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Foresight 2 VCT plc
02
Chairman’s Statement
During the period, £664,322 was invested in follow-on
funding rounds in six portfolio companies: Oxonica plc
(£181,473), Oled-T (£180,647), Closed Loop London
(£166,667), The Bunker Secure Hosting (£81,606), High
Integrity Solutions (£37,500), and ClockWorx (£16,429).
After suffering a contract setback for its fuel additive,
Envirox, during the first half of 2007 which had a
significant impact on the company’s operations as well as
its share price, Oxonica recently reported performance
validation for this additive and significant commercial
progress in mainland Europe and Russia. In December
the company announced that it had raised in excess of
£4 million through a share placing to existing
shareholders. New contract wins in the biodiagnostics
and security divisions also helped sales.
Closed Loop London is a business at the leading edge of
plastics recycling in the UK. The company is initially
focused on producing food grade recycled PET
(polyethylene terephthalate) and HDPE (high density
polyethylene). PET is the clear plastic used in over 50%
of soft drinks bottles, with over 300,000 tonnes used per
annum in the UK with none currently recycled for use as
food grade plastic. HDPE is the white plastic used in milk
bottles. Closed Loop London is nearing completion of its
first recycling plant in Dagenham and has plans in place
for a second facility in the North-West. Initial
commissioning of the first plant will commence at the end
of June with the whole plant coming on-stream within
three months, starting with PET and then with the HDPE
facilities.
The Bunker Secure Hosting is experiencing strong
demand for its ultra secure IT hosting services and is
developing plans for a substantial increase in its capacity.
I C Share Portfolio — Investment Activity
The C Share fund continues to progress well and three
new investments were made during the six months under
review: Lynwood Group Holdings Limited (£250,000),
AWP Environmental Limited (£500,000) and Land Energy
Limited (£500,000).
Lynwood is a co-investment with the Ordinary Shares
fund and further details are included earlier in this
statement.
AWP plans to develop waste to energy power stations,
geographically distributed across the country. The
investment offers significant environmental benefits. It will
divert waste from landfill, contributing to the reduction in
landfill targeted by EU and UK legislation. It will also
generate renewable electricity, contributing to government
targets and earning Renewable Obligation Certificates.
Land Energy has been set up to generate renewable
power from virgin wood and to exploit the growing
demand for wood pellets as a renewable fuel, through a
series of plants countrywide. The plants will generate
electricity for export to the grid and either use heat for
pellet production or supply heat to a nearby user. The
company will therefore be both a combined heat and
power (CHP) generation operator and a pellet producer.
The UK Government has identified CHP as a highly
efficient form of energy use, which will be further
incentivised from April 2009 by becoming eligible for
double Renewable Obligations Certificates.
A follow-on investment of £166,667 was also made from
the C Shares fund during the period in Closed Loop
London, which is described in more detail earlier.
I Valuation policy
Investments held by the Company have been valued in
accordance with the International Private Equity and
Venture Capital (IPEVC) guidelines developed by the
British Venture Capital Association and other organisations
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 or accretion 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 March 2008. The portfolio valuations
are prepared by Foresight Group and are subject to
approval by the Board.
I Share Issues and Share Buy-backs
During the period, the Company issued 196,008 Ordinary
Shares under the Dividend Investment Scheme at
101.19p per share raising approximately £198,000 in
aggregate. These shares were issued under the new VCT
provisions that commenced on 6 April 2006, namely:
30% upfront income tax relief which can be retained by
qualifying investors if the shares are held for the minimum
five year holding period.
As a result of the linked offer for subscription, Foresight 2
issued 1,493,309 Ordinary Shares during the period at
prices ranging from 104.0p to 114.0p per share.
It continues to be the Company’s policy to consider
repurchasing shares when they become available in order
to provide a degree of liquidity for the Company’s shares.
During the period, the Company repurchased 252,435
Ordinary Shares for cancellation at a cost of £222,588
and at an approximate discount to Net Asset Value (NAV)
of 10%.
A total of 4,353,152 C Shares were issued under its offer
for subscription at a cost of £1 per share during the
period.
I Manager Change of Name
The Investment Manager changed its name from Foresight
Venture Partners to Foresight Group on 1 October 2007.
I Outlook
To date there has been no significant fallout from the
current credit crunch on the levels of merger and
acquisition activity at the smaller end of the market in
which Foresight 2 VCT operates and of which the sale of
Utarget and Covion Holdings are examples. Your
Manager will continue to pursue potential realisations
from within the portfolio.
The market in which Foresight 2 VCT operates continues
to be encouraging in terms of potential new investment
opportunities, as evidenced by the current deal flow
being reviewed by Foresight Group. Foresight 2 VCT will
have access to this deal flow of new opportunities as it
invests new funds raised as well as reinvesting some of
the proceeds from successful realisations.
Peter Dicks
Chairman
30 May 2008