This VCT invests in companies that use technology as a competitive advantage and raised £19.2m in its original fundraising, which closed in June 2005.
To date it has invested £10.6m in 16 companies. At the current rate of investment and allowing liquidity for share buybacks, running costs and follow on investments, the directors believe the company will be fully invested within 12 months.
As they are seeing good investment opportunities coming through, the directors are keen to increase the size of the VCT to spread the costs over a wider asset base. A C share issue was felt to be the best way to do this while protecting the interests of existing shareholders.
The C share investments will have a slightly different focus to the ordinary shares, identifying companies that are already profitable or expected to become profitable in the short term.
The directors think its investment strategy will fit nicely with the recent changes to the type of companies a VCT can invest in. These companies must now have assets of no more than £7m – less than half the previous limit of £15m.
To back this up, the VCT made 23 new and follow on investments totaling £21.3m last year. Of these, only two would be non-qualifying under the new rules.
The managers believe technology valuations are more realistic than they were in the late 1990s and that the investment environment has improved since then.
Companies within the portfolio must show they can distinguish themselves from their competitors through factors such an experienced management teams and innovative products The ability of companies to sustain their competitive advantage and their growth prospects will be carefully considered. Early stage and start up companies will be avoided and co-investment with Foresight’s other VCTs will be possible.
The portfolio will be diversified across sectors within the technology field such as IT, communications and manufacturing technology.
Although this diversity will help reduce risks, the VCT is still investing in one broad sector which makes it a more specialist, higher-risk investment than generalist VCTs. However, many businesses in all industries are dependent on technology, so returns could potentially be high if the underlying companies grow successfully.