Foresight Enterprise VCT (formerly Foresight 4 VCT)

Foresight 4 VCT has net assets of £117.6 million (31 Mar 2019). Its most recent share offer raised approximately £51 million in 2018/19. The VCT has a weighting towards technology, media and telecoms.

In July 2021, the VCT announced it has changed its name from Foresight 4 VCT to Foresight Enterprise VCT. 

Highlights

• Established, mature VCT portfolio with a weighting towards technology, media and telecoms
• Target dividend of 5% – not guaranteed 
• Experienced, well-resourced team
• Minimum investment £3,000
• 0.10% annual rebate through Wealth Club for three years

Review of the most recent share offer (2018/19)

The manager

Foresight Group was founded in 1984 as a specialist technology venture capital manager. In total, the group has £2.8 billion under management. Around £300 million is invested in its range of three VCTs. 

Foresight 4 VCT has a long history of takeovers, mergers and diverse investment mandates – the most recent of these being the merger with its smaller sibling, Foresight 3 VCT, in 2017. 

As background, it started life as Advent 2 VCT in 1998, and after becoming Foresight 4 VCT then merged with Foresight 5 VCT, Foresight Clearwater VCT and Acuity VCT. Foresight 3 was originally the Advent VCT, and in 2008 was merged with Noble VCT. 

As at March 2019, Foresight 4 VCT had net assets of £117.6 million, with 30 portfolio companies. Nine new investments of £7.8 million and one follow-on investment of £0.5 million were made during the year to March 2019.

Strategy

Foresight 4 VCT seeks to invest in UK unquoted companies with high growth potential. The broad aim is to deliver attractive returns to shareholders from a combination of dividends and interest payments from investments, as well as distributions from capital gains from trade sales or flotations. Foresight will focus on making investments in the following sectors: 

• Technology, media and telecommunications 
  
• Business services
  
• Industrials and manufacturing
• Consumer and leisure
• Healthcare 
  

Foresight 4 VCT was originally a technology-focused portfolio. In the late 1990s, Foresight changed the emphasis of the fund to a mix of environmental investments, MBOs (Management Buy outs), MBIs (Management Buy Ins) and replacement capital deals, before returning to its original technology focus.

Foresight sources deals from a network of 1,300 intermediaries: legal firms, accountancy firms and insurance brokers are prime examples. It hosts events for entrepreneurs and small businesses across the country and sees deals from numerous non-executive directors in Foresight's extensive personal and professional network. 

Example holdings in Foresight 4 VCT

Datapath 

Datapath represents a large holding of the VCT (15% of the VCT's assets at November 2018).

It is a Derby-based manufacturer of PC-based multi-screen computer graphics cards and video capture hardware, specialising in video wall and data wall technology. 

Picture a traffic control room. Several people are sat behind desks in front of a large video wall. Datapath provides the hardware and control box which manages the whole video wall. 

A video wall can be anything from four TVs in a square to sixty-four. Video walls have multiple applications: they are used in advertising, universities, betting shops and retailers. Datapath has around half the total global market share of the controllers for video walls. 

TFC Europe 

TFC Europe is a well established and, according to Foresight, “very slightly boring” business. Based in East Sussex, TFC is one of Europe’s leading suppliers of fixing and fastening products. From eight sites in the UK, Germany and the Czech Republic, it supplies injection-moulded technical fasteners and ring and spring products to customers across a wide range of industries, including aerospace, automotive, hydraulics and petrochemicals.

Take a Bosch lawnmower, which has around 171 parts. 11 are large, 160 are small. The smaller components – washers, springs and clips – are provided by TFC on a just-in-time basis to Bosch’s production line. 

TFC Europe has a UK and German licence to distribute Smalley springs. These are made of flat wire and take up about a third of the space of traditional springs but perform the same role. 

Target dividend

Foresight 4 VCT targets an annual dividend of 5%. Please remember, returns are not guaranteed. 

Dividend performance

NAV total return performance

Risks: important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

VCTs are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

To retain the tax benefits, VCTs should be held for at least five years. If you sell VCT shares and reinvest in new shares of the same VCT (including any mergers) within six months, tax relief can be restricted. Tax rules can change and benefits depend on circumstances.

VCTs can now only invest new money in growth capital deals. Management buyouts, replacement capital deals and investments in mature companies are no longer permitted. This results in considerably higher risks.

This is a concentrated portfolio. Datapath represents a large chunk of the VCT and problems with that business will have a significant impact on performance. 

Foresight may raise up to £80 million in new money. A large portion of the portfolio will then be in cash awaiting investment. 

Fees and charges

A summary of the fees and charges is shown below. The net initial charge shown includes the Wealth Club discount plus any early bird saving.

Share buy backs

Foresight 4 VCT operates a share buy-back facility at a discount to net asset value. This is subject to availability and Board and shareholder approval. Please see the offer documents for details.

Dividend Investment Scheme (DRIS)

There is a Dividend Investment Scheme which allows shareholders to reinvest future cash dividend payments in new shares, if desired. As these are new shares they should be eligible for tax relief (you will need to claim this on your tax return or directly with HMRC) and the shares will count towards the VCT annual subscription limit.

Annual rebate when you invest through Wealth Club

The Foresight 4 VCT includes an annual rebate for Wealth Club investors, payable for the first three years. 

This is a rebate of our renewal commission and should be equivalent to 0.10% of the Net Asset Value of the Offer Shares issued to you when you invest. Terms and conditions apply.

Our view

This VCT is a strange creature – a cross-breed of several ugly ducklings which Foresight has been working hard to turn into a beautiful swan. It is the result of the amalgamation of several previous under-performing VCTs from other providers, which Foresight was asked to take over and revitalise.

But that’s firmly in the past.

Foresight has refocused the VCT on private equity investments. For the last five years it has been diligently pruning the portfolios it inherited and, since 2015, started adding several new investments. Last year it merged with Foresight 3 VCT, which created a larger portfolio and facilitated cost savings and administrative efficiencies.

Foresight benefits from good deal flow and the enlarged Foresight 4 VCT should now have a more settled investment mandate. In addition to new growth capital investments, this offer gives investors the chance to access a mature VCT portfolio with an experienced private equity manager. In recent years, Foresight 4 has been cash-constrained. This fund raise, if successful, should allow it to participate in new deals.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.