TIDMVEN2
RNS Number : 5694F
Ventus 2 VCT PLC
28 May 2013
Ventus 2 VCT plc
Annual Report and Financial Statements
for the year ended 28 February 2013
Registered No: 05667210
Copies of the Report and Financial Statements will be submitted
to the UK Listing Authority's National Storage Mechanism and will
shortly be available at www.hemscott.com/nsm.do.
This announcement, which is extracted from the 2013 Annual
Report, constitutes the material which is required to be
communicated to the media in unedited full text through a
Regulatory Information Service for the purposes of compliance with
DTR 6.3.5. It should be read in conjunction with and is not a
substitute for the full 2013 Annual Report.
Chairman's Statement
I am pleased to present the Annual Report and Financial
Statements of Ventus 2 VCT plc (the "Company") for the year ended
28 February 2013. This has been a year during which the Company,
through the diligence of its Investment Manager, has consolidated
its investments and procedures. This is reflected in the
substantial increase in the net asset value and shareholder returns
reported here.
The Company's investment manager, Temporis Capital LLP, has now
been in place for 21 months, during which time the Ventus
investment management team has focused on investments at the
lower-risk end of the wind sector. The Directors are pleased that
the recent successful sale of Craig Wind Farm Limited has
contributed to the increased net asset value of the Company's
ordinary share fund. During the year the ordinary share fund has
made investments in four companies which are constructing wind
farms in England. The Company's "C" share fund has also made
investments in two of these companies.
In the Company's previous annual report, which was published on
31 May 2012, the Directors set out their intentions and objectives
with respect to future dividends. The Directors stated their
intention to pay a minimum annual dividend of 3.5p per ordinary
share for the next three years and an annual dividend of 3p to 4p
per share per "C" share for the next two years. The directors
affirm these intentions. It should be stressed that these are
intentions only, and no forecasts are intended or are to be
inferred.
Group
The Company has a shareholding of 60% of the ordinary shares
issued by Spurlens Rig Wind Limited which is immaterial to both the
results and the net assets of the group. During the year, the
Company held 60% of the ordinary shares of Redeven Energy Limited
until 14 February 2013 when the Company's holding reduced to 50%.
Redeven Energy Limited was therefore a subsidiary of the Company
until that date however, following the loss of control of Redeven
Energy Limited, there were no material subsidiaries at the year end
and consolidated financial statements have not been presented this
year.
Net Asset Value, Results and Dividends - Ordinary Shares
At the year end, net asset value of the ordinary share fund of
the Company attributable to equity shareholders was GBP17,517,000
or 71.7p per ordinary share (2012: GBP14,427,000 or 58.8p per
ordinary share).
During the year ended 28 February 2013 the total shareholder
return of the ordinary share fund increased by 17.0p per ordinary
share, which represents a 24.4% increase. Total shareholder return
is the net asset value plus the cumulative dividends paid to
date.
The revenue profit attributable to ordinary shareholders for the
year was GBP955,000 or 3.91p per ordinary share. The capital gain
attributable to ordinary shareholders for the year was GBP3,157,000
or 12.92p per ordinary share, resulting in a net gain to ordinary
shareholders for the year of GBP4,112,000 or 16.83p per ordinary
share (2012: net loss of GBP3,957,000 or 16.12p per ordinary
share).
The value of investments and investments in subsidiaries held by
the ordinary share fund of the Company at 28 February 2013 was
GBP15,831,000 compared to GBP13,048,000 at 29 February 2012. .
During the year the Company disposed of its interest in Craig Wind
Farm Limited for a minimum consideration of GBP1,647,000 which
generated an initial capital gain on investment cost of GBP809,000.
The Company also received GBP28,000 of interest which had accrued
on the mezzanine loan with Craig Wind Farm Limited prior to the
sale. Further details on this disposal are presented in the
Investment Manger's Report.
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 2013 was GBP1,363,000, of which GBP847,000 was derived
from loan stock, including early repayment fees of GBP162,000,
GBP508,000 was dividend income and GBP8,000 from bank interest.
This compares to total income of GBP847,000 for the year ended 29
February 2012. The increase in income is mainly attributable to a
substantial increase in dividend income.
The Company has declared a final dividend of 1.75p per ordinary
share to be paid on 7 August 2013 to all ordinary shareholders on
the register as at the close of business on 12 July 2013. The
Company paid an interim dividend of 1.75p per ordinary share on 16
January 2013. Therefore, the total annual dividend is 3.50p per
ordinary share.
Net Asset Value and Results and Dividends - "C" Shares
At the year end, the net asset value of the "C" share fund of
the Company stood at GBP12,093,000 or 106.7p per "C" share (2012:
GBP10,414,000 or 91.9 per "C" share).
During the year ended 28 February 2013 the total shareholder
return of the "C" share fund increased by 17.0p per "C" share which
represents an 18.3% increase. Total shareholder return is the net
asset value plus the cumulative dividends paid to date.
The revenue profit attributable to "C" shareholders for the year
was GBP208,000 or 1.83p per "C" share. The capital gain
attributable to "C" shareholders for the year was GBP1,720,000 or
15.19p per "C" share, resulting in a net profit to "C" shareholders
for the year of GBP1,928,000 or 17.02p per "C" share (2012: net
profit of GBP59,000 or 0.51p per "C" share).
The value of investments held by the "C" share fund of the
Company at 28 February 2013 was GBP10,743,000 (2012:
GBP8,183,000).
The income generated in the "C" share fund during the year
comprised interest earned on loan stock and cash deposits. Total
income for the year ended 28 February 2013 was GBP439,000, of which
GBP339,000 was loan stock interest, GBP90,000 was a loan facility
fee and GBP10,000 was bank deposit interest. This compares with
income generated by the "C" share fund of GBP442,000 in the year
ended 29 February 2012. During the year a number of short term
loans were repaid to the Company which resulted in the amount
earned from loan stock reducing compared to the amount earned in
the previous year.
The Company proposes to declare a final dividend of 1.80p per
"C" share to be paid on
7 August 2013 to all "C" shareholders on the register as at the
close of business on 12 July 2013. The Company paid an interim
dividend of 1.20p per "C" share on 16 January 2013. Therefore the
total annual dividend will be 3.00 per "C" share.
Investments
The Company's Investment Manager, Temporis Capital LLP,
continues to be actively engaged in managing the portfolio and in
identifying and negotiating potential investment opportunities.
As at 28 February 2013, the ordinary share fund of the Company
held investments in 18 companies (2012: 17 companies) with a total
value of GBP15.8 million (2012: GBP13.0 million). As at 28 February
2013, the "C" share fund held an investment in 9 companies (2012:
10 companies) with a value of GBP10.7 million (2012: GBP8.2
million).
The Investment Manager's Report provides details of the
investments held as at
28 February 2013 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.
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.
Share Offer and Tender Offer
In March 2012, the Company completed a tender offer under which
ordinary shareholders were able to sell their ordinary shares to
the Company at net asset value ("NAV") provided they committed to
investing the entire proceeds of the sale in new ordinary shares
under a share offer which closed on 3 April 2012. The tender offer
was successful, with 8,389,457 ordinary shares being tendered at a
price of 58.4p per share. This represented 38% of the ordinary
shares originally subscribed for by shareholders in the Company's
2006 share offer.
Under the share offer which closed on 3 April 2012, the Company
issued 8,274,552 new ordinary shares at an aggregate subscription
price of GBP4,925,443. This included 8,231,766 ordinary shares
subscribed for by existing ordinary shareholders with proceeds from
the sale of their ordinary shares pursuant to the tender offer.
Share Buy-backs
The Board believes that it is beneficial to the Company for it
to continue to have the flexibility to purchase its own shares in
the market. However, the Board considers it in the best interest of
all shareholders if the Directors use their authority to make share
buy-backs judiciously.
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.
Alan Moore
Chairman
24 May 2013
Investment Manager's Report
In line with the strategic objectives set by the Board, the
Investment Manager has continued to focus the Company's activities
on wind investments generating stable long-term income with the
objective of providing predictable dividends to shareholders. In
order to improve stability of cash returns from investee companies
and enhance the predictability of dividends to shareholders of the
Company, recent investments have, on average, been structured with
lighter leverage than earlier investments. The investments in Wind
Power Renewables Limited and Redeven Energy Limited have been
restructured with the intention of unlocking embedded development
value in these companies. During the year ended 28 February 2013,
the value of the Company's investments in Greenfield Wind Farm
Limited, White Mill Windfarm Limited, AD Wind Farmers Limited and
Osspower Limited increased significantly as a result of the
successful completion of the construction of their wind farms and
hydro project. The Investment Manager continues to work actively
with investee companies to manage risk through the construction
phase.
Ordinary share portfolio
A summary of the ordinary share fund's investment valuations as
at 28 February 2013 and gains and losses during the year ended 28
February 2013 is given below.
Investment Investment Gain/ Investment Investment
value cost
Voting (loss) value cost
rights Shares Loans Total Shares Loans Total in Total Total
the
as as as as as as as year as as
at at at at at at at to at at
28 28 28 28 28 28 28 28 29 29
February February February February February February February February February February
2013 2013 2013 2013 2013 2013 2013 2013 2012 2012
% GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Operational
wind
Achairn
Energy
Limited
* Q 40.40% 2,392 1,360 3,752 1,226 1,289 2,515 80 3,672 2,515
A7 Lochhead
Limited
* Q 20.00% 729 126 855 569 121 690 79 776 690
Greenfield
Wind
Farm
Limited
* PQ 16.65% 1,401 1,418 2,819 666 1,332 1,998 821 1,998 1,998
-------------- ---- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Wind
under
construction
Biggleswade
Wind
Farm
Limited
* Q 3.50% 86 264 350 86 264 350 - - -
Eye
Wind
Power
Limited
* PQ 50.00% 1,102 1,050 2,152 984 1,050 2,034 118 - -
Bernard
Matthews
Green
Energy
Weston
Limited
* Q 50.00% 538 - 538 500 - 500 38 - -
Bernard
Matthews
Green
Energy
Pickenham
Limited
* Q 50.00% 536 - 536 500 - 500 36 - -
-------------- ---- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Operational
companies
in the wind
sector
Broadview
Energy
Limited
* Q 2.22% 410 - 410 200 - 200 (40) 2,250 2,000
Firefly
Energy
Limited
* Q 50.00% - 102 102 200 136 336 (29) 155 360
-------------- ---- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Operational
landfill
gas
Renewable
Power
Systems
(Dargan
Road)
Limited Q 50.00% 710 1,281 1,991 780 1,120 1,900 108 1,883 1,900
-------------- ---- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Operational
small
hydro
Osspower
Limited 50.00% 2,017 48 2,065 300 55 355 1,710 355 355
-------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Development
and
pre-planning
Redeven
Energy
Limited
* 50.00% 66 195 261 - 363 363 (101) 584 584
-------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Realised
investments
Craig
Wind
Farm
Limited
* 0.00% - - - - - - 456 1,203 838
Wind
Power
Renewables
Limited
* 0.00% - - - - - - (20) 140 372
Redimo
LFG
Limited
* Q 50.00% - - - 1,000 - 1,000 - - 1,000
PBM
Power
Limited 25.00% - - - 574 - 574 - - 574
Sandsfield
Heat
& Power
Limited Q 44.90% - - - 1,796 1,000 2,796 - - 2,796
Twinwoods
Heat
& Power
Limited 0.00% - - - - - - - - 2,400
The
Small
Hydro
Company
Limited 22.50% - - - 115 534 649 - - 649
Spurlens
Rig
Wind
Limited
* 60.00% - - - 209 - 209 1 32 242
Olgrinmore
Limited
* 17.60% - - - 68 - 68 - - 68
-------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Total 9,987 5,844 15,831 9,773 7,264 17,037 3,257 13,048 19,341
-------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
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 has also invested (or in
which Ventus VCT plc had invested prior to the investment being
realised). The Company and Ventus VCT plc are managed by Temporis
Capital LLP.
New Investments
During the year ended 28 February 2013, the Company made the
following new investments from the ordinary share fund:
Voting
Rights Equity Loan
Acquired Investment Investment
GBP GBP
Biggleswade Wind Farm Limited 3.5% 86,000 264,000
Eye Wind Power Limited 50.0% 984,000 1,050,000
Bernard Matthews Green Energy
Pickenham Limited 50.0% 500,000 -
Bernard Matthews Green Energy
Weston Limited 50.0% 500,000 -
The Company's investment in Eye Wind Power Limited consisted of
GBP1,865,000 of new funds and the exchange of loans from the
Company to Wind Power Renewables Limited valued at GBP169,000
(GBP138,000 principal plus GBP31,000 accrued interest). The
realisation of Wind Power Renewables Limited is discussed below.
Although the cost of the equity investment in Eye Wind Power
Limited is GBP984,000, the value of the equity investment, based on
the price of a recent investment made by Ventus VCT plc for the
same shareholding, is considered to be GBP1,102,000.
See a discussion of each of the above investments in the section
titled "Summary of Ordinary Share Fund Investments".
Disposals
Craig Wind Farm Limited
In November 2012, the Company sold its 12.5% equity holding in
Craig Wind Farm Limited ("CWFL"), as well as the Company's
outstanding loan with CWFL of GBP341,000, to Partnerships for
Renewables Limited, a renewable energy developer focusing primarily
on public sector land. CWFL owns and operates a 10 megawatt wind
farm in Dumfries and Galloway, Scotland. The Company also received
GBP28,000 of interest which had accrued on the mezzanine loan with
Craig Wind Farm Limited prior to the sale.
The minimum proceeds to the Company from the sale, net of costs,
totalled GBP1,647,000, consisting of GBP973,000 in cash and
GBP674,000 of deferred consideration at initial fair value. The
deferred consideration is fully secured on the assets of CWFL.
There is also the possibility of further deferred consideration
contingent on the development of further turbines on the CWFL site.
The amortised cost value of the non-contingent deferred
consideration is recorded in the accounts of the Company as at 28
February 2013 as a non-current amount receivable of GBP687,000. The
contingent consideration is considered to have no material value
and is therefore held in the accounts of the Company as at 28
February 2013 at nil value.
The Company made its investment in CWFL in 2006. Without regard
to any contingent deferred consideration, the return to the Company
on the CWFL investment, including past dividends and interest
payments received, totalled 3.12 times the original cost of the
investment.
Wind Power Renewables Limited
In connection with acquiring an interest in Eye Wind Power
Limited in July 2012, the Company disposed of its entire interest
in Wind Power Renewables Limited. This interest consisted of 48% of
the ordinary shares of Wind Power Renewables Limited as well as a
loan of GBP138,000 plus accrued interest of GBP31,000. The loan
amount and accrued interest receivable totalling GBP169,000 was
rolled into the cost of the investment in Eye Wind Power
Limited.
Summary of Ordinary Share Fund Investments
Details of the valuations of the investments held by the
ordinary share fund are shown in the table above.
OPERATIONAL WIND
Each of the following investee companies owns and operates a
single wind farm:
Wind farm
capacity
(megawatts) Operational since Location
Achairn Energy Limited 6.0 May 2009 Caithness, Scotland
A7 Lochhead Limited 6.0 June 2009 Lanarkshire, Scotland
Greenfield Wind Farm Limited 12.3 March 2011 Lanarkshire,
Scotland
The Company's investments in the above companies are valued
using discounted cash flow models. The value of A7 Lochhead Limited
increased during the year ended 28 February 2013 primarily because
theunderlying project debt decreased during the year and because of
a decrease in projected future corporation tax rates as set out in
this year's Budget. The value of Achairn Energy Limited also
increased for the same reasons, however most of this increase was
offset by a decrease due to a downward revision of 5.8% in the
projected annual energy yield. The value of Greenfield Wind Farm
Limited increased significantly during the year ended 28 February
2013 because the investment was still held at cost as at 29
February 2012 and has subsequently been revalued on a discounted
cash flow basis in line with the Company's valuation policy for
investments in companies with operating renewable energy
assets.
Set out below is a brief summary of the performance of the
investee companies operating wind farms. All the companies
operating wind farms experienced good availability during the year
ended 28 February 2013, however wind speeds were below average,
resulting in output across the portfolio being 13% below
budget.
Achairn Energy Limited
The electricity production of Achairn Energy Limited during the
year ended 28 February 2013 was 89% of budget (i.e. the recently
revised projected annual energy yield, which was revised downward
by 5.8%). The Company received dividends and mezzanine interest
cash payments totalling GBP255,000 from Achairn Energy Limited in
the year ended 28 February 2013, representing a 10.2% cash yield on
the cost of investment. In addition to dividend and mezzanine
interest income, the Company recognised a valuation gain of
GBP80,000 on its investment in Achairn Energy Limited during the
year.
A7 Lochhead Limited
The electricity production of A7 Lochhead Limited during the
year ended 28 February 2013 was 86% of budget. The Company received
dividends and mezzanine interest cash payments totalling GBP88,000
from A7 Lochhead Limited in the year ended 28 February 2013,
representing a 12.8% cash yield on the cost of investment. In
addition to dividend and mezzanine interest income, the Company
recognised a valuation gain of GBP79,000 on its investment in A7
Lochhead Limited during the year.
Greenfield Wind Farm Limited
The electricity production of Greenfield Wind Farm Limited
during the year ended 28 February 2013 was 86% of budget. The
Company received mezzanine interest cash payments totalling
GBP483,000 from Greenfield Wind Farm Limited in the year ended 28
February 2013, representing a 24.2% cash yield on the cost of the
investment. Approximately 70% of the cash payments received from
Greenfield Wind Farm Limited related to mezzanine debt interest
which had been accrued as income in the Company's accounts in prior
years. In addition to mezzanine interest income, the Company's
ordinary share fund recognised a valuation gain of GBP821,000 on
its investment in Greenfield Wind Farm Limited during the year.
The Company's "C" share fund also holds an investment in
Greenfield Wind Farm Limited as discussed below.
WIND UNDER CONSTRUCTION
Biggleswade Wind Farm Limited
Biggleswade Wind Farm Limited is constructing a 20 megawatt wind
farm in Langford, central Bedfordshire. The wind farm will operate
ten Vestas V-90 turbines. In January 2013, the ordinary share fund
of the Company invested GBP86,000 to acquire 3.5% of the ordinary
shares of Biggleswade Wind Farm Limited and made a mezzanine loan
to Biggleswade Wind Farm Limited of GBP264,000. The construction of
the Biggleswade wind farm is currently on time and on budget and is
scheduled to be commissioned in January 2014.
The Company's "C" share fund also holds as investment in
Biggleswade Wind Farm Limited as discussed below.
Eye Wind Power Limited
Eye Wind Power Limited is constructing a 6.8 megawatt wind farm
on Eye Airfield near Eye, Suffolk . The wind farm will operate two
REpower 3.4M turbines. Over the course of the year ended 28
February 2013, the Company invested GBP984,000 to acquire 50% of
the ordinary shares of Eye Wind Power Limited and made a mezzanine
loan to Eye Wind Power Limited of GBP1,050,000. Subsequent to 28
February 2013, the capital of Eye Wind Power Limited has been
restructured, with the Company converting GBP848,000 of its
mezzanine loans to ordinary shares while maintaining its equity
ownership at 50%. The company also acquired senior debt financing
of GBP5 million. The construction of the Eye Airfield wind farm is
currently on time and on budget and is scheduled to be commissioned
in January 2014.
The Company's "C" share fund also holds as investment in Eye
Wind Power Limited as discussed below.
Bernard Matthews Green Energy Weston Limited
Bernard Matthews Green Energy Weston Limited, in partnership
with Weston Airfield Investments Limited (in which the Company's
"C" share fund holds an investment, as discussed below), is
constructing a 4 megawatt wind farm at the Weston Airfield, 15
kilometres north-west of Norwich, Norfolk. The wind farm is
expected to be commissioned in January 2014 and will operate two
Vestas V-100 turbines.
In February 2013, the ordinary share fund of the Company
invested GBP500,000 to acquire 50% of the ordinary shares of
Bernard Matthews Green Energy Weston Limited. The investment in
Bernard Matthews Green Energy Weston Limited is held at GBP538,000,
which represents the total cost of the investment incurred both in
the investee company and through Redeven Energy Limited, which was
the development company for the Weston Airfield wind farm. More
detail on Redeven Energy Limited is provided below.
Bernard Matthews Green Energy Pickenham Limited
Bernard Matthews Green Energy Pickenham Limited, in partnership
with North Pickenham Energy Limited (in which the Company's "C"
share fund holds an investment, as discussed below), is
constructing a 4 megawatt wind farm at the North Pickenham
Airfield, 35 kilometres west of Norwich, Norfolk. The wind farm is
expected to be commissioned in January 2014 and will operate two
Vestas V-100 turbines.
In February 2013, the ordinary share fund of the Company
invested GBP500,000 to acquire 50% of the ordinary shares of
Bernard Matthews Green Energy Pickenham Limited. The investment in
Bernard Matthews Green Energy Pickenham Limited is held at
GBP536,000, which represents the total cost of the investment
incurred both in the investee company and through Redeven Energy
Limited, which was the development company for the North Pickenham
Airfield wind farm. More detail on Redeven Energy Limited is
provided below.
OPERATIONAL COMPANIES IN THE WIND SECTOR
Broadview Energy Limited
Broadview Energy Limited is an independent renewable energy
company that develops, constructs and operates wind farms
throughout the UK. In May 2012, Broadview completed the sale of two
operating wind farms and one wind farm in construction (comprising
25.35 megawatts in total). The consideration received by Broadview
Energy Limited for these assets was reported in the annual
financial statements of Infinis Wind Holdings Limited as GBP17.4
million including GBP5.3 million consideration deferred until
completion of the wind farm in construction. In addition to the net
cash resulting from the sale of these assets and the deferred
consideration, Broadview has a development portfolio comprised of
one consented project of three turbines (6 to 9 megawatts), four
projects in the planning process (totalling 16 turbines and 32 to
48 megawatts) and several other projects at earlier stages of the
development process.
The Company's holding of ordinary shares in Broadview Energy
Limited has been valued based on the reported value of the assets
sold and the Investment Manager's estimate of the market value of
the remaining consented wind energy projects and the development
pipeline. The valuation as at 28 February 2013 has been reduced by
9% from the valuation at 29 February 2012. This reduction is
largely due to the downward revaluation of Spring Farm Ridge, a
development project of Broadview Energy Limited which had been
consented on appeal by the Government Planning Inspectorate in July
2012 following a public enquiry. In January 2013, the appeal
decision was quashed in the High Court after a challenge by local
residents. The appeal has been returned to the Planning
Inspectorate for re-determination.
At 29 February 2012, the Company had a secured mezzanine loan
investment of GBP1,800,000 with Broadview Energy Limited that
accrued interest at 11% per annum. This mezzanine loan, which was
secured by one of the wind farm assets sold in May 2012 by
Broadview Energy Limited, had a final maturity date of 31 March
2024. In connection with the sale of the wind farm asset securing
this mezzanine loan, the loan was repaid in full, including accrued
interest of GBP940,000, on 4 May 2012. In accordance with the terms
of the mezzanine loan, Broadview Energy Limited also paid an early
repayment fee of GBP162,000.
As well as the equity investment made by the ordinary share
fund, the Company's "C" share fund had two mezzanine loans
outstanding at 29 February 2012 to subsidiaries of Broadview Energy
Limited, which were repaid in full, including accrued interest, on
4 May 2012. See the discussion of BEGL 2 Limited and BEGL3 Limited
below.
Firefly Energy Limited
Firefly Energy Limited is the parent company of a group of
trading subsidiaries that have entered into long term power
purchase agreements with customers for 41.7 megawatts of generating
capacity across five wind farm developments. The five wind farm
projects are fully operational and generating revenues. Each of the
five power purchase agreements expires on 31 March 2016. Firefly
Energy Limited earns a margin on the five long-term power purchase
agreements. The Company received mezzanine interest and prepayment
penalty cash payments totalling GBP28,000 from Firefly Energy
Limited in the year ended 28 February 2013, representing a 7.8%
cash yield on the cost of the investment. Firefly Energy Limited
also repaid GBP24,000 of mezzanine loan principal to the Company
during the year ended 28 February 2013.
The Company has a loan investment in Firefly Energy Limited
which had a principal amount outstanding at 28 February 2013 of
GBP136,000 and which accrues interest at 9% per annum. The loan is
valued in the Company's accounts based on the discounted projected
future cash flows from the five power purchase agreement on which
the company earns a spread, net of projected administration costs.
During the year ended 28 February 2013, the Company recorded a
further write down in the value of the loan of GBP29,000 which
constitutes a realised loss. As at 28 February 2013, the value of
the loan was GBP102,000. The loan, as valued, is projected to be
paid off, with interest, by the end of 2016. The Company also holds
50% of the ordinary shares of Firefly Energy Limited (cost of
GBP200,000) which was written down to nil value in a previous
period.
OPERATIONAL LANDFILL GAS
Renewable Power Systems (Dargan Road) Limited
Renewable Power Systems (Dargan Road) Limited operates a
landfill gas electricity generation site in Northern Ireland. The
site performed in line with expectations during the year ended 28
February 2013 and disposed of the first of its five generators as
the volume of gas at the site reduced. The disposal of the
generator resulted in significant cash inflow for the investee
company. The Company received dividends and loan interest payments
totalling GBP478,000 from Renewable Power Systems (Dargan Road)
Limited in the year ended 28 Febuary 2013, representing a 25.2%
cash yield on the cost of the investment.
The investment in Renewable Power Systems (Dargan Road) Limited
is valued by applying a discount rate to the revenues the Company
expects to receive from the investee company. 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. However, the
value of the Company's investment in Renewable Power Systems
(Dargan Road) Limited increased by GBP109,000 in the year ended 28
February 2013 because the total future cash flows available for
distribution from the investment have been revised upwards due to
the higher than expected proceeds from the recent sale of a second
generator. Also the lower risk profile of this investment has led
to a decision to reduce the discount factor applied in the
valuation analysis. The impact of the reduction in the discount
factor on the value of the investment in prior periods is not
considered to be material.
OPERATIONAL SMALL HYDRO
Osspower Limited
The Company holds 50% of the ordinary shares of Osspower
Limited, which owns and operates a 1.99 megawatt hydro project at
Allt Fionn Ghlinne in Scotland. The Allt Fionn Ghlinne site was
commissioned in June 2012, on schedule and on budget. The Company
did not receive dividends from Osspower Limited in the year ended
28 February 2013. The value of the Company's investment in Osspower
Limited increased by GBP1,710,000 during the year ended 28 February
2013, as Osspower Limited is now valued based on the discounted
cash flows of the Allt Fionn Ghlinne project.
Osspower Limited has consent for a further three small hydro
projects on the same estate as the Allt Fionn Ghlinne project. The
Investment Manager is working with the management of Osspower
Limited to develop the appropriate strategy for financing the
construction of those three projects.
DEVELOPMENT AND PRE-PLANNING
Redeven Energy Limited
Through a development funding agreement entered into by Redeven
Energy Limited, the Company holds investment rights in a company
intending to develop and operate a five-turbine wind farm in East
Anglia. The development company holds a lease option over a site
for which planning permission has been sought and received. The
Company is working with the development company to proceed with the
building out of the project as soon as possible.
In the year ended 28 February 2013, the investment rights
Redeven Energy Limited held in two other companies (Bernard
Matthews Green Energy Weston Limited and Bernard Matthews Green
Energy Pickenham Limited) were transferred to the Company and to
Ventus VCT plc. See above for a description of Bernard Matthews
Green Energy Weston Limited and Bernard Matthews Green Energy
Pickenham Limited.
OTHER DISPOSALS AND INVESTMENTS HELD AS REALISED LOSSES
Redimo LFG Limited
Redimo LFG Limited operates four landfill gas electricity
generation sites in the north of England. Redimo LFG Limited is not
paying dividends to the Company and has been held in the accounts
at a nil valuation since late 2010. Given the senior debt
commitments of the Redimo LFG Limited's subsidiaries, there is no
possibility that the Company will recover any part of its
investment in Redimo LFG Limited. Therefore, the loss in value in
respect of this investment is treated as a realised loss.
PBM Power Limited, Sandsfield Heat & Power Limited and
Twinwoods Heat & Power Limited
PBM Power Limited, Sandsfield Heat & Power Limited and
Twinwoods Heat & Power Limited are companies that constructed
biomass power plants fired with waste wood. The plants run by the
companies experienced severe operating difficulties. The three
investments were written down to nil value in previous accounting
periods. During the year ended 28 February 2013, the Company's
interest in Twinwoods Heat & Power Limited (comprising 50% of
the ordinary shares and a mezzanine loan of GBP400,000) was sold
for a nominal consideration. Sandsfield Heat & Power Limited is
currently in administration and is expected to go into liquidation
in due course. There is no possibility of any recovery from PBM
Power Limited and Sandsfield Heat & Power Limited, therefore
the loss in value in respect of these investments is a realised
loss. PBM Power Limited is not considered to be a qualifying
holding.
The Small Hydro Company Limited
The Small Hydro Company Limited, a developer of hydroelectric
projects, obtained planning consent for five low-head run-of-river
small hydroelectric projects in England. After considerable
analysis by the Investment Manager and the management of The Small
Hydro Company Limited, it was determined that the five projects
were not economic to build out. The Small Hydro Company Limited is
in process of members' voluntary liquidation, which is expected to
be concluded before the end of 2013. The original investment in The
Small Hydro Company of GBP649,000 was written down to in full in
the year ended 29 February 2012. Therefore, the investment is held
at nil value. During the year ended 28 February 2013, the loss in
value was recognised as a realised loss.
Spurlens Rig Wind Limited
Spurlens Rig Wind Limited is the developer of a six-turbine site
in the Scottish Borders which was refused for planning in December
2011. There are no plans to appeal the planning refusal, so the
proposed six-turbine project is no longer viable. Spurlens Rig Wind
Limited repaid GBP36,000 of an outstanding loan to the Company
during the year. The remaining outstanding loan was converted to
equity and written off. The directors of Spurlens Rig Wind Limited
applied to have the company struck off the register on 4 February
2013.
Olgrinmore Limited
Olgrinmore Limited was a potential two-turbine site in Caithness
which was refused in planning and is being held at nil value. The
lease option held by Olginmore Limited has expired and the
directors applied to have the company struck off the register on 3
April 2013. The Company's investment in Olgrinmore Limited was
written down to nil value in the previous financial period. The
amount by which the company's value has been written down is
considered to be a realised loss.
"C" share portfolio
A summary of the "C" share fund's investment valuations as at 28
February 2013 and gains and losses during the year ended 28
February 2013 is given below.
Investment Investment Gain/ Investment Investment
value cost
Voting (loss) value cost
rights Shares Loans Total Shares Loans Total in Total Total
the
as as as as as as as year as as
at at at at at at at to at at
28 28 28 28 28 28 28 28 29 29
February February February February February February February February February February
2013 2013 2013 2013 2013 2013 2013 2013 2012 2012
% GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Operational
wind
Greenfield
Wind
Farm
Limited
* PQ 12.50% 1,052 1,064 2,116 500 1,000 1,500 616 1,500 1,500
White
Mill
Windfarm
Limited
* PQ 25.00% 2,209 403 2,612 1,000 381 1,381 1,231 1,673 1,673
AD Wind
Farmers
Limited
* Q 50.00% 1,227 - 1,227 1,000 - 1,000 227 1,000 1,000
-------------- ---- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Wind
under
construction
Biggleswade
Wind
Farm
Limited
* Q 21.50% 527 1,623 2,150 527 1,623 2,150 - - -
Eye Wind
Power
Limited
* PQ 0.00% - 400 400 - 400 400 - - -
Weston
Airfield
Investments
Limited
* Q 50.00% 1,000 - 1,000 1,000 - 1,000 - 1,000 1,000
North
Pickenham
Energy
Limited
* Q 50.00% 1,000 - 1,000 1,000 - 1,000 - 1,000 1,000
-------------- ---- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Development
and
pre-planning
Iceni
Renewables
Limited
* 50.00% 200 18 218 400 18 418 (200) 400 400
Blawearie
Wind
Limited
* 50.00% 20 - 20 20 - 20 - - -
-------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Realised
investments
Renewable
Power
Systems
Limited
* 0.00% - - - - - - - 200 200
BEGL
2 Limited
* 0.00% - - - - - - - 500 500
BEGL
3 Limited
* 0.00% - - - - - - - 500 500
EcoGen
Limited
* 0.00% - - - - - - - 410 410
-------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
Total 7,235 3,508 10,743 5,447 3,422 8,869 1,874 8,183 8,183
-------------------- --------- --------- --------- --------- --------- --------- --------- --------- ----------- -----------
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 has also invested (or in
which Ventus VCT plc had invested prior to the investment being
realised). The Company and Ventus VCT plc are managed by Temporis
Capital LLP.
New Investments
During the year ended 28 February 2013, the Company made the
following new investments from the "C" share fund:
Voting
Rights Equity Loan
Acquired Investment Investment
GBP GBP
Biggleswade Wind Farm Limited 21.5% 527,000 1,623,000
Eye Wind Power Limited - - 400,000
Iceni Renewables Limited - - 18,000
Blawearie Wind Limited 50.0% 20,000 -
See a discussion of each of the above investments in the section
titled "Summary of "C" Share Fund Investments".
Repayment of Short-Term Secured Loans to Renewable Energy
Companies
During the year ended 28 February 2013, the Company received
payment of GBP1,610,000 plus accrued interest with respect to
short-term secured loans to renewable energy companies. These
secured loans had been made in order to generate investment yields
for the Company during the "C" share investment period as the wind
investment portfolio was developed. The interest on these secured
loans has helped defray the "C" share fund's running costs and
allowed the Company to pay dividends to holders of "C" shares. The
loans, which were repaid in full with accrued interest, were as
follows:
-- Renewable Power Systems Limited - GBP200,000, repaid on 3 August 2012
-- BEGL 2 Limited - GBP500,000, repaid on 4 May 2012
-- BEGL 3 Limited - GBP500,000, repaid on 4 May 2012
-- EcoGen Limited - GBP410,000, repaid on 28 February 2013
Summary of "C" Share Fund Investments
Details of the valuations of the investments held by the "C"
share fund are shown in the table above.
OPERATIONAL WIND
Each of the following investee companies owns and operates a
single wind farm (or, in the case of AD Wind Farmers Limited, owns
an interest in a limited liability partnership that owns and
operates a single wind farm):
Wind farm
capacity
(megawatts) Operational since Location
Greenfield Wind Farm Limited 12.3 March 2011 Lanarkshire,
Scotland
White Mill Windfarm Limited 14.35 August 2012 Cambridgeshire
AD Wind Farmers Limited 10.2 December 2012 Argyll and Bute,
Scotland
The Company's investments in the above companies are valued
using discounted cash flow models. The values of all three
investments increased significantly during the year ended 28
February 2013 because they were still held at cost as at 29
February 2012 and have subsequently been revalued on a discounted
cash flow basis in line with the Company's valuation policy for
investments in companies with operating renewable energy
assets.
Set out below is a brief summary of the performance of the
investee companies' operating wind farms. All the companies'
operating wind farms experienced good availability during the year
ended 28 February 2013, however wind speeds were below average,
resulting in aggregate output for Greenfield Wind Farm Limited and
White Mill Windfarm Limited being 15% below budget. It should be
noted that there are considerable lags between the production of
electricity of a wind farm operated by an investee company and the
ultimate payment of dividends from the investee company to the
Company.
Greenfield Wind Farm Limited
The electricity production of Greenfield Wind Farm Limited
during the year ended 28 February 2013 was 86% of budget. The
Company received mezzanine interest cash payments totalling
GBP363,000 from Greenfield Wind Farm Limited in the year ended 28
February 2013, representing a 24.2% cash yield on the cost of the
investment. Approximately 70% of the cash payments received from
Greenfield Wind Farm Limited related to mezzanine debt interest
which had been accrued as income in the Company's accounts in prior
years. In addition to dividend and mezzanine interest income, the
Company's "C" share fund recognised a valuation gain of GBP616,000
on its investment in Greenfield Wind Farm Limited during the
year.
The Company's ordinary share fund also holds as investment in
Greenfield Wind Farm Limited as discussed above.
White Mill Windfarm Limited
White Mill Windfarm Limited began exporting electricity to the
grid in May 2012 and became fully operational in August 2012. The
electricity production of White Mill Wind Farm Limited from
September 2012 to February 2013 was 83% of budget. The Company
received mezzanine interest cash payments totalling GBP128,000 from
White Mill Windfarm Limited in the year ended 28 February 2013,
representing a 7.6% cash yield on the cost of the investment. White
Mill Windfarm Limited also repaid GBP292,000 of the mezzanine loan
principal to the Company during the year ended 28 February 2013.
Early repayment of the loan was possible due to the cost of
construction being materially under budget. In addition to
mezzanine interest income, the Company recognised a valuation gain
of GBP1,231,000 on its investment in White Mill Windfarm Limited
during the year.
AD Wind Farmers Limited
AD Wind Farmers Limited is an investor in Allt Dearg Wind
Farmers LLP. Allt Dearg Wind Farmers LLP began exporting
electricity to the grid ahead of schedule in October 2012 and was
fully operational prior to the end of 2012. The electricity
production of Allt Dearg Wind Farmers LLP in January and February
2013 was 110% of budget. The Company received no cash income from
AD Wind Farmers Limited in the year ended 28 February 2013. The
Company recognised a valuation gain of GBP227,000 on its investment
in AD Wind Farmers Limited during the year.
WIND UNDER CONSTRUCTION
Weston Airfield Investments Limited (formerly Ovalau Investments
1 Limited)
The Company's "C" share fund made a GBP1,000,000 investment in
Weston Airfield Investments Limited in February 2012.
Weston Airfield Investments Limited is in partnership with
Bernard Matthews Green Energy Weston Limited (in which the
Company's ordinary share fund holds an investment, as discussed
above).
North Pickenham Energy Limited (formerly Ovalau Investments 2
Limited)
The Company's "C" share fund made a GBP1,000,000 investment in
North Pickenham Energy Limited in February 2012.
North Pickenham Energy Limited is in partnership with Bernard
Matthews Green Energy Pickenham Limited (in which the Company's
ordinary share fund holds an investment, as discussed above).
Biggleswade Wind Farm Limited
In January 2013, the "C" share fund of the Company invested
GBP527,000 to acquire 21.5% of the ordinary shares of Biggleswade
Wind Farm Limited and made a mezzanine loan to Biggleswade Wind
Farm Limited of GBP1,623,000.
The Company's ordinary share fund also holds as investment in
Biggleswade Wind Farm Limited as discussed above.
Eye Wind Power Limited
In February 2013, the "C" share fund of the Company made a
mezzanine loan to Eye Wind Power Limited of GBP400,000. In March
2013, the "C" share fund of the Company made a further mezzanine
loan to Eye Wind Power Limited of GBP100,000.
The Company's ordinary share fund also holds as investment in
Eye Wind Power Limited as discussed above.
DEVELOPMENT AND PRE-PLANNING
Iceni Renewables Limited
Iceni Renewables Limited is a company developing two wind energy
development projects in Scotland being managed by Lomond Energy
Limited. The Company's "C" share fund holds 50% of the ordinary
shares in Iceni Renewables Limited (at a cost of GBP400,000) and
has made a loan of GBP18,000 to Iceni Renewables Limited. The
investment in Iceni Renewables Limited is not a qualifying holding
for the purposes of the VCT regulations.
The first project, Craigannet, is a six-turbine project which
was submitted for planning in January 2012, appealed for
non-determination in August 2012 and then turned down on appeal by
the Scottish Government in November 2012. The other site, Merkins,
was also submitted for planning in January 2012 but has still not
been determined. A decision on Merkins is not expected before
August 2013. The Company is in consultations with Lomond Energy
Limited regarding a potential re-submission of the Craigannet
planning application. The Company has recorded an unrealised loss
of GBP200,000 on the investment in Iceni Renewables Limited,
representing the cost allocated to the Craigannet planning
application.
Blawearie Wind Limited (formerly Blackhaugh Wind Limited)
During the year ended 28 February 2013, the Company acquired a
50% interest in Blawearie Wind Limited for GBP20,000, a company
which intends to apply for planning permission to construct a wind
farm in the Scottish Borders. The investment in Blawearie Wind
Limited is not a qualifying holding for the purposes of the VCT
regulations.
Top Ten Investments
The details of the top ten investments, by value, held by each
of the ordinary share fund and the "C" share fund at 28 February
2013 are set out in the tables below:
Ordinary Share Fund
Income
recognised Proportion
by of
the share
Company fund Date
during Basis portfolio of Net
Share- Voting the of by latest assets/ Profit/
Company Value Cost holding rights year Value value accounts (liabilities) Turnover (loss)
GBP000 GBP000 % % GBP000 % GBP000 GBP000 GBP000
Achairn
Energy
Limited 3,752 2,515 40.40% 40.40% 255 DCF 23.70% 30/11/2011 1,397 1,437 84
Greenfield
Wind Farm
Limited 2,819 1,998 16.65% 16.65% 173 DCF 17.80% 31/12/2011 1,985 - (7)
Eye Wind
Power
Limited 2,152 2,034 50.00% 50.00% - PRI 13.59% 31/03/2012 (37) - (37)
Osspower
Limited 2,065 355 50.00% 50.00% 6 DCF 13.04% 31/03/2012 543 - (16)
Renewable
Power
Systems
(Dargan
Road)
Limited 1,992 1,900 50.00% 50.00% 476 DCF 12.58% 31/07/2011 1,136 1,820 472
A7 Lochhead
Limited 855 690 20.00% 20.00% 88 DCF 5.40% 31/03/2012 1,866 1,904 508
Bernard
Matthews
Green
Energy Not
Weston yet
Limited 538 500 50.00% 50.00% - PRI 3.40% due N/a N/a N/a
Bernard
Matthews
Green
Energy Not
Pickenham yet
Limited 536 500 50.00% 50.00% - PRI 3.39% due N/a N/a N/a
Broadview
Energy
Limited 410 200 2.22% 2.22% - NAV 2.59% 31/12/2011 3,627 2,801 (1,233)
Biggleswade Not
Wind Farm yet
Limited 350 350 3.50% 3.50% 4 PRI 2.21% due N/a N/a N/a
"C" Share Fund
Income
recognised Proportion
by of
the share
Company fund Date
during Basis portfolio of Net
Share- Voting the of by latest assets/ Profit/
Company Value Cost holding rights year Value value accounts (liabilities) Turnover (loss)
GBP000 GBP000 % % GBP000 % GBP000 GBP000 GBP000
White Mill
Windfarm
Limited 2,612 1,381 25.00% 25.00% 85 DCF 24.31% 31/12/2011 1,991 - (9)
Biggleswade Not
Wind Farm yet
Limited 2,150 2,150 21.50% 21.50% 23 PRI 20.01% due N/a N/a N/a
Greenfield
Wind Farm
Limited 2,116 1,500 12.50% 12.50% 130 DCF 19.70% 31/12/2011 1,985 - (7)
AD Wind Not
Farmers yet
Limited 1,227 1,000 50.00% 50.00% - DCF 11.42% due N/a N/a N/a
Weston
Airfield Not
Investments yet
Limited 1,000 1,000 50.00% 50.00% - PRI 9.31% due N/a N/a N/a
North
Pickenham Not
Energy yet
Limited 1,000 1,000 50.00% 50.00% - PRI 9.31% due N/a N/a N/a
Eye Wind
Power
Limited 400 400 50.00% 50.00% - PRI 3.72% 31/03/2012 (37) - (37)
Iceni
Renewables
Limited 218 418 50.00% 50.00% - PRI 2.03% 31/07/2012 385 - (417)
Blawearie Not
Wind yet
Limited 20 20 50.00% 50.00% - PRI 0.19% due N/a N/a N/a
Basis of valuation
DCF Discounted future cash flows from the underlying business
excluding interest earned to date
NAV The Investment Manager's estimate of the value of the net
assets of the investee company
PRI Price of recent investment reviewed for impairment
The ordinary share fund and the "C" share fund have
shareholdings in Greenfield Wind Farm Limited of 16.65% and 12.5%
respectively, therefore the Company's aggregate shareholding is
29.15%.
The ordinary share fund and the "C" share fund have
shareholdings in Biggleswade Wind Farm Limited of 3.5% and 21.5%
respectively, therefore the Company's aggregate shareholding is
25.0%.
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 renewable energy
assets are valued using a discounted cash flow methodology, unless
material uncertainties exist as to the future receipt of cash
flows, in which case an investment is valued at cost subject to an
impairment review.
In prior periods, the Company had applied its valuation policy
in a manner such that investments in companies operating renewable
energy assets were valued at cost until a deemed satisfactory
period of operations of between six and 18 months had passed. Based
on the Company's experience over the past seven years with investee
companies developing wind projects, and given that the projects of
such investee companies use well-established technology and benefit
from manufacturer and contractor warranties, manufacturer
performance guarantees and insurance, the Investment Manager and
the Board believe that the satisfactory operation of such projects
should be determined based on the specific circumstances and that
an arbitrary waiting period of six to 18 months is unnecessarily
prudent. The impact of the change in application of this policy
resulted in unrealised gains of GBP227,000 reported in the current
year.
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 companies' generating assets
are expected to produce and operating costs.
The fair value of the Company's investments in project companies
which have not passed an initial satisfactory operational period,
or are engaged in seeking planning permission, are determined to be
the price of investment subject to a periodic impairment
review.
The Company's valuation of its holding in Broadview Energy
Limited is discussed above.
The Company's valuation policy is discussed in more detail in
note 1 of the Financial Statements.
Investment Policy
The Company is focused on investing in companies developing
renewable energy projects with installed capacities of 2 to 20
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 to allocate the Company's
investments in equity securities and loan stock of companies owning
renewable energy projects, primarily wind energy. 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 together with Ventus VCT plc has an allocation
agreement in place with its Investment Manager. The allocation
agreement prescribes the allocation of investments between the two
companies and their share funds in accordance with the ratio of
available funds in each share fund, subject to adjustment in
consideration of maintaining the Company's VCT status, its
concentration risk, expected timing of realisations and the
projected dividend profile.
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 made via subscriptions for new share
capital, acquiring existing 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 Company
intends to continue to have a portfolio concentrated on wind energy
assets.
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. See the
discussion of Energy Market Reform and the proposed changes in the
financial support mechanism for renewable energy generation in the
"Market Outlook" section below.
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 Company
for any purpose, the Directors shall restrict the borrowings of the
Company. The aggregate principal amount at any time outstanding in
respect of money borrowed by the Company 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 ("HMRC") of the Company's status as a VCT
becomes effective. The relevant compliance date was 1 March 2008
for the initial share ordinary share offer, 1 March 2012 for the
first "C" share offer and the ordinary share "top-up" offer, and 1
March 2013 for the second "C" share offer.
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
HMRC 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.
VCT Regulations
The Finance Act 2012, which became law on 17 July 2012, included
a number of important changes to the VCT rules, the most important
of which for the Company was an increase to GBP5 million in the
amount that can be invested by a VCT in an individual company in
any twelve month period.
No further changes in the VCT regulations were proposed in the
Chancellor's March 2013 Budget. The Budget document stated that the
Government is committed to maintaining stability in the VCT
regulations to ensure the effectiveness of the tax reliefs being
offered. The only specific reference to VCTs in the Budget document
was a statement that "the Government is concerned that VCTs
offering enhanced buy-backs are not operating within the spirit of
the legislation." No restrictions on enhanced buy-backs have been
proposed, however the Budget document stated that "the Government
will continue to monitor particular aspects of the venture capital
schemes to ensure that they remain well-focused and supportive of
businesses' needs".
Market Outlook
The Department of Energy and Climate Change ("DECC") estimates
that, over the next 30 years, improved energy efficiency will
reduce demand per head of population by 30 to 50%, but that these
savings will be outweighed by rising demand from electrification of
heating, transport and parts of industry and by the impact of
economic and population growth. DECC estimates that, by 2050,
electricity demand in the UK will increase by 30 to 60% from
current levels and that electricity generation capacity may need to
be doubled to deal with peak demand levels. This projected increase
in generation capacity is set in the context of the Government's
objective to almost completely decarbonise electricity supply by
2050, which will require a significant change in the mix of
generation and in the electricity grid.
In the shorter term, DECC estimates that, due to plant closures
and the need to replace and upgrade the UK's electricity
infrastructure, the UK electricity sector will need around GBP110
billion of capital investment by 2020.
In order to attract the investment needed to replace ageing
energy infrastructure and meet the projected future increases in
electricity demand with low-carbon generation, the Government has
initiated a comprehensive reform of the UK electricity market This
initiative, called Electricity Market Reform ("EMR"), is the
centre-piece of the governing coalition's energy policy.
On 29 November 2012, the Secretary of State for Energy and
Climate Change introduced the Energy Bill into Parliament. The
Energy Bill, which implements the main aspects of EMR, is expected
to achieve Royal Assent in 2013. The measures in the bill are meant
to encourage the development of a balanced portfolio of renewable,
gas and nuclear generation capacity and to ensure that these
technologies can compete in the market-place.
EMR represents a fundamental transformation of the UK
electricity market, and there is considerable uncertainty in the
industry about how EMR will be implemented over the coming years.
Nuclear generation is a key element of EMR, however the Government
is still in negotiations with EDF over the necessary price support
for the proposed 3.3 gigawatt Hinckley Point C nuclear power
station, and there are regular reports in the press speculating
that EDF may pull out of the project.
Under EMR, the Renewables Obligation ("RO") is planned to be
phased out and replaced by Contracts for Difference ("CfD") for all
renewable energy generation capacity brought on line after 31 March
2017. Up until 31 March 2017, renewable energy generators will have
a choice between the RO regime and the CfD regime, but no new
generation will be accredited for Renewable Obligation Certificates
("ROCs") after 31 March 2017. A renewable energy project is
entitled to earn ROCs for 20 years, so the RO regime will not end
completely until 31 March 2037. The majority of the Company's
investments are in companies that earn a significant portion of
their revenues from ROCs, so the Board and Investment Manager are
following developments in this area closely. The Company's current
investments and any investments in companies that own and operate
wind farms commissioned by 31 March 2017 will continue to be
qualifying investments under the current VCT rules. However, it is
not clear at present how the transition from ROCs to CfDs might
impact the VCT qualifying status of investments made by the Company
subsequent to 31 March 2017 in companies that own and operate wind
farms.
With the backdrop of EMR, the UK renewable energy industry is
operating in a state of political uncertainty. There have been
well-publicised disagreements within the governing coalition on how
renewable energy policy should be implemented. A significant group
of Conservative MPs, including certain ministers, have expressed
consistent public opposition to onshore wind. On the positive side,
the Government has consistently re-affirmed the concept that
existing projects will always be "grandfathered" with respect to
future changes in tariffs. Furthermore, the Scottish Government
(where a significant portion of the Company's investments are
based) continues to provide strong support for renewables.
The level of banding for new offshore wind projects is currently
0.9 ROCs per megawatt hour. On 20 September 2012, the Government
published a call for evidence regarding onshore wind industry costs
stating that, if the evidence identified a significant change in
generation costs for onshore wind, the Government would initiate a
review of onshore wind ROC banding levels. Changes in ROC banding
for onshore wind, if any, would not take effect prior to 1 April
2014. In the call for evidence, the Government reiterated its
long-standing position that, in the event of any changes in ROC
banding, grandfathering and grace periods would be honoured for
projects already committed in the event of a change in support
levels. To date, there has been no further statement from the
Government about ROC banding other than a restatement of the
position on grandfathering and grace periods. Although the level of
ROCs for onshore wind is important for the industry, the level of
ROCs for new wind farms does not impact on any existing wind farms
operated by the Company's investee companies. The Investment
Manager's analysis of any future investments by the Company always
take into account the level of ROCs expected to be available for
projects operated by investee companies at the time of
commissioning. Because the Company's target returns remain
unchanged, any future changes in ROC banding for onshore wind will
be reflected in the price the Company will pay for investments.
Wholesale electricity prices have been reasonably stable in the
past year. The Company has relatively little exposure to short-term
wholesale electricity prices, as its investee companies generally
sell their electricity output pursuant to power purchase agreements
with wholesale electricity prices that are fixed over the medium
term.
Wind turbine prices (primarily denominated in Euros) have been
relatively stable during the past six months, however the weakening
of Sterling against the Euro has caused turbine prices for UK
projects to increase. The UK market for turbines is reasonably
stable at the present time, with no significant shortages or
oversupply situations.
The banking market for renewable energy projects remains
challenging. There is limited availability of senior debt finance
for renewable energy projects of 2 to 20 megawatts, which is the
typical size range for investee companies of the Company. Lending
margins and arrangement fees remain very wide by historical
standards and banks are unable to lend over the same term as they
have been able to in the past. Although the debt market has made it
more difficult to finance renewable energy projects, the shortage
and cost of senior debt has created an opportunity for the Company
to invest greater amounts of equity in companies with lower
leverage. Investments in portfolio companies with lower leverage
should reduce the volatility in dividends from those companies
compared to the dividends from portfolio companies with higher
leverage. The Investment Manager has also worked with investee
companies to access non-bank sources of senior debt to finance
investee company projects.
Existing investments of the Company are not impacted by the
current lending environment for renewable energy projects.
Temporis Capital LLP
Investment Manager
24 May 2013
DIRECTORS' REPORT
The Directors present their Annual Report and the audited
Financial Statements for the year ended 28 February 2013.
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 by Section 833
of the Companies Act 2006. The Company received approval as a VCT
from HMRC for the year ended 29 February 2012. 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
2013 Ordinary Shares "C" Shares Total
Pence Pence
per share per share
GBP000 (1) GBP000 (1) GBP000
Revenue profit
attributable
to equity
shareholders 955 3.91 208 1.83 1,163
Capital gain
attributable
to equity
shareholders 3,157 12.92 1,720 15.19 4,877
--------------------- ----------- --------------------- ----------- -------------------------
Net profit
attributable
to equity
shareholders 4,112 16.83 1,928 17.02 6,040
Dividends paid
during the year (989) (4.05) (249) (2.20) (1,238)
--------------------- ----------- --------------------- ----------- -------------------------
Total movement
in equity
shareholders'
funds 3,123 12.78 1,679 14.82 4,802
===================== =========== ===================== =========== =========================
% % %
Ongoing charges
ratio (2) 1.40% 2.97% 2.04%
====== ====== ======
Ordinary Shares "C" Shares Total
Pence Pence
GBP000 per share GBP000 per share GBP000
As at 28
February
2013
Net asset
value
(3) 17,517 71.7 12,093 106.7 29,610
=================== ============================= =================== ============================ =======================
Total
shareholder
return (4) 20,058 86.7 12,455 109.9 32,513
=================== ============================= =================== ============================ =======================
(1) The "pence 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 ongoing charges ratio represents the total
operating expenditure during the year (excluding
irrecoverable VAT, investment costs and tender
costs) as a percentage of the net asset value of
the Company at year end.
(3) The "pence per share" value is determined in respect
of the number of shares in issue as at the year
end, except in respect of the total shareholder
return, which includes dividends paid which are
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 HMRC 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 HMRC VCT regulations.
The Board mitigates this risk by regularly reviewing investment
management activity with appropriately qualified advisers and by
obtaining pre-approval from HMRC 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. In addition, the Board
has appointed an independent external party, Roffe Swayne, to
report directly to the Board in respect of the Company's internal
controls.
-- Non-compliance with the Listing Rules of the Financial
Conduct Authority, Companies Act Legislation, HMRC 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.
-- Reliance on the UK Government's continued support for the renewable energy sector
The future level of Government-mandated support for renewables
has important implications for the industry and could impact the
value of investments the Company has made in companies developing
renewable projects. However, the Directors believe that any future
reductions in renewable energy tariffs should not impact any
existing investments in companies operating renewable energy
assets, as the UK Government has a consistent history of
grandfathering financial support mechanisms for existing
projects.
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, having reviewed the Company's cash
flow forecast for the next 16 months, has a reasonable expectation
that the Company is able to continue in operational existence for a
period of at least 12 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 17. The Company's
investment activities are described in the Investment Manager's
Report and its performance is reviewed in the Directors'
Report.
Share capital
Authorised share capital
At 28 February 2013, the Company had authorised share capital of
GBP17,500,000 in total which was represented by 50 million ordinary
shares of 25p each and 20 million "C" shares of 25p each being
71.4% and 28.6% of the Company's authorised share capital
respectively. At the general meeting held on 8 March 2012 the
authorised share capital was increased to GBP17,500,000 by the
creation of 20,000,000 Ordinary Shares of 25p each.
Allotted, called and fully paid up shares
As at 28 February 2013, the Company had allotted, called and
fully paid up shares in two share funds, of which 24,422,655 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
At the general meeting held on 8 March 2012 the Directors were
authorised to allot relevant securities (within the meaning of
section 551 of the Companies Act 2006) up to a maximum aggregate
nominal amount of GBP5,000,000. This authority expires on 8 March
2017.
Disapplication of pre-emption rights
At the general meeting held on 8 March 2012 the Directors were
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 8 March
2017.
Authority to repurchase shares
At the Annual General Meeting ("AGM") held on 24 July 2012 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.
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.
Share premium account cancellation
Further to the passing of a special resolution at a general
meeting on 22 December 2011, on 8 February 2012 the Company
cancelled its share premium accounts by court order and created
distributable special reserves which the Company may use to
purchase its own shares and other corporate purposes. By this
action the Company increased the special reserve of the ordinary
share fund from GBP7,803,000 to GBP15,693,000 and created a special
reserve of the "C" share fund of GBP7,874,000.
Further to the tender offer and offer for issue of ordinary
shares described below, a special resolution was passed at the AGM
on 24 July 2012 which allowed the Company to request a further
court order to cancel the share premium arising from the newly
allotted ordinary shares. By this action, on 31 October 2012, the
Company increased the special reserve of the ordinary share fund by
GBP2,798,000 to GBP13,592,000, the Company having used GBP4,899,000
of the special reserve to fund the purchase for cancellation of
8,389,457 ordinary shares.
Tender offer and offer for issue of ordinary shares
On 3 February 2012, the Company published a Circular in respect
of (i) a Tender Offer to purchase up to 14,000,000 ordinary shares
from existing shareholders and (ii) an Offer for the issue of up to
GBP10,000,000 of ordinary shares of 25p each of the Company.
On 30 March 2012 a total of 8,273,796 ordinary shares were
purchased for cancellation at a price of 58.4p per ordinary share
and a total of 8,118,280 ordinary shares of 25p each in the Company
were allotted in respect of the shares tendered for cancellation at
a price of 61.6p per ordinary share.
On 3 April 2012 a total of 115,661 ordinary shares were
purchased for cancellation at a price of 58.4p per ordinary share
and a total of 113,486 ordinary shares of 25p each in the Company
were allotted in respect of the shares tendered for cancellation at
a price of 61.6p per ordinary share. In addition, a total of 42,786
ordinary shares were allotted at a price of 61.6p per ordinary
share under the offer for issue of ordinary shares.
Following the cancellation and allotments described above, the
issued share capital of the Company is 24,422,655 ordinary shares
and 11,329,107 "C" shares.
CREST
The Company's ordinary shares are available for trading in
CREST, the settlement system for uncertified stocks and shares.
Dividends
The Company paid an interim dividend of 1.75p per ordinary share
on 16 January 2013 to all ordinary shareholders on the register as
at the close of business on 14 December 2012. The Directors
recommend a final dividend of 1.75p per ordinary share to be paid
on 7 August 2013 to ordinary shareholders on the register on 12
July 2013. The total dividend for the year is therefore 3.5p per
ordinary share.
The Company paid an interim dividend of 1.20p per "C" share on
16 January 2013 to all "C" shareholders on the register as at the
close of business on 14 December 2012. The Directors recommend a
final dividend of 1.8p per "C" share to be paid on 7 August 2013 to
all "C" shareholders on the register as at the close of business on
12
July 2013. The total dividend for the year is therefore 3.0p per "C" share.
Note 7 of the Financial Statements gives details of the
dividends declared and paid in the current year and prior year.
The Company is able to pay dividends from special reserves as
these are distributable reserves.
Also, a recent change to the Companies Act 2006 allows
investment companies to pay dividends from realised capital
profits.
Directors and their interests
The Directors who held office during the year and their
interests in the Company were as follows:
As at As at As at As at
28 February 28 February 29 February 29 February
2013 2013 2012 2012
Ordinary "C" Ordinary "C"
Shares Shares Shares Shares
----------------------- ------------- ------------- ------------- -------------
Alan Moore (Chairman) 15,867 10,400 16,061 10,400
Paul Thomas 10,090 5,200 10,284 5,200
Colin Wood 10,090 5,200 10,284 5,200
----------------------- ------------- ------------- ------------- -------------
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 the Company's Articles of Association and the
Financial Reporting Council's UK Corporate Governance Code and the
Listing Rules of the Financial Conduct 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 2013 and the date of this report, the Company
was aware that Pershing Nominees and The Bank of New York
(Nominees) Limited held 3.53% and 3.67%, respectively, of the
shareholding and voting rights of the Company's ordinary share
capital and that Chase Nominees Limited held 3.52% of the
shareholding and voting rights of the Company's "C" 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
Temporis Capital LLP was appointed as Investment Manager of the
Company on 12 September 2011 and provides management and other
administrative services to the Company. Temporis Capital LLP 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.
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 GBP15,750 plus VAT. The
company secretarial services agreement was 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, cash and trade and other receivables and trade
and other payables. Further details are set out in note 17 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 2013 were 2 days
(2012: 5 days).
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
As a result of PKF (UK) LLP entering a business combination with
BDO LLP on 28 March 2013, PKF (UK) LLP resigned as auditor on 23
May 2013 and BDO LLP was appointed to fill the casual vacancy. A
resolution to appoint BDO 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 4 of the Financial Statements.
Annual General Meeting
Enclosed with this Annual Report and Financial Statements is the
Notice of Annual General Meeting of the Company (or any adjournment
thereof) to be convened for Monday, 22 July 2013 at 12.30pm (the
"Notice"). A copy of the Notice is set out at the end of this
report. A Form of Proxy for use in connection with the AGM has been
issued with this report.
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 2013.
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 1.75p per ordinary share to ordinary shareholders and 1.80p per
"C" share to "C" shareholders, payable on 7 August 2013 to those
shareholders registered at the close of business on 12 July 2013,
which will bring the total dividend for the year to 3.5p per
ordinary share and 3.0p per "C" 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 - Appointment of Auditor
This resolution proposes that BDO LLP be 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 3,660,956 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, for 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 2014 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 judiciously. 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
special reserves 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
24 May 2013
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 Monday, 22 July 2013.
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.
Directors' fees (audited information)
The following fees were paid to individual Directors in respect
of the year ended 28 February 2013 with comparative figures for the
year ended 29 February 2012:
28 February 29 February
2013 2012
GBP GBP
----------------------- ------------ ------------
Alan Moore (Chairman) 25,000 25,000
Paul Thomas 20,000 20,000
Colin Wood 20,000 20,000
----------------------- ------------ ------------
Aggregate emoluments 65,000 65,000
----------------------- ------------ ------------
None of the Directors received any other remuneration during the
year.
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 the 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 2013 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 an increase in shareholder
value during the year in respect of the total shareholder return
based on NAV, which is attributable to the profit generated by the
share fund's investments and the dividends paid to ordinary
shareholders during the year. 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 2013
compared with the total return attributable to GBP100 invested in
companies comprising the FTSE 100 Index over the same period. There
was an increase in shareholder value during the year in respect of
the total shareholder return based on NAV, which is attributable to
the profit generated by the share fund's investments and the
dividends paid to "C" shareholders during the year. 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.
(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
24 May 2013
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 the 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.
For the reasons set out in the AIC Guide, and as explained in
the UK Corporate Governance Code, the Board considers these
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 these provisions. Also, the
Company does not comply with the AIC Code in its recommendation
that the Board appoints a senior independent director. However, the
Board considers that as the directors are few in number the Company
does not require a senior independent director. The Board is
currently considering the changes to the Corporate Governance Code
(effective for periods commencing 1 October 2012) and is taking
steps to implement these changes as appropriate.
Board of Directors
For the year ended 28 February 2013 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 Conduct
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 Investment Committee of
the Investment Manager and is therefore not considered to be
independent. No Directors of the Company are directors 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:
Audit
Board Committee
Meetings Meetings
Held Attended Held Attended
----------------------- ----- --------- ----- ---------
Alan Moore (Chairman) 5 5 3 3
Paul Thomas 5 5 3 3
Colin Wood 5 5 3 3
----------------------- ----- --------- ----- ---------
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 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 he considered all Directors, with the exception
of Paul Thomas, for reasons mentioned above, to be independent. The
assessment process included consideration of performance monitoring
and evaluation, strategy and corporate issues, shareholder value
and communications and governance.
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. While the Board recognises the benefits of gender
diversity, the priority in appointing new Directors to the Board is
to identify the candidate with the best range of skills and
experience to complement existing Directors.
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 at
least three times a year to review the audit plan, 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 and are available on the Company's
website www.ventusvct.com. 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 24 July 2012. PKF (UK)
LLP entered into a business combination with BDO LLP, therefore,
subsequently, on 23 May 2013 PKF (UK) LLP resigned and BDO LLP was
appointed to fill the casual vacancy. The Board recommends the
services of BDO LLP to the shareholders in view of the firm's
extensive experience in auditing VCTs. A resolution to appoint BDO
LLP as auditor to the Company will be proposed at the forthcoming
AGM.
During the year under review, the Company's external Auditor
also provided tax compliance services, iXBRL tagging services and a
review of the half-yearly report. 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 tax services were provided by a separate team 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. Where a VCT has no executive directors,
the UK Corporate Governance Code principles relating to directors'
remuneration do not apply and as such no Remuneration Committee has
been appointed. 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 Company has appointed Roffe Swayne, an independent external
party, to undertake an internal audit of the processes and
procedures in place at the Investment Manager. Roffe Swayne have
agreed a three year rolling internal audit plan in consultation
with the Investment Manager and the Directors based on risks and
control objectives identified jointly. Roffe Swayne tests the
satisfactory operation of internal controls for the Company and
reports to the Audit Committee twice yearly. The controls on which
Roffe Swayne is focusing are portfolio management, asset
management, execution of investment and divestment decisions and
back office operations. Roffe Swayne has reported to the Audit
Committee that key controls tested in the current year are
predominantly effectively and efficiently designed and operate to
mitigate the risk associated with them. 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 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 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
Investment Manager has in place in respect of the Company's
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. The Board
completed a formal assessment of the performance of the current
Investment Manager and in the opinion of the Directors, the
continuing appointment of the Investment Manager, on the terms
agreed, is in the interests of the shareholders. The Directors are
satisfied that the Investment Manager will continue to manage the
Company's investment programme in a way which will enable the
Company to achieve its objectives.
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 above.
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 above.
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 is also happy to respond to any
written queries made by shareholders during the course of the year.
Shareholders may write to the Board of Ventus 2 VCT plc at the
following address: c/o The City Partnership (UK) Limited, Thistle
House, 21 Thistle Street, Edinburgh, EH2 1DF.
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 UK Corporate Governance 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 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
24 May 2013
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 - 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 also a non-executive director of Partnerships
for Renewables Limited. He was appointed an Adjunct Professor at
Imperial College, London, in 2012. In 2013 he was appointed
non-executive director of the Offshore Renewable Energy Catapult.
He has been a member of the Board since January 2006.
Paul Thomas - Director
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 - Chairman of the Audit Committee
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 was a
Director of The Century Building Society in Edinburgh until it
merged with the Scottish Building Society on 1 February 2013. He
has been a member of the Board since January 2006.
Statement of Directors' Responsibilities
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.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have elected to prepare the Financial Statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union. 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 of the profit or loss for Company 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 accounting estimates that are reasonable and prudent; and
-- state whether they have been prepared in accordance with
IFRSs as adopted by the European Union, subject to any material
departures disclosed and explained in the Financial Statements.
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 enable them to ensure that
the Financial Statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the directors.
The directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' responsibilities pursuant to DTR4
The directors confirm to the best of their knowledge:
-- The Financial Statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs) as adopted
by the European Union and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Company;
and
-- the annual report includes a fair review of the development
and performance of the business and the financial position of the
Company, together with a description or the principal risks and
uncertainties that they face.
The names and functions of all the Directors are stated in the
Directors' Information above.
For and on behalf of the Board
Alan Moore
Chairman
24 May 2013
Directors and Advisers
Directors Investment Manager
Alan Moore OBE Temporis Capital LLP
Paul Thomas Berger House
Colin Wood 36-38 Berkeley Square
London
W1J 5AE
Company Secretary Principal Banker
The City Partnership (UK) Limited HSBC Bank plc
Thistle House 60 Queen Victoria Street
21 Thistle Street London
Edinburgh EC4N 4TR
EH2 1DF
Auditor VCT Taxation Adviser
BDO LLP PricewaterhouseCoopers LLP
Farringdon Place 1 Embankment Place
20 Farringdon Road London
London WC2N 6RH
EC1M 3AP
Solicitors Broker
Berwin Leighton Paisner LLP Panmure Gordon (UK) Limited
Adelaide House One New Change
London Bridge London
London EC4M 9AF
EC4R 9HA
Howard Kennedy LLP Registrars and Registered Office
19 Cavendish Square Capita Registrars
London The Registry
W1A 2AW 34 Beckenham Road
Beckenham
Kent
BR3 4TU
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 2013 which comprise the Statement of
Comprehensive Income, the Statement of Financial Position, the
Statement of Changes in Equity, the Statement 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.
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 auditors
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
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the Financial Statements:
-- give a true and fair view of the state of the company's
affairs as at 28 February 2013 and of its profit for the year then
ended;
-- have been properly prepared in accordance with IFRSs as adopted by the European Union; and
-- have been prepared in accordance with the requirements of the Companies Act 2006.
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
set out above in compliance with rules 7.2.5 and 7.2.6 in the
Disclosure Rules and Transparency Rules sourcebook issued by the
Financial Conduct 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, or returns
adequate for our audit have not been received from branches not
visited by us; or
-- the 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 above, in relation to going concern;
-- the part of the Corporate Governance Statement relating to
the company's compliance with the nine provisions of the UK
Corporate Governance Code specified for our review; and
-- certain elements of the report to shareholders by the Board on directors' remuneration.
Rosemary Clarke (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
24 May 2013
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Statement of Comprehensive Income
for the year ended 28 February 2013
Ordinary Shares "C" Shares Total
--------------------------- --------------------------- ---------------------------
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Realised
loss on
investments 9 - (18) (18) - - - - (18) (18)
Net unrealised
gain on
investments 9 - 3,275 3,275 - 1,874 1,874 - 5,149 5,149
Income 2 1,363 - 1,363 439 - 439 1,802 - 1,802
Investment
management
fees 3 (14) (42) (56) (68) (202) (270) (82) (244) (326)
Other expenses 4 (242) (68) (310) (98) - (98) (340) (68) (408)
Profit before
taxation 1,107 3,147 4,254 273 1,672 1,945 1,380 4,819 6,199
Taxation 6 (152) 10 (142) (65) 48 (17) (217) 58 (159)
Profit and
total comprehensive
income for
the year
attributable
to equity
shareholders 955 3,157 4,112 208 1,720 1,928 1,163 4,877 6,040
-------- -------- ------- -------- -------- ------- -------- -------- -------
Return per
share
Basic and
diluted
return per
share (p) 8 3.91 12.92 16.83 1.83 15.19 17.02
The Company has only one class of business and derives its
income from investments made in the UK.
The total column of this statement represents the 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 on form an integral part of these
Financial Statements.
Statement of Comprehensive Income
for the year ended 29 February 2012
Ordinary Shares "C" Shares Total
---------------------------- --------------------------- ----------------------------
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Realised
loss on
investments 9 - (4,627) (4,627) - - - - (4,627) (4,627)
Net unrealised
gain on
investments 9 - 444 444 - - - - 444 444
Income 2 847 - 847 442 - 442 1,289 - 1,289
Investment
management
fees 3 (63) (189) (252) (65) (194) (259) (128) (383) (511)
Other expenses 4 (227) (54) (281) (94) (65) (159) (321) (119) (440)
-------- -------- -------- -------- -------- ------- -------- -------- --------
(Loss)/
profit before
taxation 557 (4,426) (3,869) 283 (259) 24 840 (4,685) (3,845)
Taxation 6 (137) 49 (88) (57) 92 35 (194) 141 (53)
(Loss)/
profit and
total comprehensive
income for
the year
attributable
to equity
shareholders 420 (4,377) (3,957) 226 (167) 59 646 (4,544) (3,898)
-------- -------- -------- -------- -------- ------- -------- -------- --------
Return per
share
Basic and
diluted
return per
share (p) 8 1.72 (17.84) (16.12) 1.99 (1.48) 0.51
The Company has only one class of business and derives its
income from investments made in the UK.
The total column of this statement represents the 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 on form an integral part of these
Financial Statements.
Statement of Financial Position
as at 28 February 2013
As at 28 February As at 29 February
2013 2012
Ordinary "C" Ordinary "C"
Shares Shares Total Shares Shares Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Non-current
assets
Investments 9 15,831 10,743 26,574 12,599 8,183 20,782
Investments
in subsidiaries 10 - - - 449 - 449
Trade and other
receivables 11 708 113 821 37 47 84
16,539 10,856 27,395 13,085 8,230 21,315
--------- -------- --------- --------- -------- --------
Current assets
Trade and other
receivables 11 192 30 222 1,258 531 1,789
Cash and cash
equivalents 12 1,637 1,248 2,885 608 1,685 2,293
1,829 1,278 3,107 1,866 2,216 4,082
--------- -------- --------- --------- -------- --------
Total assets 18,368 12,134 30,502 14,951 10,446 25,397
--------- -------- --------- --------- -------- --------
Current liabilities
Trade and other
payables 13 (851) (41) (892) (197) (32) (229)
Net current
assets 978 1,237 2,215 1,669 2,184 3,853
--------- -------- --------- --------- -------- --------
Financial liabilities 3 - - - (327) - (327)
Net assets 17,517 12,093 29,610 14,427 10,414 24,841
--------- -------- --------- --------- -------- --------
Equity attributable
to equity holders
Share capital 14 6,105 2,832 8,937 6,134 2,832 8,966
Capital redemption
reserve 2,097 - 2,097 - - -
Special reserve 13,592 7,874 21,466 15,693 7,874 23,567
Capital reserve
- realised (10,367) (591) (10,958) (9,373) (437) (9,810)
Capital reserve
- unrealised 5,550 1,874 7,424 1,399 - 1,399
Revenue reserve 540 104 644 574 145 719
Total equity 17,517 12,093 29,610 14,427 10,414 24,841
--------- -------- --------- --------- -------- --------
Basic and diluted
net asset value
per share (p) 15 71.7 106.7 58.8 91.9
Approved by the Board and authorised for issue on 24 May
2013.
Alan Moore
Chairman
The accompanying notes on form an integral part of these
Financial Statements.
Ventus 2 VCT plc. Registered No: 05667210
Statement of Changes in Equity
for the year ended 28 February 2013
Capital Capital Capital
Share redemption Share Special reserve reserve Revenue
capital reserve premium reserve realised unrealised reserve Total
Ordinary
Shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2012 6,134 - - 15,693 (9,373) 1,399 574 14,427
Shares issued
in the year 2,068 - 2,857 - - - - 4,925
Issue costs - - (59) - - - - (59)
Shares
repurchased
in the year (2,097) 2,097 - (4,899) - - - (4,899)
Cancellation
of share
premium
account - - (2,798) 2,798 - - - -
Transfers
of unrealised
losses on
investments
to realised
losses on
investments - - - - (876) 876 - -
Profit and
total
comprehensive
income for
the year - - - - (118) 3,275 955 4,112
Dividends
paid in the
year - - - - - - (989) (989)
-------------- --------------- -------------- -------------- ------------------ --------------- -------------- --------------
At 28 February
2013 6,105 2,097 - 13,592 (10,367) 5,550 540 17,517
-------------- --------------- -------------- -------------- ------------------ --------------- -------------- --------------
"C" Shares
At 1 March
2012 2,832 - - 7,874 (437) - 145 10,414
Profit and
total
comprehensive
income for
the year - - - - (154) 1,874 208 1,928
Dividends
paid in the
year - - - - - (249) (249)
-------------- --------------- -------------- -------------- ------------------ --------------- -------------- --------------
At 28 February
2013 2,832 - - 7,874 (591) 1,874 104 12,093
-------------- --------------- -------------- -------------- ------------------ --------------- -------------- --------------
Total
At 1 March
2012 8,966 - - 23,567 (9,810) 1,399 719 24,841
Shares issued
in the year 2,068 - 2,857 - - - - 4,925
Issue costs - - (59) - - - - (59)
Shares
repurchased
in the year (2,097) 2,097 - (4,899) - - - (4,899)
Cancellation
of share
premium
account - - (2,798) 2,798 - - - -
Transfers
of unrealised
losses on
investments
to realised
losses on
investments - - - - (876) 876 - -
Loss and total
comprehensive
income for
the year - - - - (272) 5,149 1,163 6,040
Dividends
paid in the
year - - - - - - (1,238) (1,238)
-------------- --------------- -------------- -------------- ------------------ --------------- -------------- --------------
At 28 February
2013 8,937 2,097 - 21,466 (10,958) 7,424 644 29,610
-------------- --------------- -------------- -------------- ------------------ --------------- -------------- --------------
All amounts presented in the Statement of Changes in Equity are
attributable to equity holders.
The revenue reserve, special reserve and realised capital
reserve are distributable reserves. The special reserve may be used
to fund buy-backs of shares and pay dividends as and if it is
considered by the Board to be in the interests of the shareholders.
During the year the Company cancelled its share premium accounts
and transferred the balances to the special reserves
The accompanying notes on form an integral part of these
Financial Statements.
Statement of Changes in Equity
for the year ended 29 February 2012
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
2011 6,134 7,890 7,803 (1,755) (1,842) 399 18,629
Cancellation
of share
premium
account - (7,890) 7,890 - - - -
Transfers of
unrealised
losses on
investments
to realised
losses on
investments - - - (2,797) 2,797 -
Loss and total
comprehensive
income for
the year - - - (4,821) 444 420 (3,957)
Dividends paid
in the year - - - - - (245) (245)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
At 29 February
2012 6,134 - 15,693 (9,373) 1,399 574 14,427
-------------- -------------- -------------- -------------- -------------- -------------- --------------
"C" Shares
At 1 March
2011 2,832 7,874 - (270) - 32 10,468
Cancellation
of share
premium
account - (7,874) 7,874 - - - -
Profit and
total
comprehensive
income for
the year - - - (167) - 226 59
Dividends paid
in the year - - - - - (113) (113)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
At 29 February
2012 2,832 - 7,874 (437) - 145 10,414
-------------- -------------- -------------- -------------- -------------- -------------- --------------
Total
At 1 March
2011 8,966 15,764 7,803 (2,025) (1,842) 431 29,097
Cancellation
of share
premium
account - (15,764) 15,764 - - - -
Transfers of
unrealised
losses on
investments
to realised
losses on
investments - - - (2,797) 2,797 - -
Loss and total
comprehensive
income for
the year - - - (4,988) 444 646 (3,898)
Dividends paid
in the year - - - - - (358) (358)
-------------- -------------- -------------- -------------- -------------- -------------- --------------
At 29 February
2012 8,966 - 23,567 (9,810) 1,399 719 24,841
-------------- -------------- -------------- -------------- -------------- -------------- --------------
The accompanying notes on form an integral part of these
Financial Statements.
Statement of Cash Flows
for the year ended 28 February 2013
Year ended 28 Year ended 29
February 2013 February 2012
Ordinary "C" Ordinary "C"
Shares Shares Total Shares Shares Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash flows from
operating activities
Investment income
received 2,392 822 3,214 683 113 796
Deposit interest
received 8 10 18 2 25 27
Investment management
fees paid (56) (270) (326) (252) (259) (511)
Other cash payments (330) (89) (419) (408) (116) (524)
-------------- --------------- -------------- ------------- ------------- -------------
Net cash generated
from/ (used
in) operations 2,014 473 2,487 25 (237) (212)
Taxes paid (191) 25 (166) (4) 4 -
Net cash inflow/
(outflow) from
operating activities 1,823 498 2,321 21 (233) (212)
-------------- --------------- -------------- ------------- ------------- -------------
Cash flows from
investing activities
Purchases of
investments (2,681) (2,588) (5,269) (165) (5,298) (5,463)
Proceeds from
investments 3,197 1,902 5,099 40 1,075 1,115
Net cash
inflow/(outflow)
from investing
activities 516 (686) (170) (125) (4,223) (4,348)
-------------- --------------- -------------- ------------- ------------- -------------
Cash flows from
financing activities
Ordinary shares
issued 26 - 26 - - -
Ordinary share
issue costs (20) - (20) - - -
Dividends paid (989) (249) (1,238) (245) (113) (358)
Loan financing (327) - (327) 327 - 327
Net cash (outflow)/
inflow from
financing activities (1,310) (249) (1,559) 82 (113) (31)
-------------- --------------- -------------- ------------- ------------- -------------
Net increase/
(decrease) in
cash and cash
equivalents 1,029 (437) 592 (22) (4,569) (4,591)
Cash and cash
equivalents
at the beginning
of the year 608 1,685 2,293 630 6,254 6,884
Cash and cash
equivalents
at the end of
the year 1,637 1,248 2,885 608 1,685 2,293
-------------- --------------- -------------- ------------- ------------- -------------
The accompanying notes on form an integral part of these
Financial Statements.
Notes to the Financial Statements
for the year ended 28 February 2013
1. Accounting policies
Accounting convention
The Financial Statements 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.
Changes in accounting policy and disclosure
The accounting policies adopted are consistent with those of the
previous financial year, except that consolidated financial
statements are not presented as the results and net assets of the
only subsidiary at the year end are not material. The Statement of
Comprehensive Income therefore shows the results of the Company for
the year and the results for the comparative period as a stand
alone entity.
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, IFRS
1, IAS 1, IFRS 10, IFRS 11, IFRS 12, IFRS 13, IAS 27, IAS 28, IAS
19, IFRIC 20, IFRS 7, IAS 32 and IFRS 9. These changes are not
expected to have a material impact on the transactions and balances
reported in the Financial Statements.
Basis of preparation of the financial statements
The Company has a shareholding of 60% of the ordinary shares
issued by Spurlens Rig Wind Limited which is immaterial to both the
results and the net assets of the group. During the year, the
Company held 60% of the ordinary shares of Redeven Energy Limited
until 14 February 2013 when the Company's holding reduced to 50%.
Redeven Energy Limited was therefore a subsidiary of the Company
until that date however, following the loss of control of Redeven
Energy Limited, there are no material subsidiaries at the year end,
therefore consolidated financial statements have not been
presented.
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 presented as revenue 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 VCT, 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.
Financial Instruments
Financial assets and financial liabilities are recognised on the
Company's Statement of Financial Position 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.
Deferred consideration
Deferred consideration is initially recognised at fair value and
then designated as a loan and receivable under IAS 39 measured at
amortised cost. Any subsequent movement in the value relating to
changes in expected cash flows and the recognition of income using
the effective interest rate is shown 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.
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 reserves were created by approval of the High Court
to cancel the Company's share premium accounts in respect of the
shares issued. The special reserves may be used to fund buy-backs
of shares and pay dividends 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
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 and equity based derivatives
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 are valued using the "discounted future cash flows from
the underlying business" methodology, excluding interest accrued in
the accounts to date, unless uncertainties existwhich would make
the "price of recent investment" methodology, reviewed for
impairment, more appropriate. Generally, renewable energy
generating plant will be considered to be operating when it has
been taken-over by the investee company, although specific
circumstances could cause a plant to be considered operating
satisfactorily earlier than formal take-over by the investee
company. 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, or where any loss in value below cost is considered to
be permanent, 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.
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. The estimates and
assumptions are consistent with those adopted in the Financial
Statements for the year ended 29 February 2012 except for a change
in the application of the valuation policy so that an investment
may be considered for revaluation prior to having demonstrated 6 to
18 months of stable operational performance. 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.
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
Year ended 28 February
2013
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Income from investments
Loan stock interest 685 339 1,024
Dividend income 508 - 508
Other investment income 162 90 252
---------------------- --------------- --------
1,355 429 1,784
Other income
Bank deposit interest 8 10 18
1,363 439 1,802
====================== =============== ========
Year ended 29 February
2012
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Income from investments
Loan stock interest 790 418 1,208
Dividend income 55 - 55
----------------------- --------------- ---------
845 418 1,263
Other income
UK treasury bill income - 6 6
Bank deposit interest 2 18 20
847 442 1,289
======================= =============== =========
3. Investment management fees
Year ended 28 February
2013
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Investment management
fees 56 270 326
====================== ====================== ===============
Year ended 29 February
2012
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Investment management
fees 252 259 511
====================== ====================== ===============
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.
Temporis Capital LLP agreed to waive investment management fees
payable by the Company's ordinary share fund in the amount of
GBP530,000 from 12 September 2011 until the end of the period over
which such amount would have otherwise accrued. Therefore the
amount paid to Temporis Capital LLP during the year in respect of
the net asset value attributable to ordinary shareholders was
GBP56,000 when it would otherwise have been GBP383,000 had the
investment management fees not been waived. The waived management
fees of GBP327,000 were used to repay the financial liability of
that amount as at 28 February 2012.
The amount paid to Temporis Capital LLP, during the year in
respect of the net assets attributable to the "C" shareholders was
GBP270,000.
4. Other expenses
Year ended 28 February
2013
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Revenue expenses:
Directors' remuneration
(note 5) 45 20 65
Fees payable to the
Company's Auditor for:
- Audit of the Company's
Annual Financial Statements 18 8 26
- Other services relating
to taxation 2 1 3
- Other services pursuant
to legislation 7 3 10
Legal and professional
fees 59 10 69
Other revenue expenses 111 56 167
----------------------- ----------------------- ----------------
242 98 340
Capital expenses:
Investment costs 68 - 68
310 98 408
======================= ======================= ================
Other services relating to taxation were in respect of tax
services provided by the Company's Auditor relating to corporation
tax compliance and iXBRL tagging services. Other services pursuant
to legislation provided by the Company's Auditor related to the
review of the Half-yearly Report.
Investment costs of GBP68,000 incurred by the Company's ordinary
share fund during the year included GBP37,000 in respect of the
disposal or dealing with the insolvency of the waste wood biomass
generators which had been written off in the previous year,
GBP25,000 in respect of an attempted reorganisation of The Small
Hydro Company Limited, GBP5,000 in respect of the acquisition of
ordinary shares of Eye Wind Power Limited and GBP1,000 in respect
of general advice in relation to investee companies.
Year ended 29 February
2012
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Revenue expenses:
Directors' remuneration
(note 5) 45 20 65
Fees payable to the
Company's Auditor for: -
- Audit of the Company's
Annual Financial Statements 18 8 26
- Audit of the accounts
of associates of the
Company pursuant to
legislation 13 - 13
- Other services relating
to taxation 2 1 3
- Other services pursuant
to legislation 8 3 11
Legal and professional
fees 37 10 47
Other expenses 104 52 156
----------------------- ------------------------
227 94 321
Capital expenses:
Investment costs 54 65 119
281 159 440
======================= ======================== =================
5. Directors' remuneration
Year ended 28 February
2013
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
A Moore 17 8 25
P Thomas 14 6 20
C Wood 14 6 20
Aggregate emoluments 45 20 65
====================== ======================= ======================
Year ended 29 February
2012
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
A Moore 17 8 25
P Thomas 14 6 20
C Wood 14 6 20
Aggregate emoluments 45 20 65
====================== ======================= ======================
Further details regarding Directors' remuneration are disclosed
in the Directors' Remuneration Report above.
The Company had no employees other than the Directors.
6. Taxation
Year ended 28 February
2013
Ordinary "C"
Shares Shares Total
GBP000 GBP000 GBP000
(a) Tax charge/ (credit)
for the year
Current UK corporation
tax:
Charged to revenue
reserve 152 65 217
Credited to capital
reserve (10) (48) (58)
142 17 159
==================== ============== ===========
(b) Factors affecting the tax
charge/ (credit) for the year
Profit before taxation 4,254 1,945 6,199
-------------------- -------------- -----------
Tax credit calculated
on loss before taxation
at the applicable
rate of 24% 1,021 467 1,488
Effect of:
UK dividends not
subject to tax (122) - (122)
Capital gains not
subject to tax (782) (450) (1,232)
Non-deductible revenue
expenses 9 - 9
Non-deductible investment
costs 16 - 16
142 17 159
==================== ============== ===========
Year ended 29 February
2012
Ordinary "C"
Shares Shares Total
GBP000 GBP000 GBP000
(a) Tax charge/ (credit)
for the year
Current UK corporation
tax:
Charged to revenue
reserve 137 57 194
Credited to capital
reserve (49) (92) (141)
88 (35) 53
===================== =============== ============
(b) Factors affecting the tax
charge/ (credit) for the year
Loss before taxation (3,869) 24 (3,845)
Tax credit calculated
on loss before taxation
at the applicable
rate of 26% (1,006) 6 (1,000)
Effect of:
UK dividends not
subject to tax (14) - (14)
Capital losses not
subject to tax 1,088 - 1,088
Non-deductible revenue
costs 6 - 6
Non-deductible investment
costs 14 17 31
Tax losses brought
forward - (58) (58)
88 (35) 53
===================== =============== ============
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.
7. Dividends
Ordinary Shares 2013 2012
GBP000 GBP000
Amounts recognised as distributions
to ordinary shareholders in
the year:
Previous year's final dividend
of 2.30p per ordinary share
(2012: 1.00p) 562 245
Current year's interim dividend
of 1.75p per ordinary share
(2012: nil) 427 -
989 245
===================== =======================
The Directors recommend a final dividend of 1.75p per ordinary
share (2012: 2.30p) to be paid on
7 August 2013 to all ordinary shareholders on the register as at
the close of business on
12 July 2013. 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.
Ordinary Shares 2013 2012
GBP000 GBP000
Subject to the approval of
the final dividend, the total
dividend to be paid to ordinary
shareholders in respect of
the financial year is set
out below:
Interim dividend for the year
ended 28 February 2013 of
1.75p per ordinary share (2012:
nil) 427 -
Proposed final dividend for
the year ended 28 February
2013 of 1.75p per ordinary
share (2012: 2.30p) 427 562
854 562
===================== =======================
"C" Shares 2013 2012
GBP000 GBP000
Amounts recognised as distributions
to "C" shareholders in the
year:
Previous year's final dividend
of 1.00p per "C" share (2012:
nil) 113 -
Current year's interim dividend
of 1.20p per "C" share (2012:
1.00p) 136 113
249 113
===================== =======================
The Directors recommend a final dividend of 1.80p per "C" share
(2012: 1.00p) to be paid on
7 August 2013 to all "C" shareholders on the register as at the
close of business on
12 July 2013. 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.
"C" Shares 2013 2012
GBP000 GBP000
Subject to approval of the
final dividend, the total
dividend to be paid to "C"
shareholders in respect of
the financial year is set
out below:
Interim dividend for the year
ended 28 February 2013 of
1.20p per "C" share (2012:
1.00p) 136 113
Proposed final dividend for
the year ended 28 February
2013 of 1.80p per "C" share
(2012: 1.00p) 204 113
340 226
===================== =====================
8. Basic and diluted return per share
For the year ended 28 February Ordinary
2013 Shares "C" Shares
Revenue return for the
year p per share 3.91 1.83
Based on:
Revenue return for the
year GBP000 955 208
Weighted average number number
of shares in issue of shares 24,431,654 11,329,107
Capital gain for the year p per share 12.92 15.19
Based on:
Capital gain for the year GBP000 3,157 1,720
Weighted average number number
of shares in issue of shares 24,431,654 11,329,107
Net profit for the year p per share 16.83 17.02
Based on:
Net profit for the year GBP000 4,112 1,928
Weighted average number number
of shares in issue of shares 24,431,654 11,329,107
For the year ended 29 February Ordinary
2012 Shares "C" Shares
Revenue return for the
year p per share 1.72 1.99
Based on:
Revenue return for the
year GBP000 420 226
Weighted average number number
of shares in issue of shares 24,537,560 11,329,107
Capital loss for the year p per share (17.84) (1.48)
Based on:
Capital loss for the year GBP000 (4,377) (167)
Weighted average number number
of shares in issue of shares 24,537,560 11,329,107
Net profit/(loss) for the
year p per share (16.12) 0.51
Based on:
Net profit/(loss) for the
year GBP000 (3,957) 59
Weighted average number number
of shares in issue of shares 24,537,560 11,329,107
There is no difference between the basic return per ordinary
share and the diluted return per ordinary share or between the
basic loss per "C" share and the diluted loss per "C" share because
no dilutive financial instruments have been issued.
9. Investments
Ordinary
Shares "C" Shares Total
Year ended
28 February Loan Loan Loan
2013 Shares stock Total Shares stock Total Shares stock Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening position
Opening cost 10,242 8,272 18,514 4,900 3,283 8,183 15,142 11,555 26,697
Closing realised
losses (5,904) (1,410) (7,314) - - - (5,904) (1,410) (7,314)
Opening
unrealised
gains/(losses) 1,796 (397) 1,399 - - - 1,796 (397) 1,399
Opening fair
value 6,134 6,465 12,599 4,900 3,283 8,183 11,034 9,748 20,782
During the
year
Purchases
at cost 2,072 1,332 3,404 547 2,041 2,588 2,619 3,373 5,992
Reclassification
of investment
in subsidiary
to investment
due to loss
of control - 196 196 - - - - 196 196
Disposal proceeds (1,291) (2,332) (3,623) - (1,902) (1,902) (1,291) (4,234) (5,525)
Realised losses (14) (6) (20) - - - (14) (6) (20)
Unrealised
gains 3,086 189 3,275 1,788 86 1,874 4,874 275 5,149
Closing fair
value 9,987 5,844 15,831 7,235 3,508 10,743 17,222 9,352 26,574
------------- ------------ -------------- ------------- ------------- ------------- ------------- ------------ --------------
Closing position
Closing cost 9,773 7,264 17,037 5,447 3,422 8,869 15,220 10,686 25,906
Closing realised
losses (4,329) (1,740) (6,069) - - - (4,329) (1,740) (6,069)
Closing
unrealised
gains 4,543 320 4,863 1,788 86 1,874 6,331 406 6,737
Closing fair
value 9,987 5,844 15,831 7,235 3,508 10,743 17,222 9,352 26,574
============= ============ ============== ============= ============= ============= ============= ============ ==============
During the year ended 28 February 2013 net unrealised losses of
GBP876,000 were transferred to realised losses in respect of
investments which had been realised during the year. The ordinary
share fund recognised an unrealised gain of GBP326,000 during the
year ended 28 February 2013 in respect of the deferred
consideration from the sale of Craig Wind Farm Limited, which is
held as a receivable as at 28 February 2013. The reversal of a
realised loss of GBP2,000 in respect of the Company's subsidiary,
Spurlens Rig Wind Limited, was recognised during the year.
Ordinary
Shares "C" Shares Total
Year ended 29 Loan Loan Loan
February 2012 Shares stock Total stock Shares stock Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening position
Opening cost 10,242 8,242 18,484 900 3,060 3,960 11,142 11,302 22,444
Closing realised
losses (266) (2) (268) - - - (266) (2) (268)
Opening unrealised
(losses)/gains (2,233) 391 (1,842) - - - (2,233) 391 (1,842)
Opening fair
value 7,743 8,631 16,374 900 3,060 3,960 8,643 11,691 20,334
During the year
Purchases at
cost - 70 70 4,000 1,298 5,298 4,000 1,368 5,368
Disposal proceeds - (40) (40) - (1,075) (1,075) - (1,115) (1,115)
Realised losses (2,546) (1,703) (4,249) - - - (2,546) (1,703) (4,249)
Unrealised gains/(losses) 937 (493) 444 - - - 937 (493) 444
Closing fair
value 6,134 6,465 12,599 4,900 3,283 8,183 11,034 9,748 20,782
-------- -------- -------- ------ -------- -------- -------- -------- --------
Closing position
Closing cost 10,242 8,272 18,514 4,900 3,283 8,183 15,142 11,555 26,697
Closing realised
losses (5,904) (1,410) (7,314) - - - (5,904) (1,410) (7,314)
Closing unrealised
gains/(losses) 1,796 (397) 1,399 - - - 1,796 (397) 1,399
Closing fair
value 6,134 6,465 12,599 4,900 3,283 8,183 11,034 9,748 20,782
======== ======== ======== ====== ======== ======== ======== ======== ========
During the year ended 29 February 2012 realised losses of
GBP378,000 were recognised in respect of investments in
subsidiaries, refer to note 10 for further details.
The shares held by the Company are in unquoted UK companies. The
Investment Manager's Report above provides details in respect of
the Company's shareholding in each investment, loans issued,
investments purchased and disposed of during the year.
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 2013, 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.
The key assumptions that have a significant impact on fair value
in the discounted future cash flow valuations 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 which have been
valued using the discounted future cash flows from the underlying
business.
The application of the upside alternative discount factor to the
investments in the ordinary share fund's portfolio would have
resulted in the total value of its investments having been
GBP868,000 or 5.5% higher. The application of the downside
alternative discount factor would have resulted in the total value
of all investments having been GBP768,000 or 4.9% lower.
The application of the upside alternative discount factor to the
"C" share fund's portfolio would have resulted in the total value
of its investments having been GBP469,000 or 4.4% higher. The
application of the downside alternative discount factor would have
resulted in the total value of its investments having been
GBP416,000 or 3.9% 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.
10. Investments in subsidiaries
The details of the Company's subsidiary undertaking which is
held by the ordinary share fund only are set out below:
Portion Portion
of of
Country voting voting Principal
Subsidiary undertaking of incorporation rights rights activity
As at As at
28 February 28 February
2013 2012
Spurlens Rig Wind farm
Wind Limited England 60% 60% development
The Company's 60% shareholding in Redeven Energy Limited was
reduced to 50% on 14 February 2013, at which date the Company no
longer controlled Redeven Energy Limited.
As the planning permission which Spurlens Rig Wind Limited was
seeking for a six-turbine wind farm was refused in December 2011
and there being no viable alternative scheme at that site, the
directors of that company applied on 12 February 2013 to have the
company wound up and struck off the register. Spurlens Rig Wind
Limited had nil net assets at the year end and made no profit or
loss during the year ended 28 February 2013.
Ordinary Shares
Year ended 28 February Shareholder
2013 Shares loans Total
GBP000 GBP000 GBP000
Opening position
Opening cost 174 653 827
Opening realised
losses (174) (204) (378)
Opening fair value - 449 449
During the year
Purchases at cost - 6 6
Disposal proceeds - (261) (261)
Shareholder loans
converted to shares 35 (35) -
Realised (loss)/gain (35) 37 2
Reclassification
of investment in
subsidiary to investment
(due to loss of
control) - (196) (196)
Closing fair value - - -
---------------------- ----------------------- ------------------------
Closing position
Closing cost 209 - 209
Closing realised
losses (209) - (209)
Closing fair value - - -
====================== ======================= ========================
Ordinary Shares
Year ended 29 February Shareholder
2012 Shares loans Total
GBP000 GBP000 GBP000
Opening position
Opening cost and
fair value 174 558 732
During the year
Purchases at cost - 95 95
Realised loss (174) (204) (378)
Closing fair value - 449 449
---------------------- --------------------- -----------------------
Closing position
Closing cost 174 653 827
Closing realised
losses (174) (204) (378)
Closing fair value - 449 449
====================== ===================== =======================
11. Trade and other receivables
Year ended 28 February 2013
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Non-current assets
Deferred consideration 687 - 687
Other investment
income - 90 90
Accrued interest
income 21 23 44
708 113 821
============================ ============================ ============================
Current assets
Accrued interest
income 166 24 190
Other receivables 14 - 14
Corporation tax - - -
Prepayments 12 6 18
192 30 222
============================ ============================ ============================
The deferred consideration of GBP687,000 represents the
outstanding balance of the consideration arising from the Company's
sale of Craig Wind Farm Limited during the year ended 28 February
2013. The directors expect the Company will receive the outstanding
amount in a period of between one and two years, therefore this
amount is regarded as a non-current asset. As at 28 February 2013
the Company had receivables of GBP134,000 (2012: GBP84,000) which
were expected to be paid after more than one year, which represent
non-current assets. The Directors consider that the carrying amount
of trade and other receivables approximates to their fair
value.
As at 29 February 2012
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Non-current assets
Accrued interest
income 37 47 84
37 47 84
=========================== ========================== ==========================
Current assets
Accrued interest
income 1,187 483 1,670
Other receivables 4 8 12
Corporation tax - 34 34
Prepayments 67 6 73
1,258 531 1,789
=========================== ========================== ==========================
12. Cash and cash equivalents
Ordinary
Shares "C" Shares Total
Cash Cash Cash
GBP000 GBP000 GBP000
As at 1 March 2012 608 1,685 2,293
Net increase/
(decrease) 1,029 (437) 592
As at 28 February
2013 1,637 1,248 2,885
===================== ================= ===========
Ordinary
Shares "C" Shares Total
Treasury Treasury
Cash Cash Bills Total Cash Bills Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
As at 1 March
2011 630 1,058 5,196 6,254 1,688 5,196 6,884
Net
(decrease)/increase (22) 627 (5,196) (4,569) 605 (5,196) (4,591)
As at 29 February
2012 608 1,685 - 1,685 2,293 - 2,293
======================= ================ ============== ============ =========== ============== ============
The increase in cash held by the ordinary share fund during the
year was primarily due to investment income generated and proceeds
from investment disposals offset by payment of expenses and
dividends. However, the ordinary share fund was holding GBP727,000
on behalf of Bernard Matthews Green Energy Weston Limited, one of
its investee companies, as at 28 February 2013, the corresponding
balance being included within other payables.
The decrease in cash and cash equivalents held by the "C" share
fund during the year was primarily attributable to the purchase of
investments and payment of expenses, offset by investment income
and proceeds from investments.
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.
13. Trade and other payables
As at 28 February 2013
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Corporation
tax 38 8 46
Trade payables 3 3 6
Other payables 738 15 753
Accruals 72 15 87
851 41 892
=============================== =============================== ===============================
As at 29 February 2012
Ordinary
Shares "C" Shares Total
GBP000 GBP000 GBP000
Corporation
tax 87 - 87
Trade payables 14 - 14
Other payables 7 7 14
Accruals 89 25 114
197 32 229
=============================== ================================ ==============================
The Directors consider that the carrying amount of trade and
other payables approximates to their
fair value.
14. Share capital
Ordinary
Shares "C" Shares Total
Number Number Number
of shares of shares of shares
of 25p of 25p of 25p
Authorised each GBP000 each GBP000 each GBP000
At 1 March 2012 30,000,000 7,500 20,000,000 5,000 50,000,000 12,500
Shares authorised
during the year 20,000,000 5,000 - - 20,000,000 5,000
At 28 February
2013 50,000,000 12,500 20,000,000 5,000 70,000,000 17,500
============ =============== ================ ================ ============ ===============
Ordinary
Shares "C" Shares Total
Number Number Number
Allotted, called of shares of shares of shares
up and fully of 25p of 25p of 25p
paid each GBP000 each GBP000 each GBP000
At 1 March 2012 24,537,560 6,134 11,329,107 2,832 35,866,667 8,966
Allotted, called
up and fully
paid during the
year 8,274,552 2,068 - - 8,276,620 2,068
Purchased and
cancelled during
the year (8,389,457) (2,097) - - (8,391,554) (2,097)
At 28 February
2013 24,422,655 6,105 11,329,107 2,832 35,751,733 8,937
============ =============== ============ =============== ============
Ordinary Shares "C" Shares Total
Number Number Number
of shares of shares of shares
of 25p of 25p of 25p
Authorised each GBP000 each GBP000 each GBP000
At 1 March 2011 30,000,000 7,500 20,000,000 5,000 50,000,000 12,500
At 29 February
2012 30,000,000 7,500 20,000,000 5,000 50,000,000 12,500
============ ============ =============== ============ ===============
Ordinary Shares "C" Shares Total
Number Number Number
Allotted, called of shares of shares of shares
up and fully of 25p of 25p of 25p
paid each GBP000 each GBP000 each GBP000
At 1 March 2011 24,537,560 6,134 11,329,107 2,832 35,866,667 8,966
At 29 February
2012 24,537,560 6,134 11,329,107 2,832 35,866,667 8,966
============ ============ ============
At 28 February 2013, 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.
15. Basic and diluted net asset value per share
The net asset value per ordinary share of 71.7p as at 28
February 2013 (2012: 58.8p) is based on net assets of GBP17,517,000
(2012: GBP14,427,000) divided by 24,422,655 ordinary shares in
issue at that date (2012: 24,537,560 ordinary shares). The net
asset value per "C" share of 106.7p as at 28 February 2013 (2012:
91.9p) is based on net assets of GBP12,093,000 (2012:
GBP10,414,000) divided by 11,329,107 "C" shares in issue at that
date (2012: 11,329,107 "C" shares).
16. Events subsequent to year end
Since the year end the "C" share fund has advanced a further
GBP100,000 loan to Eye Wind Power Limited. The ordinary share fund
has converted GBP847,500 of its outstanding loan to Eye Wind Power
Limited into equity. Eye Wind Power Limited acquired senior debt
financing of GBP5 million, subsequent to which Eye Wind Power
Limited has repurchased a portion of its own shares in order to
return GBP352,000 to the Company's ordinary share fund.
On 15 April 2013, the Company registered a charge over its
shares in Eye Wind Power Limited to GCP Onshore Wind 1 Limited as
security for the senior loan facility of GBP5 million raised by Eye
Wind Power Limited to finance the construction costs of a wind
farm. The liability of the Company under this charge of shares is
limited to the value of the Company's investment in the shares of
Eye Wind Power Limited.
17. Financial instruments and risk management
The Company'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 Company 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 Company'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. 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 2013
Weighted average interest Weighted average period to
Ordinary Shares Interest rate p.a. rate p.a. maturity
GBP000 % %
At fair value through profit
or loss:
Ordinary shares 9,987 n/a n/a n/a
Loan stock 5,844 0% - 13.5% 9.99% 9.6 years
Loans and receivables:
Cash 1,637 0% 0% n/a
Deferred consideration 687 7.84% 7.84% 1.2 years
Accrued interest income 187 n/a n/a n/a
As at 28 February 2013
Weighted average interest Weighted average period to
"C" Shares Interest rate p.a. rate p.a. maturity
GBP000 % %
At fair value through profit
or loss:
Ordinary shares 7,235 n/a n/a n/a
Loan stock 3,508 0% - 13% 11.54% 10.8 years
Loans and receivables:
Cash 1,248 0% - 0.25% 0.02% n/a
Accrued interest income 47 n/a n/a n/a
As at 29 February 2012
Weighted average interest Weighted average period to
Ordinary Shares Interest rate p.a. rate p.a. maturity
GBP000 % %
At fair value through profit
or loss:
Ordinary shares 6,134 n/a n/a n/a
Loan stock 6,914 0% - 13.5% 11.11% 11.6 years
Loans and receivables:
Cash 608 0% - 0.56% 0.43% n/a
Accrued interest income 1,224 n/a n/a n/a
As at 29 February 2012
Weighted average interest Weighted average period to
"C" Shares Interest rate p.a. rate p.a. maturity
GBP000 % %
At fair value through profit
or loss:
Ordinary shares 4,900 n/a n/a n/a
Loan stock 3,283 11% - 13% 12.20% 6.7 years
Loans and receivables:
Cash 1,685 0% - 0.56% 0.50% n/a
Accrued interest income 530 n/a n/a n/a
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 significant guarantees or financial
liabilities other than the accruals.
Currency exposure
All financial assets and liabilities are held in sterling, hence
there is no foreign currency exchange rate exposure.
Borrowing facilities
As at 28 February 2013 the Company had no outstanding borrowings
(2012: GBP327,000).
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.
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 ordinary share fund of GBP1,583,000 or
37.21% (2012: GBP1,305,000 or 33.72%) and an increase or decrease
in net asset value of the same amount or 9.04% (2012: 9.04%).
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 "C" share fund of GBP1,074,000 or 55.22%
(2012: GBP818,000 or 3,409.58%) and an increase or decrease in net
asset value of the same amount or 8.88% (2012: 7.86%).
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 easy
to 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. The Company is exposed to
credit risk through its receivables, and through cash held on
deposit with banks. The Company is also exposed to credit risk
through its investments in loan stock. The Company's receivables
include GBP687,000 of deferred consideration from the sale of Craig
Wind Farm Limited. The Company holds security over the assets of
Craig Wind Farm Limited in respect of the deferred
consideration.
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 Company's maximum credit risk is GBP13.3 million (2012:
GBP15 million) of which the ordinary share fund is exposed to
GBP8.4 million (2012: GBP9.5 million) and the "C" share fund is
exposed to GBP4.9 million (2012: GBP5.5 million).
The table below sets out the amounts receivable by the Company
which were past due but not individually impaired as at 28 February
2013 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 55 - - 55
Accrued interest 15 1 3 11
Receivables past due 70 1 3 66
The amounts past due for payment represent interest due on a
loan investment with Osspower Limited. In this analysis, the loan
principal amount on which the interest has accrued is included as
past due. Osspower Limited's hydro-electric generator is operating,
however the company cannot repay its loan or interest until a
defects notification period on the hydro-scheme has ended,
therefore the loan and interest accrued are expected to be paid
within a period of between one and two years.
The tables below set out the amounts receivable by the Company
which were past due but not individually impaired as at 29 February
2012 and the extent to which they were 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 - -
The expected timing of receipt of trade and other receivables is
presented below:
Ordinary Shares Total Within 1 year Between 1 and 2 years Over 2 years
GBP000 GBP000 GBP000 GBP000
Deferred consideration 687 - 687 -
Accrued interest income 187 166 21 -
Other receivables 14 14 - -
888 180 708 -
"C" Shares Total Within 1 year Between 1 and 2 years Over 2 years
GBP000 GBP000 GBP000 GBP000
Accrued interest income 47 25 22 -
Other investment income 90 - 90 -
137 25 112 -
18. Contingencies, guarantees and financial commitments
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 of the two companies. 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 including those shares
acquired by the Company from Ventus 3 VCT plc as a result of the
Merger which took place in May 2010. As at 28 February 2013 the
Company's investment was valued at nil 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 which took
place in May 2010.
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 which took place in
May 2010.
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 which took place in May 2010.
As at 28 February 2013 the Company's investment was valued at nil
for the reasons described in the Investment Manager's Report.
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 which took place in May 2010.
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).
The Company has provided a cost overrun guarantee of GBP750,000
to the Co-operative Bank plc on behalf of Osspower Limited. Any
sums called under this guarantee shall be payable by way of a loan
from the Company to Osspower Ltd which may be drawn down in the
event of the construction of Allt Fionn Ghlinne small hydro scheme
exceeding its budget of GBP7.5 million. The construction of the
hydro scheme is complete but the guarantee remains in place during
a defects notification period. In the event of cost overrun, the
loan is repayable over a term of 15 years, interest free. The
Directors consider the probability of the loan being drawn down to
be very low and the fair value of the liability associated with the
guarantee is not considered to be significant at the year end.
On 26 July 2011, the Company registered a charge over its shares
in White Mill Windfarm Limited to The Co-operative Bank plc as
security for a senior loan facility of up to GBP15.5 million raised
by White Mill Windfarm 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 White Mill Windfarm Limited.
On 31 January 2013, the Company registered a charge over its
shares in Biggleswade Wind Farm Limited to The Co-operative Bank
plc as security for a senior loan facility of up to GBP22.5 million
raised by Biggleswade 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 Biggleswade Wind Farm Limited.
The Company had no other contingencies, financial commitments or
guarantees as at 28 February 2013.
19. Related party transactions
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.
As at 28 February 2013
Ordinary Shares "C" shares Total
Balances GBP000 GBP000 GBP000
Investments - shares 9,577 7,235 16,812
Investments - loan stock 5,844 3,508 9,352
Accrued interest income 187 47 234
Transactions GBP000 GBP000 GBP000
Loan stock interest income 530 237 767
Dividend income 491 - 491
As at 29 February 2012
Ordinary Shares "C" shares Total
Balances GBP000 GBP000 GBP000
Investments - shares 4,827 4,900 9,727
Investments - loan stock 4,767 1,673 6,440
Accrued interest income 521 301 822
Transactions GBP000 GBP000 GBP000
Loan stock interest income 516 177 693
Dividend income 55 - 55
20. Controlling party
In the opinion of the Directors there is no immediate or
ultimate controlling party.
21. 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 VCT 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 Monday, 22 July 2013 at the offices of Howard
Kennedy LLP, 19 Cavendish Square, London, W1A 2AW 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 7 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 2013.
2. To declare a final dividend of 1.75p per ordinary share and
1.80p per "C" share in respect of the year ended 28 February
2013.
3. To approve the Directors' Remuneration Report for the year ended 28 February 2013.
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 appoint BDO 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 Resolutions
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 3,660,956 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 2014 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
24 May 2013
This information is provided by RNS
The company news service from the London Stock Exchange
END
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