Foresight Solar & Infrastructure VCT plc : Announc

Foresight Solar & Infrastructure VCT plc ("Company")

Announcement of Posting of Circular and opening of Tender Offer

Further to the announcement of 8 December 2016, the board of the Company ("Board") is pleased to announce the publication of a circular to Shareholders containing details of a tender offer.

In November 2016, Ordinary Shareholders were invited to complete and return a Binding Indication of Preference form (" BIP Form "), indicating whether, they preferred to sell either all or half of their Ordinary Shares back to the Company or, instead, to retain their holding and continue to benefit from a tax-free dividend income stream.

The forms have now been collated and in order to give effect to the wishes of the respondents, the Company is now seeking Shareholder approval to conduct a tender offer to buy back a maximum of 30% of the Ordinary Shares in issue, being 11,487,258 Shares (the " Tender Offer "). The Tender Offer will allow the Company to return funds to Ordinary Shareholders who now wish to exit from their investment, in full or in part, as soon as possible, while allowing those Shareholders who wish to continue to hold their Shares to do so. The Board feels that the 30% limit is appropriate and should allow Shareholders who have indicated their desire to sell their Shares to do so whilst also providing some 'headroom' to accommodate those Shareholders who were unable to respond to the previous communication but also wish to exit some or all of their investment

The Tender Offer is available to all Shareholders on the register at the Record Date and is subject to the passing of the Resolution to be proposed at the General Meeting to be held at 10:30 a.m. on 4 May 2017.

As the number of Ordinary Shares which may be repurchased pursuant to the Tender Offer is limited to a maximum of 30% of the Company's issued Ordinary Shares, in the event that Tender Forms are returned for a greater number of Shares than can be repurchased, Shareholders who returned their completed BIP Forms indicating they wish to sell some or all of their Shares will be given first priority .

Where Shareholders who did not return their BIP Form, or who indicated on their BIP Form that they wished to retain their Shares, return a Tender Form indicating that they wish to sell their Shares, their wishes will be accommodated as far as possible up to the Tender Offer limit of 30% of the Ordinary Shares. Where such applications would exceed this limit, all such Shareholders applications shall be scaled back pro-rata to the number of Shares tendered.

The Tender Offer will be undertaken at the Tender Price, which will be calculated based on the most recently announced NAV per Ordinary Share prior to the Tender Date, adjusted for the estimated costs of the Tender Offer.

Summary Timetable

Performance Incentive Payment

The prospectus published by the Company in 2010 in respect of the original Ordinary Share offer included details of the performance incentive arrangements the Company had entered into with Foresight, its investment manager. In summary, Foresight is entitled to receive 20% of distributions in excess of 100p (per Ordinary Share issued and remaining in issue) until distributions reach 130p (per Ordinary Share issued and remaining in issue) and 30% of distributions above that level.

At the time of publication, it was envisaged that, if the Company's Ordinary Share fund achieved these targets, this incentive would become payable shortly after the five-year minimum holding period following a share buyback for those wishing to exit at that point combined with an 'enhanced buyback' for those wishing to remain invested. The effect, irrespective of the outcome of these corporate actions, would have been for Foresight to receive its performance fee based on any outperformance at that date on all the Ordinary Shares in issue. The total amount of the potential performance fee, based on a Total Return of 135.3p (using figures as at 31 December 2016) would have been approximately £2.9 million, as is currently accrued in the accounts of the Company (the " Performance Incentive Payment "). As at 31 December 2016, the Total Return attributable to Ordinary Shares, prior to payment of the Performance Incentive Payment was 135.3p and, immediately after it is paid, will be 127.7p.

In the meantime, however, the VCT regulations have been changed to prevent the issue of new shares pursuant to an 'enhanced buyback'. Whilst this change has had no impact on the quantum of the performance incentive due to Foresight, it does delay the time at which it is triggered.

Enhanced buybacks were typically structured so that a shareholder might subscribe for a number of shares ('Substitution Shares") equal in number to the number of his existing shares and to finance his subscription a Shareholder would be invited to sell his existing shares back to the VCT at their current net asset value. The Shareholder would then claim additional VCT relief of up to 30% of the amount of his new subscription and, under the terms of the performance incentive arrangements the amount paid by the Company to buyback the exiting shares would rank as a distribution triggering an entitlement to performance incentive fees to the extent that the amount paid, when added to previous dividends exceeded the 100p and 130p hurdles mentioned above.

The Board considers that Foresight, as the Company's manager, has performed well in bringing the Company to the point where Ordinary Shareholders can be offered a major liquidity event in excess of the performance targets originally set. As such, we are recommending that, as part of the arrangements for the Tender Offer, Ordinary Shareholders approve an amendment to the Company's performance incentive agreement so that Foresight become entitled to a full payment of its performance fee as if the original intention of effecting a corporate action for continuing Ordinary Shareholders as well as a share buyback for those who wish to exit were still capable of being implemented. Accordingly, it is proposed to amend the performance incentive arrangements so that the definition of what constitutes a 'distribution' is extended to include the amount which could have been returned to each Ordinary Shareholder had an enhanced buyback been effected on the same date as the share buyback.

The most recently announced NAV of an Ordinary Share is 101.7p (which takes into account a 7.6p per Ordinary Share accrued Performance Incentive Payment to the Manager) and, assuming no significant event occurs prior to the buyback of the Ordinary Shares from those who wish to exit, this NAV when added to dividends paid in the past (see table below) this will amount to a Total Return for continuing shareholders of 135.3p per Ordinary Share (reducing to 127.7p once the Performance Incentive Payment is made) which is in excess of the hurdle of 100p. Therefore, it is proposed that in addition to the performance fee which will become payable in respect of the Total Return in respect of the Ordinary Shares bought back from those wishing to exit, subject to the approval of Shareholders, a performance fee payment should be made to Foresight in respect of the continuing Shareholders equal to 20% of the excess Total Return (NAV plus distributions paid in the past) above 100p per share and 30% of the excess above 130p per share. This additional payment is estimated to amount to be £2.17 million in total but will be adjusted for any intervening change of the NAV per Ordinary Share and will be paid on the same date on which performance fee payment is made following the buyback.

As part of discussions on this matter, the Board has negotiated to replace the existing hurdle with a new growth hurdle before any further performance incentive payments are due, subject to the approval by Shareholders of the variation noted above. If this is implemented, the Total Return threshold of 130p per Ordinary Share will no longer be a fixed target but will increase by a simple 5% per annum going forward: 136.5p for the Company's financial year ending 30 June 2018, 143p for the year ending 30 June 2019 and so on.

For example, and assuming the total return per Ordinary Share following the close of the Tender Offer stands at 130p exactly, should a distribution be made during the year ending 30 June 2018 which results in a Total Return of 133p being achieved, no performance incentive payment will be made to the Manager. However, if a distribution is made during the same year which results in a Total Return of 138p being achieved, the Manager will be entitled to a performance incentive payment equal to 30% of the 1.5p per share by which the increased hurdle is beaten.

The Manager is regarded as a related party of the Company under the Listing Rules. Therefore, the entering into of the amended performance incentive agreement constitutes a related party transaction for the purpose of the Listing Rules and requires Shareholders' approval.

A copy of the Circular will be shortly available for inspection on both the Foresight Group LLP website (www.foresightgroup.eu) as well as at the National Storage Mechanism ( www.morningstar.co.uk/uk/nsm ).

For further information, please contact: Gary Fraser Foresight Group LLP Telephone: 020 3667 8100