Foresight VCT PLC : Dividend Declaration
Foresight VCT plc ("the Company")
Planned Exit Shares fund and Infrastructure Shares fund - Final Dividends
The Company was launched in 1997 through an issue of ordinary shares and has raised funds on multiple occasions since launch. Currently, the Company has three separate share classes: ordinary shares of 1p each ("Ordinary Shares"), planned exit shares of 1p each ("Planned Exit Shares") and infrastructure shares of 1p each ("Infrastructure Shares"). Each separate share class, subject to Company level requirements, has its own strategy and is managed separately with the fund (comprising the assets and liabilities) of each separate share class being referred to as the "Ordinary Shares fund", the "Planned Exit Shares fund" and the "Infrastructure Shares fund".
The Ordinary Shares fund is an evergreen fund with a general venture capital investment policy aiming to provide investors with attractive returns from a portfolio of investments in fast growing unquoted UK companies. The Ordinary Shares fund represents the significant proportion of the assets of the Company.
The Planned Exit Shares fund and the Infrastructure Shares fund were launched in 2010 and 2011 respectively and each have been in the process of being wound down as further explained below.
Planned Exit Shares fund Update
The Planned Exit Shares fund was launched with the objective of investing in opportunities which provided more predictable investment returns than VCTs had traditionally offered, with a particular emphasis on opportunities with environmental benefits (e.g. renewable energy/recycling). The strategy was to realise all investments and distribute a minimum of 110p per Planned Exit Share before the sixth anniversary of the final closing date of the original offer (this being June 2016).
The majority of the investments within the Planned Exit Shares fund were realised by June 2016 with the proceeds being returned to holders of Planned Exit Shares through the payment of dividends. The remaining investments were disposed of in the following 12 months, resulting in the fund as at 30 June 2017 consisting wholly of cash and an entitlement to consideration held in escrow in respect of the sale of holdings in Trilogy Communications Holdings Limited to be released in 2019 and subject to reduction in relation to any tax claims ("Trilogy Entitlement").
The Board decided that it was in the best interests of the holders of Planned Exit Shares to seek to realise this Trilogy Entitlement to enable a final return to be made as soon as possible (and then complete the removal of the Planned Exit Shares), in accordance with the original objective of the Planned Exit Shares fund, rather than waiting until 2019 and continuing to incur the ongoing costs.
A number of options were pursued in relation to realising the Trilogy Entitlement in order to turn the Planned Exit Shares fund fully into cash. It was decided to transfer the Trilogy Entitlement to the Ordinary Shares fund in exchange for a cash payment (the Ordinary Shares fund already having a similar consideration entitlement arising from the sale of its former holdings in Trilogy Communications Holdings Limited). The transfer, completed on 6 December 2017, was at £265,712 on the basis of an independent valuation (this being a 14% premium to the carrying value of the Trilogy Entitlement as at 30 June 2017 but at a 14% discount to the amount which might be received in 2019 if there are no reductions). The transfer resulted in the assets of the Planned Exit Shares fund being fully in cash.
Planned Exit Share Final Dividend
After taking into account all expected remaining costs and expenses of the Planned Exit Shares fund (including normal ongoing expenses and costs relating to realising investments, the payment of a final dividend and the removal of the Planned Exit Shares), the Board has today declared a dividend of 7.71p per Planned Exit Share, payable to holders of Planned Exit Shares on the register as at 22 December 2017 and to be paid on 29 December 2017 ("Planned Exit Share Final Dividend"). This will be the final amount to be returned to the holders of Planned Exit Shares.
This Planned Exit Share Final Dividend will bring the total return on a Planned Exit Share to 82.71p (ignoring any tax reliefs).
The final outcome for investors in the Planned Exit Shares fund is far from that anticipated at its inception. The reasons have been summarised in previous annual reports during the life of the fund. Both the Board and Foresight Group CI Limited ("Manager") recognise that the return will represent poor overall performance and regret that this is significantly behind the original target.
Infrastructure Shares fund Update
The Infrastructure Shares fund was launched with the objective of investing in companies which generate long-term contractual revenues, thereby facilitating the payment of regular predictable dividends to investors. The intention was to ask holders of Infrastructure Shares whether they wished to exit or continue with their holdings after the initial five year holding period required to maintain upfront VCT tax reliefs.
For a variety of reasons, including maintenance of VCT status following the merger of Foresight 2 VCT plc into the Company, a number of the investments in the Infrastructure Shares fund have previously been realised.
Due to changes in the VCT regulations, the Infrastructure Shares fund could not make any new infrastructure investments in accordance with its investment strategy. The Board, therefore, wrote to the holders of Infrastructure Shares in April 2017 with a request for their expression of wishes as to whether they would like to realise their investment after the end of the initial five year holding period or continue with an investment by converting their holdings into Ordinary Shares. Of those holders of Infrastructure Shares who responded, 88.3% expressed the wish to realise their holdings.
The Board, therefore, concluded that the balance of the investments within the Infrastructure Shares fund should be realised as soon as possible and the proceeds returned to holders of Infrastructure Shares (and then the removal of the Infrastructure Shares be completed).
After offering the Infrastructure Shares fund assets on the open market, the sale of all investments has now been completed, realising £28.3m against a cost of £22.1m and a valuation as at 30 June 2017 of £24.8m. Five of the non-solar infrastructure investment assets were sold to funds managed by Equitix Investment Management Limited. The three solar investments assets and the remaining three non-solar infrastructure investment assets were sold to other funds managed by the Manager and Foresight Group LLP on the basis of an independent valuation. As a result, the Infrastructure Shares fund is also now fully represented as cash.
Infrastructure Share Final Dividend
Taking into account all expected remaining costs and expenses of the Infrastructure Shares fund (including normal ongoing expenses and costs relating to realising investments, the payment of a final dividend and the removal of the Infrastructure Shares, as well as the performance fee payable to Foresight Group LLP referred to below), the Board has today declared a dividend of 93.05p per Infrastructure Share ("Infrastructure Share Final Dividend"), payable to holders of Infrastructure Shares on the register as at 22 December 2017 and to be paid on 29 December 2017. This will be the final amount to be returned to the holders of Infrastructure Shares.
This Infrastructure Share Final Dividend will bring the total return on an Infrastructure Share to 115.05p (ignoring any tax reliefs and after the payment of performance incentive fees). The performance of the Infrastructure Shares fund has triggered a performance fee payable to Foresight Group LLP of £863,142 in accordance with the performance incentive arrangements entered into at the time of launch of the fund.
The expected costs and expenses of the Planned Exit Shares fund and the Infrastructure Shares fund have been estimated in order to calculate the Planned Exit Share Final Dividend and the Infrastructure Share Final Dividend. Should the normal ongoing expenses of the funds, plus the costs and expenses of completing the realisation of investments within the funds and the costs of removing the Planned Exit Shares and the Infrastructure Shares, be greater than the amount estimated, the Manager has agreed to meet these by way of a reduction in its future fees relating to the Ordinary Shares fund so that remaining holders of Ordinary Shares are not materially affected.
Following the payment of the Final Dividends there will be no value remaining in the Planned Exit Shares and Infrastructure Shares. The Board will, therefore, shortly be putting proposals to Shareholders to complete the removal of both share classes and a further announcement will be made.
For further information please contact:
Foresight Group LLP
Tel: 020 3667 8159