Foresight4 - Foresight Group

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Foresight
4
JOB 13183 — PROOF 03 — 06/12/2006
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Foresight 4 VCT plc
Interim Report for the six months
ended 31 August 2006
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Foresight4
Objective
The objective of Foresight 4 VCT plc is to provide private investors with an attractive return from a
portfolio of investments in fast-growing unquoted technology-based companies in the United
Kingdom.
It is the intention to maximise the 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.
VCT Tax Benefit for Shareholders beyond 6 April 2006
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
from 6 April 2006 are:
●
Income tax relief of 30% on subscription into new shares, which is retained by shareholders if
the shares are held for more than five years.
●
VCT dividends (including capital distributions of realised gains on investments) are not subject
to income tax.
●
Capital gains on disposal of VCT shares are tax-free, whenever the disposal occurs.
Website: www.foresightvct.com
Contents
Summary and Chairman’s Statement
1
Summarised Statement of Cash Flows
13
Investment Summary
3
Notes to the Interim Report
14
Income Statement
11
Shareholder Information
15
Balance Sheet
12
Corporate Information
16
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Summary
● Net asset value per share as at 31 August 2006 was 98.7p (compared to 104.6p as at 28 February 2006 and 102.8p as at 31
August 2005).
● An interim dividend of 2.5p per share will be paid on 15 December 2006 (2005: 5.0p).
● £7,524,000 of new share capital was raised in the six months to 31 August 2006.
● Two realisations were achieved during the period, namely a sale of the business and assets of EnSeal Systems and the sale
of The Casella Group’s measurement division, together realising £573,000 in cash. Following its sale to Invitrogen in October
2004, DNA Research Innovations achieved its seventh and final milestone, generating £925,000 in cash.
● The Company invested £302,000 in follow-on funding rounds in two portfolio companies, namely EnSeal Systems (£52,000)
and Nomad Software (£250,000).
● Five new investments totalling £2.825m were made during the period: £750,000 in Ixaris Systems (electronic payment
services); £400,000 in The Bunker Secure Hosting (high security IT managed service hosting), £825,000 in Auctioning4u
(leading electronic auction facilitator), £450,000 in AIM listed Probability plc (mobile phone gaming) and £400,000 in
TheSkillsMarket (managing CV data for recruitment agencies).
Chairman’s Statement
Regrettably, post-period end Healthgain’s sales declined
significantly following the loss of a number of its sales team.
As a result, cash flow materially declined and Healthgain’s
directors placed the company into voluntary liquidation. The
investment has been written down to nil.
Peter Dicks
Chairman
I am pleased to report that your Company is continuing to
build on recent progress and reflecting recent investment
gains, an interim dividend of 2.5p per share will be paid to
shareholders on 15 December 2006.
Through the offer for subscription which closed on 5 April
2006, £11,270,000 was successfully raised, of which
£7,752,000 was raised in the current reporting period. These
new funds are now being invested to take advantage of the
strong deal flow being generated by Foresight Venture
Partners, the Company’s Manager.
The performance of a number of portfolio companies continue
to improve, reflecting growing demand and strong sales
pipelines, most notably Nomad Software, EQOS, Adeptra and
Snell & Wilcox. After a difficult period, Nomad Software is
now enjoying increasing demand for its market leading debit
and prepaid card processing services. EQOS and Adeptra are
enjoying continuing growth for their e-procurement software
and credit card alert services respectively. Snell & Wilcox, a
leading manufacturer of broadcast electronics, also continues
to see improved demand generating sales of nearly £39
million in its financial year to 31 March 2006.
Investment activity
The level of new investment activity was high during the six
month period, with five new investments being made totalling
£2.825 million: £750,000 in Ixaris Systems; £400,000 in The
Bunker Secure Hosting; £825,000 in Auctioning4U; £450,000
in Probability plc; and £400,000 in TheSkillsMarket.
Ixaris Systems operates a prepaid electronic payment service
integrated with the VISA network for uses including
international money transfer and online gambling.
The Bunker Secure Hosting builds, hosts and manages high
availability IT data centres and platforms for companies and
public bodies (including top financial, telecoms, and webcentric companies) with particular focus on high levels of
physical and digital security. The company owns and leases
41,500 square feet mainly underground in ex-military nuclear
command centres at Ash, Greenham Common and Bawdsey.
Auctioning4u is the UK’s leading electronic auction facilitator.
With Auctioning4u acting as an outsourced consignment
agent, companies, government organisations, charities and
individuals can sell unwanted items, collectables, return items
or excess stock via eBay, Amazon or other electronic auction
platforms — anonymously — without the hassle of writing
descriptions, digitally photographing the goods, monitoring
the auction process or dealing with payments and shipping.
Foresight 4 VCT plc
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Chairman’s Statement
Probability plc is a market leader in mobile phone gaming,
particularly offering casino games on mobile phones, a market
which is now emerging and is expected to achieve significant
growth.
TheSkillsMarket manages CV data for recruitment agencies,
outsourcing what is an important but troublesome task. It
creates economies of scale because the data it manages for
each agency is common to many others, i.e. one candidate is
known to many agencies. The service is highly automated,
using a mix of proprietary and third-party software.
During the six months to 31 August 2006, £302,000 was
invested in follow-on funding rounds in two portfolio
companies, namely EnSeal Systems (£52,000) and Nomad
Software (£250,000). The loans advanced to EnSeal Systems
were repaid during August 2006 following a sale of the
company’s business and assets to a large US corporation. In
April 2006, Nomad raised £1.25 million by way of secured loans
to support Nomad Processing Services (NPS) which is
continuing to grow its sales and secure increasing numbers of
new customer mandates for its debit and prepaid card
processing services.
During the six months to 31 August 2006, upward
revaluations were made to six investments totalling £509,000,
largely as a result of improved trading performances. These
included EQOS (£142,000), Adeptra (£72,000) and Nomad
Software (£129,000). Provisions totalling £1,650,000 were
made against the previous valuations of three companies,
principally Healthgain (£1,260,000) and Vectorcommand
(£388,000) reflecting poorer than expected performances.
Net Asset Value
The net asset value per share as at 31 August 2006 was
98.7p compared to 104.6p as at 28 February 2006 and
102.8p as at 31 August 2005.
Valuation policy
The investments held by the Company have been valued in
accordance with the International Private Equity and Venture
Capital guidelines (‘IPEVC’) developed by, alongside other
organisations, the British Venture Capital Association under
which investments are valued, as defined in the guidelines, at
‘fair value’. Ordinarily, unquoted investments will be valued at
cost for the 12 months following the date of acquisition as the
most suitable approximation of fair value unless there is an
impairment in value during the period. Quoted investments
and investments traded on AIM and PLUS (formerly OFEX) are
valued at the bid price as at 31 August 2006. The portfolio
valuations are prepared by Foresight Venture Partners and are
subject to approval by the Board.
Dividend
Reflecting gains arising during the current and previous year
from the sales of several portfolio companies, the Board is
pleased to declare an interim dividend of 2.5p per share
which will be paid on 15 December 2006 to shareholders on
the Register of Members on 8 December 2006.
Purchase of own shares
It continues to be the Company’s policy to consider
repurchasing shares when they become available in order to
provide liquidity for the Company’s shares. During the period,
the Company repurchased 210,000 shares at a cost of
£194,538, an approximate 10% discount to net asset value.
Realisation activity
In May 2006, The Casella Group sold its sole remaining
business, Casella Measurement Limited, to Ideal Industries
Inc. This disposal enabled Casella to redeem a significant part
of its shareholder loans, including £203,000 to Foresight 4. In
August 2006, the business and assets of EnSeal Systems
were sold to Fiserv, a large US corporation. At completion,
Foresight 4 received £370,000 in the form of loan repayments,
along with the entitlement to $300,000 held in escrow till April
2008. Additionally, after the first anniversary of completion
Foresight 4 will be entitled to 10% of all sales of EnSeal
related technologies for the following three year period.
Outlook
Excellent progress was made with DNA Research’s earn-out
during the period with the final seventh milestone being
achieved, generating a cash receipt of £925,000, all profit.
The sale, originally in October 2004, of DNA Research
Innovations to Invitrogen Corporation of the USA realised a
total of £3.1 million, compared with the original cost of
investment of £1 million. A partial realisation of 100,000
shares in Oasis Healthcare realised proceeds of £14,000 in
the period.
I believe the portfolio has potential to create value and
dividends for shareholders given reasonably favourable
economic conditions.
Foresight 4 VCT plc
2
Reviewing the portfolio as a whole over the last six months, I
am satisfied by the overall improvement in the performances
of a number of portfolio companies, notwithstanding the
disappointing performances of one or two other investee
companies. The portfolio is being successfully rebalanced and
refreshed with realisations of the more mature investments
continuing and the level of new investments increasing. This
process of rebalancing is expected to continue over the next
several quarters. Several approaches have been received
from potential acquirers for various companies in the portfolio,
giving confidence about exiting in due course.
Peter Dicks
Chairman
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Investment Summary
THE VENTURE CAPITAL FUNDS
During the six-month period ended 31 August 2006, further investments totalling £302,000 were made in two existing portfolio
companies: EnSeal Systems (£52,000) and Nomad Software (£250,000). Five new investments were made during the year
totalling £2,825,000: Auctioning4U (£825,000), Ixaris Systems (£750,000), Probability (£450,000), The Bunker Secure Holdings
(£400,000), and The SkillsMarket (£400,000).
During the six-month period, upward revaluations were made to six investments totalling £0.5 million as a result of improved
trading performance or exit prospects. A prudent basis of valuation and continuing difficult market conditions for some portfolio
companies have contributed to provisions of £1.6 million being made against the previous valuations of three investments.
EnSeal Systems was sold in the period and this realised an immediate sum of £370,000 with further escrow amounts of
£300,000 being due in 2008 subject to certain warranties (this amount is shown within debtors). The main trading subsidiary of
The Casella Group was sold last year and a further loan repayment of £203,000 was received during the period. There was a
small disposal of shares in Oasis Healthcare during the year totalling £14,000. The final elements of the earn-out on DNA
Research Innovations, which was sold in October 2004, was received during the period and this totalled £925,000.
The full investment portfolio as at 31 August 2006 is detailed below:
Adeptra Ltd
develops and markets interactive content based alert services, principally to banks in the USA and UK, for debit and credit card notification where
a transaction may be suspect or where an account is overdue. The company has made initial traction in these markets which provide very strong
growth opportunities. In addition, there are many other potential applications including: share price, sports results and other content based alerts.
The number of customers and volume of alerts are increasing steadily.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
December
March
October
February
1999
2000
2000
2005
As at 31 August 2006
As at 28 February 2006
£1,235,900
£198,216
3.5%
Discounted revenue multiple
£1,235,900
£126,409
3.5%
Year Ended:
31 December 2005
£’000
Sales
4,489
Loss before Tax
(1,029)
Retained Loss
(862)
Net Assets
3,127
Advanced Visual Technology Ltd
develops and markets retail space management software and now has 45 customers worldwide including Tesco, WH Smith, Barclays and HMV
in the UK and Office Depot, Staples and KMart in the USA. Its products deliver impressive financial improvements for customers. Slower capital
expenditure by customers has led to delays in its revenue targets but this should be partially offset by sales of its new hand held planner.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
December
February
September
February
May
August
1998
2000
2000
2001
2004
2005
As at 31 August 2006
As at 28 February 2006
£2,007,183
£1,073,477
43.9%
Indicative offer
£2,007,183
£1,073,477
43.9%
Year Ended:
30 September 2005
£’000
Sales
1,366
Loss before Tax
(348)
Retained Loss
(348)
Net Assets
144
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Investment Summary
Aigis Blast Protection Ltd
produces blast protection materials. Applications include containers that can be used at airports for homeland security purposes, military
vehicles and building cladding. The company is now selling products on an international basis and recently won its biggest contract to date.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
September 2005
As at 31 August 2006
As at 28 February 2006
£275,000
£275,000
2.9%
Cost less impairment
£275,000
£275,000
2.9%
Period ended:
Sales
Loss before Tax
Retained Loss
Net Assets
30 September 2005
£’000
1,762
(256)
(240)
2,673
alwaysON Group Ltd
is a market leading provider of voice over IP (“VOIP”) services to SMEs. Call quality and security issues of VOIP have held back widespread
adoption by SMEs to date. However, alwaysON’s solution addresses these issues by using the company’s own network coupled with proprietary
software.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
June 2005
As at 31 August 2006
As at 28 February 2006
£200,000
£200,000
2.6%
Cost less impairment
£200,000
£200,000
2.6%
Period ended:
Sales
Loss before Tax
Retained Loss
Net Assets
30 June 2005
£’000
3,850
(258)
(249)
1,587
Auctioning4U Ltd
Auctioning4U is the UK’s leading chain of eBay drop-off shops. Through Auctioning4U, customers can sell items via eBay, Amazon or other
electronic auction platforms — anonymously — without the inconvenience of writing descriptions, digitally photographing the goods, monitoring
the auction process or dealing with payments and shipping.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
Foresight 4 VCT plc
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May 2006
As at 31 August 2006
As at 28 February 2006
£825,000
£825,000
11.7%
Cost less impairment
—
—
—
Period ended:
Sales
Loss before Tax
Retained Loss
Net Assets
30 June 2005
£’000
137
(261)
(261)
494
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Investment Summary
Covion Holdings Ltd
provides total facilities management services (‘TFM’), or in its terminology ‘Facilities Infrastructure Services’ (‘FIS’), to private sector clients in the
office and industrial sectors. Covion manages all the client’s facilities and subcontracts specific services where necessary. It seeks to form unique
and close partnerships with its clients in the form of joint executive boards to which its site-based FIS manager reports. Key clients are Logica,
Britvic, Anglian Windows and Sara Lee.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
May 2005
As at 31 August 2006
As at 28 February 2006
£200,000
£257,844
2.4%
Price earnings multiple
£200,000
£200,000
2.4%
Period Ended:
31 December 2005
£’000
Sales
9,331
Loss before Tax
(290)
Retained Loss
(296)
Net Assets
246
EnSeal Systems Ltd
has developed seal encoding technology for detecting cheque and document fraud. The technology is being used by the US Federal Reserve
Bank and licensed to J P Morgan Chase, Fiserv (a major US banking services provider), an affiliate of Bank of America and HSBC USA. Several
major US banks are keen to adopt this anti-fraud technology to sell as a revenue generating service to their corporate customers. EnSeal
Systems’ assets were sold during the period, although amounts under Escrow (shown in debtors) are due in 2008 subject to any warranty claims.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
February
February
June
March
June
March
2002
2003
2004
2005
2005
2006
As at 31 August 2006
As at 28 February 2006
£nil
£nil
75.7%
Escrow amounts shown in debtors
£1,362,783
£448,000
75.7%
Year Ended:
31 December 2004
£’000
Sales
23
Loss before Tax
(373)
Retained Loss
(328)
Net Liabilities
(593)
Eqos Ltd
develops and markets e-collaboration and CRM (customer relationship management) software for business to business transactions, principally
sold to major UK retailers for improving the efficiency of their supply chains. A significant proportion of annual sales revenue comes from repeat
orders from existing customers but annual sales growth depends on winning a small number of orders from new customers.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
March 2000
March 2001
May 2001
As at 31 August 2006
As at 28 February 2006
£1,050,000
£1,152,011
6.6%
Revenue based multiple
£1,050,000
£1,009,696
6.6%
Year Ended:
30 September 2005
£’000
Sales
4,070
Profit before Tax
285
Retained Profit
318
Net Liabilities
(3,465)
Foresight 4 VCT plc
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Investment Summary
Healthgain Solutions Ltd
continued to experience a tough market for healthcare contract sales teams and as a result the company was placed into administration.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
June 2000
September 2005
As at 31 August 2006
As at 28 February 2006
£1,299,989
£nil
40.0%
Nil value
£1,299,989
£1,260,000
40.0%
Year Ended:
Sales
Loss before Tax
Retained Loss
Net Assets
30 April 2005
£’000
2,203
(276)
(432)
1,176
Infrared Integrated Systems Ltd
manufactures infrared arrays and sells cameras and thermal imagers incorporating these arrays. The lead product is a people counter used by
many large retail organisations but it also produces a hand-held thermal camera used in security and inspection applications.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
November 2005
As at 31 August 2006
As at 28 February 2006
£250,005
£250,005
1.3%
Cost less impairment
£250,005
£250,005
1.3%
Year Ended:
31 December 2005
£’000
Sales
6,621
Loss before Tax
(217)
Retained Loss
(133)
Net Assets
6,099
Ixaris Systems Ltd
Operates online bank accounts and a prepaid electronic payment service integrated with the VISA network. Consumers deposit funds by credit
card, cash at Post Offices and similar payment points or via normal bank transfers.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
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March 2006
As at 31 August 2006
As at 28 February 2006
£750,000
£750,000
9.4%
Cost less impairment
—
—
—
Year ended:
Sales
Loss before Tax
Retained Loss
Net Liabilities
31 December 2005
’000
520
(546)
(516)
209
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Investment Summary
Nomad Software Ltd
is a London-based developer and supplier of retail payments software and systems to the Central and Eastern European retail banking sector.
The software is used in handling and processing of payments via debit and credit cards and ATMs. In conjunction with IBM, Nomad has recently
set up Debit Direct, a new outsourced debit card service to enable smaller UK financial institutions to issue such cards cost effectively and
without heavy capital investment. Considerable interest has been shown by such institutions, 14 of which have gone live with a further 11
contracted or in implementation.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
March
December
April
November
April
2000
2001
2004
2004
2006
As at 31 August 2006
As at 28 February 2006
£1,569,968
£1,115,697
8.7%
Revenue based multiple
£1,319,968
£736,356
8.7%
Year Ended:
31 December 2005
£’000
Sales
4,180
Loss before Tax
(1,297)
Retained Loss
(1,297)
Net Liabilities
(2,779)
Oasis Healthcare plc
is the UK’s leading privately focused dental group with a national chain of 129 practices providing a full range of dental services, including
implants and cosmetics. Oasis floated on AIM during 2000 and has since grown by a series of acquisitions. For the year to 31 March 2006, ebitda
of £7.5 million was achieved on sales of £82.5 million, reflecting a substantial improvement in trading performance.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
January 2003
As at 31 August 2006
As at 28 February 2006
£276,607
£160,636
0.7%
Bid price
£324,821
£90,950
0.7%
Year Ended:
31 March 2006
£’000
82,486
(366)
(73)
8,906
Sales
Loss before Tax
Retained Loss
Net Assets
OLED-T Ltd
develops organic light-emitting display materials targeting the flat screen display market. Its materials are well suited to small portable devices with bright
clear colours, long lifetimes and low power consumption. The company is working closely with key Far East product manufacturers which have given
positive feedback. However, commercial revenues are some time away because of the cycle of building new manufacturing facilities. The $50 billion
global display screen market offers strong licence revenue opportunities.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
July 2005
August 2005
As at 31 August 2006
As at 28 February 2006
£1,010,000
£300,000
6.9%
Cost less impairment
£1,010,000
£300,000
6.9%
No audited accounts
have been produced
since incorporation
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Investment Summary
Probability plc
is a market leader in casino games on mobile phones, a market which is now emerging and is expected to achieve strong growth rates. The
global market Probability is addressing is estimated at £2 billion in 2006.
Date of Investment:
August 2006
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
As at 31 August 2006
As at 28 February 2006
£450,000
£473,684
3.3%
Bid price
—
—
—
No audited accounts
have been produced
since incorporation
Signum Technologies Ltd
has developed and owns a number of patents relating to the digital watermarking of electronic images to ensure that an original image has not been
manipulated e.g. for scene of crime photographic evidence. Although royalties are generated from licensees including police forces and photocopier
manufacturers, customer demand has been appreciably less than originally expected.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
January 2000
February 2001
As at 31 August 2006
As at 28 February 2006
£1,254,000
£nil
49.9%
Nil value
£1,254,000
£nil
49.9%
Year Ended:
Sales*
Loss before Tax
Retained Loss
Net Assets
* Not disclosed
30 June 2005
£’000
—
(48)
(48)
86
Snell & Wilcox (UK) Ltd
is a leading manufacturer of broadcast electronics and a global leader in digital and high definition TV systems. The new management team
has driven sales growth in the USA and Asia.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
Foresight 4 VCT plc
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September 2001
As at 31 August 2006
As at 28 February 2006
£839,137
£504,145
1.7%
Discounted revenue based multiple
£839,137
£506,232
1.7%
Year Ended:
Sales
Loss before Tax
Retained Loss
Net Liabilities
31 March 2005
£’000
33,765
(1,237)
(2,562)
(2,139)
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Investment Summary
The Bunker Secure Holdings Ltd
is a high security IT data business that has found new uses for nuclear bomb proof bunkers. It owns and leases 41,500 square feet underground
in ex-military command centres at Ash, Greenham Common and Bawdsey. The Bunker builds, hosts and manages IT infrastructure platforms for
top financial, telecoms, and web-centric companies worried about terrorist and disaster threats, both physical and digital.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
May 2006
As at 31 August 2006
As at 28 February 2006
£400,000
£400,000
7.4%
Cost less impairment
—
—
—
Year Ended:
31 December 2005
£’000
Sales
1,343
Loss before Tax
(939)
Retained Loss
(939)
Net Assets
1,414
The Casella Group Ltd
is a leading environmental consultancy, services and instrumentation group. In June 2006, Casella’s major subsidiary, Casella Consulting Ltd was sold
for £28.8 million enabling Casella to repay loans to its shareholders, including £746,000 to Foresight 4 VCT. In April 2006 the smaller measurement
division was sold for £4.3 million and Foresight 4 VCT received a repayment of £209,000 worth of loans.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
April
November
September
February
2000
2002
2003
2004
As at 31 August 2006
As at 28 February 2006
£774,291
£171,052
7.5%
Discounted disposal proceeds
£977,416
£374,177
7.5%
Year Ended:
Sales
Profit before Tax
Retained Profit
Net Assets
30 June 2005
£’000
37,693
12,645
12,633
5,789
TheSkillsMarket Ltd
manages CV data for recruitment agencies, outsourcing what is an important but troublesome task. It creates economies of scale because the data it
manages for each agency is common to many others, i.e. one candidate is known to many agencies. The service is highly automated, using a mix of
proprietary and third-party software. The company holds data on 90% of all IT staff in the UK and its customers employ 20% of all recruitment
consultants in the UK IT recruitment sector.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
June 2006
As at 31 August 2006
As at 28 February 2006
£399,998
£399,998
6.0%
Cost less impairment
—
—
—
Year Ended:
Sales
Loss before Tax
Retained Loss
Net Assets
31 March 2005
£’000
1,218
(650)
(650)
785
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Investment Summary
Trilogy Communications Ltd
is a world-class supplier of Audio Communications and Infrastructure equipment to the broadcast, defence, emergency management and
commercial and industrial sectors. Trilogy has a reputation for innovative design, ease of operation and reliability. The company’s products and
systems are used in more than 40 countries.
Date of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
September 2005
As at 31 August 2006
As at 28 February 2006
£500,000
£500,000
11.25%
Cost less impairment
£500,000
£500,000
11.25%
Year Ended:
Sales
Loss before Tax
Retained Loss
Net Liabilities
28 February 2006
£’000
3,603
(486)
(368)
(224)
VectorCommand Ltd
is a globally recognised authority on incident command and continues to secure orders for its core Fire Simulation and Training suites. Thirty-six UK Fire
Brigades and eight Australian Fire Authorities have deployed the system, and other users are based in Europe, the USA, Canada and the West Indies.
The company is expanding its product portfolio and the introduction of multi-agency Emergency Management tools has led to sales growth over the
last 12 months, especially overseas, and further growth is expected in the USA through its US partner.
Dates of Investment:
Amounts Invested
Valuation
% Equity/Voting Rights
Valuation Methodology
September 1999
November 2000
April 2002
As at 31 August 2006
As at 28 February 2006
£1,468,750
£1,550,400
30.3%
Recent funding round
less discount
£1,468,750
£1,938,000
30.3%
Year Ended:
31 December 2005
£’000
Sales
1,450
Loss before Tax
(414)
Retained Loss
(368)
Net Assets
1,283
The above summary does not include Radiant Networks or Reqio which are both in liquidation and valued at £nil at the year end.
The results of these companies have not been incorporated into the Income Statement. The principal activity of the Company is
to select and hold a portfolio of investments. As such, the companies are not treated as associates nor subsidiaries.
The Company has historically taken advantage of the exemptions conferred by S.229(2) and S.229(3) of the Companies Act 1985
from consolidating EnSeal Systems Ltd as the value of the company is immaterial to Foresight 4 VCT plc, an investment where
Foresight 4 VCT plc held in excess of 50% of the share capital.
Co-Investing Funds
Foresight Venture Partners also advises Foresight Technology VCT plc, Foresight 2 VCT plc and Trivest VCT plc and manages
Foresight 3 VCT plc. Together, these companies have also invested in the following companies: Oasis Healthcare (£1,472,390),
OLED-T (£1,000,000), Covion Holdings (£2,347,000), alwaysON Group (£1,300,000), Auctioning4U (£1,275,000), Ixaris Systems
(£1,250,000), Probability (£550,000), The Bunker Secure Holdings (£600,000), Infrared Integrated Systems (£1,000,000), Aigis
Blast Protection (£1,917,307), TheSkillsMarket (£1,900,000) and Trilogy Broadcast (£1,500,000).
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Income Statement
for the six months to 31 August 2006
6 months to 6 months to
31 August
31 August
2006
2005
(unaudited)
(unaudited)
£’000
£’000
Year to
28 February
2006
(audited)
£’000
Investment income and deposit interest
Investment management fees
Other expenses
Unrealised loss on revaluation of investments
261
(287)
(130)
(1,354)
97
(124)
(134)
(1,291)
158
(371)
(259)
(1,363)
Operating loss
(1,510)
(1,452)
(1,835)
216
1,666
3,064
214
1,229
—
—
Gain on realisation of investments
(Loss)/profit on ordinary activities before taxation
Tax on ordinary activities
(1,294)
—
(Loss)/profit on ordinary activities after taxation
(1,294)
214
1,229
Balance transferred (from)/to reserves
(1,294)
214
1,229
Earnings per share
(6.0)p
1.7p
9.5p
All items in the Income Statement derive from continuing operations. No operations were acquired or discontinued in the period.
The Company has only one class of business and derives its income from investments made in shares, securities and bank
deposits. Income from investments is recognised on an accruals basis.
There were no other gains or losses not recognised in the Income Statement.
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Balance Sheet
at 31 August 2006
As at
31 August
2006
(unaudited)
£’000
As at
31 August
2005
(unaudited)
£’000
As at
28 February
2006
(audited)
£’000
Non-current assets
Assets held at fair value
through profit and loss — investments
10,558
9,780
9,288
Current assets
Debtors
Money market and other deposits
Cash
253
10,104
1,467
996
1,258
1,494
1,575
4,209
1,611
11,824
3,748
7,395
(192)
(726)
(117)
Net current assets
11,632
3,022
7,278
Net assets
22,190
12,802
16,566
Capital and reserves
Called-up share capital
Share premium account
Capital redemption reserve
Revaluation reserve
Retained earnings
225
9,176
1,819
(10,317)
21,287
125
24,199
1,813
(8,891)
(4,444)
158
2,132
1,817
(8,963)
21,422
22,190
12,802
16,566
Creditors
Amounts falling due within one year
Equity shareholders’ funds
Net asset value per ordinary share
Foresight 4 VCT plc
12
98.7p
102.8p
104.6p
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Statement of Cash Flows
for the six months to 31 August 2006
6 months to 6 months to
31 August
31 August
2006
2005
(unaudited)
(unaudited)
£’000
£’000
Year to
28 February
2006
(audited)
£’000
Cash flow from operating activities
Investment income received
Deposit and similar interest received
Investment management fees paid
Secretarial fees paid
Other cash payments
57
181
(323)
(36)
(180)
133
12
(144)
(30)
(72)
181
6
(259)
(61)
(1,639)
Net cash outflow from operating activities and returns on investment
(301)
(101)
(1,772)
—
—
—
(2,377)
573
925
14
(1,077)
2,946
144
—
(2,527)
5,758
720
45
(865)
2,013
3,996
—
(690)
Taxation
Returns on investment and servicing of finance
Purchase of unquoted investments and investments quoted on AIM
Net proceeds on sale of unquoted investments
Net proceeds on deferred consideration
Net proceeds on sale of quoted investments
Net capital (outflow)/inflow from financial investment
Equity dividends paid
—
Net cash (outflow)/inflow before financing and liquid resource management
(1,166)
1,912
1,534
Management of liquid resources
Movement in money market and other deposits
(5,896)
(1,258)
(4,165)
(5,896)
(1,258)
(4,165)
7,523
(410)
(195)
832
(78)
(222)
4,768
(321)
(513)
6,918
532
3,934
(144)
1,186
1,303
Reconciliation of net cash flow to movement in net cash
(Decrease)/increase in cash for the period
Net cash at start of period
(144)
1,611
1,186
308
1,303
308
Net cash at end of period
1,467
1,494
1,611
Reconciliation of operating loss to net cash flow from operating activities
Operating loss
Unrealised losses on investments
(Decrease)/increase in creditors
(Increase)/decrease in debtors
(1,510)
1,354
(75)
(70)
(1,452)
1,291
(59)
119
(1,835)
1,363
18
(1,318)
(301)
(101)
(1,772)
Financing
Proceeds of fund-raisings
Expenses of fund-raisings
Repurchase of own shares
(Decrease)/increase in cash
Net cash outflow from operating activities
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Notes to the Interim Report
1
The unaudited interim results have been prepared on the basis of accounting policies set out in the statutory accounts of
the Company for the year ended 28 February 2006. 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 section 240 of the Companies Act 1985 and are neither audited nor
reviewed. The full audited accounts for the year ended 28 February 2006, which were unqualified, have been lodged with
the Registrar of Companies. No statutory accounts in respect of any period after 28 February 2006 have been reported on
by the Company’s auditors or delivered to the Registrar of Companies.
3
Copies of the Interim Report, have been mailed to shareholders and are available for inspection at the Registered Office of
the Company at ECA Court, South Park, Sevenoaks, Kent, TN13 1DU.
4
The number of shares in issue at 31 August 2006 was 22,481,506 ordinary shares (2005: 12,453,689). The weighted
average number of shares in issue during the period was 21,522,401 1p ordinary shares (2005: 12,435,810).
5
Earnings for the first six months should not be taken as a guide to the results for the full year.
6.
Movement in reserves
As at 28 February 2006
Share issues in the period
Expenses on share issues
Shares repurchased in the period
Net decrease in the value of investments
Retained profit for the period
As at 31 August 2006
7.
Called-up
share
capital
£’000
158
69
—
(2)
—
—
225
Share
Capital
premium redemptionRevaluation
account
reserve
reserve
£’000
£’000
£’000
2,132
1,817
(8,963)
7,455
—
—
(411)
—
—
—
2
—
—
—
(1,354)
—
—
—
9,176
1,819
(10,317)
Profit
and loss
account
£’000
21,422
—
—
(195)
—
60
Total
£’000
16,566
7,524
(411)
(195)
(1,354)
60
21,287
22,190
Summary of investment
Book cost as at 28 February 2006
Unrealised depreciation
Quoted
£’000
Unquoted
£’000
Total
£’000
325
(234)
18,383
(9,186)
18,708
(9,420)
Valuation at 28 February 2006
Movements in the period:
Purchase at cost
Disposal proceeds
Realised losses
Unrealised appreciation/(depreciation)
91
9,197
9,288
450
(14)
(34)
142
2,677
(1,126)
(492)
(333)
3,127
(1,140)
(526)
(191)
Valuation at 31 August 2006
635
9,923
10,558
Book cost as at 31 August 2006
Unrealised depreciation
727
(92)
19,442
(9,519)
20,169
(9,611)
Valuation at 31 August 2005
635
9,923
10,588
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Shareholder Information
Dividends
Interim dividends are ordinarily paid to shareholders in December. Final dividends are ordinarily paid to shareholders in July.
Shareholders who wish to have dividends paid directly into their bank account rather than by cheque to their registered address
can complete a Mandate Form for this purpose. Mandates can be obtained by telephoning the Company’s registrar,
Computershare Investor Services PLC (see over for details).
Share price
The Company’s Ordinary Shares are listed on the London Stock Exchange. The mid-price of the Company’s Ordinary Shares is
given daily in the Financial Times in the Investment Companies section of the London Share Service. Share price information can
also be obtained from many financial websites.
Notification of change of address
Communications with shareholders are mailed to the registered address held on the share register. In the event of a change of
address or other amendment this should be notified to the Company’s registrar, Computershare Investor Services PLC, under
the signature of the registered holder.
Trading shares
The Company’s Ordinary Shares can be bought and sold in the same way as any other quoted company on the London Stock
Exchange via a stockbroker. The primary market maker for Foresight 4 VCT plc is Teather & Greenwood (see over for details).
Investments in VCTs should be seen as a long-term investment and shareholders selling their shares within three years of original
purchase (five years post-6 April 2006) may lose any tax reliefs claimed. Investors who are in any doubt about selling their shares
should consult their independent financial adviser.
Please call Hazel Gross (see details below) if you or your adviser have any questions about this process.
Indicative financial calendar
April 2007
May 2007
June 2007
November 2007
Announcement of annual results for the year ended 28 February 2007
Posting of the Annual Report for the year ended 28 February 2007
Annual General meeting
Announcement of Interim Results for the six months to 31 August 2007
Enquiries
Contact Hazel
Telephone:
Fax:
e-mail:
website:
Gross, Foresight Venture Partners, VCT Investor Relations Manager for Foresight 4 VCT plc:
01732 471803
01732 471810
[email protected]
www.foresightvct.com
Foresight 4 VCT plc is managed by Foresight Venture Partners, the trading name of VCF LLP, which is authorised and regulated
by the Financial Services Authority. Past performance is not necessarily a guide to future performance. Stock markets and
currency movements may cause the value of investments 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 made in unquoted securities and smaller companies, their
potential volatility may increase the risk to the value of, and the income from, the investment.
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Corporate Information
Directors
Sponsors and Stockbrokers
Peter Dicks (Chairman)
Roger Brooke
Philip Stephens
Bernard Fairman
Teather & Greenwood
Beaufort House
15 St Botolph Street
London
EC3A 7QR
Company Secretary
Auditors and Tax Adviser
VCF Fund Managers Limited
ECA Court
South Park
Sevenoaks
TN13 1DU
Ernst & Young LLP
1 More London Place
London
SE1 2AF
Registered Office and Investment Managers
Registered Number
Foresight Venture Partners
ECA Court
South Park
Sevenoaks
TN13 1DU
3506579
Solicitors and VCT Tax Adviser
Martineau Johnson
No. 1 Colmore Square
Birmingham
B4 6AA
Registrar
Computershare Investor Services PLC
PO Box 82
The Pavilions
Bridgwater Road
Bristol
BS99 7NH
Shareholder helpline 0870 703 6384
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