Foresight Solar & Technology VCT plc - Annual Financial Report

FORESIGHT SOLAR & TECHNOLOGY VCT PLC

Ordinary Shares Total Net Assets as at 31 March 2021: £24.2m
Ordinary Shares Net Asset Value per share as at 31 March 2021: 68.9p
Foresight Williams Technology Shares Total Net Assets as at 31 March 2021: £9.8m
Foresight Williams Technology Shares Net Asset Value per share as at 31 March 2021: 98.0p

Ordinary Shares Fund

• After payment of 2.0p in dividends, Net Asset Value per Ordinary Share at 31 March 2021 was 68.9p (31 March 2020: 72.7p).

• An interim dividend of 2.0p per Ordinary Share was paid during the year on 25 September 2020.

• At 31 March 2021, the fund held positions in 11 UK solar assets, with a total installed capacity of 69.7MW.

• During the year, our existing portfolio companies successfully completed the disposal of its holdings in Littlewood and Telecomponenti.

Foresight Williams Technology Shares Fund

• During the year, under the Offers for subscription for the Foresight Williams Technology Shares fund (the “FWT Shares fund”), dated 20 December 2019 and 30 December 2020, £8.9m of new funds were raised.

• During the year, the fund invested in its first four investments in Additive Manufacturing Technologies Limited, Audioscenic Limited, Cambridge GaN Devices Limited & Refeyn Limited, investing a total of £1.4m.

• Since the end of the reporting period, a further £2.5m has been raised, bringing the total funds raised to £12.5m.

• Since the end of the reporting period, a further seven investments have been made, bringing total deployment to £5.0m.

Chairman’s Statement

On behalf of the Board, I am pleased to present the Annual Report and Accounts for Foresight Solar & Technology VCT Plc for the year ended 31 March 2021 and to provide you with an update on the developments affecting the Company.

As with previous recent publications, my introduction to the Annual Report and Accounts will be split between the two share classes, the Ordinary Shares and the FWT Shares, with a general section for the Company as a whole at the end.

ORDINARY SHARES

Performance and portfolio activity
The underlying net asset value decreased by 1.8p per Ordinary Share before deducting the 2.0p per Ordinary Share dividend paid during the year.

This decrease was driven by a fall in the underlying value of the portfolio caused by a further reduction in market power prices forecast by the energy industry’s independent, external modelling agencies. The COVID-19 pandemic has been a factor in the decrease in the market forecast power prices, but otherwise will have a limited impact on the assets within the investment portfolio given their underlying nature, and as a result of the strategic decision to maintain a high proportion of fixed revenues linked to government subsidies and fixed price arrangements in the short and medium term.

Furthermore, during the first UK national lockdown in April, the Investment Manager moved swiftly to implement its Business Continuity Plan and co-ordinated closely with its operational service providers to ensure the safety of its staff and stakeholders and the operational stability of the portfolio. This rapid and co-ordinated action between key service providers meant that there was no operational disruption during the year as a result of the pandemic.

There were no new acquisitions in the UK portfolio during the year. As reported in the Interim Report to 30 September 2020, the sale of the Italian rooftop asset, Telecomponenti, completed in December 2020, delivering a return of 1.2x to the Company.

The Board was also pleased with the Investment Manager’s sale of the Littlewood site, completing in December 2020 at a material uplift to its valuation pre-sale. A sale of Greenersite, the smallest asset in the portfolio, is also being pursued.

Following the award of the Spanish claim (equivalent to £2m-£2.5m, or 5.7-7.1p per Ordinary Share), consistent with prior communications, there continues to remain significant challenges with respect to collectability. The Company continues to follow up this claim in the courts and as such, the Board has not assigned any current value to the claim in the net asset value reported.

The Board was also pleased that the Investment Manager was able to complete the refinancing of the investment portfolio in June 2020, reducing finance costs across the portfolio. With a portfolio now solely situated in the UK, the Board consider the Ordinary Shares fund to be optimally invested and well placed to maximise future returns for Shareholders.

The overall performance of the Ordinary Shares remains robust and the total return since inception as at 31 March 2021 was 114.9p per Ordinary Share.

Cash and working capital
The Ordinary Shares had cash and liquid resources of £0.5m at 31 March 2021 (excluding cash held in portfolio companies).

The Company receives regular interest and loan stock payments and dividends from its underlying investments enabling it to continue to fund its dividend policy as well as meeting expenses in the ordinary course of business as they fall due.

Dividends and share buybacks
In its original prospectus, the Board’s stated objective was to pay dividends of 5.0p per Ordinary Share each year throughout the life of the Company after the first year. The level of dividends was not, however, guaranteed.

Following the completion of the tender offer last year, the Board considered the future dividend policy of the Ordinary Shares fund. With the objective of maximising long-term future returns for Ordinary Shareholders, the Board will endeavour to pay out dividends derived from the income generated by the underlying portfolio, rather than a fixed pence per share. The Board and the Investment Manager hope that this may be enhanced by additional ‘special’ dividends as and when particularly successful portfolio exits are made. The impact of COVID-19 will be taken into consideration when the Board considers dividends in the near term.

During the year, an interim dividend of 2.0p per Ordinary Share was paid on 25 September 2020. This means that total dividends of 46.0p per Ordinary Share have been paid during the ten years since launch.

During the year under review, the Ordinary Shares fund repurchased 351,929 shares for cancellation at a cost of £243,000, at an average discount to NAV of 2.0%. No new Ordinary Shares were issued during the year.

Management fees
The annual management fee of the Ordinary Shares fund is calculated as 1.5% of Net Assets and equated to £379,000 during the year.

In the context of realisations achieved during the year and the continuing professional management of the portfolio, the Board believe that the annual management fee represents good value for investors.

Green Economy Mark
The Board is pleased that the Company continues to be classified as a Green Economy Issuer by the London Stock Exchange (“LSE”). This is an initiative launched by the LSE supporting sustainable finance on its markets. The Green Economy Mark recognises listed companies with 50% or more of revenues from environmental solutions.

FWT SHARES
The Foresight Williams Technology VCT share class (the “FWT Shares”) was launched in December 2019, and represents an exciting investment opportunity made possible by the collaboration between Foresight Group and Williams Advanced Engineering (‘WAE’), a technology and engineering services business, originally spun out of the Williams Formula 1 business.

The share class provides investors with the opportunity to invest in a portfolio of early-stage companies with highgrowth-potential, developing innovative and occasionally transformational technologies across a range of different sectors. It builds on the successful relationship that Foresight and WAE have enjoyed from their launch of the Foresight Williams Technology EIS Fund (the ‘EIS fund’) in November 2016, which has raised over £50 million to date and has made over twenty investments across a range of different sectors so far.

Fundraising and share issues
The Offers for subscription, dated 20 December 2019 and relaunched on 30 December 2020, are each up to £20 million (with an overallotment facility for up to an additional £10 million) through the issue of FWT Shares. During the year, across both Offers, 8.9 million FWT Shares were allotted, raising a further £8.9m, bringing the total funds raised to over £10.0m.

Post year end, a further 2.5 million FWT Shares were allotted, increasing the total funds raised to £12.5m.

Portfolio and deal activity
As at year end, the FWT Shares had made investments totalling £1.4m in four exciting companies: Additive Manufacturing Technologies Limited, Audioscenic Limited, Cambridge GaN Devices Limited and Refeyn Limited. Post year end, the FWT Shares made investments in six new companies plus one follow on investment in Additive Manufacturing Technologies Limited. Further details of all of these deals are included in the Investment Manager’s review.

Management fees
The annual management fee of the FWT Shares fund is calculated as 2.0% of Net Assets and equated to £75,000 during the year.

COMPANY

Auditor
The Board launched a tender for its audit contract following the signing of the 2020 Annual Report and Accounts. The previous auditor, KPMG LLP, was invited to tender alongside several other firms. Following this tender process, Deloitte LLP was appointed as company auditor for the year ending 31 March 2021. The Board is pleased with the appointment but would like to record its thanks to KPMG LLP for its services and advice over the past seven years.

Board composition
Mike Liston resigned from the Board on 3 February 2021. On behalf of the Board, I would like to place on record our thanks to Mike for his contribution to the success of the Company since launch and wish him well for the future.

The Board was delighted to announce that, following an independent professional search, Carol Thompson was appointed as non-executive director with effect from 22 March 2021. Carol is an experienced non-executive director and brings over 25 years’ experience in governance and strategic financial management to her new role, and has spent large parts of her career as a board member in technology and regulated businesses. She has held senior positions at Hellman & Friedman, a leading private equity investment firm, and JP Morgan. Carol will be offering herself for election at the forthcoming AGM and if elected, will be appointed as chair of the Audit Committee, as well as a member of the Nomination and Management Engagement and Remuneration Committees.

Listing of Investment Manager
The Company’s Investment Manager, Foresight Group LLP, undertook a successful listing on the London Stock Exchange as Foresight Group Holdings Ltd (FSG) on 9 February 2021. The Board welcomes the additional visibility and profile this will provide for its Investment Manager and is confident that the services provided by the Investment Manager will remain of the same high standard following its listing.

Annual General Meeting
With social distancing restrictions now relaxed as at the date of this report, we are planning to hold a usual physical Annual General Meeting this year, along with an update from the Investment Manager, taking place at the offices of Foresight Group in London on 23 September 2021 at 12.30pm.

If you intend to attend the AGM, please also notify us by email at investorrelations@foresightgroup.eu in case there are any changes to arrangements that need to be communicated at short notice.

Shareholders will note that it is proposed by resolution 11 to adopt new articles of association (“New Articles”). The key changes to the New Articles are to provide for the ability to hold virtual and hybrid general meetings. The Board wishes to note its preference is to hold AGMs by way of an open meeting and AGMs will only be held virtually where absolutely necessary.

Outlook
Following the successful refinancing of the underlying portfolio, the Company will continue to seek to optimise the performance of the existing Ordinary Shares portfolio including fixing power price agreements (PPAs) when they are deemed attractive, and pay dividends through a combination of income earned and realised gains.

Over the medium to long term, once all Ordinary Shareholders have reached their minimum 5-year qualifying holding period, the Board and the Investment Manager will, if appropriate, begin a managed process of returning the value of the Ordinary Shares fund to its Shareholders.

The Company will also continue to raise new funds in the FWT Shares fund and seek appropriate qualifying investments for this share class.

Ernie Richardson
Chairman
27 August 2021

Investment Manager’s Review – Ordinary Shares

Portfolio summary and performance
The Investment Manager has focused on delivering positive operational performance from the assets within the portfolio. The portfolio performed well with revenue 0.7% above budget aided by high levels of solar irradiation which was 5.3% above budget during the year.

The assets in the portfolio achieved a strong performance during the year despite production outages occurring at two sites. Some sites were also affected by snowfall in the early part of 2021. Further details on performance of the individual assets are included on pages 12 to 17. The operation of the assets has not been affected materially by national or regional COVID-19 lockdowns.

As anticipated, in June 2020 a new cross-portfolio debt facility was agreed with the existing lender, refinancing all project-level debt for the UK solar assets. The term of the new facility runs until 31 December 2023. By working with the existing lender, which is familiar with the whole portfolio, the Investment Manager was able to secure preferable terms on the loans.

The disposal of two smaller assets was completed and there were no acquisitions during the year.

Disposals
The existing portfolio companies sold two assets during the year. Telecomponenti – which was the fund’s sole remaining foreign asset – was sold at a profit during the year. Littlewood was also sold in a profitable exit at a price significantly above the prior valuation. A large part of the proceeds for these disposals were used to repay the majority of the borrowings originally used to finance the acquisition of Littlewood, with much of the remainder retained within the portfolio company or paid up to the Company. These disposals are illustrative of demand for these assets among certain investors which we hope, in due course, feeds through to valuation maximisation in the future. A sale of the Greenersite, the smallest UK asset, is also being pursued.

Market update
COVID-19
As the UK went into lockdown in March 2020, the energy industry saw a sharp contraction in energy demand across the country which resulted in wholesale energy prices reaching historic lows. Following an overall drop in electricity demand of 20%, the UK slowly recovered in June 2020 as lockdown restrictions eased, businesses and schools began to reopen and the holiday period came to an end in early September. With the acceleration of the vaccination program in 2021 and the reopening of businesses, energy consumption is slowly returning to pre-pandemic levels.

Green Investment
Governments in the UK and across Europe continue to remain supportive of the renewables sector and have made commitments to green energy and decarbonisation as central pillars of their pandemic recovery packages. In November the UK Prime Minister announced plans for a Green Industrial Revolution which included a ‘Ten Point Plan’ which promised to mobilise up to £12 billion of state investment and potentially three times as much from the private sector in a bid to create 250,000 ‘green jobs’. The UK has also stated its intention to use both the G7 Summit in June and the COP26 Summit in November to push other countries to follow its ambitious net carbon neutral plans. Despite the disruption caused by the emergence of COVID-19 during 2020, the UK continued its path towards its 2050 decarbonisation goal with renewables continuing to play an increasing role. While the extensive pipeline of UK subsidy free solar expected to be constructed during the year fell short of expectations, it is estimated that a further 545 MW of solar capacity was connected in 2020, 60% of which was utility scale.

Brexit

2020 marked the year the UK left the European Union, with the EU-UK Trade and Cooperation Agreement agreed on 24 December 2020 and ratified by the UK Parliament on 30 December 2020. The impact on the Company is expected to be limited considering the measures implemented in recent years including maintaining robust levels of spare parts. The Investment Manager will continue to review the impact of the Agreement on the Company’s operations.

Revenues
During the year, the majority of revenue from the UK portfolio investments came from subsidies (predominantly under the ROC scheme) and other green benefits. These revenues are directly and explicitly linked to inflation for 20 years from the accreditation date under the ROC regime and subject to Retail Price Index (“RPI”) inflationary increases applied by Ofgem in April of each year. The remaining revenues derive from electricity sales by our UK portfolio companies, which are subject to wholesale electricity price movements.

The average power price achieved during the year was as high as £67.25 per MWh, representing increases from the average price achieved in the 12 months to 31 March 2020 (£44.45 per MWh). Power prices rose gradually throughout the year as the emergence from COVID-19 lockdown increased demand. There remains volatility and uncertainty about market factors affecting prices in the short to medium term. The Investment Manager continues to monitor these to seek the best opportunities to enter into short term price fixing arrangements when they arise.

During the year there was a 5.3% decrease in long term power price forecasts. This was driven by a major reduction in forecast electricity demand as a result of COVID-19 induced economic restrictions. The Investment Manager uses these forward-looking power price assumptions to assess the likely future income of the portfolio investments for valuation purposes.

The Company’s assumptions are formed from a blended average of the forecasts provided by third party consultants and are updated on a quarterly basis. The forecasts anticipate a small increase in prices over 2021-2031 and then remain broadly stable over the longer term.

This decrease from the March 2020 figure is largely driven by global factors including the pandemic, fluctuating exchange rates, weather events and the impact of gas prices on power prices. The various lockdown measures announced across Europe over Winter 2020 will continue to incite volatility in power prices, with near-term contracts falling following strong gas supply to Europe.

Power Purchase Agreements (“PPAs”) are entered into between each portfolio company and regulated retail energy suppliers in the UK electricity supply market. Under the PPAs, each portfolio company will sell the entirety of the generated electricity and ROCs. Electricity can be sold at a fixed price for an agreed duration, or at a variable rate, as agreed from time to time.

The PPA strategy adopted by our portfolio companies seeks to optimise their revenues from the power generated, while keeping the flexibility to manage their solar assets appropriately. The Boards of our portfolio companies, with assistance from Foresight, constantly assess conditions in the electricity market and set their pricing strategy on the basis of likely future movements.

The Company’s strategy is to maintain c.30% of the portfolio under fixed pricing agreements, with the remainder selling electricity at a variable market rate. As at the year end date, the assets with fixed arrangements currently account for 34% of capacity.

Sustainable Investing
Sustainability lies at the heart of the Investment Manager’s approach, and the Investment Manager believes that investing responsibly, seeking to make a positive social and environmental impact, is critical to its long-term success. These factors have been integrated into the investment process, and are actively supported by all involved, regardless of seniority. Foresight continues to refine its sustainability tracking to further improve its investment processes, enhance the sustainability performance of existing assets and demonstrate more comprehensively the environmental benefits and social contribution of the Company’s activities, implementing Foresight Group’s Sustainable Investing in Infrastructure Strategy. This strategy focuses on ensuring all assets are evaluated prior to acquisition and throughout their ownership, in accordance with Foresight Group’s Sustainability Evaluation Criteria.

There are five central themes to the Criteria, which cover the key areas of sustainability. The five criteria are:

1. Sustainable Development Contribution: The development of affordable and clean energy and improved resource and energy efficiency.

2. Environmental Footprint: Assessing potential environmental impact such as emissions to air, land and water, effects on biodiversity and noise and light pollution

3. Social Engagement: Engagement and consultation with local stakeholders. Ensuring a positive local economic and social impact, community engagement and the health and wellbeing of stakeholders.

4. Governance: Compliance with relevant laws and regulations and ensuring best practice is followed.

5. Third Party Interactions: Third party due diligence is conducted on key counterparties to ensure adherence to the aforementioned criteria where relevant.

Land Management
Compliance audits have been carried out on all UK sites held by portfolio companies, confirming that they are in line with government permits and conditions. Foresight Group remains a working partner of the Solar Trade Association’s Large Scale Asset Management Working Group. Foresight is a signatory to the Solar Farm Land Management Charter and seeks to ensure that the solar farms operated by all of our portfolio companies are managed in a manner that maximises the agricultural, landscaping, biodiversity and wildlife potential, which can also contribute to lowering maintenance costs and enhancing security. As such, Foresight Group regularly inspects sites and advises portfolio companies to develop site specific land management and biodiversity enhancement plans to secure long term gains for wildlife and ensure that the land and environment are maintained to a high standard. This includes:

• Management of grassland areas within the security fencing to promote wildflower meadows and sustainable sheep grazing;

• Planting and management of hedgerows and associated hedge banks;

• Management of field boundaries between security fencing and hedgerows;

• Sustainable land drainage and pond restoration;

• Installation of insect hotels and reptile hibernacula;

• Installation of boxes for bats, owls and kestrels; and

• Installation of beehives by local beekeepers.

Most solar parks are designed to enable sheep grazing and the remaining plants are investigated for alterations to ensure that the farmland on which the solar assets are located can remain useful in agricultural production, which is a frequent desire of local communities. Examples of sustainable land management activities across the portfolio include:

• Free-range chickens grazing at the New Kaine site

• The grounds of Turweston continue to be managed as wildflower meadow

• Beehives are on site at Turweston

• Bird and bat boxes have been installed at Basin Bridge

• At Turweston additional gates with sufficient gaps at the lower edge were installed to allow for safe wildlife passage across the site

• Trees and hedgerows have been planted, and hedge infill work undertaken at Dove View and Hurcott.

Social and Community Engagement
Foresight Group actively seeks to engage with the local communities around the solar assets operated by our portfolio companies and regularly attends parish meetings to encourage community engagement and promote the benefits of their solar assets.

Due to COVID-19, there were no site visits during the year and the Investment Manager was unable to attend parish meetings. However, the Investment Manager has continued to make annual community payments for Marchington, which have been extended to reflect the site’s 40-year consent.

Health and Safety
Health and safety audits have been carried out at all assets during the year and there have been no reportable or material health and safety incidents.

In May 2020 there was a fire close to the Stables farm asset. Although outside of the boundaries of the site, the event was recorded and investigated as a Near Miss to identify and eliminate any fire hazards from the premises.

Safety, Health, Environment and Quality (“SHEQ”) performance and risk management are a top priority at all levels for Foresight Group. To further improve the management of SHEQ risks, reinforce best practice and ensure non-compliance with regulations is avoided, Foresight Group continues to work with independent health and safety consultants who regularly visit the assets operated by our portfolio companies to ensure they not only meet, but exceed, industry and legal standards. The consultants have confirmed that all sites are compliant with applicable regulations.

Recommendations have been investigated with follow-up actions agreed to help raise standards further. During the year, improvements to method statements have been made relating to the safe isolation of central inverters. The health and safety advisor provided additional recommendations to plan movement around the sites. The advisor noted that wet weather conditions make traversing the sites difficult in some places, especially when completing manual handling of heavy parts. Recommendations included a warning regarding driving off-road, which will be implemented for applicable sites by the Operation and Maintenance companies.

Outlook
Despite a fall in external power prices negatively impacting the portfolio valuation in the early part of the year, it has otherwise been another positive year for the Company with strong performance from the assets.

The Ordinary Shares fund has a solar-only investment mandate and therefore has an exposure to power pricing. Valuations are particularly influenced by long-term power price forecasts which have fallen over the life of this fund due to a reduction in the cost of renewable energy and the cost of capital that supports new renewable energy deployment. At the time of writing, there are reasons to believe that this downward trend may be at an end. Power prices over the winter period have exceeded pre-pandemic levels and these power price levels have persisted into the spring period following this reporting period.

The Investment Manager successfully concluded the negotiation of new debt terms with the existing lender to refinance the majority of the UK solar assets, with pricing materially less than the previous arrangements. Long-term renewable energy projects typically have inflation-linked income streams, often with a high degree of Government backing through subsidies, which will be unaffected by a slowdown in economic growth.

The Investment Manager is working on various fronts to extend the operating lives of all assets in the portfolio which is expected to add value when the assets are eventually sold. There is cautious optimism that asset values will trade up over the next couple of years before the next exit is considered.

The Company will continue to focus on delivering strong operational performance across the portfolio.

Foresight Group LLP
Investment Manager

27 August 2021

Investment Manager’s Review – Foresight Williams Technology Shares

Summary
Between its launch on 20 December 2019 and the year end, the Foresight Williams Technology Shares (“the FWT fund”) had raised £10.0 million. The Offer provides investors with the opportunity to invest in a portfolio of early-stage companies with high growth-potential, developing innovative and occasionally transformational technologies across a range of different sectors. As at 31 March 2021, the FWT fund had made four investments totalling £1.4 million:

Additive Manufacturing Technologies (AMT): a manufacturer of systems that automate the postprocessing covering functionality including unpacking, surface smoothing, sealing and colouring of 3D printed parts.

Audioscenic: a University of Southampton spin-out applying computer vision software to create 3D immersive audio experiences initially in consumer soundbars.

Cambridge GaN: a developer of a new generation of gallium nitride semiconductor power devices.

Refeyn: a spin-out from the University of Oxford developing a new generation of biomolecule analysis instrumentation based on weighing molecules using light, known as mass photometry.

Further information relating to each of these investments can be found on pages 24 to 26.

Post period acquisitions
Subsequent to the year end, the FWT fund has made seven further investments, totalling £3.6 million, including:

Insphere
In April, the FWT fund completed its investment into INSPHERE, a Bristol-based company pioneering measurement systems that enhance the accuracy of automated production lines, boosting productivity and profitability for manufacturers. INSPHERE’s measurement systems meet the growing demand from high value manufacturing customers for smarter “Industry 4.0” automation solutions. The company’s philosophy is to develop measurement systems that monitor and control the manufacturing process itself, rather than simply checking parts once they have been produced. INSPHERE’s in-process metrology systems operate in real-time, automatically measuring the accuracy of the production line robots and instructing self-correction, creating a closed-loop control system. This not only avoids downtime but also provides significantly quicker line set up, reducing waste, improving productivity and ultimately enhancing profitability for manufacturers.

Machine Discovery
The FWT fund completed its investment into Machine Discovery in April 2021. Machine Discovery is an ambitious early-stage software company that was spun out of the University of Oxford in 2019 to develop machine learning technology that simplifies, automates and accelerates simulation tasks. Machine learning is used in artificial intelligence. Software algorithms allow computers to analyse massive qualities at once, and learn from past data to identify meaningful patterns, all at extraordinary speed. Today, simulations used in the engineering and technology sectors are increasingly complex and costly. Machine Discovery is commercialising a new software platform, based on a new type of algorithm to make these simulations much faster, easier and less costly.

Vector Photonics
The FWT fund’s investment into Vector Photonics, a University of Glasgow spin-out commercialising the next generation of semiconductor lasers, was completed in April. Known as a PCSEL (photonic crystal surface emitting laser), Vector Photonics’ design uses a photonic crystal with a series of reflectors to control and confine the laser. This results in dramatically improved performance including faster switching speeds, longer wavelengths (>1000 nanometre) and higher output power. This novel design is expected to reduce the overall manufacturing cost of laser devices and provide real benefits over existing laser technology. Areas expected to benefit include some of the fastest growing technology markets in the world; data communications, additive manufacturing (including metal and plastic printing), LiDAR (light detection and ranging) and optical sensing.

Fundraising
The Offer, made possible through an innovative collaboration between Foresight Group and Williams Advanced Engineering Ltd, continues to build positive momentum in the market. Since the year end, a further £2.5 million has been raised, bringing the total raised to £12.5 million.

Climate Change Statement
The Investment Manager has a long-term investing vision and its strategy aligns with the UN’s Sustainable Development Goals and the decarbonisation targets set out in the 2015 Paris Agreement. To meaningfully assist international efforts to limit the global temperature increase this century to 2 degree Celsius, the Investment Manager follows the recommendations of the Task Force for Climate- Related Financial Disclosures (“TCFD”) by integrating analysis of climate related risks and opportunities in the investment cycle and increasing awareness of climate related issues internally and throughout its operations.

Recognising the importance of assessing the climate-related risks that have the potential to materially impact its business, the Investment Manager actively participates or supports a number of other climate related initiatives and organisations:

1. Principles for Responsible Investment. The Investment Manager has been a signatory of the Principles for Responsible Investment (“PRI”) since 2013. The PRI is a UN supported network of global investors working to promote sustainable investment through the incorporation of environmental, social and governance (“ESG”) principles.

2. UN Global Compact. Founded in 2000, the United Nations Global Compact (“UNGC”) is the world’s largest corporate sustainability initiative. The Investment Manager has been a member since 2019 and joins over 9,000 companies across 165 countries in its commitment to responsible and sustainable practices. The Investment Manager’s first Communication on Progress was published in June 2021

3. Initiative Climat International. The Investment Manager recognises that a global systemic challenge such as climate change requires a collaborative approach and to this end, it has become a member of the initiative Climat International (“iCI”). The Investment Manager is engaging with its peers in the industry to find ways to reduce the carbon emissions of investee companies whilst taking into account the unique challenges faced by companies with smaller operations, such as those within the FWT Shares portfolio.

The Company supports the Investment Manager’s views on climate change and ESG and its vigorous process in the evaluation of environmental and social impacts throughout the investment lifecycle. For each material risk identified during due diligence, a mitigation plan is proposed in the investment submission and these actions form part of the portfolio company’s “100-day plan” post-investment. From an environmental perspective, analysis relating to the implementation of good industry practice in limiting and mitigating the potentially adverse environmental impact of a company’s operations has four principal components:

• Environmental policy and track record

• Energy and resource usage and environmental impact

• Environmental impact of products and services

• Environmental performance improvements

As long-term stewards of its investors’ capital, the Investment Manager will use its experience and capabilities to guide its investee companies towards better sustainability and ESG performance throughout the course of its investment through to exit.

Pipeline
The onset of the COVID-19 pandemic and the strict lockdown measures introduced in March 2020 triggered a slowdown in investment activity in the market targeted by the FWT fund. Encouragingly, the Investment Manager started to see a recovery in the demand for growth capital towards the end of the summer, supporting the development of a healthy pipeline of opportunities as the fund began to invest. The Investment Manager expects this to increase as the economy recovers from the pandemic. At the time of writing, two further deals had passed the Investment Manager’s final Investment Committee stage and were nearing completion. On three further deals, terms and exclusivity had been agreed and, subject to Investment Committee approval, were progressing to due diligence.

Foresight Group LLP
Investment Manager
27 August 2021

Unaudited Non-Statutory Analysis of the Share Classes

Income Statement
for the year ended 31 March 2021
	Ordinary Shares			FWT Shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investment holding losses	—	(17,500)	(17,500)	—	—	—
Income	17,667	—	17,667	—	—	—
Investment management fees	(95)	(284)	(379)	(19)	(56)	(75)
Interest payable	(71)	—	(71)	—	—	—
Other expenses	(362)	—	(362)	(116)	—	(116)
Profit/(loss) before taxation	17,139	(17,784)	(645)	(135)	(56)	(191)
Taxation	—	—	—	—	—	—
Profit/(loss) after taxation	17,139	(17,784)	(645)	(135)	(56)	(191)
Profit/(loss) per share	48.4p	(50.2)p	(1.8)p	(3.5)p	(1.5)p	(5.0)p

Balance Sheet
at 31 March 2021
				Ordinary Shares		FWT Shares
				£'000		£'000
Fixed assets
Investments held at fair value through profit or loss				23,911		1,441
Current assets
Debtors				216		893
Cash and cash equivalents				533		7,543
				749		8,436
Creditors
Amounts falling due within one year				(482)		(59)
Net current assets				267		8,377
Net assets				24,178		9,818
Capital and reserves
Called-up share capital				351		100
Share premium				—		7,515
Capital redemption reserve				203		—
Distributable reserve				35,995		2,260
Capital reserve				(12,510)		(57)
Revaluation reserve				139		—
Equity shareholders' funds				24,178		9,818
Number of shares in issue				35,109,032		10,021,408
Net asset value per share				68.9p		98.0p

At 31 March 2021 there was an inter-share debtor/creditor of £52,000 which has been eliminated on aggregation.

Unaudited Non-Statutory Analysis of the Share Classes

Reconciliations of Movements in Shareholders’ Funds
for the year ended 31 March 2021

Ordinary Shares	Called-up share capital	Share premium account	Capital redemption reserve	Distributable reserve	Capital reserve	Revaluation reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 April 2020	354	6,967	200	12,853	(12,226)	17,639	25,787
Expenses in relation to prior year share issues	—	(7)	—	(5)	—	—	(12)
Repurchase of shares	(3)	—	3	(243)	—	—	(243)
Cancellation of share premium	—	(6,960)	—	6,960	—	—	—
Investment holding losses	—	—	—	—	—	(17,500)	(17,500)
Dividends paid	—	—	—	(709)	—	—	(709)
Management fees charged to capital	—	—	—	—	(284)	—	(284)
Revenue profit for the year	—	—	—	17,139	—	—	17,139
As at 31 March 2021	351	—	203	35,995	(12,510)	139	24,178
FWT Shares	Called-up share capital	Share premium account	Capital redemption reserve	Distributable reserve	Capital reserve	Revaluation reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 April 2020	11	1,134	—	(8)	(1)	—	1,136
Share issues in the year	89	9,062	—	—	—	—	9,151
Expenses in relation to share issues	—	(277)	—	—	—	—	(277)
Expenses in relation to prior year share issues	—	(1)	—	—	—	—	(1)
Cancellation of share premium	—	(2,403)	—	2,403	—	—	—
Management fees charged to capital	—	—	—	—	(56)	—	(56)
Revenue loss for the year	—	—	—	(135)	—	—	(135)
As at 31 March 2021	100	7,515	—	2,260	(57)	—	9,818

Income Statement for the year ended 31 March 2021

	Year ended 31 March 2021			Year ended 31 March 2020
	Revenue £’000	Capital £’000	Total £’000	Revenue £’000	Capital £’000	Total £’000
Investment holding losses	—	(17,500)	(17,500)	—	(7,881)	(7,881)
Realised losses on investments	—	—	—	—	(941)	(941)
Income	17,667	—	17,667	3,385	—	3,385
Investment management fees	(114)	(340)	(454)	(147)	(440)	(587)
Interest payable	(71)	—	(71)	(397)	—	(397)
Other expenses	(478)	—	(478)	(449)	—	(449)
Profit/(loss) before taxation	17,004	(17,840)	(836)	2,392	(9,262)	(6,870)
Taxation	—	—	—	—	—	—
Profit/(loss) after taxation	17,004	(17,840)	(836)	2,392	(9,262)	(6,870)
Profit/(loss) per share:
Ordinary Share	48.4p	(50.2)p	(1.8)p	5.6p	(21.6)p	(16.0)p
FWT Share	(3.5)p	(1.5)p	(5.0)p	(0.7)p	(0.1)p	(0.8)p

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

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

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

Reconciliation of Movements in Shareholders’ Funds

Year ended 31 March 2021	Called-up share capital	Share premium account	Capital redemption reserve	Distributable reserve*	Capital reserve*	Revaluation reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 April 2020	365	8,101	200	12,845	(12,227)	17,639	26,923
Share issues in the year	89	9,062	—	—	—	—	9,151
Expenses in relation to share issues	—	(277)	—	—	—	—	(277)
Expenses in relation to prior year share issues	—	(8)	—	(5)	—	—	(13)
Repurchase of shares	(3)	—	3	(243)	—	—	(243)
Cancellation of share premium	—	(9,363)	—	9,363	—	—	—
Investment holding losses	—	—	—	—	—	(17,500)	(17,500)
Dividends paid	—	—	—	(709)	—	—	(709)
Management fees charged to capital	—	—	—	—	(340)	—	(340)
Revenue profit for the year	—	—	—	17,004	—	—	17,004
As at 31 March 2021	451	7,515	203	38,255	(12,567)	139	33,996
Year ended 31 March 2020	Called-up share capital	Share premium account	Capital redemption reserve	Distributable reserve*	Capital reserve*	Revaluation reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
As at 1 April 2019	432	7,032	122	19,426	(10,846)	25,520	41,686
Share issues in the year	11	1,162	—	—	—	—	1,173
Expenses in relation to share issues	—	(28)	—	—	—	—	(28)
Expenses in relation to prior year share issues	—	(26)	—	—	—	—	(26)
Repurchase of shares	(78)	—	78	(6,390)	—	—	(6,390)
Expenses in relation to tender offer	—	(39)	—	—	—	—	(39)
Realised losses on disposal of investments	—	—	—	—	(941)	—	(941)
Investment holding losses	—	—	—	—	—	(7,881)	(7,881)
Dividends paid	—	—	—	(2,583)	—	—	(2,583)
Management fees charged to capital	—	—	—	—	(440)	—	(440)
Revenue profit for the year	—	—	—	2,392	—	—	2,392
As at 31 March 2020	365	8,101	200	12,845	(12,227)	17,639	26,923

* Total distributable reserves at 31 March 2021 were £25,688,000 (2020: £618,000).

Balance Sheet at 31 March 2021 Registered Number: 07289280

	As at 31 March 2021 £’000	As at 31 March 2020 £’000
Fixed assets
Investments held at fair value through profit or loss	25,352	42,170
Current assets
Debtors	1,057	293
Cash and cash equivalents	8,076	1,802
	9,133	2,095
Creditors
Amounts falling due within one year	(489)	(17,342)
Net current assets/(liabilities)	8,644	(15,247)
Net assets	33,996	26,923
Capital and reserves
Called-up share capital	451	365
Share premium	7,515	8,101
Capital redemption reserve	203	200
Distributable reserve	38,255	12,845
Capital reserve	(12,567)	(12,227)
Revaluation reserve	139	17,639
Equity shareholders’ funds	33,996	26,923
Net asset value per share:
Ordinary Share	68.9p	72.7p
FWT Share	98.0p	99.1p

Cash Flow Statement for the year ended 31 March 2021

	Year ended 31 March 2020 £’000	Year ended 31 March 2020 £’000
Cash flow from operating activities
Deposit and similar interest received	1	11
Investment management fees paid	(435)	(600)
Secretarial fees paid	(172)	(128)
Other cash receipts/(payments)	43	(387)
Net cash outflow from operating activities	(563)	(1,104)
Cash flow from investing activities
Purchase of investments	(1,441)	—
Investments pending completion	(796)	—
Net proceeds on sale of investments	759	5,280
Investment income received	406	3,129
Net cash (outflow)/inflow from investing activities	(1,072)	8,409
Cash flow from financing activities
Proceeds of fund raising	9,065	1,162
Expenses of fund raising	(204)	(26)
Repurchase of own shares	(243)	(6,390)
Equity dividends paid	(709)	(2,583)
Net cash inflow/(outflow) from financing activities	7,909	(7,837)
Net inflow/(outflow )of cash in the period	6,274	(532)
Reconciliation of net cash flow to movement in net funds
Increase/(Decrease) in cash for the period	6,274	(532)
Net cash at start of period	1,802	2,334
Net cash at end of period	8,076	1,802

Analysis of changes in net debt
	At 1 April 2020 £’000	Cash Flows £’000	Other non cash changes £’000	At 31 March 2021 £’000
Cash and cash equivalents
Cash	1,802	6,274	—	8,076
Borrowings
Loan with Youtan due within one year	15,811	—	(15,811)	—

Notes to the accounts

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 2021. 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, as updated in December 2018 with further COVID-19 guidance issued in March 2020.

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 2021, which were unqualified and did not contain any statements under S498(2) or S498(3) of Companies Act 2006, will be lodged with the Registrar of Companies. Statutory accounts for the year ended 31 March 2021 including an unqualified 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 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 share

Net asset value per Ordinary Share is based on net assets at the year end of £24,178,000 (2020: £25,787,000) and on 35,109,032 Ordinary Shares (2020: 35,460,961), being the number of Ordinary Shares in issue at that date.

Net asset value per FWT Share is based on net assets at the year end of £9,818,000 (2020: £1,136,000) and on 10,021,408 FWT Shares (2020: 1,145,927), being the number of FWT Shares in issue at that date.

5. Return per share

	Year ended 31 March 2021		Year ended 31 March 2020
	Ordinary Shares £'000	FWT Shares £’000	Ordinary Shares £'000	FWT Shares £’000
Total loss after taxation	(645)	(191)	(6,861)	(9)
Total loss per share (note a)	(1.8)p	(5.0)p	(16.0)p	(0.8)p
Revenue profit/(loss) from ordinary activities after taxation	17,139	(135)	2,400	(8)
Revenue profit/(loss) per share (note b)	48.4p	(3.5)p	5.6p	(0.7)p
Capital loss from ordinary activities after taxation	(17,784)	(56)	(9,261)	(1)
Capital loss per share (note c)	(50.2)p	(1.5)p	(21.6)p	(0.1)p
Weighted average number of shares in issue during the period (note d)	35,414,680	3,831,368	42,897,610	1,145,927

Notes:
a) Total loss per share is total loss after taxation divided by the weighted average number of shares in issue during the period.
b) Revenue profit/(loss) per share is revenue profit/(loss) after taxation divided by the weighted average number of shares in issue during the period.
c) Capital loss per share is capital loss after taxation divided by the weighted average number of shares in issue during the period.
d) The weighted average number of shares in issue for the FWT shares reflect the weighted average number of shares in issue following the first allotment of shares.

6. The Annual General Meeting will be held at 12.30pm on 23 September 2021 at the offices of Foresight Group, The Shard, 32 London Bridge Street, London, SE1 9SG. If you intend to attend the AGM, please also notify us by email at investorrelations@foresightgroup.eu in case there are any changes to arrangements that need to be communicated at short notice. Please refer to the formal notice on page 86 of the Annual Report and Accounts for further details in relation to this year’s meeting.

7. Income

	Year ended 31 March 2021 £’000	Year ended 31 March 2020 £’000
Loan stock interest	442	609
Dividends received	233	2,765
Bank interest	1	11
Release of loans payable*	16,991	—
	17,667	3,385

*Release of loans payable in the year relates to the release of the Company’s loan liability from its wholly owned subsidiary, Youtan Limited and associated accrued interest. The release had an equal and opposite effect on the carrying value of Investments, resulting in a nil impact for the NAV of the Company.

8. Investments held at fair value through profit or loss

	Ordinary Shares Fund £’000	FWT Shares Fund £’000	Company £’000
Book cost at 1 April 2020	24,531	—	24,531
Investment holding gains	17,639	—	17,639
Valuation at 1 April 2020	42,170	—	42,170
Movements in the year:
Purchases at cost	—	1,441	1,441
Disposal proceeds	(759)	—	(759)
Realised losses	—	—	—
Investment holding losses	(17,500)	—	(17,500)
Valuation at 31 March 2021	23,911	1,441	25,352
Book cost at 31 March 2021	23,772	1,441	25,213
Investment holding gains	139	—	139
Valuation at 31 March 2021	23,911	1,441	25,352

9. Transactions with the Investment Manager

Details of arrangements with Foresight Group LLP and Foresight Group CI Limited are given in the Directors’ Report and Notes 3 and 13 of the annual report and accounts. All arrangements and transactions were on an arms length basis.

Foresight Group CI Limited, which acted as investment manager to the Company until 27 January 2020 when Foresight Group LLP was appointed as Investment Manager, earned fees of £nil (2020: £491,000). Foresight Group LLP, who was
appointed as Investment Manager on 27 January 2020 earned fees of £454,000 up to 31 March 2021 (2020: £96,000). No performance fee was paid or accrued for the year (2020: nil).

Foresight Group LLP, to whom the Investment Manager delegated the function of Company Secretary from November 2017, earned fees of £169,000 (2020: £131,000), during the year.

At the balance sheet date there was £nil (2020: £112,000) due from Foresight Group CI Limited and £30,000 (2020: £86,000) due from Foresight Group LLP. No amounts have been written off in the year in respect of debts due to or from related parties.

END