Foresight 3 VCT : Interim Results to 30 June 2018 and Dividend Announcement

20.4 Other risks

Political and economic risk

The value of Ordinary Shares may be affected by uncertainties such as political or diplomatic developments, social and religious instability, changes in government policies, taxation or interest rates, currency repatriation and other political and economic developments in law or regulations and, in particular, the risk of expropriation, nationalisation, and confiscation of assets and changes in legislation relating to the level of foreign ownership.

Governmental authorities at all levels are actively involved in the promulgation and enforcement of regulations relating to taxation, land use and zoning and planning restrictions, environmental protection, safety and other matters. The introduction and enforcement of such regulations could have the effect of increasing the expense and lowering the income or rate of return from, as well as adversely affecting the value of, the Company's assets.

1. Capital Management

The Company's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares (up to its authorised number of shares) or sell assets to reduce debt.

1. Dividends

Dividends paid during the period comprise an interim dividend in respect of quarter 1 (1 January 2018 to 31 March 2018) of £7,109,243 (1.58 pence per Ordinary Share) (2017: £6,413,924, 1.58 pence per Ordinary Share) and quarter 2 (1 April 2018 to 30 June 2018) of £7,109,243 (1.58 pence per Ordinary Share) (2017: £6,538,064, 1.58 pence per Ordinary Share).

1. Related party disclosures

For the purposes of these Financial Statements, a related party is an entity or entities who are able to exercise significant influence directly or indirectly on the Company's operations.

As noted in Note 2, the Company does not consolidate its subsidiary. However, the Company and its subsidiaries (direct and indirect) are a Group and therefore, are considered to be related parties.

Transactions with UK Hold Co

During the period the Company issued no additional Loan Notes to UK Hold Co (1 January 2017 to 30 June 2017: £Nil, 1 January 2017 to 31 December 2017: £Nil), thus the total issued to UK Hold Co remained at £250,000,000 (30 June 2017: £250,000,000, 31 December 2017: £250,000,000), on which interest of £16,750,732 accrued during the period (1 January 2017 to 30 June 2017: £15,549,068, 1 January 2017 to 31 December 2017: £32,245,925). As at the reporting date interest of £65,496,400 was receivable (30 June 2017: £42,863,304, 31 December 2017: £48,745,653).

On 30 June 2018 the Company issued an additional £4,500,000 shareholder loan to UK Hold Co. As at the reporting date, the Company had increased its shareholders loan receivable from UK Hold Co to £158,609,725 (30 June 2017: £126,609,725, 31 December 2017: £154,109,725). Total interest of £1,571,111 accrued for the period (30 June 2017: £1,797,936, 31 December 2017: £3,150,225). As at reporting date interest of £3,451,175 was receivable (30 June 2017: £7,527,776, 31 December 2017: £8,880,064).

Transactions between UK Hold Co and FS Holdco

As at the reporting date, FS Holdco had a non-interest bearing loan receivable from UK Holdco totalling £143,503,500 (30 June 2017: £143,503,500, 31 December 2017: £143,503,500) and an interest bearing loan payable to UK Hold Co of £343,730,873 (30 June 2017: £343,730,873, 31 December 2017: £343,730,873). Total interest of £13,636,198 (1 January 2017 to 30 June 2017: £13,560,859, 1 January 2017 to 31 December 2017: £27,121,719) accrued to UK Hold Co during the period of which £51,347,559 (30 June 2017: £34,072,582, 31 December 2017: £37,711,361) remained payable by FS Holdco at period end.

On 19 June 2018, a £40,000,000 loan was issued to FS Holdco by UK Hold Co at an interest rate of 5% per annum. Total interest of £394,520 accrued for the period, all of which was outstanding at period end.

Transactions between UK Hold Co and FS Holdco 2

As at the reporting date, UK Hold Co had an interest bearing loan receivable from FS Holdco 2 totalling £74,893,885 (30 June 2017: £74,893,885, 31 December 2017: £74,893,885), on which interest of £1,856,958 accrued during the period (1 January 2017 to 30 June 2017: £1,333,727, 1 January 2017 to 31 December 2017: £3,221,463). As at the reporting date total interest of £1,856,958 (30 June 2017: £1,333,727, 31 December 2017: £3,221,463) was receivable.

As at the reporting date UK Hold Co had an interest bearing loan payable to FS Holdco 2 totalling £28,970,000 (30 June 2017: £nil, 31 December 2017: £28,970,000), on which interest of £718,297 (1 January 2017 to 30 June 2017: £nil, 1 January 2017 to 31 December 2017: £nil) accrued during the period.

As at the reporting date UK Hold Co also had an interest bearing loan payable to FS Holdco 2 totalling £13,000,000 (30 June 2017: £nil, 31 December 2017: £13,000,000), on which interest of £322,329 (1 January 2017 to 30 June 2017: £nil, 1 January 2017 to 31 December 2017: £169,178) was accrued during the period.

Transactions between UK Hold Co and FS Holdco 3

As at the reporting date UK Hold Co had an interest bearing loan receivable from FS Holdco 3 totalling £10,380,000 (30 June 2017: £nil, 31 December 2017: £nil), on which interest of £123,707 (30 June 2017: £nil, 31 December 2017: £nil) was accrued during the period.

On 19 June 2018, a £36,123,745 loan was issued to FS Holdco 3 by UK Hold Co at an interest rate of 5% per annum. Total interest of £356,288 accrued for the period, all of which was outstanding at period end.

Transactions between UK Hold Co and FS Holdco 4

As at the reporting date UK Hold Co had an interest bearing loan receivable from FS Holdco 4 totalling £28,970,000 (30 June 2017: £nil, 31 December 2017: £28,970,000), on which interest of £718,297 (30 June 2017: £nil, 31 December 2017: £nil) was accrued during the period.

As at the reporting date UK Hold Co also had non interest bearing loans receivable from FS Holdco 4 totalling £12,481,519 (30 June 2017: £nil, 31 December 2017: £12,481,519), on which interest of £309,473 (1 January 2017 to 30 June 2017: £nil, 1 January 2017 to 31 December 2017: £162,430) was accrued during the period.

Transactions between UK Hold Co and FS Debtco

As at the reporting date UK Hold Co had an interest bearing loan receivable from FS Debtco totalling £55,000,000 (30 June 2017: £nil, 31 December 2017: £55,000,000 ) on which interest of £1,363,699 (1 January 2017 to 30 June 2017: £nil, 1 January 2017 to 31 December 2017: £2,019,178) accrued during the period.

Transactions between FS Holdco, FS Debtco 2, FS Holdco 4 and their SPVs

All of the SPVs are cash generating solar farms. On occasion revenues are received and expenses are paid on their behalf by FS Holdco, FS Debtco and FS Holdco 4. All of these transactions are related party transactions. FS Holdco made the following net transactions on behalf of SPVs during the period and had the following net amounts payable or receivable at period end (none payable and receivable to FS Debtco or FS Holdco 4):

All of the SPVs are cash generating solar farms. On occasion revenues received and expenses are paid on their behalf by FS Holdco. All of these transactions are related parties. At period end, the following SPVs had amounts payable and receivable to FS Holdco: