TIDMVEN2
RNS Number : 8962I
Ventus 2 VCT PLC
22 June 2011
Ventus 2 VCT plc
Annual Report and Financial Statements
for the year ended 28 February 2011
Registered No: 05667210
Chairman's Statement
I present the Annual Report and Financial Statements of Ventus 2
VCT plc (the "Company") for the year ended 28 February 2011.
Overview
This has been a challenging year for the ordinary share fund,
principally as a result of technical problems which have arisen
during commissioning of waste wood biomass fuelled projects in some
of our investee companies. This is covered in more detail below.
Issues have also arisen involving internal control which are being
addressed by the Board together with the Investment Manager.
Despite these difficulties, the UK renewable market remains
attractive and the Company's investment portfolio and pipeline
offer promise for the future.
Merger with Ventus 3 VCT plc
As explained in the Half-yearly Report, on 6 May 2010 the
Company completed a scheme of reconstruction with Ventus 3 VCT plc
(the "Scheme" or "Merger"). The terms of the Scheme were set out in
a circular issued by the Company on 8 February 2010. The Scheme was
effected by Ventus 3 VCT plc transferring its assets and
liabilities to the Company, in consideration for which the Company
issued 12,250,311 new ordinary shares to the shareholders of Ventus
3 VCT plc. Further details in respect of the Merger are presented
in the Directors' Report.
In acquiring the assets of Ventus 3 VCT plc, the Company now has
a shareholding of 60% of the ordinary shares issued by each of
Redeven Energy Limited and Spurlens Rig Wind Limited. These
shareholdings constitute controlling interests and therefore these
companies are subsidiaries of the Company. The consolidated
financial statements of the Company and its subsidiaries (the
"Group") are presented in this report.
Group Net Asset Value and Results
At the year end, the net asset value of the Group attributable
to equity shareholders stood at GBP29,099,000. The Group was formed
during the year as a result of the Company acquiring a controlling
interest in two investee companies subsequent to the Merger. The
net loss of the Group for the year ended 28 February 2011 was
GBP1,729,000 and was wholly attributable to the Company's
shareholders.
Net Asset Value, Results and Dividends - Ordinary Shares
At the year end, the net asset value of the ordinary share fund
of the Company stood at GBP18,629,000 or 75.9p per ordinary share
(2010: GBP10,356,000 or 84.3p per ordinary share). The revenue
profit attributable to ordinary shareholders for the year was
GBP734,000 or 3.29p per ordinary share. The capital loss
attributable to ordinary shareholders for the year was GBP2,388,000
or 10.70p per ordinary share, resulting in a net loss to ordinary
shareholders for the year of GBP1,654,000 or 7.41p per ordinary
share (2010: net loss of GBP798,000 or 7.08p per ordinary
share).
The value of investments and investments in subsidiaries held by
the ordinary share fund of the Company at 28 February 2011 was
GBP17,106,000 compared to GBP8,434,000 at 28 February 2010. The
Investment Manager's Report gives details of investments made
during the year, together with information about the valuation of
all investee company holdings within the portfolio.
The income generated in the ordinary share fund of the Company
during the year comprised dividend income and interest earned on
loan stock and cash deposits. Total income for the year to 28
February 2011 was GBP1,127,000 compared to GBP376,000 for the year
ended 28 February 2010. The increased income was primarily
attributable to loan interest income and dividend income from
investments, including those acquired from Ventus 3 VCT plc.
The Company has declared a final dividend of 1.00p per ordinary
share to be paid on 10 August 2011 to all ordinary shareholders on
the register as at the close of business on 15 July 2011. An
interim dividend of 1.50p per ordinary share was paid on 12 January
2011. Therefore, the total annual dividend is 2.50p per ordinary
share.
Net Asset Value and Results - "C" Shares
As reported in the Half-yearly Report, on 8 February 2010 the
Company launched a second joint "C" share offer with Ventus VCT
plc. The offer closed on 31 May 2010, the Company having allotted
4,404,421 "C" shares, resulting in net proceeds of GBP4,162,000
after issue costs.
At the year end, the net asset value of the "C" share fund of
the Company stood at GBP10,468,000 or 92.4p per "C" share. The
revenue profit attributable to "C" shareholders for the year was
GBP91,000 or 0.84p per "C" share. The capital loss attributable to
"C" shareholders for the year was GBP166,000 or 1.52p per "C"
share, resulting in a net loss to "C" shareholders for the year of
GBP75,000 or 0.68p per "C" share (2010: net loss of GBP163,000 or
2.67p per "C" share).
The value of investments held by the "C" share fund of the
Company at 28 February 2011 was GBP3,960,000 (2010: GBP325,000).
The Investment Manager's Report gives details of investments made
during the year, together with information about the valuation of
all investee company holdings within the portfolio.
The income generated in the "C" share fund of the Company during
the year comprised interest earned on loan stock, UK treasury bills
and cash deposits. Total income for the period to 28 February 2011
was GBP262,000, of which GBP227,000 was derived from loan stock.
This compares with income generated by the "C" share fund of
GBP31,000 in the year ended 28 February 2010. The primary reason
for the increase in income is the progress made in making
investments over the year (as described in more detail below) which
has allowed the share fund to accrue interest income from its loan
stock investments.
The Company has not declared a dividend in respect of the "C"
shares because, although the share fund has made a net revenue
profit for the year, it has yet to accumulate sufficient revenue
reserves from which to make a significant distribution.
Investments
The Company's Investment Manager, Climate Change Capital
Limited, continues to be actively engaged in managing the portfolio
and in identifying and negotiating potential investment
opportunities to invest the remaining "C" share capital that has
been raised. The investments made, dividends paid and capital
raised constitute the important events of the year.
As at 28 February 2011, the ordinary share fund of the Company
held investments in 17 companies (2010: 18 companies) with a total
value of GBP17.1 million (2010: GBP8.4 million). During the year
the Company acquired investments from Ventus 3 VCT plc with a fair
value of GBP9.4 million. As at 28 February 2011, the "C" share fund
held an investment in seven companies (2010: one company) with a
value of GBP4.0 million (2010: GBP0.3 million).
The Investment Manager's Report provides details of the
investments held as at 28 February 2011 and as at the date of this
report. All investments are structured so as to be treated as
qualifying holdings for the purposes of Venture Capital Trust
("VCT") regulations, unless otherwise stated.
Investments in PBM Power Limited ("PBM"), Sandsfield Heat &
Power Limited ("Sandsfield") and Twinwoods Heat & Power Limited
("Twinwoods")
On 6 June 2011 Ventus 2 VCT plc the ("Company") issued an
announcement reporting the unaudited revaluations of its
investments in PBM, Sandsfield and Twinwoods as at 28 February
2011. That announcement does not affect the Company's "C" share
portfolio.
PBM was the first of the three companies to construct its waste
wood biomass plant and commence generation. The plant at PBM has
experienced technical issues which have led to unplanned outages
and expenditure beyond budget. These issues have led the Company
and the Investment Manager to re-assess the electricity generation
expectations and operational expenditure requirements of the plant.
The Company has an investment in the ordinary shares of PBM of
GBP574,000 and is owed GBP530,000 by PBM in respect of amounts that
have been advanced to fund PBM's operating expenses. Your Board
resolved that it was appropriate at this stage to record
write-downs of the full balances of both the investment in the
ordinary shares of PBM and the amount receivable relating to PBM's
operating expenses. The write-down related to PBM is therefore
GBP1,104,000. Further detail in respect of the impairment charge
against the amount receivable from PBM is presented in note 4 of
the financial statements. The Board is satisfying itself concerning
the precise circumstances surrounding the advances to PBM and is
pursuing possible avenues to recover the amount owed.
The issues experienced at PBM have led the Board to consider the
valuations of the investments in Sandsfield and Twinwoods. The
waste wood biomass power plant at Sandsfield is operational, but
has already experienced unexpected outages and an increase in
expenditure beyond budget. Whilst remedial works are being carried
out at Sandsfield the Board felt it appropriate to recognise the
shift in long term expectations from the project and so resolved to
record an unrealised write-down of GBP700,000 in the value of the
Company's investment. The waste wood biomass power plant at
Twinwoods is not yet operational but it is right to reassess the
expectations of the project in light of the issues encountered at
the other two plants and as such the Board has decided to record an
unrealised write-down of GBP355,000 in respect of the Company's
investment in Twinwoods. The Company now therefore values its
investments in Sandsfield and Twinwoods at GBP2,096,000 and
GBP2,045,000 respectively. The carrying value of these assets
includes accrued interest income on mezzanine loan stock with these
companies of GBP250,000 and GBP45,000 respectively, which has not
been recognised as revenue in the Statement of Comprehensive Income
as the timing of receipt of these amounts is uncertain.
It is important that the Board makes you aware of the basis on
which the valuations were determined for those investments. There
are a number of key assumptions behind each valuation, the most
important being the availability of the plant, the generating
capacity, operating expenses, the regime for sourcing waste wood as
fuel for the sites, the discount rate applied to the projected cash
flows and the price received for power and associated benefits. The
inputs for these variables were determined by considering and
applying the data available at the time in respect of the level of
performance the plant may reasonably achieve. Those input
assumptions may be refined over time as progress is made in
resolving the issues behind underperformance and as negotiations
progress with third parties. Whilst those figures are considered
reasonable and fair at the date of this Report, there is inherent
uncertainty in the assumptions. Also, the validity of these
assumptions is dependent on the renegotiation of contracts and debt
finance terms with third parties, including the lending bank, which
are underway. Sensitivity analyses which show the potential effect
on valuation of the selected changes in these assumptions - both
positive and negative - are given in note 11 of the financial
statements. Significant efforts are being made to resolve the
operational issues and the Investment Manager continues to work
with each of the investee companies, the key contractors, the joint
venture partners and the lending banks to address the performance
of these assets.
Corporate Governance
The Board has been made aware by the Investment Manager of a
breach of internal control within the Investment Manager relating
to the Company. This relates to the GBP530,000 advanced to fund
PBM's operating expenses. The Investment Manager is currently
investigating the background to this matter, has confirmed to the
Board that no similar events have occurred in the past, and has
made proposals to implement remedial actions for the future. The
Board is taking steps to satisfy itself in respect of this matter,
which is discussed further in the Corporate Governance
Statement.
Investment Manager
The lead investment manager for the Company has recently
tendered his resignation to Climate Change Capital Limited, the
Investment Manager for the Company. This, together with the poor
performance of parts of the investment portfolio, have led your
Board and the Board of Ventus VCT plc to enter discussions with
Climate Change Capital Limited on the scale and nature of the
staffing resources needed for the future. As at the time of this
Report it is not possible to forecast the outcome of these
discussions.
VCT Qualifying Status
The Company retains PricewaterhouseCoopers LLP to review its
compliance with VCT regulations. The Directors are satisfied that
the Company continues to fulfil the conditions for maintaining VCT
status.
Outlook
The UK renewable energy market continues to be an attractive
sector in which to make investments and the Company remains well
positioned to support small to medium sized companies at a time
when access to capital continues to be a challenge. The Investment
Manager's Report provides further comment on the wider market
outlook and the opportunities open to the Company.
The Company has substantially invested the ordinary share
capital raised and the Investment Manager is progressing several
opportunities for new investments to be made from the "C" share
fund.
Within the ordinary share fund emphasis will be on delivering
the operating performance expected of the waste wood biomass and
landfill gas assets. For both the ordinary and "C" share funds, the
wind assets offer considerable promise for the future.
The Board of Directors would like to express its appreciation of
the hard work demonstrated by the Investment Manager and all the
Company's service providers throughout the year.
Shareholder Communications
In accordance with the Company's commitment to environmental
sustainability and to minimise costs wherever appropriate, the
financial statements will continue to be made available through
regulated news service providers and on the Company website at
www.ventusvct.com. Any shareholder who wishes to receive
notification of reports by either email or post may request this by
contacting the Registrar.
The Board
In order to deal with certain changes to the Listing Rules
regarding the independence of directors who are also directors of
other companies managed by the same investment manager, during the
year David Pinckney stood down as a Director of the Company. The
Board wishes to express its appreciation to David Pinckney in
respect of his service to the Company over the period during which
he was in office as Director and Chairman of the Company. Alan
Moore was appointed Chairman of the Company following David
Pinckney's resignation. David Pinckney will continue to serve as a
director of Ventus VCT plc.
Alan Moore
Chairman
21 June 2011
Investment Manager's Report
Climate Change Capital Limited, the Company's Investment
Manager, presents its annual review of the Company's
investments.
The Company's results for the year are significantly impacted by
unrealised losses on investment in respect of the write down in
value of the waste wood biomass assets amounting to GBP1.63
million. In addition, the ordinary share fund has incurred an
impairment charge in relation to the amounts advanced to PBM Power
Limited of GBP530,000, which is recognised as a realised capital
loss in the Statement of Comprehensive Income. Notwithstanding the
impairment provision, the Company is continuing to take steps to
try to recover the amount. The write down in value of the waste
wood biomass investments and the impairment of the amount
receivable from PBM Power Limited have not impacted the "C" share
fund as these investments are held by the ordinary share fund.
The Company's pre-tax revenue profit for the year of GBP939,000
contrasts with negative net cash flow from operations of
GBP529,000, partly due to the advance to PBM Power Limited noted
above and higher accrued income from investments. During the year,
the net cash outflow from investing activities of the Company's
ordinary share fund was GBP782,000. The net cash inflow from
financing activities of the Company's "C" share fund was
GBP3,718,000 from shares issued during the year and its net cash
outflow from investing activities was GBP3,635,000.
In addition to the issues that have been identified with the
waste wood biomass investments, it has been widely recognised that
2010 was a year of unusually low wind speeds across the UK. This
has had an impact on the revenue generated by the Company's
operational wind assets. Further details on this, as well as the
process of reassessing the energy yield projections for some of the
Company's wind investments, is set out in detail below.
Ordinary Share portfolio
A summary of the valuations and unrealised gains and losses in
the Company's ordinary share investments held during the year is
given below.
Investments
acquired
from
Valuation Ventus
Ordinary Voting Investment Investment gain/ 3 VCT Investment Investment
Shares rights value cost (loss) plc value cost
Shares Loans Total Shares Loans Total Total Total Total
in
the
as as as as as as as year as as
at at at at at at at to on at at
28 28 28 28 28 28 28 28 28 28
February February February February February February February February 6 May February February
2011 2011 2011 2011 2011 2011 2011 2011 2010 2010 2010
% GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Operational:
Wind
Craig
Wind Farm
Limited * Q 12.50% 601 343 944 497 341 838 (33) 489 489 349
Achairn
Energy
Limited * Q 40.40% 1,819 1,334 3,153 1,226 1,289 2,515 360 1,396 1,396 1,118
A7 Lochhead
Limited * Q 20.00% 524 122 646 569 121 690 (68) 357 357 333
Greenfield
Wind Farm
Limited * PQ 16.65% 666 1,332 1,998 666 1,332 1,998 - 997 - -
Operational
companies
in the
wind sector
Broadview
Energy
Limited * Q 2.22% 500 1,800 2,300 200 1,800 2,000 300 1,000 1,000 1,000
Firefly
Energy
Limited * Q 50.00% 100 200 300 200 200 400 (100) 200 200 200
Operational:
Landfill
gas
Redimo
LFG Limited * Q 50.00% - - - 1,000 - 1,000 - - - 1,000
Renewable
Power
Systems
(Dargan
Road)
Limited
** Q 50.00% 536 1,166 1,702 780 1,120 1,900 (198) 950 950 950
Waste
wood biomass
PBM Power
Limited Q 25.00% - - - 574 - 574 (574) 287 287 287
Sandsfield
Heat &
Power
Limited Q 44.90% 846 1,250 2,096 1,796 1,000 2,796 (700) 1,398 1,398 1,398
Twinwoods
Heat &
Power
Limited Q 50.00% 1,600 445 2,045 2,000 400 2,400 (355) 1,000 1,000 1,000
Development
and
pre-planning
Osspower
Limited 50.00% 300 55 355 300 55 355 - 176 164 164
The Small
Hydro
Company
Limited 22.50% 115 464 579 115 464 579 - 248 248 248
Redeven
Energy
Limited*** * 60.00% - 534 534 - 534 534 - 237 237 237
Spurlens
Rig Wind
Limited*** * 60.00% 174 24 198 174 24 198 - 99 99 99
Wind Power
Renewables
Limited * Q 48.00% 136 120 256 252 120 372 (116) 150 150 150
Olgrinmore
Limited * 17.60% - - - 68 - 68 (68) 34 34 34
Kettering
East Energy
Limited 0.00% - - - - - - - 125 125 125
EcoGen
Limited * 0.00% - - - - - - - 300 300 300
Total 7,917 9,189 17,106 10,417 8,800 19,217 (1,552) 9,443 8,434 8,992
--------- --------- ---------- --------- --------- ---------- ---------- ------------ ----------- -----------
Q - Investment complies with VCT regulations on qualifying
holdings.
PQ - Part of the investment complies with VCT regulations on
qualifying holdings.
* - A company in which Ventus VCT plc's ordinary share fund has
also invested. The Company and Ventus VCT plc are managed by
Climate Change Capital Limited.
** - In the Half-yearly Report for the six month period ended 31
August 2010, the Company recognised an unrealised gain in value in
respect of Renewable Power Systems (Dargan Road) Limited of
GBP198,000. In the six month period to 28 February 2011 a realised
loss of GBP268,000 has been recognised. Therefore, the net change
in value over the year ended 28 February 2011 was GBP198,000.
Further details in respect of this investment are presented
below.
*** -These investments are accounted for as subsidiaries within
the Group balance sheet and their assets are reported as
development wind assets.
Investments in PBM Power Limited, Sandsfield Heat & Power
Limited and Twinwoods Heat & Power Limited
On 6 June 2011 the Company issued an RNS announcement reporting
the unaudited revaluations of its investments in PBM Power Limited
("PBM"), Sandsfield Heat & Power Limited ("Sandsfield") and
Twinwoods Heat & Power Limited ("Twinwoods"). Further detail is
given in the Chairman's Statement.
Reassessment of energy yield projections for Craig Wind Farm
Limited and A7 Lochhead Limited
Projected energy yield is the key driver of the valuation of the
Company's operational wind assets. The Company has adopted a policy
of reassessing the wind yield projections for each of its
operational sites after a period of three years of operation. The
collection of operational data over a sufficient period usually
allows a more accurate analysis of the projected energy yield. The
Company will also re-evaluate energy yield assumptions where it
becomes aware of any possible errors inherent in the methodology
prevalent at the time that previous wind yield analyses were
prepared.
The Company has identified that there was a potential issue in
the original wind yield assessments for the two investee companies
listed above and in line with its policy, determined that it was
appropriate to carry out new wind yield analyses for these sites
using operational data. It is an industry wide issue and is not
specific to the projects in which the Company has invested. It is
not a matter that was discoverable through due diligence;
consideration of the impact of the data from the years in question
was not part of the methodology prevalent in the industry at the
time that the original energy yield reports were prepared.
It is now widely understood that the inclusion of historic data
from 1990 to 1995 in the long term modelling of future wind yield
may lead to an overstatement of the projected long term wind speed.
Where those years form a significant part of the data set used,
this may result in the long term wind speed projection being
overstated. We have identified that the correlation exercises in
the wind yield reports for the projects listed above included data
from this period and so it was appropriate to correct for this
issue. It should be noted that the issue is not relevant to the
wind yield assessments carried out for Greenfield Wind Farm Limited
and Achairn Energy Limited as data from 1990 to 1995 was not
included in the reference dataset. Neither of the sites has been
operational for three years and so it is not thought appropriate to
reassess the energy yield projections at these sites.
Firefly Energy derives a significant part of its revenues from
power purchase agreements that it holds with a number of
operational wind farms. Craig Wind Farm Limited is a counterparty
to Firefly Energy Limited power purchase agreements and the fall in
expected energy yield from the schemes operated by these companies
has impacted the projected revenues to Firefly Energy Limited from
the power purchase agreements.
The results of that review have led to a drop in projected long
term energy yields compared to previous assumptions. The impact of
the changes in value of these investments on the Company's ordinary
share fund net asset value since 31 August 2010 is presented
below:
Change in value
since 31 August
2010
Company (p per ordinary
share)
-------------------- -----------------
A7 Lochhead Limited -0.38 p
Craig Wind Farm -0.30 p
Limited
Firefly Energy -0.41 p
Limited
Total -1.09 p
-------------------- -----------------
The Company's investments in these projects are valued by
discounting the expected returns from the equity and debt
instruments that it holds in each investee company and expected
returns are directly linked to projected electricity generation
levels. The drop in projected energy yield has therefore had an
impact on the Company's valuation of its holdings in these projects
as set out in the table above and other projects with which it
holds power purchase agreements.
Wind conditions in 2010
Wind speeds across the United Kingdom in 2010 were significantly
lower than the long term average. Wind speeds naturally vary from
year to year but the past year represented a significant departure
from the long term mean.
Low wind speeds equate to lower revenues from operational wind
assets. In a typical project finance model a drop in revenues
results in a levered fall in the cash available to pay dividends.
This period of unusually low wind speeds has had a significant
impact on budgeted cash receipts from the operational wind farm
investments in the Company's portfolio. The same is true of Firefly
Energy Limited, as its revenues in part depend on the number of
megawatt hours generated by the companies with which it holds power
purchase agreements. This has impacted the final dividend that the
Company is able to pay to its shareholders for the financial year
ended 28 February 2011. One year of unusually low wind speeds does
not however indicate that there is a fundamental shift in the UK's
wind climate. Reports of the performance of the Company's wind
farms against projections for 2011 will be given in the Company's
Half-yearly Report.
Dividend Objective
The stated dividend objective of the Company is to pay its
ordinary shareholders an annual dividend of between 6p and 10p per
ordinary share when the companies in which it invests are fully
operational. The impact of the fall in projected receipts from
Redimo LFG Limited, as well as the recent reassessment of the
investments in PBM Power Limited, Sandsfield Heat & Power
Limited and Twinwoods Heat & Power Limited have necessarily
negatively impacted the expected returns to the Company and,
therefore, the near term dividend that it is able to pay its
ordinary shareholders.
On the basis of projected cash flows from the assets which are
presently cash generative the target dividend will not be
achievable in the short term without modest success from assets
which are currently not cash generative, such as the Company's
development investments, or a rebalancing of the portfolio with a
bias towards cash yielding investments. At present, only 45% of the
portfolio (by cost of investment) is cash yielding.
Valuation of Investments
It is the accounting policy of the Company to hold its
investments at fair value. In this report, the Company's
investments in investee companies which operate an asset and have
passed an initial satisfactory operational period are valued using
a discounted cash flow methodology. The key assumptions that have a
significant impact on discounted cash flow valuations for these
assets are the discount rate used, the price at which the power and
associated benefits can be sold, the amount of electricity the
investee company's generating assets are expected to produce and
operating costs.
The fair value of the Company's investments in companies which
have not passed an initial satisfactory operational period, or are
engaged in seeking planning permission, are determined to be the
investment cost subject to a periodic impairment review. The
Company has resolved that it is appropriate to value its holding in
Broadview Energy Limited on the basis of the price paid by
investors in a recent capital raising round. Details of the
valuations are shown in the table above.
Summary of Investments
Operational wind farms
Set out below is a brief summary of the performance of the
Company's operational wind assets. The general theme is that the
projects are achieving sound availability figures, and so are
making good use of the wind resource available to them. The
comparisons of actual generation versus budgeted generation for
Craig Wind Farm Limited and A7 Lochhead Limited are given against
budget figures revised to take account of the recent wind yield
analyses.
Craig Wind Farm Limited
In the year ended 28 February 2011 the project exceeded its
target availability but, despite the improvement in availability
against previous years, it generated 12% less electricity than its
revised target due to unusually low speeds throughout 2010. The
company continues to pursue the possibility of adding further
turbines to the site.
The Company received dividends and mezzanine interest cash
payments totalling GBP59,000 from Craig Wind Farm Limited in the
year ended 28 February 2011, representing a 8.5% cash yield on the
original investment.
Achairn Energy Limited
The project experienced some technical difficulties with part of
the grid connection system in late 2010 and was unable to export
electricity for almost four weeks whilst a faulty component was
removed and a temporary solution installed to allow the wind farm
to generate and export. The component was successfully repaired and
replaced during December 2010 and the wind farm restored to its
normal configuration. This, in addition to lower than expected wind
speeds, meant that generation was 29% below budget in the year
ended 28 February 2011.
The Company received dividends and mezzanine interest cash
payments totalling GBP227,000 from Achairn Energy Limited in the
year ended 28 February 2011, representing a 10.1% cash yield on the
original investment.
The carrying value of the Company's investment in Achairn Energy
Limited increased by GBP360,000 during the year ended 28 February
2011. This was due to increases in the forecast power prices
assumed in the discounted cash flow analysis used to value the
investment. The past performance issues experienced by the company
are not relevant to its carrying value as the valuation is
determined by the projected future cash flows.
A7 Lochhead Limited
The project again met its availability expectations during the
year ended 28 February 2011. Low wind speeds meant that generation
was 20% below the revised budget.
The Company received dividends and mezzanine interest cash
payments totalling GBP58,000 from A7 Lochhead Limited in the year
ended 28 February 2011, representing an 8.7% cash yield on the
original investment.
Greenfield Wind Farm Limited (parent company of Muirhall
Windfarm Limited)
Construction of this 12.3MW wind farm was substantially
completed in February 2011 around five weeks later than expected
and the project has begun to export electricity at levels within
the range of expectations. The Company will report in more detail
on operations at this site in the Half-yearly Report.
Operational companies in the wind sector
Broadview Energy Limited
Broadview Energy Limited continues to expand its portfolio of
wind farm sites and now has one fully operational three turbine
site in Aberdeenshire. A four turbine site in Leicestershire is due
to become fully operational this summer. It holds consent on two
further projects which together have approval to erect eight
turbines. It also has a portfolio of seven other sites at various
stages in the planning process.
Broadview Energy Limited undertook a further capital raising
round in June 2010, raising a further GBP880,000 by issuing 352,000
new ordinary shares at GBP2.50 per share. The Company did not
participate in this funding round but it has adopted the price of
this subscription to value its shareholding in Broadview Energy
Limited.
Firefly Energy Limited
The value of the Company's investment in Firefly Energy Limited
has fallen by GBP100,000 during the year ended 28 February 2011
because, as explained above, the fall in expected energy yields
from the projects with which it has power purchase agreements has
impacted the company's projected revenues.
The Company received loan interest cash payments totalling
GBP43,000 from Firefly Energy Limited in the year ended 28 February
2011, representing a 10.7% cash yield on the original
investment.
Firefly Energy Limited has had success in the past year rolling
out the provision of power purchase agreement and management
accounting services to renewable energy project operators. The
management team will look to build on the achievements of the past
year by generating further new business.
Other operational investee companies
Redimo LFG Limited
The operating environment for the Redimo LFG Limited landfill
gas generation portfolio continues to be challenging and whilst a
great deal of effort has been made over the last two years to
stabilise operational performance, the levels of contamination in
the gas continue to cause problems for the generators at the two
largest sites. This continues to impact the amount of power being
generated. The investee company retains the support of its lending
bank and has recently renewed its energy offtake agreements on
marginally better terms. Rising forward projections for power
prices give some scope for improved financial performance, but the
outlook for the company remains uncertain. That being the case it
has been resolved to maintain the carrying value of the Company's
investment at zero. The Company did not receive cash proceeds from
Redimo LFG Limited during the year.
Renewable Power Systems (Dargan Road) Limited
The project performed in line with expectations over the twelve
months to 28 February 2011. The Company received dividends and
mezzanine interest payments totalling GBP546,000 from RPS (Dargan
Road) Limited in the financial year ended 28 February 2011,
representing a 28.7% cash yield on the original investment.
Shareholders will note that even though the investment has
performed in accordance with expectations its value has fallen in
the six months since 31 August 2010. The investment is valued by
applying a discount rate to the revenues the Company expects to
receive from the project. The revenue streams are finite and so,
all other things being equal, this will mean that the holding value
will fall over time as the projected revenues are realised and paid
over to the Company.
Waste wood biomass investments
A summary of the performance of the Company's waste wood biomass
investments is presented in the Chairman's Statement above.
Development and pre-planning investments
Osspower Limited
Osspower Limited holds planning permission on a portfolio of
four hydro electric schemes in Scotland. Finance to construct the
first scheme, Allt Fionn Ghlinne, has been secured from The
Co-operative Bank plc by way of a GBP6.45 million loan facility.
Allt Fionn is expected to become operational in late summer 2012
and work is ongoing to finalise the strategy for the remaining
three sites within the portfolio.
Small Hydro Company Limited
The Small Hydro Company Limited holds planning permission on
five low head run of river hydro electric projects in England and
is currently assessing the strategic options for raising further
finance to construct and operate the projects. The schemes are
expected to be eligible under the Feed-In Tariff regime. The
Feed-In Tariff regime is expected to be subject to further
government consultation in the second half of 2011 and this is
likely to have implications for the way forward for the current
schemes and the longer term strategy of The Small Hydro Company
Limited. In addition, recently announced changes to the rules
governing VCTs investing in companies which derive the majority of
their income from the Feed-in Tariff regime may also have a bearing
on how future development is funded.
The Company has a 22.5% equity share in The Small Hydro Company
Limited and has also provided a shareholder loan facility which was
increased to GBP534,000 in November 2010 to provide further working
capital. As at 28 February 2011 the Company had advanced GBP464,000
of the facility, the balance of the facility was drawn down by The
Small Hydro Company Limited after the year end.
Redeven Energy Limited
Redeven Energy Limited continues to work on the development of
its portfolio of wind farm sites in East Anglia. Planning
permission is held on two schemes totalling seven turbines.
Progress on the larger of these two schemes, which has permission
to erect five turbines, has been delayed as a result of the need to
vary one of the planning conditions to remove an unhelpful
restriction on turbine features. The third planning application for
a two turbine project was refused in January 2011 and it is likely
that an appeal will be lodged. Given that an appeal on the third
site is feasible, and that the total cost of the investment
represents
fair value for the achievement of two consented sites, the
holding value of this investment has been maintained.
Spurlens Rig Wind Limited
A planning application for this proposed six turbine site was
submitted in December 2010. It is expected that the outcome will be
determined by the end of September 2011.
Wind Power Renewables Limited
Planning determinations are expected shortly on a pair of two
turbine schemes in the East Anglia region. An application for a
third site was refused in December 2010 and is not being appealed.
The company has three further sites secured under option but these
will not be taken forward until, at the earliest, the time at which
planning determinations have been made on the other two sites.
Given that progress with the sites for which applications have
not been submitted is uncertain, and that one of the three
submissions has been refused and will not be appealed, it is
considered appropriate to reflect these matters in the value
attributed to this investment. Accordingly it was resolved to
write-down the enterprise value of the company by one third, with
resultant write down in value of GBP116,000 of the equity held by
the Company.
Olgrinmore Limited
A planning application for two wind turbines at Olgrinmore Moss,
near Scotscalder in Caithness was submitted in December 2009 and
subsequently refused planning permission in May 2010. A 'Notice of
Review' appeal was filed with the Council in August 2010 to appeal
against this decision, which was narrowly dismissed by three votes
to two in December 2010. The development team is reviewing the
options to re-apply for permission to build a smaller project on
the same site which would address the previous reasons for refusal.
The viability of the project is uncertain however and so it was
felt appropriate to write-down the value of the Company's holding
from GBP68,000 to zero.
EcoGen Limited
Subsequent to the Merger on 6 May 2010, the Company held
GBP400,000 in ordinary shares in EcoGen Limited and GBP200,000 of
convertible loan notes. EcoGen Limited carried out a capital
restructuring exercise in late 2010 through which the Company's
shares were redeemed at face value and the convertible loan
facility repaid in full together with the interest accrued on the
loan of GBP18,000.
Kettering East Energy Limited
The Company had made a loan facility of GBP250,000 available to
Kettering East Energy Limited in respect of the development of a
wind farm in Northamptonshire. The Company decided not to proceed
any further with investment in the project and the loan facility
was repaid in full to the Company in October 2010.
"C" Share portfolio
A summary of the investments held by the Company's "C" share
fund is given below. There were no valuation movements recognised
during the year in these investments.
Voting Investment Investment Investment
"C"Shares rights Investment value cost value cost
Shares Loans Total Shares Loans Total Total Total
as as as as as as as as as
at at at at at at at at at
28 28 28 28 28 28 28 28 28
February February February February February February February February February
2011 2011 2011 2011 2011 2011 2011 2010 2010
% GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Operational:
Wind
Greenfield
Wind Farm
Limited * PQ 12.50% 500 1,000 1,500 500 1,000 1,500 - -
Development,
developers
and
pre-planning
Iceni
Renewables
Limited * 50.00% 400 - 400 400 - 400 - -
Renewable
Power
Systems
Limited * 0.00% - 350 350 - 350 350 - -
Muirhall
Windfarm
Limited * 0.00% - - - - - - 325 325
BEGL 2
Limited * 0.00% - 500 500 - 500 500 - -
BEGL 3
Limited * 0.00% - 500 500 - 500 500 - -
Osspower
Limited * 0.00% - 300 300 - 300 300 - -
EcoGen
Limited * 0.00% - 410 410 - 410 410 - -
Total 900 3,060 3,960 900 3,060 3,960 325 325
--------- --------- ---------- --------- --------- ---------- ----------- -----------
PQ - Part of the investment complies with VCT regulations on
qualifying holdings.
* - A company in which Ventus VCT plc's "C" share fund has also
invested. The Company and Ventus VCT plc are managed by Climate
Change Capital Limited.
The Investment Manager continues to source, appraise and
progress suitable investment opportunities in which to deploy the
balance of the "C" share funds. The Investment Manager has secured
exclusivity to invest in two consented wind farm developments which
together would comprise 24 MW of generating capacity. It is
expected that long term investments will be made into those
projects in the next few months. The Investment Manager expects the
"C" share funds to be substantially invested by the end of
2012.
The near term strategy is to generate income from short term
loan investments in development and operational companies whilst
investments into suitable longer term opportunities are finalised.
Those investments are typically secured over the investee's assets.
The interest received or accrued on these loans helps to defray the
"C" share fund's allocation of the Company's running costs. Other
than short term loans, the remaining funds not yet deployed in long
term investments have been held in government treasuries and cash
deposits in line with the Company's stated policy for managing such
funds. But with interest rates on cash at historic lows it has not
been possible to generate sufficient income to support the payment
of a dividend.
Summary of Investments
Operational wind farms
Greenfield Wind Farm Limited (parent company of Muirhall
Windfarm Limited)
Both the ordinary share fund and "C" share fund have made
investments in Greenfield Wind Farm Limited, details of which are
presented in the ordinary share fund's summary of investments
above.
Development, developers and pre-planning investments
Shareholders should note that the following investments are not
structured so as to be qualifying holdings for the purposes of the
VCT regulations.
Iceni Renewables Limited
Through Iceni Renewables Limited the Company has invested in and
committed to provide further funding to two wind energy development
projects in Scotland. The total investment and commitment is
GBP400,000. Scoping and pre-planning work is underway on both
sites. The first, named Craigannet, is likely to be submitted for
planning permission this year as a six turbine scheme. The other
site is known as Merkins and is likely to be submitted as a ten
turbine scheme later this year. Lomond Energy Limited is the
development manager of these sites.
Renewable Power Systems Limited
The Company's "C" share fund has provided a loan facility of
GBP350,000 to Renewable Power Systems Limited, a company which
specialises in the development and operation of energy from waste
generating plants.
This facility is structured as a short term investment to
provide Renewable Power Systems with development capital and is
scheduled to be repaid by 30 June 2011.
BEGL 2 Limited and BEGL 3 Limited
The Company has provided medium term loan facilities of
GBP500,000 to each of BEGL 2 Limited and BEGL 3 Limited.
These companies are subsidiaries of Broadview Energy Limited.
BEGL 2 Limited is the development company for a fully consented
four turbine wind farm in Teesside and BEGL 3 Limited is the
development company for a fully consented five turbine wind farm in
Leicestershire. The BEGL 3 Limited site is due to complete
construction in summer 2011 and the BEGL 2 Limited site will
commence construction in the second half of 2011 and is expected to
become operational in the first half of 2012.
In each case the loans have been secured against the relevant
development company and will be used to meet construction and post
consent development costs alongside long term bank loan
facilities.
The loans, together with accrued interest, are to be repaid in
full no later than 30 June 2012.
Osspower Limited
To support the development of Allt Fionn Ghlinne, the first of
Osspower Limited's schemes to begin construction, the Company
provided Osspower Limited with a GBP300,000 short term loan
facility from the "C" share fund which was extended to GBP900,000
in April 2011. Of the facility GBP300,000 was drawn before the year
end and a further draw down of GBP350,000 was made in April 2011.
Osspower Limited secured debt finance facilities of GBP6.45 million
from The Co-operative Bank plc in May 2011 and repaid GBP650,000 to
the Company, being the total principal of the loan drawn down on
the facility at that time, and paid the interest of GBP17,000 which
had accrued to the date of repayment. The facility has now been
cancelled.
EcoGen Limited
The Company has provided a medium term loan facility of
GBP410,000 to EcoGen Limited.
The facility has been used to provide EcoGen Limited with
working capital and to repay a loan note facility to certain
lenders, including the Company through its ordinary share fund. The
facility has also been used by EcoGen Limited to reorganise its
share capital structure, including the repurchase of shares held in
EcoGen Limited by the Company's ordinary share fund.
The loan, together with accrued interest, is to be repaid in
full no later than 31 December 2012. It is secured against EcoGen's
one third shareholding in Fenpower Limited, a company which owns
and operates a fully operational 10 MW wind farm in Cambridgeshire
and in which the ordinary share fund of Ventus VCT plc is an
investor.
Allt Dearg Wind Farmers LLP
This LLP has consent to develop a 12 turbine site near
Lochgilphead, Scotland. The "C" share fund has provided a secured
short term loan facility of GBP300,000 to fund pre-financial close
project expenditure. The Company has secured exclusivity to make a
long term investment in the project. This investment was made
subsequent to 28 February 2011 and so does not appear in the table
above.
Top Ten Investments
The details of the top ten investments held by the ordinary
share fund and all the investments held by the "C" share fund at 28
February 2011, by value, are set out in the tables below:
Ordinary Share Fund
Portfolio company
Investment Investment information information
Income
recognised
by the Proportion Date Profit
Company of of latest /(loss)
Voting during the Basis of Portfolio audited Net Assets/ before
Company Value Cost Share-holding rights year valuation by Value % accounts (liabil-ities) Turn-over tax
GBP000 GBP000 % % GBP000 GBP000 GBP000 GBP000
Achairn
Energy
Limited 3,153 2,515 40.40% 40.40% 184 DCFU 18.43% 30/11/2009 1,293 620 111
Broadview
Energy
Limited 2,300 2,000 2.22% 2.22% 226 PRI 13.45% 31/12/2009 2,122 900 196
Sandsfield
Heat &
Power
Limited 2,096 2,796 44.90% 44.90% - PRI 12.25% 31/12/2010 1,748 288 7
Twinwoods
Heat & UNAUDITED
Power ABB
Limited 2,045 2,400 50.00% 50.00% - PRI 11.95% 31/01/2011 1,930 n/a n/a
Greenfield
Wind Farm
Limited* 1,998 1,998 16.65% 16.65% 165 PRI 11.68% n/a n/a n/a n/a
Renewable
Power
Systems
(Dargan
Road)
Limited 1,702 1,900 50.00% 50.00% 546 DCFU 9.95% 31/07/2010 1,193 2,220 1,026
Craig
Wind Farm
Limited 944 838 12.50% 12.50% 49 DCFU 5.52% 31/08/2010 2,190 1,529 119
A7 Lochhead ABB
Limited 646 690 20.00% 20.00% 43 DCFU 3.78% 31/03/2010 1,470 1,090 256
The Small
Hydro UNAUDITED
Company ABB
Limited 579 579 22.50% 22.50% 18 PRI 3.38% 31/03/2010 (72) n/a n/a
Redeven UNAUDITED
Energy ABB
Limited 534 534 60.00% 60.00% - PRI 3.12% 31/03/2010 2 n/a n/a
------------ ------- ------- -------------- ------- ----------- ---------- ------------ ----------- --------------- ---------- ---------
"C"Share Fund
Portfolio company
Investment Investment information information
Income Proportion
recog-nised of
by the Portfolio Date Profit
Company by of latest /(loss)
Voting during the Basis of Value audited Net Assets/ before
Company Value Cost Share-holding rights year valuation % accounts (liabil-ities) Turn-over tax
GBP000 GBP000 % % GBP000 GBP000 GBP000 GBP000
Greenfield
Wind Farm
Limited* 1,500 1,500 12.50% 12.50% 126 PRI 37.88% n/a n/a n/a n/a
BEGL 2
Limited 500 500 0.00% 0.00% 24 PRI 12.63% 31/12/2010 (331) n/a (332)
BEGL 3
Limited** 500 500 0.00% 0.00% 24 PRI 12.63% n/a n/a n/a n/a
UNAUDITED
EcoGen ABB
Limited 410 410 0.00% 0.00% 9 PRI 10.35% 30/09/2010 2,010 n/a (263)
Iceni
Renewables
Limited 400 400 50.00% 50.00% - PRI 10.10% 31/07/2010 (22) n/a (6)
Renewable
Power UNAUDITED
Systems ABB
Limited 350 350 0.00% 0.00% 38 PRI 8.84% 31/07/10 1,348 n/a n/a
Osspower UNAUDITED
Limited 300 300 0.00% 0.00% 6 PRI 7.58% 31/03/2010 576 - (5)
------------ ------- ------- -------------- ------- ------------ ---------- ----------- ----------- --------------- ---------- ---------
ABB - Abbreviated accounts
Basis of valuation
DCFU - Discounted future cash flows from the underlying business
excluding interest earned to date
PRI - Price of recent investment reviewed for impairment
* The ordinary share fund and "C" share fund have shareholdings
in Greenfield Wind Farm Limited of 16.65% and 12.50% respectively,
therefore the Company's aggregate shareholding is 29.15%.
Greenfield Wind Farm Limited was incorporated on 14 December 2009.
The accounts for Greenfield Wind Farm Limited's first accounting
period have not been prepared as yet.
** BEGL 3 Limited was incorporated on 30 April 2010. The
accounts for BEGL 3 Limited's first accounting period have not been
prepared as yet.
Investment Policy
The Company is focused on investing in companies developing
renewable energy projects with installed capacities of two to
twelve megawatts, although larger projects may also be considered.
Given the target investment size, investments will generally be in
companies developing projects initiated by specialist small-scale
developers and smaller projects which are not attractive to large
development companies and utilities.
Asset Allocation
The Investment Manager seeks, primarily, to allocate the
Company's investments in equity securities and loan stock of
companies owning renewable energy projects with full planning
consent, ready for construction of the project to commence or whose
assets are already operational. Up to 10% of net proceeds raised
from the initial share offer and the "C" share offer, respectively,
may be allocated to development funding for early stage renewable
energy projects prior to planning permissions being obtained.
The Company's policy is to maintain cash reserves of at least 5%
of net proceeds raised from the initial share offer and the "C"
share offer for the purpose of meeting operating expenses and
purchasing its shares in the market. Circumstances may arise which
would require the Company to hold less than 5% of net proceeds in
cash for a limited period of time.
In order to comply with VCT requirements, at least 70% by value
of the Company's investments are required to be comprised of
qualifying investments.
The Company typically owns 25% to 50% of the equity share
capital of each investee company and a portion of its investment in
each investee company may be in the form of loan stock.
The Company's uninvested funds are placed on deposit or invested
in short-term fixed income securities until suitable investment
opportunities are found.
Risk Diversification
The geographical focus of the portfolio is the UK and the
majority of investments made to date are in the wind sector. Funds
are invested with a range of small-scale independent developers so
project risk is not concentrated on only a few developers. The
portfolio contains projects at different stages of the asset
lifecycle, ranging from pre-planning, to construction and then into
operation. Investments are also made in technologies that have no
inherent operational correlation with the performance of wind
farms. Investments are made via subscriptions for new share capital
or via loan stock instruments in order to secure a negotiated level
of return from the project. The majority of investments are made in
special purpose companies set up specifically to develop each
project and bank debt financing is non-recourse to the Company.
The returns from projects depend on the UK Government's
continued support for renewable energy, primarily under the
Renewables Obligation and Feed-in Tariff mechanisms. The effects of
any negative change to this policy are mitigated by the UK
Government's historic practice of grandfathering financial support
mechanisms for existing assets. This risk is further mitigated by
the Company typically negotiating fixed and/or floor price
mechanisms into the power purchase agreements entered into by
project companies for the sale of their generated output.
Gearing
The Company does not intend to borrow funds for investment
purposes. However the Company is exposed to gearing through its
investee companies which typically fund the construction costs of
each project through senior bank debt finance. The Investment
Manager is involved in assisting investee companies in negotiating
the terms of this finance to ensure competitive terms are achieved.
The interest rate is typically fixed via an interest rate swap for
the duration of the bank loan so that investee companies are not
exposed to changes in market interest rates.
To the extent that borrowing should be required by the Group for
any purpose, the Directors shall restrict the borrowings of the
Group. The aggregate principal amount at any time outstanding in
respect of money borrowed by the Group shall not without the
previous sanction of an ordinary resolution of the Company exceed a
sum equal to 10% of the adjusted share capital and reserves of the
Company in accordance with its Articles.
Maximum Exposures
In order to gauge the maximum exposure of the funds to various
risks, the following can be used as a guide:
i) Investments in qualifying holdings
70-95% of the funds will be invested in qualifying holdings no
later than three years after the date that provisional approval by
HM Revenue & Customs of the Company's status as a VCT becomes
effective. The relevant compliance date for the initial share offer
was 1 March 2009 and for the first "C" share offer and ordinary
share "top-up" offer is 1 March 2012. The relevant compliance date
for the second "C" share offer is 1 March 2013.
For the purposes of the 70% qualifying holdings requirement,
disposals of qualifying investments for cash may be disregarded for
a period of six months. Where a VCT breaches one or more of the
requirements due to factors outside of its control, it may apply to
HM Revenue & Customs for a determination that the breach will
be disregarded for a period of 90 days while the breach is
remedied.
ii) Concentration limits
Under VCT regulations no more than 15% of the Company's total
assets should be in a single investee company at the time the
investment is made in that investee company.
iii) Investments in pre-planning projects
In accordance with the Company's investment policy a maximum of
10% of the net funds raised from each of the initial share offer
and "C" share offer respectively may be invested in pre-planning
projects.
Market outlook
In May 2011, the UK Government agreed to adopt some of the most
ambitious carbon reduction targets in the world by setting a carbon
budget of halving greenhouse gas emissions from 1990 levels by
2025. However, a series of Government policy announcements and
initiatives over the last year have left the UK green energy market
in a state of uncertainty as to the shape of its future. While the
Government continues to confirm its commitment to the green agenda,
its recent actions, perhaps only in the short term, led to a degree
of investment hiatus.
The most significant test for the sector remains Government's
Electricity Market Reform ("EMR") proposals, which aim to provide a
framework for decarbonisation, renewable energy, security of supply
and affordability. The consultation document was wide in its scope
and set challenging timescales that the market remains doubtful can
be achieved. The intention is to support the green energy sector
while providing best value, market based support for the consumer.
At the date of this report the mechanisms that will support such an
idea remain uncertain and consequently it cannot be determined
exactly how this will support the renewable energy market. However,
while the EMR framework is clearly an attempt to bring nuclear
power into the subsidy mix, the industry does not feel that the
intention is to limit the role that renewables can make in the
future.
Initial consultation rounds for the EMR indicate that the
Renewables Obligation will be grandfathered in a form that will
sustain existing accredited generating plant, although there is a
possibility that a rump market could develop. How grandfathering
will work remains uncertain but early indications are that new
projects will be eligible for accreditation until at least 2017
with grandfathering for project lives of 20 years.
The Localism Bill continues its passage through the
Parliamentary process in an attempt to provide more control over
housing and planning decisions at a local level. Clearly there is
potential for local decisions to be made without regard to broader
national policies and a consequent fall in the number of successful
renewable energy planning applications. It is inevitable there will
be a refocus on local community engagement from developers. While
it would be easy to be negative about the Bill, the alternative
view could be that certain communities would welcome the
installation of renewable energy assets, given they can provide a
valuable local source of funding for communities struggling during
difficult economic times.
The April 2011 budget announcement was mixed from the standpoint
of the VCT industry. A proposed increase in the gross asset limit
for qualifying investments to GBP15 million and the limit on the
amount that an investee company can receive from a VCT to GBP10
million were well received. But at the same time the ability of
VCTs to invest in Feed-in Tariff ("FiT") projects has been hampered
by the announcement that investment in companies which derive a
substantial part of their income from FiTs will not be classified
as a qualifying investment for the purposes of the VCT regulations.
This will not completely prohibit investment in FiT schemes but any
such opportunity will have to be considered carefully against the
requirement that at least 70% of the Company's investments are
qualifying for the purposes of the VCT regulations.
The banking market for renewable energy projects can generally
be described as relatively stable. No new entrants have been seen
over the last year and lending margins and leverage packages remain
consistent with the preceding couple of years. Although turbine
prices continue to decline, fluctuations in the Sterling / Euro
exchange rate make the timing of purchasing decisions challenging.
On a more positive note, wholesale electricity prices have begun to
rise for near term delivery and longer term projections are showing
positive signs.
Climate Change Capital Limited
Investment Manager
21 June 2011
Directors' Report
The Directors present their Annual Report and the audited
Financial Statements for the year ended 28 February 2011.
Business review
The business review has been prepared in accordance with the
requirements of Section 417 of the Companies Act 2006 and best
practice. The purpose of the review is to provide shareholders with
a summary of the business objectives of the Company, the board's
strategy to achieve those objectives, the risks faced, the
regulatory environment and the key performance indicators (KPIs)
used to measure performance.
The Company's business objectives are set out in the Investment
Policy in the Investment Manager's Report.
Principal activities and status
The Company is an investment company, as defined in Section 833
of the Companies Act 2006, and received approval as a Venture
Capital Trust from HM Revenue & Customs for the year ended 28
February 2010. The Directors consider that the Company has
conducted its affairs in a manner to enable it to continue to
comply with Section 274 of the Income Tax Act 2007. The Company is
a public limited company, incorporated in England and listed on the
London Stock Exchange. The registered address of the Company is The
Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU.
The Company has no employees other than the Directors.
The Company's business during the year and future developments
are reviewed in the Chairman's Statement and the Investment
Manager's Report.
Companies Act 2006 disclosures: environmental matters
The Board recognises the requirement under Section 417(5) of the
Companies Act 2006 to detail information about environmental
matters (including the impact of the Company's business on the
environment). It is the specific purpose of the Company to invest
in companies that develop and operate assets which generate energy
from renewable sources. Through its investment policy, the Company
is committed to mitigating the impact of climate change by
contributing to the transition to a low carbon economy and a
cleaner environment.
Key performance indicators of the Company
Results and dividends
For the year ended
28 February 2011 Ordinary Shares "C" Shares Total
Pence Pence
per share per share
GBP000 (1) GBP000 (1) GBP000
Revenue profit
attributable to
equity shareholders 734 3.29 91 0.84 825
Capital loss
attributable to
equity shareholders (2,388) (10.70) (166) (1.52) (2,554)
-------- ----------- ------- ----------- --------
Net loss attributable
to equity
shareholders (1,654) (7.41) (75) (0.68) (1,729)
Dividends paid during
the year (368) (1.50) - - (368)
-------- ----------- ------- ----------- --------
Total movement in
equity shareholders'
funds (2,022) (8.91) (75) (0.68) (2,097)
======== =========== ======= =========== ========
Total expense ratio
(2) 3.27% 3.14% 3.22%
======== =========== ======= =========== ========
Ordinary Shares "C" Shares Total
Pence Pence
per share per share
GBP000 (3) GBP000 (3) GBP000
As at 28 February
2011
Net asset value 18,629 75.9 10,468 92.4 29,097
======= =========== ======= =========== =======
Total shareholder
return (4) 19,936 85.8 10,468 92.4 30,404
======= =========== ======= =========== =======
(1 ) The "per share" value is determined in respect of the
weighted average number of shares in issue during the year, except
in respect of the dividends paid in the year, which is determined
on the basis of the number of shares eligible to receive dividends
at the time the dividends were paid.
(2) The total expense ratio represents the total operating
expenditure during the year (excluding irrecoverable VAT, merger
costs and investment costs) as a percentage of the net asset value
of the Company at year end.
(3 ) The "per share" value is determined in respect of the
number of shares in issue at year end, except in respect of the
dividends paid, which is determined on the basis of the number of
shares eligible to receive dividends at the time the dividends were
paid.
(4) The total shareholder return represents the net asset value
of the Company at year end plus the cumulative dividends paid by
the Company since incorporation.
The performance of the Company is reviewed in the Investment
Manager's Report, including the Company's compliance with HM
Revenue & Customs VCT regulations. The Company's prospects are
considered in the Outlook section of the Chairman's Statement.
Principal risks
Other than the inherent risks associated with investment
activities, which are discussed in the Investment Manager's Report,
the risks described below are those which the Directors consider to
be material:
-- Failure to meet and maintain the investment requirements for
compliance with HM Revenue & Customs VCT regulations.
The Board mitigates this risk by regularly reviewing investment
management activity with appropriately qualified advisers and by
obtaining pre-approval from HM Revenue & Customs for each
qualifying investment.
-- Inadequate control environment at service providers.
The Board mitigates this risk by only appointing service
providers of a high standing under agreements that set out their
responsibilities and by obtaining assurances from them that all
exceptions have been reported to the Board. See the Corporate
Governance Statement for discussion of a breach of internal control
within the Investment Manager relating to the Company. The Board is
currently reviewing the internal control procedures of the
Investment Manager.
-- Non-compliance with the Listing Rules of the Financial
Services Authority, Companies Act Legislation, HM Revenue &
Customs VCT regulations and other applicable regulations.
The Board mitigates this risk by employing external advisers
fully conversant with applicable statutory and regulatory
requirements who report regularly to the Board on the Company's
compliance.
Going concern
The Company's major cash outflows are within the Company's
control (namely investments and dividends) or are reasonably
predictable (namely the operating expenses). The Company is able to
forecast cash inflows comprising proceeds from investments to a
reasonable degree. The Board has a reasonable expectation that the
Company is able to continue in operational existence for a period
of at least twelve months from the date of this report. The
Directors have concluded that it is appropriate to continue to
adopt the going concern basis in preparing the accounts.
The liquidity risks and details of the Company's policy for
managing its financial risks are shown in note 22. The Company's
investment activities are described in the Investment Manager's
Report and its performance is reviewed in the Directors'
Report.
Merger with Ventus 3 VCT plc
On 6 May 2010, the Company completed a scheme of reconstruction
with Ventus 3 VCT plc (the "Scheme" or "Merger"). The terms of the
Scheme were set out in a circular issued by the Company on 8
February 2010. The Scheme was effected by Ventus 3 VCT plc
transferring its assets and liabilities to the Company, in
consideration for which the Company issued 12,250,311 new ordinary
shares to the shareholders of Ventus 3 VCT plc. Under the Scheme,
Ventus 3 VCT plc was placed into members' voluntary liquidation.
The number of new shares issued by the Company to the shareholders
of Ventus 3 VCT plc was determined on the basis of the relevant net
assets of Ventus 3 VCT plc and the Company's ordinary share fund on
the date prior to the Merger, adjusted in accordance with the terms
of the Scheme. The new ordinary shares rank pari passu in all
respects and form a single class with the existing ordinary
shares.
The creation of a single, larger company is expected to bring
significant advantages to shareholders, primarily through a
reduction in the annual running costs of the enlarged company when
compared to the combined running costs of each separate company.
This should increase dividends in the future.
The costs of the Scheme were allocated to the ordinary share
fund of the Company and Ventus 3 VCT plc in accordance with the
terms of the Scheme. The aggregate cost of the Merger was
GBP278,000 of which GBP134,000 was borne by the Company's ordinary
share fund and GBP144,000 by Ventus 3 VCT plc. Excluding investment
management fees and Merger costs, the revenue expenses of the
ordinary share fund of the enlarged Company for the year ended 28
February 2011 amounted to GBP154,000 compared to the aggregate
revenue expenses of the ordinary share fund of the Company and
Ventus 3 VCT plc for the year ended 28 February 2010, which
amounted to GBP219,000. This represents a reduction in revenue
expenditure of GBP65,000.
In acquiring the assets of Ventus 3 VCT plc, the Company now has
a shareholding of 60% of the ordinary shares issued by each of
Redeven Energy Limited and Spurlens Rig Wind Limited. These
shareholdings constitute controlling interests and therefore these
companies are subsidiaries of the Company. The consolidated
financial statements of the Company and its subsidiaries (i.e. the
Group) are presented in this report.
Share capital
At a general meeting held on 2 March 2009, the Company passed
several resolutions concerning the Company's share capital:
Authorised share capital
The authorised share capital was increased from GBP7,500,000 to
GBP12,500,000 by the creation of 20,000,000 "C" shares of 25p each.
At 28 February 2011, the Company had authorised share capital of
GBP12,500,000 in total which was represented by 30 million ordinary
shares of 25p each and 20 million "C" shares of 25p each being 60%
and 40% of the Company's authorised share capital respectively.
Allotted, called and fully paid up shares
As at 28 February 2011, the Company had allotted, called and
fully paid up shares in two share funds, of which 24,537,560 shares
were ordinary shares of 25p each and 11,329,107 were "C" shares of
25p each. These shares represented 68% and 32% of the Company's
issued share capital respectively.
Authority to allot
The Directors are authorised to allot relevant securities
(within the meaning of section 551 of the Companies Act 2006) up to
a maximum aggregate nominal amount of GBP5,931,111. This authority
expires on 1 March 2014.
Disapplication of pre-emption rights
The Directors are empowered to allot equity securities for cash
(further to the authority referred to above) without first offering
such securities to existing shareholders in proportion to their
shareholdings - such power being limited to the allotment of
securities only in certain, defined circumstances. This power
expires on 1 March 2014.
Authority to repurchase shares
At the Annual General Meeting ("AGM") held on 13 July 2010 the
Company renewed its authority to repurchase up to 14.99% of its own
issued ordinary share capital and up to 14.99% of its own issued
"C" share capital.
Issued share capital
During the year ended 28 February 2011 12,250,311 ordinary
shares and 4,404,421 "C" shares were allotted.
Rights and restrictions attaching to shares and powers of the
Board of Directors
As set out in the Company's Articles of Association, subject to
the provisions of the Companies Act 2006 and to any special rights
conferred to the holders of any other shares, any share may be
issued with or have attached to it such rights and restrictions as
the Company may by ordinary resolution decide or, if no such
resolution has been passed so far as the resolution does not make
specific provision, as the Board may decide. The business of the
Company shall be managed by the Board of Directors which may
exercise all the powers of the Company, subject to the provisions
of the Companies Act 2006, the Memorandum of Association of the
Company, the Company's Articles of Association and any special
resolution of the Company. Copies of the Articles of Association
can be obtained by Companies House in the UK or by writing to the
Company Secretary.
CREST
The Company's ordinary shares are available for trading in
CREST, the settlement system for uncertified stocks and shares.
Dividends
The dividend for the half-year to 31 August 2010 of 1.50p per
ordinary share was paid on 12 January 2011 to ordinary shareholders
on the register on 10 December 2010. The Directors recommend a
final dividend of 1.00p per ordinary share to be paid on 10 August
2011 to ordinary shareholders on the register on 15 July 2011. The
total dividend for the year is therefore 2.50p per ordinary share.
Note 9 of the Financial Statements gives details of the dividends
declared and paid in the current year and prior year. No dividends
have been declared or paid to "C" shareholders.
Directors and their interests
The Directors who held office during the year and their
interests in the Company were as follows:
28 February 28 February 28 February 28 February
2011 2011 2010 2010
Ordinary "C" Ordinary "C"
Shares Shares Shares Shares
A Moore (Chairman) 16,061 10,400 8,043 5,200
P Thomas 10,284 5,200 5,150 5,200
C Wood 10,284 5,200 5,150 5,200
D Pinckney* n/a n/a 5,150 2,600
*David Pinckney resigned following the AGM held on 13 July
2010.
All the Directors are non-executives and all are independent,
except Paul Thomas who is Chairman of the Investment Committee of
the Investment Manager.
In accordance with Listing Rule 15.2.12A the Company should not
have a majority of directors who are also a director of another
company managed by the Manager. On 13 July 2010 Mr David Pinckney
resigned from the Board of Directors and Mr Alan Moore was
appointed Chairman of the Company.
In accordance with the Company's Articles of Association and the
Financial Reporting Council's (FRC) 2008 Combined Code and the
Listing Rules of the Financial Services Authority, Paul Thomas and
Alan Moore will retire at the AGM and being eligible, will offer
themselves for re-election. As both Mr Thomas and Mr Moore have
acted in the interests of the Company throughout the period of
their appointment and demonstrated commitment to their roles, the
Board recommends they be re-elected at the AGM.
Biographical information on the Directors is shown below. The
terms of the Directors' appointment and replacement are set out in
the Corporate Governance Statement.
Substantial interests
As at 28 February 2011 and the date of this report, the Company
was aware that Pershing Nominees and Heartwood Nominees held 3.43%
and 4.82%, respectively, of the shareholding and voting rights of
the Company's ordinary share capital. The Company was not aware of
any other individual shareholding exceeding 3% or more of the
voting rights attached to the Company's ordinary or "C" share
capital.
Investment management, administration and performance fees
Climate Change Capital Limited, whose ultimate parent
undertaking is Climate Change Capital Group Limited, is the
Investment Manager of the Company and provides management and other
administrative services. Climate Change Capital Limited also
provided similar services to Ventus VCT plc during the financial
year. The principal terms of the investment management agreement
are set out in note 3 of the Financial Statements.
Investment Manager
As noted in the Chairman's Statement, in light of the recent
resignation of the lead investment manager and the poor performance
of parts of the investment portfolio, the Board is in discussions
with the Investment Manager on the scale and nature of future
staffing resources. The Board is also in the process of
investigating the background to and implications of the breach of
internal control within the Investment Manager. As at the date of
this Report, the Board's deliberations on these matters are at an
early stage. Therefore the Board is unable at the present time to
express a view as to whether the continuing appointment of the
Investment Manager with the current resourcing and on the terms
agreed is in the best interests of the shareholders. A further
announcement will be made in due course; in the meantime, the
Investment Manager will continue to manage the Company's investment
programme.
Company Secretary
The City Partnership (UK) Limited has been appointed to provide
company secretarial services to the Company as set out in the
company secretarial services agreement. For these services the
Company Secretary receives an annual fee of GBP15,000 plus VAT. The
company secretarial services agreement is for an initial period of
three years from 1 February 2009, terminable thereafter by either
party giving not less than six months notice in writing.
VCT monitoring status
The Company retains PricewaterhouseCoopers LLP to advise on its
compliance with the taxation requirements relating to VCTs.
Financial instruments
The Company's financial instruments comprise investments in
unquoted companies, government securities, cash, trade and other
receivables and trade and other payables. Further details are set
out in note 22 of the Financial Statements.
Supplier payment policy
The Company's payment policy is to agree terms of payment before
business is transacted and to settle accounts in accordance with
those terms. During the year, all suppliers were paid within the
terms agreed. The creditor days as at 28 February 2011 were 6 days
(2010: nil).
Directors' statement as to disclosure of information to the
Auditor
The Directors who were in office on the date of approval of
these Financial Statements have confirmed that, as far as they are
aware, there is no relevant audit information of which the Auditor
is unaware. Each of the Directors has confirmed that they have
taken all the steps that they ought to have taken as Directors in
order to make themselves aware of any relevant audit information
and to establish that it has been communicated to the Auditor.
Auditor
A resolution to re-appoint PKF (UK) LLP as the Auditor of the
Company will be proposed at the forthcoming AGM.
Details of the non-audit services provided to the Company by the
Auditor are set out in note 6 of the Financial Statements.
Annual General Meeting
Enclosed with this Annual Report and Financial Statements is the
Notice of Annual General Meeting ("AGM") of the Company (or any
adjournment thereof) to be convened for Wednesday, 27 July 2011 at
12.30pm. A copy of the Notice is set out at the end of this
announcement (the "Notice"). A Form of Proxy for use in connection
with the AGM has been issued with this document.
The business of the meeting is outlined below:
Resolution 1 - Annual Report and Financial Statements
The Directors are required to present to the AGM the Annual
Report and Financial Statements for the financial year ended 28
February 2011.
Resolution 2 - To declare a final dividend
The final dividend cannot exceed the amount recommended by the
Directors and can only be paid after the members at a general
meeting have approved it. The Directors recommend a final dividend
of 1.00p per ordinary share payable on 10 August 2011 to holders of
ordinary shares registered at the close of business on 15 July
2011, which will bring the total dividend for the year to 2.50p per
share.
Resolution 3 - Directors' Remuneration Report
Under Regulation 11 and Schedule 8 of the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008, the
Company is required to produce a Directors' Remuneration Report for
each relevant financial year and to seek shareholder approval for
that report at the AGM. The Directors' Remuneration Report is set
out below.
Resolution 4 - Re-election of Director
Mr Paul Thomas retires in accordance with Listing Rule 15.2.13A
and, being eligible, offers himself for re-election.
Resolution 5 - Re-election of Director
Mr Alan Moore retires by rotation in accordance with the
Company's Articles of Association and, being eligible, offers
himself for re-election.
Resolution 6 - Re-appointment of Auditor
This resolution proposes that PKF (UK) LLP be re-appointed as
Auditor of the Company.
Resolution 7 - Remuneration of the Auditor
This resolution proposes that the Directors be authorised to set
the Auditor's remuneration.
Resolution 8 - Purchase of shares by the Company
This resolution, which will be proposed as a special resolution,
will, if passed, authorise the Company to purchase in the market up
to 3,678,180 ordinary shares and 1,698,233 "C" shares, representing
14.99% of the current issued share capital of each class, at a
minimum price of 25p per share, exclusive of any expenses, of not
more than an amount equal to the higher of (a) 105% of the average
of the middle market prices shown in the quotations for a share in
The London Stock Exchange Daily Official List for the five business
days immediately preceding the day on which that share is
purchased; and (b) the amount stipulated by Article 5(1) of the
Buy-back and Stabilisation Regulation 2003. This authority will be
effective until the earlier of the date of the AGM of the Company
to be held in 2012 and the date which is 18 months after the date
on which this resolution is passed (unless the authority is
previously revoked, varied or extended by the Company in general
meeting). The Board believes that it is beneficial to the Company
for it to continue to have the flexibility to purchase in the
market its own shares. However, the Board considers it in the best
interests of all shareholders if the Directors use their authority
to make share buy-backs sparingly. This resolution seeks authority
from the shareholders for the Company to be authorised to do so
when considered appropriate by the Directors. This resolution would
renew the authority granted to the Directors at the last AGM of the
Company. The minimum and maximum prices to be paid for the shares
are stated in the Notice. Repurchases of shares will be made at the
discretion of the Board and will only be made in the market at
prices below the prevailing net asset value ("NAV") per share as
and when market conditions are appropriate. Any shares which are
repurchased in this way may be cancelled or held as treasury
shares, which may then be cancelled or sold for cash, as determined
by the Board. The Directors consider that this authority is in the
interests of shareholders as a whole, as the repurchase of shares
at a discount to the underlying NAV enhances the NAV of the
remaining shares. The Directors are aware that the secondary market
for the shares of VCT companies can be illiquid and that shares may
trade at a discount to their NAV. The Company has established a
special reserve out of which it may fund share buy-backs.
Action to be taken
Shareholders have been issued with a Form of Proxy for use in
connection with the AGM. Shareholders are requested to complete the
Form of Proxy in accordance with the instructions printed on it and
to return it to the Company's Registrar, Capita Registrars, PXS, 34
Beckenham Road, Beckenham, Kent, BR3 4TU not less than 48 hours
before the time of the AGM (excluding any time which is not part of
a working day). Completion and return of a Form of Proxy will not
preclude shareholders from attending and voting at the AGM in
person should they subsequently decide to do so.
Recommendation
The Directors believe that all of the resolutions are in the
best interests of the Company and its shareholders as a whole and,
accordingly, unanimously recommend that you vote in favour of the
resolutions, as they intend to do in respect of their own
beneficial holdings of shares.
By order of the Board
The City Partnership (UK) Limited
Secretary
21 June 2011
Directors' Remuneration Report
This report has been prepared by the Directors in accordance
with the requirements of the Companies Act 2006 and the Large and
Medium-sized Company and Groups (Accounts and Reports) Regulations
2008. An ordinary resolution to approve the report will be proposed
at the AGM to be held on Wednesday, 27 July 2011.
Remuneration policy
The Board comprises three Directors, all of whom are
non-executive. The Board does not have a separate remuneration
committee, as the Company has no employees, other than the
non-executive Directors.
The Board considers that Directors' fees should reflect the time
commitment required and the high level of responsibility borne by
Directors and should be broadly comparable to those paid by similar
companies. It is not considered appropriate that Directors'
remuneration should be performance-related, and none of the
Directors are eligible for bonuses, pension benefits, share
options, long-term incentive schemes or other benefits in respect
of their services as non-executive Directors of the Company. The
total remuneration of non-executive Directors has not exceeded the
GBP100,000 per annum limit set in the Articles of Association of
the Company.
No Director has a contract of service with the Company. All of
the Directors have been provided with letters of appointment. The
Articles of Association provide that Directors shall retire and
offer themselves for re-election at the first AGM after their
appointment and at least every three years thereafter. A Director's
appointment will continue unless terminated by the Company by
giving three months written notice; it may also be terminated in
certain other circumstances. No Director has been granted any
options to acquire shares in the Company.
Directors' fees (audited information)
The following fees were paid to individual Directors in respect
of the year ended 28 February 2011 with comparative figures for the
year ended 28 February 2010:
28 February 28 February
2011 2010
GBP GBP
A Moore (Chairman) 19,805 7,500
P Thomas 16,647 7,500
C Wood 16,647 7,500
D Pinckney* 5,349 10,000
------------ ------------
Aggregate emoluments 58,448 32,500
============ ============
*David Pinckney resigned on 13 July 2010.
None of the Directors received any other remuneration during the
year. The current Directors were each directors of Ventus 3 VCT plc
prior to it merging with the Company on 6 May 2010. Ventus 3 VCT
plc had invested in parallel with the Company prior to the Merger.
Subsequent to the Merger the directors' fees were increased to
reflect the service of the Directors to the single enlarged
Company. Ventus 3 VCT plc was placed into members' voluntary
liquidation.
Company performance
Due to the positioning of the Company in the market as a
specialist VCT investing in companies that will develop, construct
and operate small on-shore UK renewable energy projects, the
Directors consider that, currently, there is no suitable company or
index that can be identified for comparison. However, in order to
comply with Directors' Remuneration Report Regulations 2002, the
FTSE 100 Index has been used as a comparative.
Total shareholder return on ordinary shares
The graph demonstrates the change in value, in terms of Share
Price Total Return(1) and NAV Total Return(2) , based on GBP100
invested in ordinary shares on the date they were listed on the
London Stock Exchange (10 March 2006) over the period to 28
February 2011 compared with the total return attributable to GBP100
invested in companies comprising the FTSE 100 Index over the same
period. The graph shows there had been a reduction in shareholder
value during the year in respect of the total shareholder return
based on NAV, which is representative of the net downward
revaluation of investments as detailed in the Investment Manager's
Report. The graph also demonstrates the discount to NAV of the
share price of the ordinary shares as the total shareholder return
based on share price is lower than that based on NAV.
Total shareholder return on "C" shares
The graph demonstrates the change in value, in terms of Share
Price Total Return(1) and NAV Total Return(2) , based on GBP100
invested in "C" shares on the date they were listed on the London
Stock Exchange (24 March 2009) over the period to 28 February 2011
compared with the total return attributable to GBP100 invested in
companies comprising the FTSE 100 Index over the same period. There
was slight increase in shareholder value during the year in respect
of the total shareholder return based on NAV, which is attributable
to the costs of the "C" share fund being shared over a larger
capital base following the second "C" share offer. . The graph also
demonstrates the discount to NAV of the share price of the "C"
shares as the total shareholder return based on share price is
lower than that based on NAV.
(1) Share Price Total Return is the return attributable to the
share price of the shares held assuming that dividends paid in
respect of those shares were immediately reinvested in shares at
the market price as at the date the dividends were paid.
(2) NAV Total Return is the net asset value of the shares held
plus the cumulative dividends paid to those shares over the period
in which they were held.
By order of the Board
The City Partnership (UK) Limited
Secretary
21 June 2011
Corporate Governance Statement
The Board of Ventus 2 VCT plc has considered the principles and
recommendations of the AIC Code of Corporate Governance ("AIC
Code") by reference to the AIC Corporate Governance Guide for
Investment Companies ("AIC Guide"). The AIC Code, as explained by
the AIC Guide, addresses all the principles set out in the UK
Corporate Governance Code, as well as setting out additional
principles and recommendations on issues that are of specific
relevance to member companies of the AIC.
The Company has complied with the recommendations of the AIC
Code and the relevant provisions of UK Corporate Governance Code,
except as set out below.
The UK Corporate Governance Code includes provisions relating
to:
-- the role of the chief executive
-- executive directors' remuneration
-- the need for an internal audit function.
For the reasons set out in the AIC Guide, and as explained in
the UK Corporate Governance Code, the Board considers the first two
provisions are not relevant to the position of the Company, being
an externally managed investment company. The Company has therefore
not reported further in respect of the first two provisions.
However, in the light of the breach in internal controls within the
Investment Manager the third provision is currently under review by
the Board.
Board of Directors
For most of the year ended 28 February 2011 the Board consisted
of three Directors, all of whom are non-executive. The Board
ensures that it has the appropriate balance of skills, experience,
length of service and knowledge of the Company amongst its
Directors. Biographical information on the Directors, is shown
below.
Independence
In accordance with the Listing Rules of the Financial Services
Authority, the Board has reviewed the independence of each Director
and of the Board as a whole. Directors withdrew from discussions
concerning their individual status.
Mr Thomas is also the Chairman of the Ventus funds' Investment
Committee of the Investment Manager and is therefore not considered
to be independent. In the last year all Board members have served
as directors of Ventus VCT plc and Ventus 3 VCT plc. Ventus 3 VCT
plc merged with the Company under a scheme of reconstruction on 6
May 2010 and was placed into members' voluntary liquidation.
Climate Change Capital Limited is also the Investment Manager of
Ventus VCT plc. In accordance with changes to the Listing Rules the
Directors no longer serve on the board of another company managed
by the Investment Manager. The Board believes that each Director,
with the exception of Mr Thomas, has demonstrated that he is
independent in character and judgement and independent of the
Investment Manager and therefore, that Mr Moore and Mr Wood are
each considered independent.
Directors' responsibilities
The Board meets at least quarterly and is in regular contact
with the Investment Manager between these meetings. There were a
number of ad-hoc meetings, including meetings related to the
approval of the Half-yearly Report and the Interim Management
Statements. The number of meetings of the Board and the Audit
Committee held during the year and the attendance of the Directors
is shown in the table below:
Board Audit
Meeting Committee
Attendance Attendance
A Moore (Chairman) 5 (5) 1 (1)
P Thomas 7 (7) 2 (2)
C Wood 8 (9) 2 (2)
D Pinckney* 8 (8) 1 (1)
*David Pinckney resigned on 13 July 2010.
Alan Moore was appointed Chairman of the Company and became a
member of the Audit Committee on 13 July 2010.
The figure in brackets indicates the total number of meetings at
which the Director was expected to attend.
All the Directors are equally responsible under the law for the
proper conduct of the Company's affairs. In addition, the Directors
are responsible for ensuring that the policies and operations are
in the best interests of all the Company's shareholders and that
the best interests of creditors and suppliers to the Company are
properly considered.
The AIC Code states that the Board should have a formal schedule
of matters specifically reserved to it for decision, to ensure that
it has firm direction and control of the Company. The schedule of
matters reserved to it includes the general investment strategy of
the Company and the performance of the Company. The terms and
conditions of appointment of non-executive Directors are available
upon written application to the Company Secretary.
All Directors have direct access to the Company Secretary and
independent advisers at the Company's expense provided prior
clearance has been obtained from the Board. The Company Secretary
is responsible to the Board for ensuring that Board and Committee
procedures are followed and for compliance with applicable rules
and regulations. The Company Secretary is also responsible to the
Board for ensuring the timely delivery of information and reports
and that the statutory obligations of the Company are met.
When Directors have concerns that cannot be resolved about the
running of the Company or a proposed action, they are asked to
ensure that their concerns are recorded in the Board minutes. On
resignation, a Director who has any such concerns is encouraged to
provide a written statement to the Chairman, for circulation to the
Board.
Directors appointed by the Board to fill a vacancy are required
to submit to election at the next annual general meeting. At each
AGM of the Company one third of the Directors shall retire from
office and being eligible, be proposed for re-election. The
Directors to retire will be those who have been longest in office
or, in the case of those who were appointed or reappointed on the
same day, will be (unless they otherwise agree) determined by lot.
The Company may by ordinary resolution remove any Director before
his period of office has expired. In addition, as Mr Thomas is the
Chairman of the Ventus funds' Investment Committee of the
Investment Manager, he is subject to re-election under Listing Rule
15.2.13A, and will therefore offer himself for re-election at the
AGM and annually thereafter.
In accordance with the AIC Code, the Company has in place
directors' and officers' liability insurance.
Upon joining the Board, new Directors will receive a full,
formal and tailored induction. As the Company has no major
shareholders, it is considered unnecessary to provide shareholders
with the opportunity to meet new non-executive Directors at a
specific meeting other than the AGM.
The performance of the Board, Audit Committee and individual
Directors has been evaluated through an assessment process led by
the Chairman who also considered the independence of the Directors
and concluded that it considered all Directors, with the exception
of Paul Thomas, for reasons mentioned above, to be independent.
The Directors seek to ensure that the Board has an appropriate
balance of skills, experience and length of service. The
biographies of the Directors shown below demonstrate the range of
investment, commercial and professional experience that they
contribute. The size and composition of the Board and Audit
Committee is considered adequate for the effective governance of
the Company.
Audit Committee
The Audit Committee comprises Colin Wood, Alan Moore and Paul
Thomas. Colin Wood is Chairman of the Audit Committee. Alan Moore,
Chairman of the Company, has been appointed to the Audit Committee
in view of the small size of the Board. The Committee meets twice a
year to review the Half-yearly Report and Annual Financial
Statements before submission to the Board. The roles and
responsibilities of the Audit Committee, including reviewing the
Company's internal controls, risk management systems and monitoring
auditor independence, are set out in written terms of reference.
These are available upon written application to the Company
Secretary. The Audit Committee has primary responsibility for
making recommendations on the appointment, reappointment and
removal of the external Auditor.
The Audit Committee reviews the nature and extent of non audit
services provided by the Company's external Auditor and ensures
that the Auditor's independence and objectivity is safeguarded.
The re-appointment of PKF (UK) LLP as the Company's Auditor was
approved by shareholders at the AGM held on 13 July 2010. The Board
recommended the services of PKF (UK) LLP to the shareholders in
view of the firm's extensive experience in auditing Venture Capital
Trusts.
During the year under review, the Company's external Auditor
also provided tax compliance services and a review of the risk
management reporting. The Board believes that the appointment of
the Auditors to supply these services was in the interest of the
Company due to their knowledge of the Company and the VCT sector.
The Auditor was, therefore, in a position to provide a greater
efficiency of service compared to other potential providers of
these services. The Board is satisfied that the fees charged and
work undertaken did not affect the Auditor's objectivity as the
proportion of the fees earned from the Company for other services
was relatively small in relation to the audit fees. Also, the other
services were undertaken by partners other than the audit partner
and did not involve undertaking any internal review or management
role nor did these services create any self review conflict over
the preparation of the information reported in the accounts.
Nomination and Remuneration Committees
To date, no Nomination or Remuneration Committees have been
established. The establishment of a Nomination Committee is not
considered necessary as the appointment of new Directors and
recommendations for the re-election of Directors are matters
considered by the Board. Matters relating to remuneration of
Directors, all of whom are non-executive, are considered by the
Board and any Director is excluded from meetings whose purpose is
the setting of his own remuneration.
Internal control
In accordance with the AIC Code, the Board has established an
ongoing process for identifying, evaluating and managing the
significant risks faced by the Company which accords with the
Turnbull guidance. The Board acknowledges that it is responsible
for the Company's system of internal control and financial
reporting. Internal control systems are designed to provide
reasonable, but not absolute, assurance against material
misstatement or loss. The Board has delegated, contractually to
third parties, the investment management, the custodial services
(which include safeguarding the Company's assets), the day-to-day
accounting, company secretarial and administration requirements and
the registration services. Each of these contracts was entered into
after full and proper consideration by the Board of the quality and
cost of services offered.
There is an ongoing process for identifying, evaluating and
managing the significant risks faced by the Company, which has been
in place for the period under review and up to the date of approval
of the accounts. This process is regularly reviewed by the Board.
The Board is currently reviewing the need for an internal audit
function. The Board will continue to monitor and review the risk
management process on a regular basis.
The Company has a clearly defined investment policy and process.
Investment decisions are made by the Investment Manager, after
approval has been received from the Ventus funds' Investment
Committee of the Investment Manager. In certain circumstances
investment decisions are referred to the Board for approval after
due consideration of the recommendations of the Ventus funds'
Investment Committee of the Investment Manager The Board performs
regular reviews of the Company's performance in respect of the
investments and other assets, liabilities, revenue and
expenditure.
The Audit Committee reviews each of the Company's half-yearly
and annual reports, interim management statements and associated
announcements. The Audit Committee regularly reviews management
accounts information to make comparisons to budget. The Audit
Committee also regularly reviews the internal controls adopted and
implements appropriate policies to deal with operational risks. The
findings of the external Auditor in respect of internal controls
and financial reporting are discussed at Audit Committee meetings
and appropriate recommendations are made to the Board.
The principal features of the internal control systems which the
Company has in place in respect of financial reporting include:
-- authorisation limits over expenditure incurred by the
Company;
-- segregation of duties between the analysis of investment
valuations, review of the assumptions made in valuing investments
and the recording of these valuations in the accounting
records;
-- bank reconciliations are carried out on a regular basis;
and
-- review by the Audit Committee of financial information prior
to its publication.
Performance of the Investment Manager
The primary focus of regular Board meetings is to review the
investment performance against the Company's stated investment
policy and objectives. In doing so, the Board assesses the
performance of the Investment Manager and considers whether the
arrangements made between the Company and the Investment Manager
are appropriate and in the interests of shareholders.
As noted in the Chairman's Statement, the Board has been made
aware by the Investment Manager of a breach of internal control
within the Investment Manager relating to the Company. An unsecured
loan to PBM Power Limited, an investee company, totalling
GBP530,000 was approved by the Investment Manager without the
knowledge of the Ventus funds' Investment Committee of the
Investment Manager. The Investment Manager is currently
investigating the background to this matter, has confirmed to the
Board that no similar events have occurred in the past, and has
made proposals to implement remedial actions for the future. The
Board is taking steps to satisfy itself in respect of this
matter.
Going concern
The Directors are required to consider the going concern status
of the Company and prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume that the
Company will continue in business. The going concern status of the
Company is discussed in the Directors' Report.
Listing Rules disclosures: DTR 7.2.6
The Company has two classes of shares, ordinary and "C" shares,
which carry no right to fixed income. Details of the Company's
share capital, including the number of shares authorised and
allotted, are set out in the Directors' Report.
At a general meeting of the Company, on a show of hands, every
member who is present in person and entitled to vote shall have one
vote and on a poll every member who is present in person or by
proxy and entitled to vote shall have one vote for every share
held.
Any profits of each share fund which the Company may determine
to distribute in respect of any financial year shall be distributed
among the shareholders pro rata according to the amounts paid up or
credited as paid up on the shares held.
The capital and assets of the Company on a winding-up or other
return of capital shall be applied in repaying to the shareholders
the amounts paid up or credited as paid up on such shares and
subject thereto shall belong to and be distributed according to the
number of such shares held.
The identity of each of the shareholders with a significant
holding as at the year end and the date of this report, including
details of the size and nature of their holding, is disclosed in
the Substantial Interests section of the Directors' Report.
As at the year end and date of this report the Company had no
immediate or ultimate controlling parties and there were no shares
in issue carrying special rights with regard to control of the
Company.
In accordance with the Company's Articles of Association,
subject to the provisions of the Companies Act 2006 and to any
special rights conferred on the holders of any other shares, any
shares may be issued with or have attached to them such rights and
restrictions as the Company may by ordinary resolutions decide or,
if no such resolution has been passed or so far as the resolution
does not make specific provision, as the Board may decide.
There are no shares in issue which hold special rights.
The Company may by ordinary resolution appoint any person who is
willing to act as a Director, either to fill a vacancy or as an
additional Director. Each Director is to be appointed by separate
resolution.
The Company may by special resolution make amendment to the
Company's Articles of Association.
The powers of the Company's Directors in relation to the Company
issuing or buying back its own shares are set out in the Director's
Report.
Relations with shareholders
The Company communicates with shareholders and solicits their
views where it is appropriate to do so. All shareholders are
welcome at the AGM, which provides a forum for shareholders to ask
questions of the Directors and to discuss with them issues
affecting the Company. The Board as a whole approves the Chairman's
Statement which forms part of the Annual and Half-yearly Reports to
shareholders in order to ensure that they present a balanced and
understandable assessment of the Company's position and future
prospects. Notice of the AGM accompanies this Annual Report, which
is sent to shareholders a minimum of 20 working days before the
meeting.
A separate resolution is proposed at the AGM on each
substantially separate issue. The Registrar collates the proxy
votes, and the results (together with the proxy forms) are
forwarded to the Company Secretary immediately prior to the AGM. In
order to comply with the Combined Code, proxy votes are announced
at the AGM, following each vote on a show of hands, except in the
event of a poll being called. The notice of the next AGM and proxy
form can be found at the end of these Financial Statements. A proxy
form in respect of this meeting has been issued to shareholders
separately.
For and on behalf of the Board
Alan Moore
Chairman
21 June 2011
Directors' Information
The Company's Board comprises three Directors, two of whom are
independent of the Manager. The Directors operate in a
non-executive capacity and are responsible for overseeing the
investment strategy of the Company. The Directors have wide
experience of investment in both smaller growing companies and
larger quoted companies. Information about the Directors is
presented below:
Alan Moore OBE, CEng FIMechE - Chairman
Alan Moore has more than 40 years' experience in the UK
electricity industry, beginning his career
with the Central Electricity Generating Board. From 1998 to
2004, he was the Managing Director
of National Wind Power (now RWE Innogy), at the time one of the
largest developers and owners of renewable power assets in the UK.
Until 2010, for eight years he was Co-Chairman of the UK
Government's Renewables Advisory Board. He is a past Chairman of
the British Wind Energy Association (now called RenewableUK). He is
Chairman of Cowrie Limited, a fund which invests in offshore
environmental research projects, and he is also a non-executive
director of Partnerships for Renewables Limited. He has been a
member of the Board since January 2006.
Paul Thomas ACA
Paul Thomas is Managing Director of Private Investor Capital
Limited, the London-based independent private equity firm that
invests in transactions of up to GBP5 million in growing, unquoted
UK businesses. He has over 25 years of private equity experience,
including 19 years with ECI Partners LLP, the London based
midmarket buy-out house, where he was Managing Director until
retiring in 2003. During his time with ECI, the firm made over 100
equity investments in transactions ranging in size from GBP500,000
to GBP25 million, deploying capital of more than GBP200 million.
Previously, he was with Price Waterhouse for 6 years, latterly in
corporate finance. He is a physics graduate and a Chartered
Accountant. He is Chairman of the Ventus funds' Investment
Committee of the Investment Manager and has been a member of the
Board since January 2006.
Colin Wood
Colin Wood spent 27 years as a civil servant in the Scottish
Office before retiring from a senior position in the Scottish
Executive in 2001. He is an economics graduate and from 1993 to
1998, he was Senior Economic Adviser and Head of the Economics and
Statistics Unit at the Scottish Office Industry Department, where
he was responsible for providing economic advice on a range of
issues including energy markets and the environment. He is a
Director of The Century Building Society in Edinburgh. He has been
a member of the Board since January 2006.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Directors'
Report, the Directors' Remuneration Report and the Financial
Statements in accordance with applicable law and regulations. They
are also responsible for ensuring that the Annual Report includes
information required by the Listing Rules of the Financial Services
Authority.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law the directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union and have elected to
prepare the Parent Company Financial Statements in accordance with
those standards. Under company law the Directors must not approve
the Financial Statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and the
Group and of the profit or loss of the Group for that period. In
preparing these Financial Statements the Directors are required
to:
-- select suitable accounting policies and then apply them
consistently;
-- make judgements and estimates that are reasonable and
prudent;
-- state whether the Financial Statements have been prepared in
accordance with IFRS as adopted by the European Union; and
-- prepare the Financial Statements on the going concern basis
unless it is inappropriate to presume that the Company and the
Group will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the Group Financial Statements comply with the
Companies Act 2006 and Article 4 of the IAS Regulation and the
Parent Company Financial Statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the United Kingdom governing the
preparation and dissemination of the Financial Statements and other
information included in annual reports may differ from legislation
in other jurisdictions.
The Directors confirm, to the best of their knowledge that:
-- the Group Financial Statements, which have been prepared in
accordance with IFRS as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
loss of the Group; and
-- the management report included within the Chairman's
Statement, Investment Manager's Report and Directors' Report
includes a fair review of the development and performance of the
business and the position of the Company and the undertakings
included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they
face.
The names and functions of all the Directors are stated
above.
For and on behalf of the Board
Alan Moore
Chairman
21 June 2011
Directors and Advisers
Directors
Alan Moore OBE CEng FIMechE
Paul Thomas ACA
Colin Wood
Investment Manager Company Secretary
Climate Change Capital Limited The City Partnership (UK) Limited
3 More London Riverside Thistle House
London 21 Thistle Street
SE1 2AQ Edinburgh
EH2 1DF
Auditor Registrars and Registered Office
PKF (UK) LLP Capita Registrars
Farringdon Place The Registry
20 Farringdon Road 34 Beckenham Road
London Beckenham
EC1M 3AP Kent
BR3 4TU
Principal Banker VCT Taxation Adviser
HSBC Bank plc PricewaterhouseCoopers LLP
60 Queen Victoria Street 1 Embankment Place
London London
EC4N 4TR WC2N 6RH
Broker Solicitor
Matrix Corporate Capital LLP Berwin Leighton Paisner LLP
One Vine Street Adelaide House
London London Bridge
W1J 0AH London
EC4R 9HA
Independent Auditor's Report
to the members of Ventus 2 VCT plc
We have audited the financial statements of Ventus 2 VCT PLC for
the year ended 28 February 2011 which comprise the Group's
Statement of Comprehensive Income, the Group and Parent Company
Balance Sheets, the Group and Parent Company Statements of Changes
in Equity, the Group and Parent Company Statements of Cash Flows
and the related notes. The financial reporting framework that has
been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and, as regards the Parent Company Financial
Statements, as applied in accordance with the provisions of the
Companies Act 2006.
This report is made solely to the Company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
Company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the Company and the Company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors'
Responsibilities, the Directors are responsible for the preparation
of the Financial Statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the Financial Statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
Ethical Standards for Auditors.
Scope of the audit of the Financial Statements
An audit involves obtaining evidence about the amounts and
disclosures in the Financial Statements sufficient to give
reasonable assurance that the Financial Statements are free from
material misstatement, whether caused by fraud or error. This
includes an assessment of: whether the accounting policies are
appropriate to the Group's and the Parent Company's circumstances
and have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
Directors; and the overall presentation of the Financial
Statements. In addition, we read all the financial and
non-financial information in the Annual Report to identify material
inconsistencies with the audited Financial Statements. If we become
aware of any apparent material misstatements or inconsistencies we
consider the implications for our report.
Opinion on Financial Statements
In our opinion:
-- the Financial Statements give a true and fair view of the
state of the Group's and the Parent Company's affairs as at 28
February 2011 and of the Group's loss for the year then ended;
-- the Group Financial Statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the Parent Company Financial Statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
as applied in accordance with the provisions of the Companies Act
2006; and
-- the Financial Statements have been prepared in accordance
with the requirements of the Companies Act 2006 and, as regards the
group financial statements, Article 4 of the IAS Regulation.
Emphasis of matter - valuation of investments
In forming our opinion on the financial statements, which is not
modified, we have considered the adequacy of the disclosures made
in note 1 to the financial statements concerning the inherent
uncertainty of the assumptions used in the valuation of waste wood
biomass investments.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion:
-- the part of the Directors' Remuneration Report to be audited
has been properly prepared in accordance with the Companies Act
2006;
-- the information given in the Directors' Report for the
financial year for which the Financial Statements are prepared is
consistent with the Financial Statements; and
-- the information given in the Corporate Governance Statement
in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules
and Transparency Rules sourcebook issued by the Financial Services
Authority (information about internal control and risk management
systems in relation to financial reporting processes and about
share capital structures) is consistent with the Financial
Statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
-- adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the Parent Company Financial Statements and the part of the
Directors' Remuneration Report to be audited are not in agreement
with the accounting records and returns; or
-- certain disclosures of Directors' remuneration specified by
law are not made; or
-- we have not received all the information and explanations we
require for our audit; or
-- a corporate governance statement has not been prepared by the
company.
Under the Listing Rules we are required to review:
-- the Directors' statement, set out in the Directors' Report,
in relation to going concern; and
-- the part of the Corporate Governance Statement relating to
the Company's compliance with the nine provisions of the June 2008
Combined Code specified for our review; and
-- certain elements of the report to the shareholders by the
board on directors' remuneration.
Rosemary Clarke (Senior statutory auditor)
for and on behalf of PKF (UK) LLP, Statutory auditor
London, UK
21 June 2011
Group Statement of Comprehensive Income
for the year ended 28 February 2011
Ordinary Shares "C" Shares Total
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Net unrealised
loss on
investments 11 - (1,284) (1,284) - - - - (1,284) (1,284)
Realised loss
on
investments 11 - (268) (268) - - - - (268) (268)
Income 2 1,127 - 1,127 262 - 262 1,389 - 1,389
Investment
management
fees 3 (118) (354) (472) (64) (190) (254) (182) (544) (726)
Impairment
charge 4 - (530) (530) - - - - (530) (530)
Merger costs 5 (31) - (31) - - - (31) - (31)
Other expenses 6 (154) (42) (196) (83) - (83) (237) (42) (279)
-------- -------- -------- -------- -------- ------- -------- -------- --------
Loss before
taxation 824 (2,478) (1,654) 115 (190) (75) 939 (2,668) (1,729)
Taxation 8 (90) 90 - (24) 24 - (114) 114 -
Loss and total
comprehensive
income for
the year
attributable
to equity
shareholders 734 (2,388) (1,654) 91 (166) (75) 825 (2,554) (1,729)
-------- -------- -------- -------- -------- ------- -------- -------- --------
Return per
share
Basic and
diluted
return per
share (p) 10 3.29 (10.70) (7.41) 0.84 (1.52) (0.68)
The Group has only one class of business and derives its income
from investments made in the UK.
The total column of this statement represents the Group's
Statement of Comprehensive Income, prepared in accordance with the
recognition and measurement principles of International Financial
Reporting Standards as adopted by the European Union. The revenue
and capital columns shown above constitute supplementary
information prepared under the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" 2009 ("SORP") published by the Association of
Investment Companies.
The loss and total comprehensive income for the year is wholly
attributable to the owners of the Company.
The accompanying notes below form an integral part of these
Financial Statements.
Group Statement of Comprehensive Income
for the year ended 28 February 2010
Ordinary Shares "C" Shares Total
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Net unrealised
loss on
investments 11 - (711) (711) - - - - (711) (711)
Income 2 376 - 376 31 - 31 407 - 407
Investment
management
fees 3 (66) (199) (265) (36) (106) (142) (102) (305) (407)
Merger costs 5 (103) - (103) - - - (103) - (103)
Other expenses 6 (91) - (91) (56) - (56) (147) - (147)
-------- -------- ------- -------- -------- ------- -------- -------- -------
Loss before
taxation 116 (910) (794) (61) (106) (167) 55 (1,016) (961)
Taxation 8 (46) 42 (4) 2 2 4 (44) 44 -
Loss and total
comprehensive
income for
the year
attributable
to equity
shareholders 70 (868) (798) (59) (104) (163) 11 (972) (961)
-------- -------- ------- -------- -------- ------- -------- -------- -------
Return per
share
Basic and
diluted
return per
share (p) 10 0.62 (7.70) (7.08) (0.97) (1.70) (2.67)
The Group has only one class of business and derives its income
from investments made in the UK.
The total column of this statement represents the Group's
Statement of Comprehensive Income, prepared in accordance with the
recognition and measurement principles of International Financial
Reporting Standards as adopted by the European Union. The revenue
and capital columns shown above constitute supplementary
information prepared under the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" 2009 ("SORP") published by the Association of
Investment Companies.
The accompanying notes below form an integral part of these
Financial Statements.
Group Balance Sheet
as at 28 February 2011
As at 28 February As at 28 February
2011 2010
Ordinary "C" Ordinary "C"
Shares Shares Total Shares Shares Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Non-current
assets
Investments 11 16,374 3,960 20,334 8,434 325 8,759
Development
wind assets 13 1,096 - 1,096 - - -
Trade and other
receivables 14 570 103 673 126 - 126
18,040 4,063 22,103 8,560 325 8,885
--------- ------- -------- --------- ------- -------
Current assets
Trade and other
receivables 14 614 175 789 508 28 536
Cash and cash
equivalents 15 664 6,254 6,918 1,364 6,495 7,859
1,278 6,429 7,707 1,872 6,523 8,395
--------- ------- -------- --------- ------- -------
Total assets 19,318 10,492 29,810 10,432 6,848 17,280
--------- ------- -------- --------- ------- -------
Current liabilities
Trade and other
payables 16 (197) (24) (221) (76) (467) (543)
Net current
assets 1,081 6,405 7,486 1,796 6,056 7,852
--------- ------- -------- --------- ------- -------
Financial liabilities 17 (372) - (372) - - -
--------- ------- -------- --------- ------- -------
Net assets 18,749 10,468 29,217 10,356 6,381 16,737
--------- ------- -------- --------- ------- -------
Share capital 18 6,134 2,832 8,966 3,071 1,731 4,802
Share premium 7,890 7,874 15,764 658 4,813 5,471
Special reserve 7,803 - 7,803 7,803 - 7,803
Capital reserve
- realised (1,755) (270) (2,025) (651) (104) (755)
Capital reserve
- unrealised (1,842) - (1,842) (558) - (558)
Revenue reserve 401 32 433 33 (59) (26)
--------- ------- -------- --------- ------- -------
Equity attributable
to equity holders 18,631 10,468 29,099 10,356 6,381 16,737
Minority interests 118 - 118 - - -
Total equity 18,749 10,468 29,217 10,356 6,381 16,737
--------- ------- -------- --------- ------- -------
Basic and diluted
net asset value
per share (p) 19 75.9 92.4 84.3 92.1
Approved by the Board and authorised for issue on 21 June
2011.
Alan Moore
Chairman
The accompanying notes below form an integral part of these
Financial Statements.
Ventus 2 VCT plc. Registered No: 05667210
Company Balance Sheet
as at 28 February 2011
Company Company
As at 28 February As at 28 February
2011 2010
Ordinary "C" Ordinary "C"
Shares Shares Total Shares Shares Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Non-current
assets
Investments 11 16,374 3,960 20,334 8,434 325 8,759
Investments
in subsidiaries 12 732 - 732 - - -
Trade and other
receivables 14 570 103 673 126 - 126
17,676 4,063 21,739 8,560 325 8,885
--------- ------- -------- --------- ------- -------
Current assets
Trade and other
receivables 14 510 175 685 508 28 536
Cash and cash
equivalents 15 630 6,254 6,884 1,364 6,495 7,859
1,140 6,429 7,569 1,872 6,523 8,395
--------- ------- -------- --------- ------- -------
Total assets 18,816 10,492 29,308 10,432 6,848 17,280
--------- ------- -------- --------- ------- -------
Current liabilities
Trade and other
payables 16 (187) (24) (211) (76) (467) (543)
Net current
assets 953 6,405 7,358 1,796 6,056 7,852
--------- ------- -------- --------- ------- -------
Net assets 18,629 10,468 29,097 10,356 6,381 16,737
--------- ------- -------- --------- ------- -------
Equity attributable
to equity holders
Share capital 18 6,134 2,832 8,966 3,071 1,731 4,802
Share premium 7,890 7,874 15,764 658 4,813 5,471
Special reserve 7,803 - 7,803 7,803 - 7,803
Capital reserve
- realised (1,755) (270) (2,025) (651) (104) (755)
Capital reserve
- unrealised (1,842) - (1,842) (558) - (558)
Revenue reserve 399 32 431 33 (59) (26)
Total equity 18,629 10,468 29,097 10,356 6,381 16,737
--------- ------- -------- --------- ------- -------
Basic and diluted
net asset value
per share (p) 19 75.9 92.4 84.3 92.1
Approved by the Board and authorised for issue on 21 June
2011.
Alan Moore
Chairman
The accompanying notes below form an integral part of these
Financial Statements.
Ventus 2 VCT plc. Registered No: 05667210
Group Statement of Changes in Equity
for the year ended 28 February 2011
Capital Capital
Share Share Special reserve reserve Revenue Minority
capital premium reserve realised unrealised reserve interests Total
Ordinary
Shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2010 3,071 658 7,803 (651) (558) 33 - 10,356
Shares issued
in the year 3,063 7,232 - - - - - 10,295
Change in
equity
arising from
acquisition
of
subsidiaries - - - - - 2 118 120
Loss and total
comprehensive
income for
the year - - - (1,104) (1,284) 734 - (1,654)
Dividends
paid in the
year - - - - - (368) - (368)
-------- -------- -------- --------- ----------- -------- ---------- --------
At 28 February
2011 6,134 7,890 7,803 (1,755) (1,842) 401 118 18,749
======== ======== ======== ========= =========== ======== ========== ========
Capital
Share Share reserve Revenue
capital premium realised reserve Total
"C" Shares GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2010 1,731 4,813 (104) (59) 6,381
Shares issued
in the year 1,101 3,303 - - 4,404
Issue costs - (242) - - (242)
Loss and total
comprehensive
income for
the year - - (166) 91 (75)
-------- -------- -------- --------- ----------- -------- ---------- --------
At 28 February
2011 2,832 7,874 (270) 32 10,468
======== ======== ======== ========= =========== ======== ========== ========
Capital Capital
Share Share Special reserve reserve Revenue Minority
capital premium reserve realised unrealised reserve interests Total
Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2010 4,802 5,471 7,803 (755) (558) (26) - 16,737
Shares issued
in the year 4,164 10,535 - - - - - 14,699
Issue costs - (242) - - - - - (242)
Change in
equity
arising from
acquisition
of
subsidiaries - - - - - 2 118 120
Loss and total
comprehensive
income for
the year - - - (1,270) (1,284) 825 - (1,729)
Dividends
paid in the
year - - - - - (368) - (368)
-------- -------- -------- --------- ----------- -------- ---------- --------
At 28 February
2011 8,966 15,764 7,803 (2,025) (1,842) 433 118 29,217
======== ======== ======== ========= =========== ======== ========== ========
The Company did not have subsidiary undertakings in the prior
year therefore comparative movements and balances for the Group
have not been presented in respect of the prior year.
The accompanying notes below form an integral part of these
Financial Statements.
Company Statement of Changes in Equity
for the year ended 28 February 2011
Capital Capital
Share Share Special reserve reserve Revenue
capital premium reserve realised unrealised reserve Total
Ordinary
Shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2010 3,071 658 7,803 (651) (558) 33 10,356
Shares issued
in the year 3,063 7,232 - - - - 10,295
Loss and total
comprehensive
income for
the year - - - (1,104) (1,284) 734 (1,654)
Dividends paid
in the year - - - - - (368) (368)
-------- -------- -------- --------- ----------- -------- --------
At 28 February
2011 6,134 7,890 7,803 (1,755) (1,842) 399 18,629
======== ======== ======== ========= =========== ======== ========
Capital
Share Share reserve Revenue
capital premium realised reserve Total
"C" Shares GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2010 1,731 4,813 (104) (59) 6,381
Shares issued
in the year 1,101 3,303 - - 4,404
Issue costs - (242) - - (242)
Loss and total
comprehensive
income for
the year - - (166) 91 (75)
-------- -------- -------- --------- ----------- -------- --------
At 28 February
2011 2,832 7,874 (270) 32 10,468
======== ======== ======== ========= =========== ======== ========
Capital Capital
Share Share Special reserve reserve Revenue
capital premium reserve realised unrealised reserve Total
Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2010 4,802 5,471 7,803 (755) (558) (26) 16,737
Shares issued
in the year 4,164 10,535 - - - - 14,699
Issue costs - (242) - - - - (242)
Loss and total
comprehensive
income for
the year - - - (1,270) (1,284) 825 (1,729)
Dividends paid
in the year - - - - - (368) (368)
-------- -------- -------- --------- ----------- -------- --------
At 28 February
2011 8,966 15,764 7,803 (2,025) (1,842) 431 29,097
======== ======== ======== ========= =========== ======== ========
All amounts presented in the Statement of Changes in Equity are
attributable to equity holders. The reserves available for
distribution comprise the revenue reserve. The special reserve may
be used to fund buy-backs of shares as and when it is considered by
the Board to be in the interests of the shareholders.
The accompanying notes below form an integral part of these
Financial Statements.
Company Statement of Changes in Equity
for the year ended 28 February 2010
Capital Capital
Share Share Special reserve reserve Revenue
capital premium reserve realised unrealised reserve Total
Ordinary
Shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2009 2,793 - 7,803 (494) 153 298 10,553
Share issued
in the year 278 713 - - - - 991
Issue costs - (55) - - - - (55)
Loss and total
comprehensive
income for
the year - - - (157) (711) 70 (798)
Dividends paid
in the year - - - - - (335) (335)
-------- -------- -------- --------- ----------- -------- -------
At 28 February
2010 3,071 658 7,803 (651) (558) 33 10,356
-------- -------- -------- --------- ----------- -------- -------
Capital
Share Share reserve Revenue
capital premium realised reserve Total
"C" Shares GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2009 - - - - -
Share issued
in the year 1,731 5,194 - - 6,925
Issue costs - (381) - - (381)
Loss and total
comprehensive
income for
the year - - (104) (59) (163)
-------- -------- -------- --------- ----------- -------- -------
At 28 February
2010 1,731 4,813 (104) (59) 6,381
-------- -------- -------- --------- ----------- -------- -------
Capital Capital
Share Share Special reserve reserve Revenue
capital premium reserve realised unrealised reserve Total
Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2009 2,793 - 7,803 (494) 153 298 10,553
Share issued
in the year 2,009 5,907 - - - - 7,916
Issue costs - (436) - - - - (436)
Loss and total
comprehensive
income for
the year - - - (261) (711) 11 (961)
Dividends paid
in the year - - - - - (335) (335)
-------- -------- -------- --------- ----------- -------- -------
At 28 February
2010 4,802 5,471 7,803 (755) (558) (26) 16,737
-------- -------- -------- --------- ----------- -------- -------
All amounts presented in the Statement of Changes in Equity are
attributable to equity holders. The reserves available for
distribution comprise the revenue reserve. The special reserve may
be used to fund buy-backs of shares as and when it is considered by
the Board to be in the interests of the shareholders.
The accompanying notes below form an integral part of these
Financial Statements.
Group Statement of Cash Flows
for the year ended 28 February 2011
Year ended 28 February Year ended 28
2011 February 2010
Ordinary "C" Ordinary "C"
Shares Shares Total Shares Shares Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash flows from
operating
activities
Investment income
received 751 14 765 103 - 103
Deposit interest
received 2 34 36 18 20 38
Investment
management fees
paid (443) (254) (697) (199) (142) (341)
Other cash payments (425) (118) (543) (355) (46) (401)
--------- -------- -------- --------- ------- --------
Net cash used in
operations (115) (324) (439) (433) (168) (601)
Taxes paid - - - (17) - (17)
Net cash outflow
from operating
activities (115) (324) (439) (450) (168) (618)
--------- -------- -------- --------- ------- --------
Cash flows from
investing
activities
Purchases of
development wind
assets (90) - (90) - - -
Purchases of
investments (1,572) (4,010) (5,582) (1,045) (325) (1,370)
Proceeds from
investments 850 375 1,225 - - -
Net cash outflow
from investing
activities (812) (3,635) (4,447) (1,045) (325) (1,370)
--------- -------- -------- --------- ------- --------
Cash flows from
financing
activities
"C" shares issued - 3,960 3,960 (194) 6,925 6,731
"C" share issue
costs - (242) (242) - (381) (381)
"C" shares to be
issued - - - - 444 444
Ordinary shares
issued - - - 991 - 991
Ordinary share issue
costs - - - (55) - (55)
Dividends paid (368) - (368) (335) - (335)
Cash received on
acquisition of net
assets from Ventus
3 VCT plc 639 - 639 - - -
Stamp duty on shares
issued to acquire
net assets of
Ventus 3 VCT plc (22) - (22) - - -
Payments to meet
Ventus 3 VCT plc
costs (62) - (62) - - -
Loan financing 40 - 40 - - -
Net cash inflow from
financing
activities 227 3,718 3,945 407 6,988 7,395
--------- -------- -------- --------- ------- --------
Net
(decrease)/increase
in cash and cash
equivalents (700) (241) (941) (1,088) 6,495 5,407
Cash and cash
equivalents at the
beginning of the
year 1,364 6,495 7,859 2,452 - 2,452
Cash and cash
equivalents at the
end of the year 664 6,254 6,918 1,364 6,495 7,859
--------- -------- -------- --------- ------- --------
The accompanying notes below form an integral part of these
Financial Statements.
Company Statement of Cash Flows
for the year ended 28 February 2011
Year ended 28 Year ended 28
February 2011 February 2010
Ordinary "C" Ordinary "C"
Shares Shares Total Shares Shares Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash flows from
operating
activities
Investment income
received 751 14 765 103 - 103
Deposit interest
received 2 34 36 18 20 38
Investment
management fees
paid (443) (254) (697) (199) (142) (341)
Other cash payments (449) (118) (567) (355) (46) (401)
--------- -------- -------- --------- ------- --------
Net cash used in
operations (139) (324) (463) (433) (168) (601)
Taxes paid - - - (17) - (17)
Net cash outflow
from operating
activities (139) (324) (463) (450) (168) (618)
--------- -------- -------- --------- ------- --------
Cash flows from
investing
activities
Purchases of
investments (1,632) (4,010) (5,642) (1,045) (325) (1,370)
Proceeds from
investments 850 375 1,225 - - -
Net cash outflow
from investing
activities (782) (3,635) (4,417) (1,045) (325) (1,370)
--------- -------- -------- --------- ------- --------
Cash flows from
financing
activities
"C" shares issued - 3,960 3,960 (194) 6,925 6,731
"C" share issue
costs - (242) (242) - (381) (381)
"C" shares to be
issued - - - - 444 444
Ordinary shares
issued - - - 991 - 991
Ordinary share issue
costs - - - (55) - (55)
Dividends paid (368) - (368) (335) - (335)
Cash received on
acquisition of net
assets from Ventus
3 VCT plc 639 - 639 - - -
Stamp duty on shares
issued to acquire
net assets of
Ventus 3 VCT plc (22) - (22) - - -
Payments to meet
Merger costs (62) - (62) - - -
Net cash inflow from
financing
activities 187 3,718 3,905 407 6,988 7,395
--------- -------- -------- --------- ------- --------
Net
(decrease)/increase
in cash and cash
equivalents (734) (241) (975) (1,088) 6,495 5,407
Cash and cash
equivalents at the
beginning of the
year 1,364 6,495 7,859 2,452 - 2,452
Cash and cash
equivalents at the
end of the year 630 6,254 6,884 1,364 6,495 7,859
--------- -------- -------- --------- ------- --------
The accompanying notes below form an integral part of these
Financial Statements.
Notes to the Financial Statements
for the year ended 28 February 2011
1. Accounting policies
Accounting convention
The Financial Statements of the Company and the Group have been
prepared in accordance with International Financial Reporting
Standards ("IFRS"), to the extent that they have been adopted by
the European Union and with those parts of the Companies Act 2006
applicable to companies under IFRS.
The Financial Statements have been prepared on the historical
cost basis, as modified for the measurement of certain financial
instruments at fair value through profit or loss. The principal
accounting policies adopted are set out below. Where presentational
guidance set out in the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" 2009 ("SORP") is consistent with the requirements
of IFRS, the Directors have sought to prepare the Financial
Statements on a basis compliant with the recommendations of the
SORP.
On publishing the Company Financial Statements here together
with the Group Financial Statements the Company is taking advantage
of the exemption in section 408 of the Companies Act 2006 not to
present its individual Statement of Comprehensive Income and
related notes that form part of these approved financial
statements.
Changes in accounting policy and disclosure
The accounting policies adopted are consistent with those of the
previous financial year.
Standards and interpretations have been issued which will be
effective for future reporting periods but have not been early
adopted in these Financial Statements. These include IFRS 7
(Revised), IFRS 9, IFRS 10, IFRS 11, IFRS 12, IFRS 13, IAS 24, IFRS
1, IFRIC 14 and IFRIC 19. These changes are not expected to have a
material impact on transactions and balances reported in the
financial statements.
Acquisition of assets from Ventus 3 VCT plc
On 6 May 2010 Ventus 2 VCT plc (the "Company") acquired the
assets and liabilities of Ventus 3 VCT plc under a scheme of
reconstruction (the "Merger") and Ventus 3 VCT plc was placed into
members' voluntary liquidation. The Company has accounted for this
transaction as a business combination in accordance with IFRS 3, it
being the acquisition of the investment portfolio held by Ventus 3
VCT plc, and issue of new shares to the shareholders of Ventus 3
VCT plc in consideration for the assets acquired. In these
Financial Statements, the results for the period prior to 6 May
2010 reflect the activities of the Company before the Merger. The
results for the period from 6 May 2010 to 28 February 2011 reflect
the activities of the enlarged entity following the Merger.
Basis of consolidation
The Group financial statements consolidate the financial
statements of the Company and its subsidiaries (the companies over
which it exercises control) made up to the end of the financial
period. The Company is deemed to have control where it has the
power to govern the financial and operating policies of an investee
company so as to obtain benefits from its activities. In the
Company's financial statements investments in subsidiaries are
accounted for as "fair value through profit or loss" investments in
accordance with the Company's valuation policy. The Company's
shareholding in its subsidiaries is held by the ordinary share
fund.
No comparative notes to the financial statements are presented
for the Group as there were no subsidiaries requiring consolidation
in the prior year.
Business combinations
Newly acquired or newly established businesses are recognised in
the Group Financial Statements from the date of acquisition, which
is the date that the Company achieved control over the business
acquired and are subsequently de-recognised from the date that
control ceases.
The Company accounts for business combinations using the
acquisition method of accounting, with the identifiable assets and
liabilities of acquired entities measured at their fair value at
the time of acquisition. Identifiable intangible assets are
recognised where they can be separated or arise from a contractual
right, and their fair value can be reliably measured.
The difference between the fair value of the cost of the
business acquired and the fair value of the identifiable assets and
liabilities is recognised as goodwill or negative goodwill at the
date of acquisition. Goodwill is not amortised but is tested for
impairment annually and whenever impairment indicators require.
Negative goodwill is recognised immediately in the Statement of
Comprehensive Income.
Impairment testing
The carrying amount of the Group's and the Company's assets,
other than those assets held at fair value through profit and loss,
are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. If there is evidence of impairment, the recoverable
amount, being the higher of the fair value less costs to sell and
the value in use of the asset, is estimated to determine the extent
of any such impairment. For goodwill and other intangible assets
with an indefinite life or which are not ready for use, the test
for impairment is carried out annually.
Income
Income on investments is stated on an accruals basis, by
reference to the principal outstanding and at the effective
interest rates applicable. Where contractual arrangements in loan
agreements allow for interest payments to be deferred and the
timing of receipt of interest income may not be determined with
reasonable certainty, the accrued interest is not recognised in the
Statement of Comprehensive Income but is added to the carrying
value of the loan investment. Interest receivable on cash and
non-equity investments is accrued to the end of the period. No tax
is withheld at source on interest income.
Dividend income from investments is recognised when the
shareholders' rights to receive payment have been established,
which is normally the ex-dividend date.
Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the Statement of Comprehensive Income, all expenses have been
presented as revenue items except when expenses are split and
charged partly as capital items where a connection with the
maintenance or enhancement of the value of the investments held can
be demonstrated. The investment management fee has been allocated
25% to revenue and 75% to capital, in order to reflect the
Directors' expected long-term view of the nature of the investment
returns of the Company.
Expenses are allocated between the ordinary and "C" share funds
on the basis of the number of shares in issue during the period,
except expenses which are directly attributable to a particular
share fund.
Taxation
The tax expense represents the sum of the tax currently payable
and deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit before tax as reported in
the Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other periods
and it further excludes items that are never taxable or deductible.
The Company's liability for current tax is calculated using tax
rates that have been enacted or substantively enacted by the
balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets or liabilities
in the financial statements and the corresponding tax bases used in
the computation of taxable profit, and is accounted for using the
balance sheet liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised.
Due to the Company's status as a Venture Capital Trust, no
provision for deferred taxation is required in respect of any
realised or unrealised appreciation in the Company's
investments.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates enacted or
substantively enacted at the balance sheet date. Deferred tax is
charged or credited in the Statement of Comprehensive Income,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in
equity.
Development wind assets
Costs incurred in the pre-planning consent phase of the
development of a wind farm scheme are capitalised as intangible
assets and recognised as development wind assets. Costs associated
with the pre-planning phase of the wind farm development include
options over land leases, planning application costs and
environmental impact studies. These costs may be incurred directly
or comprise part of the fair value attributed to a controlling
interest in a business acquired. The capitalised costs are not
amortised until the asset is substantially complete and available
for its intended use, until which time the asset is subject to an
annual impairment test.
When a consented wind farm scheme begins construction, the
carrying value of the project is transferred to property, plant and
equipment as assets under construction.
Financial Instruments
Financial assets and financial liabilities are recognised on the
Company's Balance Sheet when the Company has become a party to the
contractual provisions of each instrument.
Trade and other receivables
Trade and other receivables are initially recognised at fair
value. They are subsequently measured at their amortised cost using
the effective interest method less any provision for impairment. A
provision for impairment is made where there is objective evidence
(including counterparties with financial difficulties or in default
on payments) that amounts will not be recovered in accordance with
original terms of the agreement. A provision for impairment is
established when the carrying value of the receivable exceeds the
present value of the future cash flows discounted using the
original effective interest rate. The carrying value of the
receivable is reduced through the use of an allowance account and
any impairment loss is recognised in the Statement of Comprehensive
Income.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand and at bank and
other short-term deposits held by the Company with maturities of
less than three months. These short-term deposits are classified
under cash equivalents as they meet the definition in IAS 7 "Cash
Flow Statements" of a short-term highly liquid investment that is
readily convertible into known amounts of cash and subject to
insignificant risk of change in value.
Financial liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into. An equity instrument is any contract that evidences a
residual interest in the assets of the Company after deducting all
of its liabilities.
Loans, trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently at amortised cost using the effective interest
method.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received amount, net of direct issue costs.
Special reserve
The special reserve was created by approval of the High Court to
cancel the Company's share premium account in respect of the shares
issued in the initial offer for the Company's ordinary shares. The
special reserve may be used to fund buy-backs of shares as and when
it is considered by the Board to be in the interests of the
shareholders.
Capital reserve - realised
This reserve includes gains and losses compared to cost on the
realisation of investments and expenses, together with the related
taxation effect, allocated to this reserve in accordance with the
above policy on expenses.
Capital reserve - unrealised
This reserve includes increases and decreases in the valuation
of investments held at fair value.
Investments
As the Company's business is investing in financial assets with
a view to profiting from their total return in the form of
interest, dividends and increases in fair value, all investments,
including investments in subsidiaries, are designated as "fair
value through profit or loss" on initial recognition. A financial
asset is designated within this category if it is acquired, managed
and evaluated on a fair value basis in accordance with the
Company's documented investment policy. In the year of acquisition,
investments are initially measured at cost, which is considered to
be their fair value. Thereafter, the investments are measured at
subsequent reporting dates on a fair value basis in accordance with
IFRS. Gains or losses resulting from revaluation of investments are
taken to the capital account of the Statement of Comprehensive
Income.
Investments in unquoted companies are valued in accordance with
International Private Equity and Venture Capital Valuation
Guidelines, using the most appropriate valuation methodology as
determined by the Board. Where there has been a recent arm's length
transaction between knowledgeable, willing parties, the "price of
recent investment" methodology is used to determine the value of
the investment. In the absence of a recent market transaction,
unquoted investee companies with renewable energy generating plant
constituting a substantial portion of their assets and which have
proved stable operational performance for an acceptable period of
time are valued using the discounted future cash flows from the
underlying business, excluding interest accrued in the accounts to
date. The period of time to assess stable operational performance
will vary depending on the nature of the renewable energy
technology that the investee company uses, but is typically between
6 and 18 months following completion of the construction phase.
Investments in unquoted companies which have not demonstrated
stable operational performance will be valued using the "price of
recent investment" methodology, reviewed for impairment.
Notwithstanding the above, the Board may determine that an
alternative methodology should be used where this more
appropriately reflects the fair value of an investment.
When an investee company has gone into receivership or
liquidation, the investment, although physically not disposed of,
is treated as being realised.
The Company has taken the exemption, permitted by IAS 28
Investments in Associates and IAS 31 Interests in Joint Ventures,
from equity accounting for investments where it has significant
influence or joint control.
The majority of money held pending investment is invested in
financial instruments with same day or two-day access and as such
is treated as cash and cash equivalents.
Key assumptions and key sources of estimation uncertainty
The preparation of the financial statements requires the
application of estimates and assumptions which may affect the
results reported in the financial statements. Estimates, by their
nature, are based on judgement and available information. The
estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying value of assets and liabilities
are those used to determine the fair value of assets which are
designated as "fair value through profit or loss".
The key assumptions that have a significant impact on fair value
in the discounted cash flow valuations are the discount factor
used, the price at which the power and associated benefits can be
sold and the amount of electricity the investee companies'
generating assets are expected to produce. The discount factor
applied to the cash flows is regularly reviewed by the Investment
Committee of the Investment Manager to ensure it is set at the
appropriate level. The Investment Committee and the Board will also
give consideration to the specific performance characteristics of
the particular type of generating technology being used. The price
at which the output from the generating assets is sold is a factor
of both wholesale electricity prices and government subsidies. The
selling price is often fixed in the medium term under power
purchase agreements. For periods outside the term of these
agreements the assumed future prices are estimated using external
third party forecasts which take the form of specialist consultancy
reports. Specifically commissioned external consultant reports are
also used to estimate the expected electrical output from the
investee company's generating assets taking into account their type
and location. All of these key assumptions are reviewed regularly
by the Investment Committee of the Investment Manager and the
Board.
In addition to the assumptions on discount factors and the price
of power and associated benefits described above, there are key
assumptions specific to determining the valuation of the waste wood
biomass investments, which are valued at GBP4,141,000 in the
ordinary share fund, and are subject to a higher degree of
uncertainty.
The assumptions that are specific to the waste wood biomass
investments and have a significant impact on their valuations are
the level of generating hours available, the gate fees (for
receiving waste wood) net of processing costs, the plant operating
costs and the economic life span of the plant.
The level of generating hours available has been estimated based
on advice from the engineers working at the sites based on their
assessment of the technical capability of the projects, rather than
the current performance of operational sites. However increases or
decreases in this assumption would have a very significant impact
on the valuation and, without having data from a reasonable period
of stable operating performance for the investments, the
achievability of the assumed performance must be considered to be
uncertain.
Also, the validity of the assumptions is dependent on the
completion of renegotiation of contracts and debt finance terms
with third parties, including the lending bank, which are in
progress.
The sensitivity of these investments to reasonable alternative
assumptions is presented in note 11 of the Financial
Statements.
Dividends payable
Dividends payable are recognised as distributions in the
financial statements when the Company's liability to make payment
has been established.
Segmental Reporting
The Directors consider that the Company has engaged in a single
operating segment as reported to the chief operating decision maker
which is that of investing in equity and debt. The chief operating
decision maker is considered to be the Board.
2. Income
Group and Company
Year ended 28 February 2011
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Income from investments
Loan stock interest 696 227 923
Dividend income 428 - 428
---------- ----------- -------
1,124 227 1,351
Other income
UK treasury bill
income - 24 24
Bank deposit interest 3 11 14
---------- ----------- -------
1,127 262 1,389
========== =========== =======
Group and Company
Year ended 28 February 2010
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Income from investments
Loan stock interest 371 12 383
---------- ----------- -------
371 12 383
Other income
UK treasury bill
income 3 15 18
Bank deposit interest 2 4 6
---------- ----------- -------
376 31 407
========== =========== =======
The income recognised by the Group was wholly derived from the
Company's activities.
3. Investment management fees
Group and Company
Year ended 28 February
2011
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Investment management
fees 472 254 726
========= =========== =======
Group and Company
Year ended 28 February
2010
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Investment management
fees 265 142 407
========= =========== =======
The Investment Manager is entitled to an annual fee equal to
2.5% of the Company's net asset value ("NAV"). This fee is
exclusive of VAT and is paid quarterly in advance. The fee covers
the provision by the Investment Manager of investment management
services as well as all accounting and administrative services
together with the additional annual trail commission payable to
authorised financial intermediaries. Total annual running costs are
in aggregate capped at 3.6% of NAV (excluding the Investment
Manager's performance-related incentive fee, any irrecoverable VAT,
Merger costs and investment costs), with any excess being borne by
the Investment Manager.
The Investment Manager will receive a performance-related
incentive fee subject to the Company achieving certain defined
targets. No incentive fee will be payable until the Company has
provided a cumulative return to investors in the form of growth in
NAV plus payment of dividends ("the Return") of 60p per share.
Thereafter, the incentive fee, which is payable in cash, is
calculated as 20% of the amount by which the Return in any
accounting period exceeds 7p per share. The incentive fee is
exclusive of VAT.
The management agreement may be terminated on 12 months' notice,
given at any time after 12 February 2013.
4. Impairment charge
The Company's ordinary share fund has paid amounts totalling
GBP530,000 in respect of the operating expenses of its investee
company, PBM Power Limited. The Company has an unsecured claim
against PBM Power Limited for this amount. However, due to the poor
performance of this investee company the carrying value of the
amount receivable is considered to be fully impaired and has been
recognised as a realised capital loss.
5. Merger costs
The Merger costs of GBP31,000 incurred by the Company during the
year were in respect of the Merger with Ventus 3 VCT plc which took
place on 6 May 2010 and represent those costs which were contingent
on the Merger taking place. The non-contingent costs which amounted
to GBP103,000 had been accrued and charged to the Statement of
Comprehensive Income during the year ended 28 February 2010. The
Merger costs borne by Ventus 3 VCT plc totalled GBP144,000.
6. Other expenses
Group and Company
Year ended 28 February
2011
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Revenue expenses:
Directors' remuneration 38 20 58
Fees payable to the
Company's Auditor
for:
- Audit of the Company's
Annual Financial Statements 17 10 27
- Other services relating
to taxation 2 1 3
- Other services 5 3 8
Legal and professional
fees 13 6 19
Other revenue expenses 79 43 122
--------- ----------- -------
154 83 237
Capital expenses:
Investment costs 42 - 42
--------- ----------- -------
196 83 279
========= =========== =======
Group and Company
Year ended 28 February
2010
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Directors' remuneration 20 13 33
Fees payable to the
Company's Auditor
for:
- Audit of the Company's
Annual Financial Statements 12 6 18
- Other services relating
to taxation 1 1 2
- Other services 1 1 2
Other expenses 57 35 92
91 56 147
========= =========== =======
The expenses of the Group were wholly derived from the Company's
activities. Other services relating to taxation were in respect of
tax services provided by the Company's Auditor relating to
corporation tax compliance. Other services provided by the
Company's Auditor related to the reviews of the Half-yearly Report
and a review of risk management reporting.
The investment costs incurred during the year were in respect of
preparing a planning application for an investment which did not
proceed. These costs have been treated as a capital expense in the
Statement of Comprehensive Income.
7. Directors' remuneration
Group and Company
Year ended 28 February
2011
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
D Pinckney 3 2 5
A Moore 13 7 20
P Thomas 11 6 17
C Wood 11 5 16
Aggregate emoluments 38 20 58
========= =========== =======
Group and Company
Year ended 28 February
2010
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
D Pinckney 6 4 10
A Moore 5 3 8
P Thomas 4 3 7
C Wood 5 3 8
Aggregate emoluments 20 13 33
========= =========== =======
David Pinckney resigned as a Director of the Company on 13 July
2010. Further details regarding Directors' remuneration are
disclosed in the Directors' Remuneration Report.
8. Taxation
Group and Company
Year ended 28 February
2011
Ordinary "C"
Shares Shares Total
GBP000 GBP000 GBP000
(a) Tax charge/ (credit)
for the year
Current UK corporation
tax:
Charged to the revenue
reserve 90 24 114
Credited to capital
reserve (90) (24) (114)
- - -
========= ========= =========
(b) Factors affecting the tax
credit for the year
Loss before taxation (1,654) (75) (1,729)
Tax credit calculated
on loss before taxation
at the applicable
rate of 21% (347) (16) (363)
Effect of:
UK dividends not
subject to tax (90) - (90)
Capital losses not
subject to tax 325 - 325
Non-deductible impairment
charge 111 - 111
Non-deductible merger
costs 7 - 7
Non-deductible investment
costs 9 - 9
Tax losses brought
forward (15) (31) (46)
Unrecognised deferred
tax asset - 47 47
- - -
========= ========= =========
Group and
Company
Year ended 28 February
2010
Ordinary "C"
Shares Shares Total
GBP000 GBP000 GBP000
(a) Tax charge/ (credit)
for the year
Current UK corporation
tax:
Charged/ (credited)
to revenue reserve 46 (2) 44
Credited to capital
reserve (42) (2) (44)
4 (4) -
========= ======== =======
(b) Factors affecting the tax
credit for the year
Loss profit before
taxation (794) (167) (961)
Tax credit calculated
on loss before taxation
at the applicable
rate of 21% (167) (35) (202)
Effect of:
Capital losses not
subject to tax 149 - 149
Unrecognised deferred
tax asset - 31 31
Non-deductible Merger
costs 22 - 22
4 (4) -
========= ======== =======
No provision for deferred taxation has been made on potential
capital gains due to the Company's current status as a VCT under
section 274 of the ITA and the Directors' intention to maintain
that status. The Company intends to continue to meet the conditions
required to maintain its status as a VCT for the foreseeable
future.
9. Dividends
Year ended Year ended
28 February 28 February
Ordinary Shares 2011 2010
GBP000 GBP000
Amounts recognised
as distributions
to ordinary shareholders
in the year:
Previous year's final
dividend of nil per
ordinary share (2010:
1.50p ) - 168
Current year's interim
dividend of 1.50p
per ordinary share
(2010: 1.50p) 368 167
------------- -------------
368 335
============= =============
The Directors recommend a final dividend of 1.00p per ordinary
share (2010: nil) to be paid on 10 August 2011 to all ordinary
shareholders on the register as at the close of business on 15 July
2011. The proposed final dividend is subject to approval by the
shareholders at the AGM and has not been included as a liability in
these Financial Statements. There were no dividends paid to "C"
shareholders during the year ended 28 February 2011 (2010: nil).
The Directors do not propose to pay a final dividend to the "C"
shareholders in respect of the year ended 28 February 2011.
Subject to approval of the final dividend, the total dividend to
be paid to ordinary shareholders in respect of the financial year
is set out below:
Year ended Year ended
28 February 28 February
2011 2010
Amounts paid or to
be paid to ordinary
shareholders in respect
of the financial
year: GBP000 GBP000
Interim dividend
for the year ended
28 February 2011
of 1.50p per ordinary
share (2010: 1.50p) 368 167
Proposed final dividend
for the year ended
28 February 2011
of 1.00 per ordinary
share (2010: nil) 245 -
------------- -------------
613 167
============= =============
10. Basic and diluted return per share
The net loss per ordinary share of 7.41p for the year ended 28
February 2011 (2010: 7.08p) is based on a loss of GBP1,654,000
(2010: net loss of GBP798,000) and the weighted average number of
ordinary shares in issue during the year of 22,322,435 (2010:
11,280,150).
The basic revenue return per ordinary share of 3.29p (2010:
0.62p) is based on the net revenue from ordinary activities after
taxation of GBP734,000 (2010: GBP70,000) and the weighted average
number of ordinary shares in issue during the year of 22,322,435
(2010: 11,280,150).
The net capital loss per ordinary share of 10.70p (2010: 7.70p)
is based on the net loss from ordinary activities after taxation of
GBP2,388,000 (2010: GBP868,000) and the weighted average number of
shares in issue during the year of 22,322,435 (2010:
11,280,150).
There is no difference between the basic profit per ordinary
share and the diluted profit per ordinary share because no dilutive
financial instruments have been issued.
The net loss per "C" share of 0.68p for the year ended 28
February 2011 (2010: 2.67p) is based on a loss of GBP75,000 (2010:
GBP163,000) and the weighted average number of "C" shares in issue
during the year of10,919,208 (2010: 6,089,818).
The basic revenue return per "C" share of 0.84p (2010: loss of
0.97p) is based on the net revenue from ordinary activities after
taxation of GBP91,000 (2010: loss of GBP59,000) and the weighted
average number of "C" shares in issue during the year of 10,919,208
(2010: 6,089,818).
The net capital loss per "C" share of 1.52p (2010: 1.70p) is
based on the net loss from ordinary activities after taxation of
GBP166,000 (2010: GBP104,000) and the weighted average number of
shares in issue during the year of 10,919,208 (2010:
6,089,818).
There is no difference between the basic loss per "C" share and
the diluted loss per "C" share because no dilutive financial
instruments have been issued.
11. Investments
Group Ordinary Shares "C" Shares Total
Year ended
28 February Loan Loan Loan
2011 Shares stock Total Shares stock Total Shares stock Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening
position
Opening
cost 5,345 3,647 8,992 - 325 325 5,345 3,972 9,317
Opening
unrealised
(losses)/gains (611) 53 (558) - - - (611) 53 (558)
Opening
fair value 4,734 3,700 8,434 - 325 325 4,734 4,025 8,759
During
the year
Investments
transferred
from Ventus
3 VCT plc 4,891 3,879 8,770 - - - 4,891 3,879 8,770
Purchases
at cost 406 1,166 1,572 900 3,110 4,010 1,306 4,276 5,582
Disposal
proceeds (400) (450) (850) - (375) (375) (400) (825) (1,225)
Unrealised
(losses)/
gains (1,622) 338 (1,284) - - - (1,622) 338 (1,284)
Realised
loss (266) (2) (268) - - - (266) (2) (268)
-------- ------- -------- ------- ------- ------- -------- ------- --------
Closing
fair value 7,743 8,631 16,374 900 3,060 3,960 8,643 11,691 20,334
-------- ------- -------- ------- ------- ------- -------- ------- --------
Closing
position
Closing
cost 10,242 8,242 18,484 900 3,060 3,960 11,142 11,302 22,444
Closing
unrealised
(losses)/gains (2,233) 391 (1,842) - - - (2,233) 391 (1,842)
Realised
loss (266) (2) (268) - - - (266) (2) (268)
-------- ------- -------- ------- ------- ------- -------- ------- --------
Closing
fair value 7,743 8,631 16,374 900 3,060 3,960 8,643 11,691 20,334
======== ======= ======== ======= ======= ======= ======== ======= ========
The Company did not have subsidiary undertakings in the prior
year therefore comparative movements and balances for the Group
have not been presented in respect of the prior year.
Company Ordinary Shares "C" Shares Total
Year ended
28 February Loan Loan Loan
2011 Shares stock Total Shares stock Total Shares stock Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening
position
Opening
cost 5,345 3,647 8,992 - 325 325 5,345 3,972 9,317
Opening
unrealised
(losses)/gains (611) 53 (558) - - - (611) 53 (558)
Opening
fair value 4,734 3,700 8,434 - 325 325 4,734 4,025 8,759
During
the year
Investments
transferred
from Ventus
3 VCT plc 4,891 3,879 8,770 - - - 4,891 3,879 8,770
Purchases
at cost 406 1,166 1,572 900 3,110 4,010 1,306 4,276 5,582
Disposal
proceeds (400) (450) (850) - (375) (375) (400) (825) (1,225)
Unrealised
(losses)/
gains (1,622) 338 (1,284) - - - (1,622) 338 (1,284)
Realised
loss (266) (2) (268) - - - (266) (2) (268)
-------- ------- -------- ------- ------- ------- -------- ------- --------
Closing
fair value 7,743 8,631 16,374 900 3,060 3,960 8,643 11,691 20,334
-------- ------- -------- ------- ------- ------- -------- ------- --------
Closing
position
Closing
cost 10,242 8,242 18,484 900 3,060 3,960 11,142 11,302 22,444
Closing
unrealised
(losses)/gains (2,233) 391 (1,842) - - - (2,233) 391 (1,842)
Realised
loss (266) (2) (268) - - - (266) (2) (268)
Closing
fair value 7,743 8,631 16,374 900 3,060 3,960 8,643 11,691 20,334
======== ======= ======== ======= ======= ======= ======== ======= ========
Company Ordinary Shares "C" Shares Total
Year ended
28 February Loan Loan Loan
2010 Shares stock Total Shares stock Total Shares stock Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening
position
Opening
cost 5,323 2,624 7,947 - - - 5,323 2,624 7,947
Opening
unrealised
gains 153 - 153 - - - 153 - 153
Opening
fair value 5,476 2,624 8,100 - - - 5,476 2,624 8,100
During
the year
Purchases
at cost 22 1,023 1,045 - 325 325 22 1,348 1,370
Unrealised
(losses)/gains (764) 53 (711) - - - (764) 53 (711)
Closing
fair value 4,734 3,700 8,434 - 325 325 4,734 4,025 8,759
Closing
position
Closing
cost 5,345 3,647 8,992 - 325 325 5,345 3,972 9,317
Closing
unrealised
(losses)/gains (611) 53 (558) - - - (611) 53 (558)
Closing
fair value 4,734 3,700 8,434 - 325 325 4,734 4,025 8,759
======= ======= ======= ======= ======= ======= =======
The shares held by the Group and Company are in unquoted UK
companies. The Investment Manager's Report above provides details
in respect of the Company's shareholding in each investment
together with details of loans issued.
Under IFRS 7, the Company is required to report the category of
fair value measurements used in determining the value of its
investments, to be disclosed by the source of inputs, using a
three-level hierarchy:
-- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (Level 1);
-- Those involving inputs other than quoted prices included in
Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (Level 2);
and
-- Those with inputs for the instrument that are not based on
observable market data (unobservable inputs) (Level 3).
As at 28 February 2011, each of the Company's investments held
was valued using inputs which are considered to be Level 3 inputs
and a reconciliation of the movements is in the table above.
The Board has considered the key assumptions which may affect
the results reported in the financial statements and the Company is
further required to disclose the effect of changing one or more
inputs with reasonable alternative assumptions where a significant
change to the fair value measurement would result.
Wind
The key assumptions that have a significant impact on the
valuations of investments in companies in the wind sector that are
valued using the discounted future cash flows are the discount
factor used, the price at which power and associated benefits may
be sold and the level of electricity the investee companies'
generating assets are likely to produce.
The Board has determined that a reasonable alternative
assumption may be made in respect of the discount factors applied;
the sensitivity of the value of the portfolio to the application of
an increase or decrease in discount factors is set out below.
The investment portfolio has been reviewed for the effect of
alternative valuation inputs, namely the sensitivity of the total
value of all investments to a 1% increase or decrease in the
discount factors applied to the valuation models of investments in
the wind sector which have been valued using the discounted future
cash flows from the underlying business. The application of the
upside alternative discount factor would have resulted in the total
value of all investments having been GBP498,000 or 2.9% higher. The
application of the downside alternative discount factor would have
resulted in the total value of all investments having been
GBP443,000 or 2.6% lower.
The future price at which power and associated benefits may be
sold is estimated using forecasts produced by third party industry
experts and, in the case of the wind energy assets, the energy
yield is determined by wind yield analyses also prepared by third
party industry experts. . The Directors do not believe there are
reasonable alternative assumptions available for these inputs at
the current time.
Waste wood biomass
The valuation of the Company's waste wood biomass investments of
GBP4,141,000 reported in the ordinary share fund has been based on
a discounted cash flow analysis. There are a number key assumptions
specific to determining these investments, which are the level of
generating hours available, the gate fees (for receiving waste
wood) net of processing costs, the plant operating costs and the
economic life span of the plant. The Board has determined there are
reasonable alternative assumptions which may be made in respect of
the holding value of Sandsfield Heat & Power Limited and
Twinwoods Heat & Power Limited. However, due to the level of
additional capital expenditure required by PBM Power Limited in
order for it to rectify the performance of its plant, the Board has
determined that the only reasonable assumption at the current time
is to conclude that this investment has a holding value of nil.
The assumptions used in the valuation of the waste wood biomass
investments are considered to be subject to a higher degree of
uncertainty than those used in the valuation of the wind energy
assets because the investments are not currently performing as
originally intended and the validity of the assumptions is
dependent on the renegotiation of contracts and debt finance terms
with third parties, including the lending bank.
The application of reasonable alternative assumptions to the
valuation of Sandsfield Heat & Power Limited and Twinwoods Heat
& Power Limited would have an impact on the valuation of the
investment portfolio as described below.
Level of generating hours available
The application of the upside alternative level of generating
hours available would result in the total value of all investments
being GBP636,000 or 3.72% higher. The application of the downside
alternative would result in the total value of all investments
being GBP1,763,000 or 10.31% lower.
Net renegotiated gate fees
The application of the upside alternative net renegotiated gate
fees would result in the total value of all investments being
GBP597,000 or 3.49% higher. The application of the downside
alternative would result in the total value of all investments
being GBP572,000 or 3.34% lower.
Plant operating costs
The application of the upside alternative plant operating costs
would result in the total value of all investments being GBP434,000
or 2.53% higher. The application of the downside alternative would
have resulted in the total value of all investments being
GBP409,000 or 2.39% lower.
Economic life span of the plant
The application of the upside alternative economic life span of
the plant would result in the total value of all investments being
GBP120,000 or 0.70% higher. The application of the downside
alternative would result in the total value of all investments
being GBP380,000 or 2.22% lower.
Bank lending
It should be noted that the application of a number of the
downside alternatives is highly likely to result in the level of
income falling to a level where the lending bank could choose to
exercise its security rights over the investments as a result of
covenant breaches. In the event that this happened, the valuation
of the investments would reduce to nil.
Power prices and associated benefits
As is the case with the wind energy assets, the future price at
which power and associated benefits may be sold is estimated using
forecasts produced by third party industry experts. The Directors
do not believe that there are reasonable alternative assumptions
available for these inputs at this time.
12. Investments in subsidiaries The details of the Company's
subsidiary undertakings are set out below both of which are held by
the ordinary share fund only:
Subsidiary Country of Portion of Portion of Principal
undertaking incorporation voting rights voting rights activity
As at 28 As at 28
February 2011 February 2010
Redeven Energy England and Wind farm
Limited Wales 60% 30% development
Spurlens Rig England and Wind farm
Wind Limited Wales 60% 30% development
Ordinary Shares
Year ended 28 February 2011 Shares Shareholder loans Total
GBP000 GBP000 GBP000
During the year
Investments held by the Company becoming
subsidiaries by virtue of the Merger 87 249 336
Investments transferred
from Ventus 3 VCT plc 87 249 336
Purchases at cost - 60 60
Closing fair value 174 558 732
Closing position
Closing cost 174 558 732
Closing fair value 174 558 732
Both Redeven Energy Limited and Spurlens Rig Wind Limited have a
financial year end of 31 March, which differ from the Group's. The
reason for the difference in accounting period is due to the dates
these subsidiaries were incorporated. There is no impact on the
Group's Financial Statements resulting from the subsidiaries having
a different year end to its own year end as the subsidiaries'
accounts as at 31 March 2011 were not materially different to their
accounts at 28 February 2011.
13. Development wind assets Development wind assets comprise
capitalised costs incurred in the pre-planning phase of the
development of wind farm schemes. The development wind assets are
held by the Company's subsidiary undertakings which are held by the
ordinary share fund only. There have been no impairments to the
value of these assets during the year.
Year ended 28 February 2011 Ordinary Shares
GBP000
Opening position
Gross carrying amount -
Opening value -
During the year
Assets acquired or recognised through business combinations 1,006
Purchases at cost 90
Closing value 1,096
Closing position
Gross carrying amount 1,096
Closing value 1,096
14. Trade and other receivables
Group
As at 28 February 2011
Ordinary Shares "C" Shares Total
GBP000 GBP000 GBP000
Non-current assets
Accrued interest income 570 103 673
570 103 673
Current assets
Accrued interest income 493 122 615
Other receivables 111 48 159
Prepayments 10 5 15
614 175 789
Company
As at 28 February 2011
Ordinary Shares "C" Shares Total
GBP000 GBP000 GBP000
Non-current assets
Accrued interest income 570 103 673
570 103 673
Current assets
Accrued interest income 493 122 615
Other receivables 7 48 55
Prepayments 10 5 15
510 175 685
Company
As at 28 February 2010
Ordinary Shares "C" Shares Total
GBP000 GBP000 GBP000
Non-current assets
Accrued interest income 126 - 126
126 - 126
Current assets
Accrued interest income 292 12 304
Other receivables 211 13 224
Prepayments 5 3 8
508 28 536
Included in accrued interest income is loan stock interest
totalling GBP673,000 (2010: GBP126,000) which is due after more
than one year, which represents non-current assets. The Directors
consider that the carrying amount of trade and other receivables
approximates to their fair value.
15. Cash and cash equivalents
Group Ordinary Shares "C" Shares Total
Treasury Treasury Treasury
Cash Bills Total Cash Bills Total Cash Bills Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1
March 2010 1,364 - 1,364 2,497 3,998 6,495 3,861 3,998 7,859
Net
(decrease)/
increase (700) - (700) (1,439) 1,198 (241) (2,139) 1,198 (941)
As at 28
February
2011 664 - 664 1,058 5,196 6,254 1,722 5,196 6,918
Company Ordinary Shares "C" Shares Total
Treasury Treasury Treasury
Cash Bills Total Cash Bills Total Cash Bills Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1
March 2010 1,364 - 1,364 2,497 3,998 6,495 3,861 3,998 7,859
Net
(decrease)/
increase (734) - (734) (1,439) 1,198 (241) (2,173) 1,198 (975)
As at 28
February
2011 630 - 630 1,058 5,196 6,254 1,688 5,196 6,884
Company Ordinary Shares "C" Shares Total
Treasury Treasury Treasury
Cash Bills Total Cash Bills Total Cash Bills Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1
March
2009 832 1,620 2,452 - - - 832 1,620 2,452
Net
increase/
(decrease) 532 (1,620) (1,088) 2,497 3,998 6,495 3,029 2,378 5,407
As at 28
February
2010 1,364 - 1,364 2,497 3,998 6,495 3,861 3,998 7,859
Cash and cash equivalents comprise bank balances and cash held
by the Company including UK treasury bills. The carrying amount of
these assets approximates to their fair value.
16. Trade and other payables
Group
As at 28 February 2011
Ordinary Shares "C" Shares Total
GBP000 GBP000 GBP000
Corporation tax 4 (4) -
Trade payables 17 - 17
Other payables 10 8 18
Accruals 166 20 186
197 24 221
Company
As at 28 February 2011
Ordinary Shares "C" Shares Total
GBP000 GBP000 GBP000
Corporation tax 4 (4) -
Trade payables 17 - 17
Other payables - 8 8
Accruals 166 20 186
187 24 211
Company
As at 28 February 2010
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Corporation tax 4 (4) -
Other payables - 457 457
Accruals 72 14 86
76 467 543
The Directors consider that the carrying amount of trade and
other payables approximates to their fair value.
17. Financial liabilities
Group
As at 28 February 2011
Ordinary Shares
GBP000
Shareholder loans 372
372
The Group's financial liabilities consist of shareholder loans
of GBP16,000 and GBP356,000 provided by Ventus VCT plc to the
Company's subsidiaries, Redeven Energy Limited and Spurlens Rig
Wind Limited respectively.
18. Share capital
Ordinary Shares "C" Shares Total
Number of Number of Number of
shares of shares of shares of
Authorised 25p each GBP000 25p each GBP000 25p each GBP000
At 1 March
2010 30,000,000 7,500 20,000,000 5,000 50,000,000 12,500
At 28
February
2011 30,000,000 7,500 20,000,000 5,000 50,000,000 12,500
Ordinary Shares "C" Shares Total
Allotted,
called up Number of Number of Number of
and fully shares of shares of shares of
paid 25p each GBP000 25p each GBP000 25p each GBP000
At 1 March
2010 12,287,249 3,071 6,924,686 1,731 19,211,935 4,802
Allotted,
called up
and fully
paid during
the period 12,250,311 3,063 4,404,421 1,101 16,654,732 4,164
At 28
February
2011 24,537,560 6,134 11,329,107 2,832 35,866,667 8,966
Ordinary Shares "C" Shares Total
Number of Number of Number of
shares of shares of shares of
Authorised 25p each GBP000 25p each GBP000 25p each GBP000
At 1 March
2009 30,000,000 7,500 - - 30,000,000 7,500
Shares
authorised
during the
year - - 20,000,000 5,000 20,000,000 5,000
At 28
February
2010 30,000,000 7,500 20,000,000 5,000 50,000,000 12,500
Ordinary Shares "C" Shares Total
Allotted,
called up Number of Number of Number of
and fully shares of shares of shares of
paid 25p each GBP000 25p each GBP000 25p each GBP000
At 1 March
2009 11,173,337 2,793 - - 11,173,337 2,793
Allotted,
called up
and fully
paid during
the year 1,113,912 278 6,924,686 1,731 8,038,598 2,009
At 28
February
2010 12,287,249 3,071 6,924,686 1,731 19,211,935 4,802
At 28 February 2011, the Company had two classes of shares which
carry no right to fixed income. The rights and obligations
attaching to the Company's shares are set out in the Directors'
Report above.
On 8 February 2010 the Company launched a second "C" share
offer.
During the year the following allotments of "C" shares of 25p
took place at a price of 100p per share:
Date of allotment Number of shares
24 March 2010 1,726,556
1 April 2010 1,725,652
5 April 2010 554,288
2 June 2010 397,925
Total 4,404,421
The offer for "C" shares closed on 31 May 2010 and the final
allotment was made on 2 June 2010. After issue costs, GBP4,162,000
was raised from these share issues. Under an agreement between the
Company and the Investment Manager, the Company agreed to pay the
Investment Manager an offer fee of 5.5% of the gross proceeds (but
net of up front commissions paid to authorised introducers by the
Company). During the year, the Company paid net GBP123,000 to the
Investment Manager pursuant to this arrangement. Issue costs were
borne by the Investment Manager.
On 6 May 2010, the Company issued 12,250,311 new ordinary shares
in respect of the scheme of reconstruction with Ventus 3 VCT
plc.
19. Basic and diluted net asset value per share
The calculation of Group's net asset value per ordinary share of
75.9p as at 28 February 2011 is based on the net asset value
attributable to equity holders of GBP18,631,000 divided by
24,537,560 ordinary shares in issue at that date. The "C" share
fund did not hold investments in subsidiaries at 28 February
2011.
The calculation of Company's net asset value per ordinary share
of 75.9p as at 28 February 2011 (2010: 84.3p) is based on net
assets of GBP18,629,000 (2010: GBP10,356,000) divided by 24,537,560
(2010: 12,287,249) ordinary shares in issue at that date. The net
asset value per "C" share of 92.4p as at 28 February 2011 (2010:
92.1p) is based on net assets of GBP10,468,000 (2010: GBP6,381,000)
divided by 11,329,107 (2010: 6,924,686) "C" shares in issue at that
date.
20. Business combinations
The table below sets out the net assets acquired by the Company
from Ventus 3 VCT plc as a result of the Merger which took place on
6 May 2010:
Book value at Fair value Fair value at
acquisition adjustment acquisition
GBP000 GBP000 GBP000
Investments 9,443 - 9,443
Non-current trade
and other
receivables 127 - 127
Cash and cash
equivalents 639 - 639
Other net current
assets 85 - 85
Net assets
acquired 10,294 - 10,294
In consideration for the net assets of Ventus 3 VCT plc the
Company issued 12,250,311 ordinary shares to the shareholders of
Ventus 3 VCTplc.
The table below sets out the income recognised by the Company
during the year ended 28 February 2011 which was derived from the
assets acquired from Ventus 3 VCT plc:
Year ended
28 February 2011
GBP000
Income from investments
Loan stock interest 351
Dividend income 214
565
Other income
Bank deposit interest 1
566
It is impracticable to present an analysis of the Company's
profit resulting from the acquisition of Ventus 3 VCT plc's assets
because the costs of the enlarged Company are not directly
attributable to either the assets previously held by Ventus 3 VCT
plc or the assets held by Company alone. Had the acquisition of
Ventus 3 VCT plc's assets occurred at the beginning of the
financial year there would be no difference to the income and net
loss in comparison to the income and net loss reported in these
financial statements.
By virtue of the Merger, the Company acquired a controlling
interest in Redeven Energy Limited and Spurlens Rig Wind Limited.
Having previously held a 30% shareholding in each of these
companies, the Company's shareholding increased to 60% in each
following the acquisition of Ventus 3 VCT plc's holdings. The table
below sets out assets acquired in respect of these controlling
interests:
Book value at Fair value Fair value at
acquisition adjustment acquisition
GBP000 GBP000 GBP000
Non-current assets
Development wind
assets 1,006 - 1,006
Cash and cash
equivalents 35 - 35
Other net current
assets 83 - 83
Financial
liabilities (332) (332)
Net assets
acquired 792 - 792
21. Post balance sheet events
The "C" share fund invested a further GBP350,000 in Osspower
Limited on 13 April 2011 by way of a short term loan, the Company
having extended its commitment under the facility from GBP300,000
to GBP900,000. Osspower Limited secured debt finance facilities of
GBP6.45 million from The Co-operative Bank plc on 17 May 2011 with
which to fund the construction of a first hydro scheme (Allt Fionn
Ghlinne). On 25 May 2011 Osspower Limited repaid GBP650,000 to the
Company, being the total principal of the loan drawn down at that
time, and paid the interest which had accrued to that date. The
availability period of the facility provided by the Company to
Osspower Limited expired on 23 May 2011. As the financial close in
relation to the first hydro scheme took place after the year end
its implications are not recognised in the value of the investment
at 28 February 2011. However, there will be a reassessment of the
value of the Company's investment in the next accounting
period.
Since the year end the "C" share fund invested GBP185,000 in
Allt Dearg Wind Farmers LLP , representing an initial drawdown on a
two year loan facility dated 15 March 2011 under which the Company
has committed to lend a total of GBP300,000 to Allt Dearg LLP.
On 26 May 2011 the ordinary share fund invested a further
GBP21,000 in Spurlens Rig Wind Limited by way of a shareholder
loan.
Since the year end the ordinary share fund invested a further
GBP70,000 in The Small Hydro Company Limited in respect of
shareholder loan facility of a total GBP534,000 which had been
increased from GBP384,000 on 23 November 2010. The Small Hydro
Company Limited had previously drawn down GBP464,000 of this
facility, therefore the facility has now been drawdown in full.
22. Financial instruments and risk management
The Group's financial instruments comprise investments in
unquoted companies, cash and cash equivalents, trade and other
receivables and trade and other payables. The investments in
unquoted companies and UK treasury bills are categorised as "fair
value through profit or loss" and the other financial instruments
are initially recognised at fair value and subsequently at
amortised cost. The main purpose of these financial instruments is
to generate revenue and capital appreciation.
The Group has not entered into any derivative transactions and
has no financial asset or liability for which hedge accounting has
been used.
The main risks arising from the Group's financial instruments
are investment risk, interest rate risk, liquidity risk and credit
risk. The Board reviews and agrees policies for managing each of
these risks, and they are summarised below in respect of the Group
and the Company. These policies have remained unchanged since the
beginning of the financial year.
Interest rate risk profile of financial assets and financial
liabilities
Financial assets
As at 28 February 2011
Group
Weighted
average Weighted
Ordinary Held at 28 Interest rate interest rate average period
Shares February 2011 p.a. p.a. to maturity
GBP000 % %
At fair value
through profit
or loss:
Ordinary
shares 7,743 n/a n/a n/a
Loan stock 8,631 0% - 15% 12.55% 12.2 years
Loans and
receivables:
Cash 664 0% - 0.56% 0.26% n/a
Accrued 1,063 n/a n/a n/a
interest
income
The Group's subsidiaries are held by the ordinary share fund
only. The Company did not have subsidiary undertakings in the prior
year therefore comparative information for the Group has not been
presented in respect to the prior year.
Company
Weighted
average Weighted
Ordinary Held at 28 Interest rate interest rate average period
Shares February 2011 p.a. p.a. to maturity
GBP000 % %
At fair value
through profit
or loss:
Ordinary
shares 7,917 n/a n/a n/a
Loan stock 9,189 0% - 15% 11.75% 11.7 years
Loans and
receivables:
Cash 630 0% - 0.56% 0.26% n/a
Accrued 1,063 n/a n/a n/a
interest
income
Weighted
average Weighted
Held at 28 Interest rate interest rate average period
"C" Shares February 2011 p.a. p.a. to maturity
GBP000 % %
At fair value
through profit
or loss:
Ordinary
shares 900 n/a n/a n/a
Loan stock 3,060 10% - 13% 9.17% 5.4 years
UK treasury
bills 5,196 0.50% - 0.51% 0.50% 51 days
Loans and
receivables:
Cash 1,058 0% - 0.56% 0.55% n/a
Accrued 225 n/a n/a n/a
interest
income
As at 28 February 2010
Company
Weighted
average Weighted
Ordinary Held at 28 Interest rate interest rate average period
Shares February 2010 p.a. p.a. to maturity
GBP000 % %
At fair value
through profit
or loss:
Ordinary
shares 4,734 n/a n/a n/a
Loan stock 3,700 0% - 15% 11.60% 12 years
Loans and
receivables:
Cash 1,364 0.25% 0.55% n/a
Accrued 418 n/a n/a n/a
interest
income
Weighted
average Weighted
Held at 28 Interest rate interest rate average period
"C" Shares February 2010 p.a. p.a. to maturity
GBP000 % %
At fair value
through profit
or loss:
Ordinary
shares - n/a n/a n/a
Loan stock 325 12.50% 12.50% 1 month
UK treasury
bills 3,998 0.41% 0.44% 3 months
Loans and
receivables:
Cash 2,497 0.25% 0.33% n/a
Accrued 12 n/a n/a n/a
interest
income
The interest rates determining the weighted average interest
rates in the tables above are the contractual rates.
The impact of applying a reasonable sensitivity in interest
rates to cash on deposit is not significant.
Other than certain accrued interest income receivable amounts,
the Company's trade and other receivables did not hold a right to
interest income. Interest income is accrued on interest income
receivable amounts which have been deferred for payment by investee
companies.
Interest income earned from loan stock held by both the ordinary
share fund and "C" share fund is not subject to movements resulting
from market interest rate fluctuations as the rates are fixed,
therefore this income presents a low interest rate risk profile.
However, interest earned from loan stock remains exposed to fair
value interest rate risk when bench-marked against market
rates.
The risk from future fluctuations in interest rate movements
should be mitigated by the Company's intention to complete its
investment strategy and to hold a majority of its investments in
instruments which are not exposed to market interest rate
changes.
Financial liabilities
The Company has no guarantees or financial liabilities other
than the accruals. The Group recognises the financial liabilities
of its subsidiaries on its balance sheet, details of which are
presented in note 17. All financial liabilities are categorised as
other financial liabilities.
Currency exposure
All financial assets and liabilities are held in sterling, hence
there is no foreign currency exchange rate exposure.
Borrowing facilities
The Company has no committed borrowing facilities as at 28
February 2011 (2010: GBPnil). The Group recognises the borrowings
of its subsidiaries on its balance sheet, these comprise the
financial liabilities detailed in note 17.
Investment risk
As a VCT, it is the Company's specific business to evaluate and
control the investment risk in its portfolio of unquoted companies,
the details of which are discussed in the Investment Manager's
Report. The Group's subsidiaries do not hold investments.
Investment price risk
Investment price risk is the risk that the fair value of future
investment cash flows will fluctuate due to factors specific to an
investment. The Company aims to mitigate the impact of investment
price risk by adhering to its investment policy of risk
diversification, as described in the Investment Manager's
Report.
The sensitivity of the ordinary share fund to a 10% increase or
decrease in valuation would be an increase or decrease in the
profit before tax of the share fund of GBP1,711,000 or 103.42%
(2010: GBP843,000 or 106.21%) and an increase or decrease in net
asset value of the same amount or 9.18% (2010: 8.19%).
The sensitivity of the "C" share fund to a 10% increase or
decrease in valuation would be an increase or decrease in the
profit before tax of the ordinary share fund of GBP396,000 or
528.00% (2010: GBP32,500 or 19.45%) and an increase or decrease in
net asset value of the same amount or 3.78% (2010: 0.51%).
A 10% variable is considered to be a suitable factor by which to
demonstrate a potential change in fair value over the course of a
year. The analysis assumes no tax effect applied on the gain or
loss.
Liquidity risk
Due to the nature of the Company's investments, it is not
possible to easily liquidate investments in ordinary shares and
loan stock. The main cash outflows are made for investments and
dividends, which are within the control of the Company, and
operating expenses which are reasonably predictable. In this
respect, the Company may manage its liquidity risk by making
prudent forecasts in respect of realising future cash proceeds from
its investments and holding sufficient cash to enable it to fund
its obligations. The cash equivalents are held on deposit or in UK
treasury bills and are therefore readily convertible into cash.
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company or its subsidiaries. The
Company and its subsidiaries are exposed to credit risk through
their receivables, and through cash held on deposit with banks. The
Company is also exposed to credit risk through its investments in
loan stock.
The Investment Manager evaluates credit risk on loan stock prior
to making investments as well as monitoring ongoing exposures. Loan
stock has a fixed charge or a fixed and floating charge over the
assets of the investee company in order to mitigate the gross
credit risk. The Investment Manager regularly reviews management
accounts from investee companies and generally appoints directors
to sit on their boards in order to identify and manage the credit
risk.
Cash is held on deposit with banks which are AA rated (or
equivalent) financial institutions. Consequently, the Directors
consider that the risk profile associated with cash deposits is low
and the carrying value in the Financial Statements approximates to
fair value.
The maximum credit risk of the Group is GBP20.1 million. The
Company's maximum credit risk is GBP20.5 million (2010: GBP12.5
million) of which the ordinary share fund is exposed to GBP10.9
million (2010: GBP5.7 million) and the "C" share fund is exposed to
GBP9.6 million (2010: GBP6.8 million).
The tables below set out the amounts receivable by the Group and
the Company which were past due but not individually impaired as at
28 February 2011 and the extent to which they are past due:
Ordinary Shares Total 0 - 6 months 6 - 12 months Over 12 months
GBP000 GBP000 GBP000 GBP000
Loan 2,961 2,961 - -
Accrued interest 183 167 14 2
Receivables past due 3,144 3,128 14 2
"C" Shares Total 0 - 6 months 6 - 12 months Over 12 months
GBP000 GBP000 GBP000 GBP000
Loan 910 910 - -
Accrued interest 16 16 - -
Receivables past due 926 926 - -
Of the amounts past due in respect of the Company's ordinary
share fund as at 28 February 2011, GBP113,000 of interest has been
received since the year end in respect of loans with a carrying
value of GBP1,677,000 as at 28 February 2011.
The carrying value of the Company's investment in PBM Power
Limited of GBP574,000 was written down to nil as at 28 February
2011. The write down has been applied in response to the poor
performance of the waste wood biomass plant which this company
operates. An amount receivable from PBM Power Limited of GBP530,000
comprising amounts advanced to fund the company's operating
expenses is considered to be fully impaired. An impairment charge
in respect of this receivable amount has been recognised in the
Statement of Comprehensive Income. Further details in respect of
the investment in PBM Power Limited are presented in the Investment
Manager's Report. Note 4 of the financial statements provides
details in respect of the impairment charge.
The expected timing of receipt of trade and other receivables is
presented below:
Group
Between 1 and 2
Ordinary Shares Total Within 1 year years Over 2 years
GBP000 GBP000 GBP000 GBP000
Accrued interest
income 1,063 692 293 78
Other receivables 111 111 - -
1,174 803 293 78
Ordinary Shares Company
Between 1 and 2
Total Within 1 year years Over 2 years
GBP000 GBP000 GBP000 GBP000
Accrued interest
income 1,063 692 293 78
Other receivables 7 7 - -
1,070 699 293 78
"C" Shares Company
Between 1 and 2
Total Within 1 year years Over 2 years
GBP000 GBP000 GBP000 GBP000
Accrued interest
income 225 122 61 42
Other receivables 48 48 - -
273 170 61 42
23. Contingencies, guarantees and financial commitments
On 31 July 2006, the Company registered a charge over its shares
in Craig Wind Farm Limited to Alliance & Leicester Commercial
Bank plc (now Santander UK plc) as security for a senior loan
facility of GBP7.6 million raised by Craig Wind Farm Limited to
finance the construction costs of the wind farm. The liability of
the Company under this charge of shares is limited to the value of
the Company's investment in shares of Craig Wind Farm Limited
including those shares acquired by the Company from Ventus 3 VCT
plc as a result of the Merger.
On 2 April 2008, the Company registered a charge over its shares
in Redimo LFG Limited to Alliance & Leicester Commercial
Finance plc as security for a senior loan facility of GBP16.9
million raised by Redimo LFG Limited. The charge includes all
existing and future shares that the Company owns in Redimo LFG
Limited and therefore includes the 2,500 shares the Company
acquired on 19 December 2008 and the further 2,000 shares the
Company acquired on 18 February 2009 together with the 7,000 shares
acquired by the Company from Ventus 3 VCT plc as a result of the
Merger. The liability of the Company under this charge of shares is
limited to the value of the Company's investment in shares of
Redimo LFG Limited, which was valued at nil at 28 February 2011 for
the reasons described in the Investment Manager's Report.
On 22 October 2008, the Company registered a charge over its
shares in Achairn Energy Limited to Alliance & Leicester
Commercial Finance plc (now Santander Asset Finance plc) as
security for a senior loan facility of GBP6.9 million raised by
Achairn Energy Limited to finance the construction costs of the
wind farm. The liability of the Company under this charge of shares
is limited to the value of the Company's investment in shares of
Achairn Energy Limited including those shares acquired by the
Company from Ventus 3 VCT plc as a result of the Merger.
On 28 November 2008, the Company registered a charge over its
shares in A7 Lochhead Limited to Alliance & Leicester
Commercial Finance plc (now Santander Asset Finance plc) as
security for a senior loan facility of GBP7.8 million raised by A7
Lochhead Limited to finance the construction costs of the wind
farm. The liability of the Company under this charge of shares is
limited to the value of the Company's investment in shares of A7
Lochhead Limited including those shares acquired by the Company
from Ventus 3 VCT plc as a result of the Merger.
On 28 April 2008, the Company registered a charge over its
shares in PBM Power Limited to Alliance & Leicester Commercial
Finance plc (now Santander Asset Finance plc) as security for a
senior loan facility of GBP3.8 million raised by PBM Power Limited
to finance the construction costs of the biomass generator. The
liability of the Company under this charge of shares is limited to
the value of the Company's investment in shares of PBM Power
Limited including those shares acquired by the Company from Ventus
3 VCT plc as a result of the Merger.
On 15 January 2010, the Company registered a charge over its
shares in Sandsfield Heat & Power Limited to The Co-operative
Bank plc as security for a senior loan facility of GBP5 million
raised by Sandsfield Heat & Power Limited to finance the
construction costs of the biomass generator. The liability of the
Company under this charge of shares is limited to the value of the
Company's investment in shares of Sandsfield Heat & Power
Limited including those shares acquired by the Company from Ventus
3 VCT plc as a result of the Merger.
On 15 January 2010, the Company registered a charge over its
shares in Greenfield Wind Farm Limited to The Co-operative Bank plc
as security for a senior loan facility of GBP18.3 million raised by
Greenfield Wind Farm Limited to finance the construction costs of
the wind farm. The liability of the Company under this charge of
shares is limited to the value of the Company's investment in
shares of Greenfield Wind Farm Limited including those shares
acquired by the Company from Ventus 3 VCT plc as a result of the
Merger.
On 17 May 2011, the Company registered a charge over its shares
in Osspower Limited to The Co-operative Bank plc as security for a
senior loan facility of GBP6.45 million raised by Osspower Limited
to finance the construction of its first hydro scheme (Allt Fionn
Ghlinne).
At the year end the Company had provided committed loan
facilities to The Small Hydro Company Limited totalling GBP534,000
of which GBP464,000 had been drawn down.
The Company had no other contingencies, financial commitments or
guarantees as at 28 February 2011.
24. Related party transactions
The Company retains Climate Change Capital Limited as its
Investment Manager, a subsidiary of Climate Change Holdings
Limited, which is a subsidiary of Climate Change Capital Group
Limited. Details of the agreement with the Investment Manager are
set out in note 3 of the Financial Statements. During the year the
Company was charged investment management fees of GBP726,000 by the
Investment Manager (2010: GBP407,000) of which GBP472,000 was
charged to the ordinary share fund and GBP254,000 was charged to
the "C" share fund. The increase in investment management fees was
attributable to the increase in net asset value of the Company
resulting from the Merger with Ventus 3 VCT plc and the additional
capital raised from the second "C" share issue.
During the year ended 28 February 2011, the Investment Manger
earned offer fees of GBP123,000 (net of up front commissions paid
to authorised introducers) in respect of the second "C" share
offer.
Climate Change Capital Limited was also the Investment Manager
of Ventus VCT plc and Ventus 3 VCT plc during the year; Ventus 2
VCT plc held certain of its investments in common with these
companies as detailed in the Investment Manager's Report. On 6 May
2010, the Company acquired the assets of Ventus 3 VCT plc under the
terms of the Merger and subsequently Ventus 3 VCT plc was placed
into members' voluntary liquidation. At 28 February 2011, the
Company owed GBP556 to Ventus VCT plc.
The investee companies in which the Company has a shareholding
of 20% or more, as identified in the Investment Manager's Report,
are related parties. The aggregate balances at the balance sheet
date and transactions with these companies during the year are
summarised below.
Company
As at 28 February 2011
Ordinary Shares "C" shares Total
Balances GBP000 GBP000 GBP000
Investments - shares 6,817 900 7,717
Investments - loan stock 7,047 1,000 8,047
Accrued interest income 540 124 664
Transactions GBP000 GBP000 GBP000
Loan stock interest income 559 124 683
Dividend income 428 - 428
Company
As at 28 February 2010
Ordinary Shares "C" shares Total
Balances GBP000 GBP000 GBP000
Investments - shares 3,352 - 3,352
Investments - loan stock 2,092 - 2,092
Accrued interest income 247 - 247
Transactions GBP000 GBP000 GBP000
Loan stock interest income 229 - 229
As at 28 February 2011 the Company was owed GBP530,000 by PBM
Power Limited in respect of amounts it had advanced to fund the
investee company's operating expenses. The Company's shareholding
in PBM Power Limited was 25% at the year end. The carrying value of
the amount receivable is considered to be fully impaired due to the
poor performance of this investment. Further details in respect of
the related impairment charge are presented in note 4 of the
financial statements.
There are no differences between the Group and Company related
party transactions with the exception of investments included above
totalling GBP732,000 relating to Redeven Energy Limited and
Spurlens Rig Wind Limited which are consolidated into the Group
accounts, of which GBP174,000 was invested in shares and GBP558,000
in shareholder loans.
25. Controlling party
In the opinion of the Directors there is no immediate or
ultimate controlling party.
26. Management of capital
The Company's objective when managing capital is to safeguard
the Company's ability to continue as a going concern in order to
continue to provide returns for shareholders.
The requirements of the Venture Capital Trust regulations and
the fact that the Company has a policy of not having any
borrowings, means that there is limited scope to manage the
Company's capital structure. However, to the extent to which it is
possible, the Company can maintain or adjust its capital structure
by adjusting the amount of dividends paid to shareholders,
purchasing its own shares or issuing new shares.
The Board considers the Company's net assets to be its
capital.
The Company does not have any externally imposed capital
requirements.
There has been no change in the objectives, policies or
processes for managing capital from the previous year.
Notice of Annual General Meeting
Notice is hereby given that the AGM of Ventus 2 VCT plc will be
held at 12.30pm on Wednesday, 27 July 2011 at Climate Change
Capital's office at 3 More London Riverside, London, SE1 2AQ for
the purpose of considering and, if thought fit, passing the
following Resolutions (of which, Resolutions 1 to 7 will be
proposed as Ordinary Resolutions and Resolution 8 will be proposed
as a Special Resolution):
Ordinary Business
1. To receive the Company's audited Annual Report and Financial
Statements for the year ended 28 February 2011.
2. To declare a final dividend of 1.00p per ordinary share in
respect of the year ended 28 February 2011.
3. To approve the Directors' Remuneration Report for the year
ended 28 February 2011.
4. To re-elect Mr Paul Thomas as a Director of the Company.
5. To re-elect Mr Alan Moore as a Director of the Company.
6. To re-appoint PKF (UK) LLP as Auditor of the Company to hold
office until the conclusion of the next general meeting at which
accounts are laid before the Company.
7. To authorise the Directors to determine the remuneration of
the Auditor.
Special Resolution
8. That the Company be and is hereby generally and
unconditionally authorised to make market purchases (as defined in
section 693(4) of the Act) of ordinary shares of 25p each and "C"
shares of 25p each in the capital of the Company provided that:
(i) The maximum aggregate number of shares hereby authorised to
be purchased is an amount equal to 3,678,180 ordinary shares and
1,698,233 "C" shares, representing 14.99% of the issued share
capital of each class;
(ii) The minimum price which may be paid for a share is 25p per
share;
(iii) The maximum price, exclusive of any expenses, which may be
paid for a share is an amount equal to the higher of; (a) 105% of
the average of the middle market prices shown in the quotations for
a share in The London Stock Exchange Daily Official List for the
five business days immediately preceding the day on which that
share is purchased; and (b) the amount stipulated by Article 5(1)
of the Buy-back and Stabilisation Regulation 2003;
(iv) The authority hereby conferred shall (unless previously
renewed or revoked) expire on the earlier of the AGM of the Company
to be held in 2012 and the date which is 18 months after the date
on which this resolution is passed; and
(v) The Company may make a contract or contracts to purchase its
own shares under this authority before the expiry of the authority
which will or may be executed wholly or partly after the expiry of
the authority, and may make a purchase of its own shares in
pursuance of any such contract or contracts as if the authority
conferred hereby had not expired.
By order of the Board
The City Partnership (UK) Limited
Secretary
21 June 2011
Note:
The Annual Report and Financial Statements will be posted to
those shareholders who have requested to receive copies and will
also be available on the Company's website www.ventusvct.com.
Copies may be obtained during normal business hours from the
Company's registered office, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4TU.
By order of the Board
Alan Moore
Chairman
21 June 2011
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EANKAAADFEEF
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