments and investments traded on AIM and ISDX Growth Market are valued at the bid price as at 31 March 2015. The portfolio valuations are prepared by Foresight Group, reviewed and approved by the Board quarterly and subject to review by the auditors annually.

VCT Tax Benefit for Shareholders

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 with UK taxable income. The tax reliefs for subscriptions since 6 April 2006 are:

Income tax relief of 30% on subscription for new shares, which is forfeit by shareholders if the shares are not held for more than five years;
VCT dividends (including capital distributions of realised gains on investments) are not subject to income tax in the hands of qualifying holders;
Capital gains on disposal of VCT shares are tax-free, whenever the disposal occurs.

Venture Capital Trust Status

Foresight 3 VCT plc has been granted approval as a Venture Capital Trust (VCT) under S274-S280A of the Income Tax Act 2007 for the year ended 31 March 2014. The next complete review will be carried out for the year ended 31 March 2015. It is intended that the business of the Company be carried on so as to maintain its VCT status.

The Directors have managed, and continue to manage, the business in order to comply with the legislation applicable to VCTs. In addition, the Board has appointed Shakespeare Martineau LLP as taxation adviser to the Company to provide further independent assurance of compliance with venture capital tax legislation and to provide guidance on changes in taxation legislation affecting Foresight 3 VCT plc. As at 31 March 2015 the Company had 75.0% of its funds in such VCT qualifying holdings.

Future Strategy

The Board and the Manager believe that the strategy of focusing on traditional private equity investments is in the best interests of Ordinary Shareholders and the historical information reproduced in this report is evidence of positive recent performance in this area.

The Company's performance relative to its peer group and benchmarks will depend on the Manager's ability to allocate the Company's assets effectively, and manage its liquidity appropriately.

Raymond Abbott

Chairman

30 July 2015

Manager's Report

Several investments performed well during the year, including TFC Europe, Orthoview Holdings, Procam Television Holdings, O-Gen UK and most notably Aerospace Tooling Corporation, which received full payment of its £450,000 loan and a £50,000 dividend being equal to the cost of their equity investment within 15 months. These companies together generated an increase in valuation of £3,587,398 in the year. In October 2014, the investment in Orthoview Holdings was sold to Materialise NV for up to £1,350,000, generating a return of three times original cost of investment.

However, notwithstanding the above, the overall performance during the year to 31 March 2015 was disappointing, the impact of the large provision of £5,813,059 made against the investment in Closed Loop Recycling, as explained below, more than counterbalancing the good performance of the private equity investments. Net asset value per Ordinary Share fell by 7.3% to 66.8p per share as at 31 March 2015 from 74.2p per share as at 31 March 2014, after deducting the 2.0p per share dividend paid in March 2015.

Provisions totalling £6,275,550 were made against three investments during the year, principally the above mentioned provision against the investment in Closed Loop Recycling following the appointment of administrators on 30 April 2015, thereby reducing the valuation to nil. Despite operating at full capacity, the company's recent performance was impacted by adverse movements in the price of waste plastic bottles as a result of overseas demand for bottles and weaker prices for virgin resin, reflecting the falling price of oil. The latter impacted the price customers paid for the company's competing recycled HDPE and PET pellets. The company focused its efforts on improving profitability whilst actively pursuing various strategic options including raising capital from third party sources and an outright sale. Notwithstanding the above efforts, the company failed to raise new capital and was placed into administration on 30 April 2015, with no prospect of any recoveries.

In consequence, the portfolio now has effectively no material exposure to environmental investments, the portfolio now comprising just traditional private equity investments operating across a range of different sectors. Foresight Group remains positive about the overall prospects for the portfolio and is focused on achieving increases in net asset value and realisations from the existing investments to facilitate shareholder distributions and provide additional funding for new investments. A review of the portfolio is set out below.

1. New investments

Company	£
Industrial Efficiency II	451,740
Positive Response Communications	500,000
Total	951,740

2. Follow-on funding

Company	£
AtFutsal Group	17,007
Biofortuna	178,898
Closed Loop Recycling	372,905
CoGen	41,527
Mplsystems (formerly The Message Pad)	90,000
Procam Television Holdings	173,608
Total	873,945

Capitalised interest was recognised in the year for Autologic Diagnostic Group (£98,391) and Closed Loop Recycling (£631,160).

Exits ans Realisations

Following a period of particularly strong trading and cash generation, Aerospace Tooling Corporation effected a recapitalisation and dividend distribution in September 2014, returning the entire £3,500,000 cost of the Foresight VCTs' investments made only 15 months previously. Having received repayment of its £450,000 loan and a dividend of £50,000 equal to the cost of its equity investment, Foresight 3 VCT plc still retains its original 7.7% equity shareholding in the company.

In December 2014, ICA completed a recapitalisation enabling loans and interest totalling £600,000 to be paid to the fund. On 31 March 2015, The Bunker Secure Hosting repaid all its shareholder loans and outstanding interest totalling £6,450,000, financed through a £5,700,000 secured medium term bank loan plus £1,000,000 of its own cash resources. In total, £5,130,000 was repaid to the Foresight VCTs, comprising £3,030,000 of loan principal and £2,100,000 interest. The Company received £1,667,704, comprising £1,258,710 of loan principal and £408,994 of interest.

In April 2014, Orthoview Holdings (formerly Meridian Technique) repaid £150,794 of loan stock. In October 2014, Orthoview Holdings was successfully sold to NASDAQ quoted Materialise NV for £8,470,000 in cash. Foresight 3 VCT received initial consideration of £1,120,000, with a further £234,099 held in escrow to support warranties, to be released in two tranches over two years. Combined with proceeds from the capital reorganisation in May 2013, the investment generated a return of three times original cost.

In May 2014, the investment in Xention Pharma, a drug development company, was sold for £10,422. Loan repayments totalling £186,250 were received from the administrators of Evance Wind Turbines.

Cole Henry PE 2 Limited, an acquisition vehicle preparing to trade, repaid a loan of £450,000 in the year, which was used to fund the investment in Industrial Efficiency II. Kingsclere PE 3 Limited, an acquisition vehicle preparing to trade, similarly repaid a loan of £550,000 in the year, which was used to fund the investment in Positive Response Communications.

4.Material provisions to a level below cost

Company	£
Closed Loop Recycling	5,813,059
Evance Wind Turbines	38,750
Mplsystems (formerly The Message Pad)	423,741
Total	6,275,550

New and Follow on Investments

In December 2014, the Company invested £500,000 alongside other Foresight VCTs in a £2,000,000 round to finance a shareholder recapitalisation of Positive Response Corporation. Established in 1997, the company monitors the safety of people and property through its 24 hour monitoring centre in Dumfries, Scotland. The flagship product, StaffSafe, provides increased staff safety and protection in customer facing environments by supporting workers in dealing with harassment and anti-social behaviour by enabling them to call for help utilising two way audio communication and a CCTV feed linked to the monitoring centre. Customers include several major restaurant and retail chains.

In April 2014, a follow on investment of £50,901 was made into Biofortuna, an early stage molecular diagnostics business based in the Wirral, being the second, final tranche of the funding round completed in August 2013. To finance the development of new products, a £1,550,000 round was concluded in January 2015, of which £890,000 was committed by the Foresight VCTs. The Company committed to invest £214,335, of which £127,997 was invested as the first tranche. To fund additional working capital requirements, further investments totalling £372,905 were made into Closed Loop Recycling during the year. A further investment of £173,608 was made into Procam Television Holdings to support two acquisitions made during the year.

Outlook

Although there is still considerable uncertainty in continental Europe as a result of macro-economic strains, the prospects for UK remain positive with continuing low interest rates, reduced political uncertainties following the recent General Election result and banks more willing to lend to SMEs. In this environment, many businesses are making steady progress.

The Manager continues to concentrate on improving the performance of the portfolio which is now well positioned for further growth. With a pipeline of high quality private equity investment opportunities and funds available from recent realisations, Foresight is now actively pursuing new investment opportunities while also continuing to endeavour to realise capital from the portfolio, where appropriate, to generate cash for shareholder distributions and further funds for new investments.

Portfolio Review

In June 2013, the Company invested £500,000 alongside other Foresight VCTs in a £3,500,000 investment in Dundee based Aerospace Tooling Corporation (ATL), a well established specialist engineering company. ATL provides repair, refurbishment and remanufacturing services to large international companies for components in high-specification aerospace and turbine engines. With a heavy focus on quality assurance, the company enjoys strong relationships with companies serving the aerospace, military, marine and industrial markets. In the year to 30 June 2014, a number of significant orders underpinned growth, with turnover doubling to £11,000,000 and EBITDA profits increasing significantly to £4,330,000. Although sales and profitability are forecast to be lower in the current financial year, this strong performance supported an increase in valuation of £1,380,000 during the year. Reflecting particularly strong cash generation, the company was able to effect a recapitalisation and dividend distribution in September 2014, returning the entire £3,500,000 cost of the Foresight VCTs' investments made only 15 months previously. Having received full repayment of its £450,000 loan and a dividend of £50,000 equal to the cost of its equity investment, Foresight 3 VCT retains its original 7.7% equity shareholding in the company effectively at nil cost.

AtFutsal Group runs government approved education programmes for students aged 16-18 years old, principally as part of a consortium made up of Football League clubs, colleges and academies and training/accreditation organisations. Funding for these programmes is sourced from the Education Funding Agency. The company's three arenas in Birmingham, Leeds and Swindon are used as part of these education programmes. AtFutsal Group has introduced a wider range of government approved BTech courses and is using its own online education software platform to provide a broader range of educational services. A separate English Colleges education programme has been established to provide additional futsal related courses for 16-18 year olds at sixth form colleges, with an increasing number of courses being offered. Courses for other age groups are also being developed. For the current student year which commenced in September 2014, the company registered some 1,400 students on its futsal related courses, compared with 1,200 in the previous academic year and some 100 for its new English Colleges programme. AtFutsal Group is also improving its capacity utilisation across its three arenas with a variety of different sports being regularly played at each arena alongside futsal at both child and adult level.

For the year ended 31 December 2014, a small operating profit was achieved on sales of £5,000,000, with the growing Education division generating the majority of the profit and cash flow within the Group. Trading in the current year has started well, a key focus for the education team being to ensure that student enrolment for September 2015 is as strong as possible. As part of a £355,000 funding round to support the continuing growth of the Educational division and a related share reorganisation, the Foresight VCTs invested a further £300,000 (£100,000 in February 2015 and £200,000 in April 2015). The Company invested £51,021 in total (£17,007 in February 2015 and £34,014 in April 2015) and increased its equity shareholding from 7.5% to 10.6%. Management is focussed on improving profitability by increasing the number of students and range of education programmes and also the usage of its online education platform.

Following the £48,000,000 secondary buy-out by Living Bridge (formerly ISIS Private Equity) in January 2012, investments in equity and loan stock valued at £2,230,000 were retained in Autologic Diagnostics Group. The company generated reduced profits for the year to December 2013, achieving an EBITDA of £5,400,000 on sales of £18,800,000 (an EBITDA of £5,900,000 on revenues of £17,200,000 in 2012). Similar trading results were achieved during 2014, with relatively stronger sales in the UK and Europe compared with the USA. As at 31 December 2014, the company had a healthy cash balance of £7,900,000. Trading in the current year to date is in line with budget. Management continues to develop a business model to generate recurring revenues and improve the quality of the company's earnings through a new service-oriented product, to be launched in May 2015. In the short term, this change in strategy towards a pure recurring revenue model will result in certain exceptional costs being incurred and depending on the level of new customer sales is likely to impact EBITDA in 2015 and 2016 while helping to drive longer term shareholder value. During the year, interest of £97,047 deferred under the terms of the loan agreement with Autologic Diagnostics Group was capitalised.

Biofortuna, an early stage molecular diagnostics business based in the Wirral, has developed unique expertise in the important area of enzyme stabilisation, effectively hi-tech freeze drying. Its first range of products, SSPGo, is a series of tests for genetic diseases and organ transplant compatibility. Because of the company's stabilisation and freeze drying technology, its products can be transported easily (in the post if needed) and stored at room temperature for up to two years. A £1,300,000 round to finance capital expenditure and working capital was completed in August 2013, in which the Company initially invested £99,066 and then £50,901 as the second, final tranche in April 2014. For the year to 31 March 2015, a substantially reduced operating loss of £528,000 was incurred on higher sales of £1,050,000 (compared to an operating loss of £1,050,000 on sales of £325,000 in the previous year).

The Custom Services division, engaged in contract research, freeze-dried product development for customers and contract manufacturing, continues to mature with paid for feasibility studies and various contract discussions. Several customers are now ordering or moving towards production volumes while additional sales resource has been recruited. Investment continues in improving and increasing production capacity. The manufacturing facility has successfully obtained FDA registration. The New Product Development division, which develops the company's proprietary products, is progressing in a number of areas, including assessing new markets and broadening the product range. To finance the development of new products, a £1,550,000 round was concluded in January 2015, of which £890,000 was committed by the Foresight VCTs. The Company committed to invest £214,335, of which £127,997 was invested as the first tranche.

During 2013/14, Closed Loop Recycling successfully doubled the capacity of its Dagenham plant, which processed approaching 1,000 tonnes per week of waste plastic bottles. During the year, as part of a £710,000 further funding round, the Company invested a further £340,000 alongside other Foresight VCTs. In October 2014, following protracted negotiations, the shareholders entered into a confidential, conditional sale and purchase agreement with a purchaser planning to seek a public listing simultaneously with the conclusion of the acquisition, at a price higher than the then carrying valuation. One of the purchase conditions related to the financial performance of the company during the listing process. However, the company's recent and short-term projected performance were impacted by adverse movements in the price of waste plastic bottles reflecting overseas demand for such bottles and weaker prices for virgin resin, indirectly reflecting the falling price of oil. The latter impacted the price customers paid for the company's competing recycled HDPE and PET pellets. To mitigate the impact of these price movements, price surcharges were negotiated with key customers. The conditional sale and purchase agreement was formally terminated in December 2014, following weaker than projected financial performance by the company and thus reduced short-term profit projections.

During the first quarter of 2015, the macroeconomic position as it related to the company worsened further with oil prices declining to below $50 per barrel. This indirectly led to a substantial fall in the price of virgin HDPE polymer and as such lower prices for the company's recycled HDPE pellets. This markedly increased the pressure on the company's margins and business model and worsened the P&L and cash position. Waste bottle prices also fell but to a lesser extent than the reduction in oil and virgin pellet prices which, combined with a time lag, meant that the price surcharge increased from £200 per tonne in December 2014 to over £300 per tonne in March 2015. This continuing pricing pressure cast doubt on the continuing viability of the company's business model.

The company focused its efforts on current trading and improving profitability, whilst also actively pursuing various strategic options, including raising capital from third party sources, an outright sale and further supply chain support. Discussions and negotiations were held with various parties in regard of raising new capital but these were hindered by lack of sufficient support from various parties within the entire customer supply chain.

Reflecting these conditions, other experienced and credible recyclers experienced similar challenges to their long-standing business models.

A Government sponsored summit was held in March 2015 with the major supermarkets and retailers, dairies and bottle manufacturers to discuss this worsening market position and the risk that food-grade recycled HDPE production in the UK could well cease in the near future. This summit was a clear indication that the Government was taking very seriously the potential market impact that such an event would have. Unfortunately, however, the summit did not result in any firm commitment or any further signs of industry support.

Reflecting the above, provisions totalling £5,813,059 were made against the cost of the investment in the company, reducing the valuation to nil. Notwithstanding the above efforts, the company failed to raise new capital and was placed into administration on 30 April 2015, with no prospect of any recoveries.

Derby based Datapath Group is a world leading innovator in the field of computer graphics and video-wall display technology utilised in a number of international markets. The company is increasing its market share in control rooms, betting and signage and is entering other new markets. For the year to 31 March 2014, record operating profits of £7,360,000 were achieved on sales of £19,600,000 (for the year ended 31 March 2013, record operating profits of £5,100,000 were achieved on sales of £14,100,000). Trading and cash generation in the year to 31 March 2015 was strong, with the company continuing to enjoy good demand from its main OEM partners and distributors. The company has acquired its US distributor and has established an office in Philadelphia to develop more US sales and distributorships. In February 2015, the company launched its range of leading new IP products at the ISE show, meeting a warm response from OEMs and distributors. Management are working to improve sales efforts and processes as well as project management and product delivery times.

Following the appointment of administrators to Evance Wind Turbines in April 2014 as a result of reductions in the Feed-in-Tariff for small wind turbines which started in October 2012, loan repayments totalling £186,250 were received during the year.

In May 2012, £200,000 was invested in Flowrite Refrigeration Holdings alongside other Foresight VCTs to finance a £3,200,000 management buyout of Kent based Flowrite Services Limited. Flowrite Refrigeration Holdings provides refrigeration and air conditioning maintenance services nationally, principally to leisure and commercial businesses such as hotels, clubs, pubs and restaurants. In the year to 31 October 2014, the company traded well, achieving an operating profit of £740,000 on sales of £10,800,000 after substantial investment in new engineers and systems (cf. an operating profit of £1,060,000 on sales of £10,000,000 in 2013). Trading in the current year is ahead of budget. Management has increased sales efforts, particularly targeting more installation work, and won a number of significant new contracts and customers.

The company traded well during this year's seasonally busy summer months, benefiting from increased numbers of engineers and also from the new workflow IT system installed in May 2014 which has already resulted in increased operational efficiency. Recent order wins and a growing prospects list should support future growth in sales and profits.

In July 2014, as a part of the initial £1,380,000 tranche of a phased funding round totalling up to £4,400,000 by three Foresight managed funds, a new investment of £326,740 was made by the Company into Industrial Efficiency II, alongside £990,760 from Foresight VCT. In December 2014, the second £500,000 tranche was advanced, £125,000 from the Company and £375,000 from Foresight VCT. Industrial Efficiency II provides energy efficiency fuel switching services, allowing customers to make significant cost savings and reduce emissions. A number of site installations have been completed and others are in the course of construction for the first customer, a major corporation, and further tranches may be drawn down over the next year. As the installations are completed, the company charges the customer based on the volume of fuel and electricity consumed at each site up to a pre agreed level, which is expected to be reached after five years, at which time the contract will terminate and payments reduce to a nominal level.

ICA Group is a leading document management solutions provider in the South East of England, reselling and maintaining Ricoh, Toshiba and

Kyocera office printing equipment to customers in the commercial and public sectors. For the year to 31 January 2015, trading was strong and ahead of budget, with an EBITDA of £645,000 being achieved on sales of £3,700,000 (against an EBITDA of £561,000 on sales of £3,000,000 in the previous year). The company continues to trade well in the current year. With stronger demand from SMEs and good cash generation, ICA completed a recapitalisation and reorganisation in December 2014, enabling loans and interest totalling £600,000 to be repaid. The recapitalisation was financed through a £1,000,000 four year bank loan facility and the company's cash resources. As part of the reorganisation, Steven Hallisey, a seasoned executive with relevant sector experience, was appointed as Executive Chairman in January 2015. The sales team has since been strengthened through the recruitment of three new sales people, resulting in an improved sales performance. The company is now well positioned to capitalise on the improving market environment.

Ixaris Systems has developed and operates Entropay, a web based global prepaid payment service using the VISA network, whose revenues and profits have continued to grow. The company also offers its IxSol product (formerly known as Opn) on a 'Platform as a Service' basis to enable enterprises to develop their own customised global applications for payments over various payment networks. IxSol is trading satisfactorily with a number of deployments in progress and a good sales pipeline. IxSol is being used by companies in the affiliate marketing and travel sectors and sales efforts are now also focussing on the international e-commerce and financial services sectors.

During 2013, the company invested in developing and marketing its Ixaris Payment System, the platform that runs IxSol, to financial institutions. The platform enables financial institutions to offer payment services to their customers based on prepaid cards. The first deployment of the Payment System is expected in mid 2015. A pipeline of sales opportunities is being developed in three applications i.e. corporate prepaid, consumer virtual prepaid and payment innovations. Ixaris was awarded an EU grant of €2,500,000, of which €1,600,000 will be received over three years, to help fund the existing platform technology roadmap which highlights the innovative nature of the Payment System.

In the year to 31 December 2014, reflecting continuing investment in software and systems, an EBITDA loss of £622,000 was incurred on revenues of £9,500,000 (cf. an EBITDA loss of £617,000 on sales of £9,500,000 in the previous year). Following a reduction in the cost base in July 2014, the company is operating at cash flow break even and had £3,100,000 of cash at 31 December 2014.

Mplsystems (formerly The Message Pad) develops and sells contact centre and customer service software on a SaaS (Software as a Service) basis to improve the efficiency of its customers' call centres and their customers' experience. For the year to 31 May 2014, an operating loss of £704,000 was incurred on sales of £1,820,000 as the company began transitioning from a perpetual licence to a SaaS business model. In the current year, the transition towards a SaaS business model is progressing well with a number of new contracts and customers being won and the company is now operating near break even on annual sales of £2,400,000, appreciably ahead of budget. In January 2015, as part of a £392,000 funding round, the Company invested £90,000 alongside other, existing shareholders. Reflecting the price of the funding round, a provision of £423,741 was made against the cost of the investment. With a strong sales pipeline, the level of contracted recurring SaaS revenues continues to grow, giving confidence that this provision should be reduced over time.

In February 2014, the O-Gen Acme Trek facility in Stoke-on Trent was granted planning permission for an enlarged 7MW waste wood to energy plant. Management is currently working with the selected technology provider and a major EPC contractor to develop the project to the next stage, but this is taking longer than anticipated. Accordingly, it is expected that the project will now need to qualify under the Contract for Difference (CfD) subsidy regime rather than the ROC subsidy regime. Both Foresight and CoGen (see O-Gen UK below) are working together to establish how best to develop the project under this new regime. In view of the delays described above, the company is actively seeking other competitive bids for the project.

O-Gen UK continues to make good progress. Working together with Carbonarius (its 50:50 joint venture with Plymouth based Una Group), O-Gen UK has built on the success of its £4,000,000, 10MW Birmingham BioPower project ("BBPL") to become the UK's leading independent developer of Advanced Conversion Technology waste to energy projects. In March 2015, O-Gen UK formalised this partnership with Una Group by combining the two management teams and staff in a new company, CoGen Limited, to further develop their substantial, combined pipeline of projects. To accelerate growth and provide additional working capital, a new investor subscribed £750,000 for equity in CoGen, alongside a loan of £500,000 from Una Group. Funds managed by Foresight hold 24.59% of CoGen's equity, including Foresight 3 VCT plc (8.59%), Foresight 2 VCT plc (3.92%), Foresight 4 VCT plc (9.50%) and the Foresight UK Sustainable EIS fund (2.58%). Reflecting the above progress, the CoGen UK valuation has been increased by £1,352,115 to £1,736,138. O-Gen remains the shareholder in BBPL.

This merger will help O-Gen UK demonstrate the sufficient scale, track record and project pipeline to secure an appropriate exit in due course.

In March 2015, CoGen reached financial close on its most recent project, a £53m, 10MWe waste wood to energy plant in Welland, Northamptonshire, using the same technology and partners as in the BBPL project. This latest project was funded with investment from Balfour Beatty plc, Equitix and Noy (an Israeli investment fund), with CoGen earning development fees on the transaction whilst retaining a 12.5% shareholding in the project. Also in March, CoGen completed the acquisition of the entire O-Gen Plymtrek site in Plymouth, originally developed by Carbonarius with MITIE plc, on which a 4.5MW waste to energy plant is planned to be built utilising much of the footprint of the existing plant. The funding for this transaction was provided by Aurium Capital Markets, with CoGen owning 50% of the acquisition vehicle and Aurium owning 50% but with a prior ranking return on the latter's invested capital. CoGen has also recently agreed terms to develop a 25MW project in Merseyside using refuse derived fuel.

Orthoview Holdings (formerly Meridian Technique) provides pre-operative planning software for orthopaedic surgery Worldwide. To facilitate repayment of capital to shareholders, a share reorganisation was completed in May 2013, enabling cash to be returned in tranches to shareholders. In April 2014, the final £150,794 tranche of loan stock was paid to the Company. In October 2014, Orthoview Holdings was successfully sold for £8,470,000 in cash to NASDAQ quoted Materialise NV, a leading provider of additive manufacturing software and of sophisticated 3D printing solutions in the medical and industrial markets. Foresight 3 VCT received initial consideration of £1,120,000, with a further £234,099 held in escrow to support warranties, to be released in two tranches over two years. Combined with proceeds from the capital reorganisation, this investment generated a return of three times original cost.

In December 2014, the Company invested £500,000 alongside other Foresight VCTs in a £2,000,000 round to finance a shareholder recapitalisation of Positive Response Corporation. Established in 1997, the company monitors the safety of people and property through its 24 hour monitoring centre in Dumfries, Scotland. The flagship product, StaffSafe, provides increased staff safety and protection in customer facing environments by supporting workers, particularly 'lone workers', in dealing with verbal abuse, harassment and anti-social behaviour by enabling them to call for help utilising high quality two way audio communication and a CCTV feed linked to the monitoring centre. Customers include several major restaurant and retail chains. Revenues are generated from both initial installation fees and monitoring and maintenance fees. In the financial year ended 31 March 2015, an EBITDA of £637,000 was achieved on sales of £2,040,000. Significant growth is expected in the current financial year, reflecting a strong sales pipeline including both existing and potential new customers. The management team has been strengthened with the appointment of a new CEO and Finance Director and additional sales resource is also being recruited.

In April 2013, the Company invested £250,000 alongside other Foresight VCTs in a £1,800,000 round to finance a management buy-out of Procam Television Holdings. Procam is one of the UK's leading broadcast hire companies, supplying equipment and crews for UK location TV production to broadcasters, production companies and other businesses for over 20 years. Headquartered in Battersea, London, with additional facilities in Manchester, Edinburgh and Glasgow, Procam is a preferred supplier to BSkyB and an approved supplier to the BBC and ITV. Over the last four years revenues have doubled, following the introduction of new camera formats and increased sales and marketing efforts.

In September 2013, Hammerhead, a competitor with facilities in London, Manchester and Edinburgh and Glasgow, was acquired in order to broaden the customer base, national coverage and realise various synergistic benefits. For the eight month period to 31 December 2013, an EBITDA of £300,000 was achieved on sales of £5,200,000. In the year to 31 December 2014, significant growth in sales and profits was achieved, well ahead of the prior year, reflecting both strong organic growth and the successful integration of the Hammerhead acquisition. Continuing strong growth is expected in the current financial year which will necessitate expansion into larger premises in due course.

In December 2014, Procam acquired True Lens Services, based in Leicester, which specialises in the repair, refurbishment and supply of camera lenses to the film and television industries in the UK and overseas. In March 2015, in order to service the requirements of many of its existing UK customers and enter the large US market, Procam acquired HotCam New York, which provides camera, audio and lighting rental for TV production, plus crew and related production services from its premises in Manhattan. These acquisitions were supported by further investment of £1,250,000 from the Foresight VCTs, of which the Company invested a further £173,608. Integration of both acquisitions is making good progress and initial trading is in line with plan. Other acquisition opportunities are under consideration.

TFC Europe, a leading distributor of technical fasteners in the UK and Germany, performed well during the year to 31 March 2014, again achieving record operating profits of £2,750,000 on sales of £19,500,000 (cf. a record operating profit of £2,450,000 on sales of £18,100,000 in 2013). Trading in the year to 31 March 2015 continued to be strong, with record profits and sales again being achieved. The budget for the current year shows continuing good growth. With effective national coverage through five service centres in the UK, management is focussed on increasing sales efforts and expansion in Germany, the largest market in Europe. A new full service centre was opened in Bochum near Dusseldorf in October 2013 and TFC is expanding its business with existing customers. The seventh service centre, acquired in October 2014 in Singen, near Stuttgart, has already won a new substantial customer with potential for further growth. This acquisition provides increased opportunities to service existing Southern German customers and target new customers with a wider product range. This strong physical presence in Europe's largest manufacturing market is expected to assist TFC in growing its sales and profits substantially. The order book remains strong and the new project pipeline is healthy showing good prospects for the coming months.

The Bunker Secure Hosting, which operates two ultra secure data centres, continues to generate substantial profits at the EBITDA level. For the year to 31 December 2014, an EBITDA of £2,220,000 was achieved on sales of £9,300,000, identical to the previous year. Sales growth slowed during the year but is now recovering. Recurring annual revenues presently exceed £9,300,000. For the year to date, trading continues in line with budget.

On 31 March 2015, The Bunker repaid all its shareholder loans and outstanding interest totalling £6,450,000, financed through a £5,700,000 secured medium term bank loan plus £1,000,000 of its own cash resources. In total, £5,130,000 was repaid to the Foresight VCTs, comprising £3,030,000 of loan principal and £2,100,000 interest. The Company received £1,667,704, comprising £1,258,710 of loan principal and £408,994 of interest.

To meet growing customer demand, a number of new Cloud based services have been launched, including Secure Archive, Secure Hosted Desktop, Backup and Disaster Recovery as a Service. A number of Channel partners and customers have already been signed and a growing pipeline has been developed through Channel partners for these Cloud 2.0 services. Secure Archive is being marketed through Channel partners to major corporates which generate and hold large amounts of data such as marketing agencies, film/photo libraries and government bodies. The sales and marketing strategy has been reassessed and sales team strengthened.

A power upgrade at the Newbury Data Centre was successfully completed in March 2015. To increase capacity and resilience, the core network was similarly upgraded and capacity to internet service providers substantially increased during the year.

David Hughes

Foresight Group

Chief Investment Officer

30 July 2015

The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require certain disclosures in relation to the annual financial report, as follows:

Principal risks, risk management and regulatory environment

The Board believes that the principal risks faced by the Company are:

Economic risk - events such as an economic recession and movement in interest rates could affect smaller companies' performance and valuations.
Loss of approval as a Venture Capital Trust - the Company must comply with Section 274 of the Income Tax Act 2007 which allows it to be exempted from corporation tax on investment gains. Any breach of these rules may lead to: the Company losing its approval as a VCT; qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained; and future dividends paid by the Company becoming subject to tax in the hands of investors. The Company would also lose its exemption from corporation tax on capital gains.
Investment and strategic - inappropriate strategy, poor asset allocation or consistently weak stock selection leading to under performance and poor returns to shareholders.
Regulatory - the Company is required to comply with the Companies Acts 2006, the rules of the UK Listing Authority and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.
Reputational - inadequate or failed controls might result in breaches of regulations or loss of shareholder trust.
Operational - failure of the Manager's or Company Secretary's accounting systems or disruption to its business leading to an inability to provide accurate reporting and monitoring.
Financial - inadequate controls might lead to misappropriation or loss of assets. Inappropriate accounting policies might lead to misreporting or breaches of regulations. Additional financial risks, including interest rate, credit, market price and currency, are detailed later in this note.
Market risk - investment in AIM traded, ISDX Growth Market traded and unquoted companies by its nature involves a higher degree of risk than investment in companies traded on the main market. In particular, smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a small number of key individuals. In addition, the market for stock in smaller companies is often less liquid than that for stock in larger companies, bringing with it potential difficulties in acquiring, valuing and disposing of such stock.
Liquidity risk - the Company's investments, both unquoted and quoted, may be difficult to realise. Furthermore, the fact that a share is traded on AIM or ISDX Growth Markets does not guarantee that it can be realised. The spread between the buying and selling price of such shares may not reflect the price that any realisation is actually made.

The Board regularly reviews the principal risks and uncertainties facing the Company which the Board and the Manager have identified and the Board sets out delegated controls designed to manage those risks and uncertainties. Key risks within investment strategy are managed by the Board through a defined investment policy, with guidelines and restrictions, and by the process of oversight at each Board meeting. Operational disruption, accounting and legal risks are also covered at least annually and regulatory compliance is reviewed at each Board meeting. The Directors have adopted a robust framework of internal controls which is designed to monitor the principal risks and uncertainties facing the Company and provide a monitoring system to enable the Directors to mitigate these risks as far as possible. Details of the Company's internal controls are contained in the Corporate Governance and Internal Control sections.

Statement of Directors' Responsibilities

Statement of Directors' Responsibilities in respect of the Annual Report and Financial Statements

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

select suitable accounting policies and then apply them consistently;
make judgements and estimates that are reasonable and prudent;
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website (which is delegated to Foresight Group and incorporated into their website). Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Statement of Directors' Responsibilities in respect of the Annual Financial Report

We confirm that to the best of our knowledge:

the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company;
the Annual Report includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that the Company faces; and
the report and accounts, taken as a whole, are fair, balanced, and understandable and provide the necessary information for the shareholders to assess the company's performance, business model and strategy.

On behalf of the Board

Raymond Abbott

Chairman

30 July 2015

Income Statement

for the year ended 31 March 2015


	Year ended 31 March 2015			Year ended 31 March 2014
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000

Realised (losses)/gains on investments	-	(10,012)	(10,012)	-	1,898	1,898
Investment holding gains/(losses)	-	7,607	7,607	-	(816)	(816)
Income	864	-	864	787	-	787
Investment management fees	(216)	(648)	(864)	(237)	(710)	(947)
Other expenses	(420)	-	(420)	(390)	-	(390)

Return/(loss) on ordinary activities before taxation	228	(3,053)	(2,825)	160	372	532
Taxation	(35)	35	-	-	-	-

Return/(loss) on ordinary activities after taxation	193	(3,018)	(2,825)	160	372	532


Return/(loss) per Ordinary Share	0.4p	(6.0)p	(5.6)p	0.3p	0.7p	1.0p

The total column of this statement is the profit and loss account of the Company and the revenue and capital columns represent supplementary information.

All revenue and capital items in the above Income Statement are derived from continuing operations. No operations were acquired or discontinued in the year.

The Company has no recognised gains or losses other than those shown above, therefore no separate statement of total recognised gains and losses has been presented.

Reconciliation of Movements in Shareholders' Funds

	Called-up share capital	Share premium account	Capital redemption reserve	Profit and loss account	Total
	£'000	£'000	£'000	£'000	£'000

Year ended 31 March 2014
As at 1 April 2013	515	8,649	1,965	27,576	38,705
Share issues in the year	4	331	-	-	335
Expenses in relation to share issues	-	(81)	-	-	(81)
Repurchase of shares	(7)	-	7	(429)	(429)
Dividends	-	-	-	(1,031)	(1,031)
Return for the year	-	-	-	532	532
As at 31 March 2014	512	8,899	1,972	26,648**	38,031

	Called-up share capital	Share premium account	Capital redemption reserve	Profit and loss account	Total
	£'000	£'000	£'000	£'000	£'000

Year ended 31 March 2015
As at 1 April 2014	512	8,899	1,972	26,648	38,031
Expenses in relation to previous years share issues*	-	(31)	-	-	(31)
Repurchase of shares	(8)	-	8	(490)	(490)
Dividends	-	-	-	(1,010)	(1,010)
Transaction costs	-	-	-	(12)	(12)
Loss for the year	-	-	-	(2,825)	(2,825)
As at 31 March 2015	504	8,868	1,980	22,311**	33,663

* Trail commission payable to financial advisors in the year.

** Of this amount £16,815,000 (2014: £28,759,000) is realised and distributable.

Balance Sheet

at 31 March 2015

		Registered Number: 03121772

	As at	As at
	31 March 2015	31 March 2014
	£'000	£'000
Fixed assets
Investments held at fair value through profit or loss	31,532	36,086
	31,532	36,086
Current assets
Debtors	730	1,762
Money market securities and other deposits	-	277
Cash	1,507	87
	2,237	2,126

Creditors
Amounts falling due within one year	(106)	(181)

Net current assets	2,131	1,945

Net assets	33,663	38,031

Capital and reserves
Called-up share capital	504	512
Share premium account	8,868	8,899
Capital redemption reserve	1,980	1,972
Profit and loss account	22,311	26,648

Equity shareholders' funds	33,663	38,031




Net asset value per Ordinary Share	66.8p	74.2p

Cash Flow Statement

for the year ended 31 March 2015

	Year ended	Year ended
	31 March 2015	31 March 2014
	£'000	£'000
Cash flow from operating activities
Investment income received	942	357
Dividends received from investments	50	283
Deposit and similar interest received	1	2
Investment management fees paid	(864)	(922)
Secretarial fees paid	(127)	(126)
Other cash payments	(262)	(250)
Net cash outflow from operating activities and returns on investment	(260)	(656)

Taxation	-	-

Investing activities
Purchase of unquoted investments and investments quoted on AIM	(1,825)	(4,673)
Net proceeds on sale of unquoted investments	4,566	4,157
Net proceeds on sale of quoted investments	19	566
Net proceeds on deferred consideration	295	-
Net capital inflow from financial investment	3,055	50

Equity dividends paid	(1,010)	(1,031)

Management of liquid resources
Movement in money market funds	277	198
	277	198
Financing
Proceeds of fund raising	-	1,196
Expenses of previous year fund raising	(57)	(75)
Repurchase of own shares	(585)	(334)
	(642)	787
Increase/(decrease) in cash	1,420	(652)

Reconciliation of net cash flow to movement in net cash
Increase/(decrease) in cash for the year	1,420	(652)
Net cash at start of the year	87	739
Net cash at end of year	1,507	87

Notes

1. The audited Annual Financial Report has been prepared on the basis of accounting policies set out in the statutory accounts of the Company for the year ended 31 March 2015. All investments held by the Company are classified as 'fair value through the profit and loss'. Unquoted investments have been valued in accordance with IPEVC guidelines. Quoted investments are stated at bid prices in accordance with the IPEVC guidelines and Generally Accepted Accounting Practice.

2. These are not statutory accounts in accordance with S436 of the Companies Act 2006. The full audited accounts for the year ended 31 March 2015, which were unmodified and did not contain any statements under S498(2) of Companies Act 2006 or S498(3) of Companies Act 2006, will be lodged with the Registrar of Companies. Statutory accounts for the year ended 31 March 2015 including an unmodified audit report and containing no statements under the Companies Act 2006 will be delivered to the Registrar of Companies in due course.

3. Copies of the Annual Financial Report will be sent to shareholders and will be available for inspection at the Registered Office of the Company at The Shard, 32 London Bridge Street, London SE1 9SG and can be accessed on the following website: www.foresightgroup.eu

4. Net asset value per Ordinary Share

Net asset value per Ordinary Share is based on net assets at the year end of £33,663,000 (2014: £38,031,000), and on 50,370,401 Ordinary

Shares (2014: 51,226,401 Ordinary Shares), being the number of Ordinary Shares in issue at that date.

5. Return per Ordinary Share

	Year ended 31 March 2015	Year ended 31 March 2014
	£'000	£'000

Total (loss)/return after taxation	(2,825)	532
Basic (loss)/return per share (note a)	(5.6)p	1.0p

Revenue return from ordinary activities after taxation	193	160
Revenue return per share (note b)	0.4p	0.3p

Capital (loss)/return from ordinary activities after taxation	(3,018)	372
Capital (loss)/return per share (note c)	(6.0)p	0.7p

Weighted average number of shares in issue in the year	50,900,357	51,767,674

Notes:

a) Total (loss)/return per share is total return after taxation divided by the weighted average number of shares in issue during the year.

b) Revenue return per share is revenue return after taxation divided by the weighted average number of shares in issue during the year.

c) Capital (loss)/return per share is capital return after taxation divided by the weighted average number of shares in issue during the year.

6. Annual General Meeting

The Annual General Meeting will be held at 1.30pm on 3 September 2015 at the offices of Shakespeare Martineau LLP, One America Square, Crosswall, London, EC3N 2SG.

Prior to the Annual General Meeting, Foresight Group, the Investment Manager and two investee companies will give presentations between 1.00pm and 1.30pm.

7. Income

	Year ended	Year ended
	31 March 2015	31 March 2014
	£'000	£'000
Loan stock interest	813	501
Dividend income	50	283
Bank deposits	1	2
Overseas based on Open Ended Investment Companies ("OEICs")	-	1
	864	787

8. Investments held at fair value through profit or loss


	Quoted	Unquoted	Total
	£'000	£'000	£'000

Book cost as at 1 April 2014	2,548	43,089	45,637
Investment holding losses	(2,308)	(7,243)	(9,551)
Valuation at 1 April 2014	240	35,846	36,086

Movements in the year:
Purchases at cost **	-	2,554	2,554
Disposal proceeds	(19)	(4,566)	(4,585)
Realised losses *	(43)	(10,087)	(10,130)
Investment holding gains/(losses)	156	7,451	7,607
Valuation at 31 March 2015	334	31,198	31,532

Book cost at 31 March 2015	2,486	30,990	33,476
Investment holding (losses)/gains	(2,152)	208	(1,944)
Valuation at 31 March 2015	334	31,198	31,532

*Included within realised gains/(losses) on investments in the Income Statement is £118,000 of deferred consideration in relation to the disposal of Orthoview Holdings in the year.

** Capitalised interest of £729,000 was recognized in the year.

9. Transactions with the manager

Foresight Group, acting as investment manager to the Company in respect of its venture capital investments, earned fees of £864,000 during the year (2014: £947,000). Fees excluding VAT of £127,000 (2014: £126,000) were received during the year for company secretarial, administrative and custodian services to the Company.

At the balance sheet date, there was £14,446 due to Foresight Group (2014: £317 due from Foresight Group) and £nil due to Foresight Fund Managers Limited (2014: £nil due to Foresight Fund Managers). No amounts have been written off in the year in respect of debts due to or from the related parties.

Foresight Group also received from investee companies arrangement fees of £41,828 (2014: £25,472). VCF partners, an associate of Foresight Group, received from investee companies, Directors' fees of £144,795 (2014: £175,287).

10. Related party transactions

No Director has an interest in any contract to which the Company is a party.

END