TIDMVEN2
RNS Number : 6460V
Ventus 2 VCT PLC
29 October 2014
Ventus 2 VCT plc
Half-yearly Financial Report
for the six month period ended 31 August 2014
Registered No: 05667210
Chairman's Statement
I am pleased to present the financial report of Ventus 2 VCT plc
(the "Company") for the six month period ended 31 August 2014.
The Investment Manager, Temporis Capital LLP, has continued its
successful management of the portfolio with a focus on delivering
predictable dividends to shareholders.
The Company's ordinary and "C" share funds now have an
established portfolio of assets generating a steady, tax-free yield
to investors characterised by stability in terms of net asset value
("NAV") and dividends. Both the ordinary and "C" share funds are
substantially invested in fully-operational renewable energy
assets. The "D" share fund made its first investment in the period
and is expected to be fully invested by the end of 2014. As
discussed in the Investment Manager's Report, the first investment
of the "D" share fund, in a company building a wind farm, was made
prior to Royal Assent of the Finance Act 2014, so is a qualifying
investment for VCT purposes. The remaining investments of the "D"
share fund will be in companies building hydroelectric projects,
which are still qualifying investments for Venture Capital Trust
("VCT") purposes. The ordinary and "C" share funds also have cash
available to invest in these companies building hydroelectric
projects.
During the period, the Company met its investment and dividend
goals. The Company's key objective going forward is to optimise the
performance of portfolio company wind farms so as to continue
generating consistent dividends.
During the period, the wind farms owned by investee companies at
Eye Airfield, Weston Airfield and North Pickenham Airfield were all
completed ahead of schedule and below budget. With these wind farms
operational, 87% of the ordinary share fund's investments and 89%
of the "C" share fund's investments by value as a percentage of the
share funds' NAV are in companies with operational wind farms
generating regular dividends and mezzanine debt interest. The
ordinary share fund also earns interest at the rate of 8% per annum
on deferred consideration from the sale of Craig Wind Farm Limited,
which accounts for 4% of the NAV of the ordinary share fund.
Also during the period, the Company received a cash distribution
of GBP306,000 from BEL Holdco Limited, the successor company to
Broadview Energy Limited, into which the Company invested
GBP200,000 in December 2008. This represents a 1.53 times multiple
on the Company's original investment.
On 3 June 2014, the Company allotted a further 377,439 "D"
shares, taking the total "D" shares issued under the "D" share
offer, which is now closed, to 1,990,767. The net proceeds raised
by the Company under the "D" share offer totalled GBP1.93
million.
Strategic Review
The Board regularly reviews the performance of the investment
manager and the implementation of the Company's investment
strategy. Since the Board appointed Temporis Capital LLP as
Investment Manager in September 2011, the Company has been managed
with the intention of achieving consistent, predictable dividends,
along with growth in NAV.
The major developments and achievements during the past three
years have been as follows:
-- The Investment Manager has restructured development
investments in the ordinary share fund to unlock planning
value.
-- Leverage on the underlying assets has been paid down as the assets have matured.
-- The investee companies of the Company have added underlying
generation capacity of 61 MW and now have 88 MW of underlying
generation capacity.
-- The Company's investment in Craig Wind Farm Limited was sold
in 2012 at a price equal to 3.12 times the initial investment.
-- Dividends have been stabilised and increased.
From 31 August 2011 to 31 August 2014, the performance of the
share classes has been as follows:
Increase Increase Dividends Dividends
in NAV in NAV paid plus paid plus
increase increase
in NAV in NAV
pence per as a % pence per as a % of
share of starting share starting
NAV NAV
Ordinary
shares 15.4p 25.9% 25.0p 42.0%
"C" shares 33.4p 36.0% 43.4p 46.7%
The Directors intend to pay a minimum dividend of 4p per
ordinary share per annum for the year ending 28 February 2015, with
a realistic target range in the medium term beyond 28 February 2015
of 4p to 6p per ordinary share per annum. The Directors intend to
pay a minimum dividend of 6.25p per "C" share per annum for the
year ending 28 February 2015, with a realistic target range in the
medium term is 6p to 8p per "C" share per annum. It should be
stressed that these are intentions only, and no forecasts are
intended or should be inferred.
Following the recent changes in legislation relating to VCTs,
the Directors and Ventus VCT plc held a special joint meeting with
the Investment Manager in late September to decide what strategies
should be adopted to preserve and enhance shareholder value. After
considering in depth a variety of options including, inter alia,
broadening the remit of the Funds to invest in non-renewables,
progressive sell off of assets and merger of the two Funds, the
Directors agreed that it was in the best interests of shareholders
to maintain the status quo and maximise the performance of the
assets, thus providing a stable and possibly increasing stream of
tax free dividends. The Directors will continue to monitor this
situation very carefully, in particular in light of any new
legislation which may be enacted after the next General
Election.
The Directors regularly review the question of when the "C"
shares will be converted into ordinary shares and intend to effect
the conversion of the "C" shares into ordinary shares when they
deem it appropriate to do so.
Net Asset Value, Results and Dividend - Ordinary Shares
At 31 August 2014, the NAV of the ordinary share fund of the
Company attributable to equity shareholders stood at GBP18,299,000
or 75.0p per ordinary share.
The revenue profit attributable to ordinary shareholders for the
six month period ended 31 August 2014 was GBP424,000 or 1.74p per
ordinary share. The capital gain attributable to ordinary
shareholders for the period was GBP605,000 or 2.48p per ordinary
share, resulting in a net gain to ordinary shareholders for the
period of GBP1,029,000 or 4.22p per ordinary share (six month
period ended 31 August 2013: net gain of GBP370,000 or 1.52p per
ordinary share; year ended 28 February 2014: net gain of
GBP1,052,000 or 4.31p per ordinary share).
The value of investments held by the Company's ordinary share
fund at 31 August 2014 was GBP16,405,000 compared to GBP16,339,000
at 28 February 2014. The Investment Manager's Report gives details
of investments made and proceeds received during the period
together with information about the valuation of all investee
company holdings within the portfolio.
The Company has declared an interim dividend of 2.0p per
ordinary share which will be paid on 14 January 2015 to all
ordinary shareholders on the register as at the close of business
on 12 December 2014.
Net Asset Value, Results and Dividend - "C" Shares
At the period end, the net asset value per "C" share of the
Company stood at GBP14,227,000 or 126.1p per "C" share.
The revenue profit attributable to "C" shareholders for the
period was GBP300,000 or 2.65p per "C" share. The capital gain
attributable to "C" shareholders for the period was GBP422,000 or
3.73p per "C" share, resulting in a net profit attributable to "C"
shareholders for the six month period ended 31 August 2014 of
GBP722,000 or 6.38p per "C" share (six month period ended 31 August
2013: net profit of GBP233,000 or 2.06p per "C" share; year ended
28 February 2014: net profit of GBP2,226,000 or 19.65p per "C"
share).
The value of investments held at 31 August 2014 by the "C" share
fund was GBP12,939,000 compared to GBP12,941,000 at 28 February
2014.
The Company has declared an interim dividend of 3.0p per "C"
share which will be paid on 14 January 2015 to all "C" shareholders
on the register as at the close of business on
12 December 2014.
Net Asset Value, Results and Dividend - "D" Shares
At the period end, the net asset value per "D" share of the
Company stood at GBP1,910,000 or 95.9p per "D" share.
The revenue loss attributable to "D" shareholders for the period
was GBP9,000 or 0.60p per "D" share. The capital loss attributable
to "D" shareholders for the period was GBP17,000 or 1.14p per "D"
share, resulting in a net loss attributable to "D" shareholders for
the six month period ended 31 August 2014 of GBP26,000 or 1.74p per
"D" share.
VCT Qualifying Status
The Company retains PricewaterhouseCoopers LLP to review its
compliance with VCT regulations. The Directors are satisfied that
the Company has continued to fulfil the conditions for maintaining
VCT status.
Key Performance Indicators
The Directors consider the following key performance indicators,
which are typical for VCTs, to best measure the Company's
performance and to provide shareholders with a summary of how the
business' objectives are pursued:
Results and
dividends
For the six
months
ended 31
August
2014
(unaudited) Ordinary Shares "C" Shares "D" Shares Total
Pence Pence
per per Pence
share share per share
GBP000 (1) GBP000 (1) GBP000 (1) GBP000
Revenue
profit/(loss)
attributable
to
equity
shareholders 424 1.74 300 2.65 (9) (0.60) 715
Capital
gain/(loss)
attributable
to
equity
shareholders 605 2.48 422 3.73 (17) (1.14) 1,010
--------------------- ------- --------------------- ------- ----------------------- ------------------------- -------------------------
Net
gain/(loss)
attributable
to
equity
shareholders 1,029 4.22 722 6.38 (26) (1.74) 1,725
Dividends paid
during the
year (427) (1.75) (283) (2.50) - - (710)
--------------------- ------- --------------------- ------- ----------------------- ------------------------- -------------------------
Total movement
in equity
shareholders'
funds 602 2.47 439 3.88 (26) (1.74) 1,015
===================== ======= ===================== ======= ======================= ========================= =========================
Ordinary Shares "C" Shares "D" Shares Total
Pence Pence Pence
per share per share per share
GBP000 (1) GBP000 (1) GBP000 (1) GBP000
% % % %
On-going
ratio
(2) 3.60% 3.07% 2.88% 3.35%
======= ========================= ======= ======================== ======= ================== ========
Ordinary Shares "C" Shares "D" Shares Total
Pence Pence Pence
GBP000 per share GBP000 per share GBP000 per share GBP000
As at 31
August
2014
Net asset
value
(3) 18,299 75.0 14,227 126.1 1,910 95.9 34,436
======= ========================= ======= ======================== ======= ================== ========
Total
shareholder
return (4) 22,121 95.2 15,359 136.1 1,910 95.9 39,390
======= ========================= ======= ======================== ======= ================== ========
(1) The "per share" value is determined in respect of the
weighted average number of shares in issue during the period,
except in respect of the dividends paid in the period, which is
determined on the basis of the number of shares eligible to receive
dividends at the time the dividends were paid.
(2) The on-going charges ratio represents the Company's total
operating expenditure during the period (excluding investment
costs) as a percentage of the average NAV of the Company during the
6 month period.
The total annual running costs cap is set out in Note 3 to the
financial statements.
(3) The "per share" value is determined in respect of the number
of shares in issue at the period end, except in respect of the
dividends paid, which is determined on the basis of the number of
shares eligible to receive dividends at the time the dividends were
paid.
(4) The total shareholder return represents the NAV at period
end plus the cumulative dividends paid since incorporation.
Temporis Capital LLP continues to be actively engaged in
managing the portfolio of existing investments and in identifying
and negotiating potential investment opportunities to invest the
share capital that has been raised. The investments made constitute
the important events of the period.
The performance of the Company is reviewed in the Investment
Manager's Report, including the Company's compliance with HM
Revenue & Customs ("HMRC") VCT regulations. The Company's
prospects are considered in the UK Market Outlook section of the
Investment Manager's Report.
Alan Moore
Chairman
29 October 2014
Principal Risks and Uncertainties
Under the Financial Conduct Authority's Disclosure and
Transparency Rules, the Directors are required to identify those
material risks to which the Company is exposed and take appropriate
steps to mitigate those 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. The Directors do not
expect that the risks and uncertainties presented will change
significantly over the current financial year.
-- Failure to meet and maintain the investment requirements for
compliance with HMRC VCT regulations may result in the Company
losing its status as a VCT.
The Board mitigates this risk by regularly reviewing investment
management activity and each new investment with appropriately
qualified advisers and, typically, by obtaining pre-approval from
HMRC for each qualifying investment.
-- Inadequate control environment at service providers may lead
to inaccurate reporting or misappropriation of assets
This risk is mitigated 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 undertaken by
the Investment Manager on behalf of the Company.
-- Non-compliance with the Listing Rules of the Financial
Conduct Authority, Companies Act Legislation and other applicable
regulations may result in termination of the Company's Stock
Exchange listing or other sanctions
This risk is mitigated 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 and the risk of adverse changes in the
application of government policies particularly in respect of the
renewable energy sector and tax legislation. Changes in legislation
may render future investment opportunities unviable and in the
unlikely event that regulations are applied retrospectively, the
impact may be detrimental to the value of the portfolio.
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
and has a long term commitment to the renewable energy sector.
Going Concern
The Directors have concluded that it is appropriate to continue
to adopt the going concern basis in preparing the accounts. The
Company's major cash flows 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. Having reviewed a cash flow forecast for the next 18
months, the Board 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.
Responsibility Statement
The Directors acknowledge responsibility for the interim results
and approve this half-yearly report. The Directors confirm that to
the best of their knowledge:
(a) the condensed financial statements have been prepared in
accordance with International Accounting Standard 34 ("IAS 34")
Interim Financial Reporting and give a true and fair view of the
assets, liabilities, financial position and the profit or loss of
the Company as required by Disclosure and Transparency Rule ("DTR")
4.2.4R;
(b) the interim management report, included within the
Chairman's Statement and Investment Manager's Report, includes a
fair review of the information required by DTR 4.2.7R, being the
important events of the first half of the year and the principal
risks and uncertainties for the remaining six months of the year;
and
(c) the financial statements include a fair review of related
party transactions and changes thereto, as required by DTR
4.2.8R.
The Responsibility Statement has been approved by the Board.
Alan Moore
Chairman
29 October 2014
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 renewable energy investments generating stable long-term income
with the objective of providing predictable dividends to
shareholders.
Ordinary share portfolio
A summary of the ordinary share fund's unaudited investment
valuations as at 31 August 2014 and gains and losses during the six
month period ended 31 August 2014 is given below.
Voting Investment value Investment cost Investment Investment
rights value cost
Gain/
Shares Loans Total Shares Loans Total (loss) Total Total
six
as months
as at at as at as at as at as at as at to as at as at
31 31 31 31 31 31 28 28
August August August 31 August August August 31 August August February February
2014 2014 2014 2014 2014 2014 2014 2014 2014 2014
% GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Operational
wind
Achairn Energy
Limited * Q 40.40% 2,541 1,407 3,948 1,226 1,289 2,515 80 3,868 2,515
A7 Lochhead
Limited * Q 20.00% 748 - 748 570 - 570 (88) 956 690
Greenfield
Wind Farm
Limited * PQ 16.65% 1,383 1,381 2,764 666 1,280 1,946 (235) 3,026 1,973
Biggleswade
Wind Farm
Limited * Q 3.50% 333 287 620 86 264 350 8 612 350
Eye Wind
Power Limited ** Q 35.09% 1,947 - 1,947 1,480 - 1,480 349 1,800 1,682
Bernard
Matthews
Green Energy
Weston
Limited * Q 50.00% 864 - 864 500 - 500 326 538 500
Bernard
Matthews
Green Energy
Pickenham
Limited * Q 50.00% 641 - 641 500 - 500 105 536 500
Wind under
construction
Bernard
Matthews
Green Energy
Halesworth
Limited ** Q 10.09% 416 - 416 351 - 351 - 416 351
Operational
companies
in the wind
sector
Firefly Energy
Limited * Q 50.00% - 82 82 200 104 304 - 82 304
Operational
landfill
gas
Renewable
Power Systems
(Dargan Road)
Limited Q 50.00% 649 1,248 1,897 780 1,120 1,900 25 1,872 1,900
Operational
small hydro
Osspower
Limited 50.00% 2,443 - 2,443 300 - 300 275 2,223 355
Development
and
pre-planning
BEL Holdco
Limited * 1.98% 25 - 25 200 - 200 (79) 410 200
BEL
Acquisition
Limited * 1.98% 10 - 10 10 - 10 - - -
Realised
investments
Redimo LFG
Limited * 50.00% - - - 1,000 - 1,000 - - 1,000
PBM Power
Limited 25.00% - - - 574 - 574 - - 574
Sandsfield
Heat & Power
Limited 44.90% - - - 1,796 1,000 2,796 - - 2,796
The Small
Hydro Company
Limited 22.50% - - - 115 - 115 - - 115
Redeven Energy
Limited * 50.00% - - - - 130 130 - - 130
Total 12,000 4,405 16,405 10,354 5,187 15,541 766 16,339 15,935
--------------------------- ------- ------- ------- ---------- ------- ------- ---------- ------- ----------- -----------
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).
** A company in which Temporis Capital Renewable Infrastructure
EIS Fund and Ventus VCT plc have also invested
The Company, Ventus VCT plc and Temporis Capital Renewable
Infrastructure EIS Fund are managed by
Temporis Capital LLP.
A discussion of each investment follows.
OPERATIONAL WIND
Each of the following investee companies owns and operates a
single wind farm (or, in the case of Bernard Matthews Green Energy
Weston Limited and Bernard Matthews Green Energy Pickenham Limited,
owns an interest in a limited liability partnership that 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
Biggleswade Wind Farm Limited 20.0 December 2013 Bedfordshire
Eye Wind Power Limited 6.8 April 2014 Suffolk
Bernard Matthews Green Energy
Weston Limited 4.0 April 2014 Norfolk
Bernard Matthews Green Energy
Pickenham Limited 4.0 April 2014 Norfolk
The Company's investments in the above companies are valued
using discounted cash flow models. The aggregate value of the above
seven companies increased by 1.73% during the six month period
ended 31 August 2014. This was due to the net effect of a variety
of factors, including the effect of the unwinding of the discount,
a decrease in the underlying project debt in some companies, a
decrease in the estimate of future electricity prices and
adjustments to the projected long-term energy yields of Greenfield
Wind Farm Limited's wind farm. Eye Wind Power Limited, Bernard
Matthews Green Energy Weston Limited and Bernard Matthews Green
Energy Pickenham Limited (all three of which were previously valued
at cost) were revalued on a discounted cash flow basis in line with
the Company's valuation policy for investments in companies with
operating renewable energy assets.
During the six month period ended 31 August 2014, the
electricity output as a percent of budget averaged 84% for the
companies with wind farms in operation during the entire period.
All investee companies' wind farms experienced satisfactory
availability during the six month period ended 31 August 2014. Set
out below is a brief summary of the financial performance of these
investee companies.
Achairn Energy Limited
The Company received mezzanine interest cash payments of
GBP125,000 from Achairn Energy Limited in the six month period
ended 31 August 2014, representing a 5.0% cash yield on the cost of
investment. In addition to mezzanine interest income, the Company
recognised a valuation gain of GBP80,000 on its investment in
Achairn Energy Limited in the six month period ended 31 August
2014.
A7 Lochhead Limited
The Company received dividends and mezzanine interest cash
payments totalling GBP164,000 from A7 Lochhead Limited in the six
month period ended 31 August 2014, representing a 26.0% cash yield
on the average cost of investment. A7 Lochhead Limited also repaid
GBP120,000 of mezzanine loan principal to the Company during the
period, reducing the balance of the mezzanine loan to nil. The
value of the Company's investment in A7 Lochhead Limited decreased
by GBP88,000 in the six month period ended 31 August 2014. This was
a consequence of the large dividend paid by A7 Lochhead Limited
during the period.
Greenfield Wind Farm Limited
The Company's ordinary share fund received dividends and
mezzanine interest cash payments totalling GBP180,000 from
Greenfield Wind Farm Limited in the six month period ended 31
August 2014, representing a 9.2% cash yield on the average cost of
the investment. Greenfield Wind Farm Limited also repaid GBP27,000
of mezzanine loan principal to the Company's ordinary share fund
during the period. In addition to dividend and mezzanine interest
income, the Company's ordinary share fund recognised a valuation
loss of GBP235,000 on its investment in Greenfield Wind Farm
Limited in the six month period ended 31 August 2014. The projected
long-term mean annual energy yield of the wind farm was reassessed
during the six month period and was revised downwards by 4.59%.
This has been taken into account in the valuation of this
investment.
The Company's "C" share fund also holds an investment in
Greenfield Wind Farm Limited as discussed below.
Biggleswade Wind Farm Limited
The Company's ordinary share fund recognised a valuation gain of
GBP8,000 on its investment in Biggleswade Wind Farm Limited in the
six month period ended 31 August 2014. The Company received no cash
income from Biggleswade Wind Farm Limited in the six month period
ended 31 August 2014.
The Company's "C" share fund also holds an investment in
Biggleswade Wind Farm Limited as discussed below.
Eye Wind Power Limited
The Eye Airfield wind farm became fully operational in April
2014. The wind farm was completed ahead of schedule and under
budget. The Company received mezzanine interest cash payments of
GBP26,000 from Eye Wind Power Limited in the six month period ended
31 August 2014, representing a 1.6% cash yield on the average cost
of the investment. Eye Wind Power Limited also repaid GBP202,000 of
mezzanine loan principal to the Company's ordinary share fund
during the period, reducing the balance of the mezzanine loan to
nil. The Company's ordinary share fund recognised a valuation gain
of GBP349,000 on its investment in Eye Wind Power Limited in the
six month period ended 31 August 2014 because the investment,
having been held at cost as at 28 February 2013, has been revalued
on a discounted cash flow basis in line with the Company's
accounting policy.
As discussed below, the Company's "C" share fund held a
mezzanine debt investment in Eye Wind Power Limited which was
repaid in full during the six month period ended 31 August
2014.
Bernard Matthews Green Energy Weston Limited
The Weston Airfield wind farm (in which Bernard Matthews Green
Energy Weston Limited holds a partnership interest) became fully
operational in April 2014. The wind farm was completed ahead of
schedule and under budget. The Company received no cash income from
Bernard Matthews Green Energy Weston Limited in the six month
period ended 31 August 2014. The Company recognised a valuation
gain of GBP326,000 on its investment in Bernard Matthews Green
Energy Weston Limited in the six month period ended 31 August 2014
because the investment, having been held at cost as at 28 February
2014, has been revalued on a discounted cash flow basis in line
with the Company's accounting policy.
As discussed below, the Company's "C" share fund holds an
investment in Weston Airfield Investments Limited, which is Bernard
Matthews Green Energy Weston Limited's partner in the Weston
Airfield wind farm.
Bernard Matthews Green Energy Pickenham Limited
The North Pickenham Airfield wind farm (in which Bernard
Matthews Green Energy Pickenham Limited holds a partnership
interest) became fully operational in April 2014. The wind farm was
completed ahead of schedule and under budget. The Company received
no cash income from Bernard Matthews Green Energy Pickenham Limited
in the six month period ended 31 August 2014. The Company
recognised a valuation gain of GBP105,000 on its investment in
Bernard Matthews Green Energy Pickenham Limited in the six month
period ended 31 August 2014 because the investment, having been
held at cost as at 28 February 2014, has been revalued on a
discounted cash flow basis in line with the Company's accounting
policy.
As discussed below, the Company's "C" share fund holds an
investment in North Pickenham Energy Limited, which is Bernard
Matthews Green Energy Pickenham Limited's partner in the North
Pickenham Airfield wind farm.
WIND UNDER CONSTRUCTION
Bernard Matthews Green Energy Halesworth Limited
Bernard Matthews Green Energy Halesworth Limited is constructing
a 10.25 megawatt wind farm at the Upper Holton Airfield near
Halesworth, Suffolk. The wind farm will operate five Senvion
(formerly REpower) MM82 2.05 megawatt turbines. The wind farm is
scheduled to be operational in March 2015. The investment of the
Company's ordinary share fund in Bernard Matthews Green Energy
Halesworth Limited is held at GBP116,000, which represents the
total cost of the investment incurred both in the investee company
and through Redeven Energy Limited, which was the development
company.
The Company's "C" and "D" share funds also hold an investment in
Bernard Matthews Green Energy Halesworth Limited as discussed
below.
OPERATIONAL COMPANIES IN THE WIND SECTOR
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. There was no change in the valuation of Firefly Energy
Limited in the six month period ended 31 August 2014.
The Company has a loan investment in Firefly Energy Limited
which had a principal amount outstanding as at 31 August 2014 of
GBP104,000. The loan is valued in the Company's accounts based on
the discounted projected future cash flows from the five power
purchase agreements on which the company earns a spread, net of
projected administration costs. As at 31 August 2014, the value of
the loan was GBP82,000. The loan, as valued, is projected to be
paid off 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 prior year.
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 six month
period ended 31 August 2014. The third of its five generators came
offline during the period as the volume of gas at the site reduced.
The Company received a loan interest payment of GBP73,000 from
Renewable Power Systems (Dargan Road) Limited in the six month
period ended 31 August 2014, representing a 3.8% cash yield on the
cost of the investment.
The value of the Company's investment in Renewable Power Systems
(Dargan Road) Limited decreased by GBP25,000 in the six month
period ended 31 August 2014.
OPERATIONAL SMALL HYDRO
Osspower Limited
The Company's ordinary share fund holds 50% of the ordinary
shares of Osspower Limited, which owns and operates a 1.999
megawatt hydroelectric project at Allt Fionn Ghlinne in Scotland.
The Allt Fionn project has been operating with satisfactory
availability and above budget since it was commissioned in June
2012.
Osspower Limited has consent for three further small hydro
projects on the same estate as the Allt Fionn project. The
Investment Manager has been working with the board of Osspower
Limited to develop a strategy for financing the construction of
those three projects.
On 22 May 2014, Osspower Limited repaid a GBP5,990,000 senior
loan with The Co-operative Bank plc secured by the Allt Fionn
project as well as the three further consented but unconstructed
hydro projects, thereby discharging the Co-operative Bank's
security over these assets. Simultaneously, Osspower Limited
obtained a GBP7 million loan from Gravis Capital Partners ("GCP")
secured solely by the Allt Fionn hydroelectric project.
Subsequent to the release of The Co-operative Bank's security
over the consented but unconstructed projects, three new companies
were formed by the shareholders of Osspower Limited (with identical
ownership percentages as Osspower Limited), and certain assets and
rights of the three unconstructed projects were transferred from
Osspower Limited to these companies. Each company will own,
construct and operate one of the projects. The Ventus Funds have
investment rights in each of the new companies. The three new
companies are now proceeding toward construction of the projects,
which should result in Osspower Limited recovering development
costs relating to the three projects totalling GBP1,870,000.
During the six months ended 31 August 2014, Osspower Limited
repaid its shareholder loan to the Company's ordinary share fund of
GBP55,000 along with accrued interest of GBP26,000. Osspower
Limited also paid GBP90,000 in arrangement fees to the Company's
"C" share fund in respect of a loan which had been provided by the
"C" share fund in 2011. The arrangement fees had been recognised as
income in a previous financial period and were outstanding for
payment as at 28 February 2014. As at 31 August 2014, the Company
held its investment in Osspower Limited at a value of GBP2,443,000
which takes into account the discounted present value of expected
cash flows from the recovery of the development costs on the three
unconstructed projects discussed above.
DEVELOPMENT AND PRE-PLANNING
BEL Holdco Limited
BEL Holdco Limited is the parent company of Broadview Energy
Limited ("Broadview"), an independent renewable energy company that
formerly developed, constructed and operated wind farms in the UK.
Having disposed of its operating and consented wind projects,
Broadview carried out a reorganisation in January 2014 with the
objective of returning cash to its shareholders. In connection with
this reorganisation, all the shareholders of Broadview, including
the Company, exchanged their holdings in Broadview for identical
holdings in BEL Holdco Limited. Subsequent to this exchange, BEL
Holdco Limited sold Broadview to BEL Acquisition Limited (see
below) in exchange for nominal cash plus deferred consideration.
Broadview's assets consisted of five wind development projects
(four of which had been rejected in planning and were being
appealed and one of which had yet to be submitted for planning),
along with a limited amount of working capital. Upon successful
consent of any of the five wind development projects, BEL
Acquisition Limited will pay deferred consideration to BEL Holdco
Limited. As the final step in its reorganisation, BEL Holdco
entered voluntary liquidation so that the cash in Broadview could
be distributed to shareholders.
During the six month period ended 31 August 2014, BEL Holdco
Limited distributed GBP306,000 to the Company. This return of cash
represents a 1.53 times multiple on the Company's GBP200,000
investment in Broadview made in December 2008.
Since the acquisition of Broadview by BEL Holdco Limited, two of
the wind development projects under appeal have been rejected by
the Secretary of State for Communities and Local Government. As at
31 August 2014, the Company's remaining interest in BEL Holdco
Limited is valued at GBP25,000, which is the Investment Manager's
estimated fair value of the company's value.
BEL Acquisition Limited
BEL Acquisition Limited is a wind farm development company. It
was incorporated in May 2014 for the purpose of acquiring Broadview
from BEL Holdco Limited (see above). The assets held by Broadview
consisted of five wind development projects, four of which had been
rejected in planning and were being appealed and one of which had
yet to be submitted for planning, along with a limited amount of
working capital. As discussed above, two of these appeals have been
rejected by the Secretary of State for Communities and Local
Government. BEL Acquisition Limited also earns income from
providing asset management services to wind farms.
During the six month period ended 31 August 2014, the Company
acquired 2.0% of the ordinary shares of BEL Acquisition Limited at
a cost of GBP10,000. The Company's investment in BEL Acquisition
Limited is held at cost.
REALISED INVESTMENTS
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 and Sandsfield Heat & Power Limited
PBM Power Limited and Sandsfield Heat & Power Limited are
companies that constructed waste wood biomass power plants which
experienced severe operating difficulties. Both investments were
written off and treated as realised losses in a prior year. PBM
Power Limited entered into liquidation on 15 October 2013.
Sandsfield Heat & Power Limited is currently in administration
and is expected to go into liquidation in due course.
The Small Hydro Company Limited
The Small Hydro Company Limited developed five low-head
run-of-river small hydroelectric projects in England which were
ultimately not economic to build out. The investment was written
off and treated as a realised loss in a prior year. The Small Hydro
Company Limited entered into members' voluntary liquidation on 17
March 2014.
Redeven Energy Limited
Redeven Energy Limited is a wind farm development company
through which the Company, jointly with Ventus VCT plc, held
investment rights in three successfully-consented wind farm
developments at three sites in East Anglia: Weston Airfield, North
Pickenham Airfield and Upper Holton Airfield. The development
rights in these wind farms have been transferred to the relevant
project companies into which the Company and Ventus VCT plc have
invested further funds, leaving Redeven Energy Limited with no
remaining significant assets or liabilities as at 31 August 2014.
The project companies that have built out or are building out the
three wind farms are owned by the Company and by Ventus VCT plc and
are described elsewhere in this report.
"C" share portfolio
A summary of the "C" share fund's unaudited investment
valuations as at 31 August 2014 and gains and losses during the six
month period ended 31 August 2014 is given below.
Voting Investment value Investment cost Investment Investment
rights value cost
Gain/
Shares Loans Total Shares Loans Total (loss) Total Total
six
as as as months
at as at at as at as at at as at to as at as at
31 31 31 31 31 31 28 28
August August August 31 August August August 31 August August February February
2014 2014 2014 2014 2014 2014 2014 2014 2014 2014
% GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Operational
wind
Greenfield
Wind Farm
Limited * PQ 12.50% 1,038 1,037 2,075 500 961 1,461 (176) 2,271 1,481
White Mill
Windfarm
Limited * PQ 25.00% 2,582 343 2,925 1,000 318 1,318 15 2,910 1,318
AD Wind
Farmers
Limited * Q 50.00% 1,162 - 1,162 1,000 - 1,000 (7) 1,169 1,000
Biggleswade
Wind Farm
Limited * Q 21.50% 2,049 1,762 3,811 527 1,623 2,150 51 3,760 2,150
Weston
Airfield
Investments
Limited * Q 50.00% 1,481 - 1,481 1,000 - 1,000 481 1,000 1,000
North
Pickenham
Energy
Limited * Q 50.00% 1,155 - 1,155 1,000 - 1,000 155 1,000 1,000
-------------- ---- ---- ------- -------
Wind under
construction
Bernard
Matthews
Green Energy
Halesworth
Limited ** Q 5.63% 300 - 300 300 - 300 - 301 301
Development
and
pre-planning
Blawearie
Wind Limited * 50.00% 30 - 30 30 - 30 - 30 30
-------------- ---------- ------- ------- ------- ---------- ------- ------- ---------- ------- ----------- -----------
Realised
investments
Iceni
Renewables
Limited * 50.00% - - - 400 18 418 - - 418
Eye Wind
Power
Limited ** 0.00% - - - - - - - 500 500
Total 9,797 3,142 12,939 5,757 2,920 8,677 519 12,941 9,198
-------------------------- ------- ------- ------- ---------- ------- ------- ---------- ------- ----------- -----------
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.
** A company in which Temporis Capital Renewable Infrastructure
EIS Fund and Ventus VCT plc have also invested (or in which Ventus
VCT plc had invested prior to the investment being realised).
The Company, Ventus VCT plc and Temporis Capital Renewable
Infrastructure EIS Fund are managed by
Temporis Capital LLP.
A discussion of each investment follows.
OPERATIONAL WIND
Each of the following investee companies owns and operates a
single wind farm (or, in the case of AD Wind Farmers Limited,
Weston Airfield Investments Limited and North Pickenham Energy
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
Biggleswade Wind Farm Limited 20.0 December 2013 Bedfordshire
Weston Airfield Investments Limited 4.0 April 2014 Norfolk
North Pickenham Energy Limited 4.0 April 2014 Norfolk
The Company's investments in the above companies are valued
using discounted cash flow models. The aggregate value of the above
six companies increased by 4.12% during the six month period ended
31 August 2014. This was due to the net effect of a variety of
factors, including the effect of the unwinding of the discount, a
decrease in the estimate of future electricity prices and a
decrease in the underlying project debt of Greenfield Wind Farm
Limited and a decrease in the projected long-term energy yield of
its wind farm. Weston Airfield Investments Limited and North
Pickenham Energy Limited (both of which were previously valued at
cost) were revalued on a discounted cash flow basis in line with
the Company's valuation policy for investments in companies with
operating renewable energy assets.
During the six month period ended 31 August 2014, the
electricity output as a percent of budget averaged 89% for the
companies with wind farms in operation during the entire period.
All investee companies' wind farms experienced satisfactory
availability during the six month period ended 31 August 2014. Set
out below is a brief summary of the financial performance of these
investee companies.
Greenfield Wind Farm Limited
The Company's "C" share fund received dividends and mezzanine
interest cash payments totalling GBP135,000 from Greenfield Wind
Farm Limited in the six month period ended 31 August 2014,
representing an 9.2% cash yield on the average cost of the
investment. Greenfield Wind Farm Limited also repaid GBP20,000 of
mezzanine loan principal to the Company's "C" share fund during the
period. In addition to dividend and mezzanine interest, the
Company's "C" share fund recognised a valuation loss of GBP176,000
on its investment in Greenfield Wind Farm Limited in the six month
period ended 31 August 2014. The projected long-term mean annual
energy yield of the wind farm was reassessed during the six month
period and was revised downwards by 4.59%. This has been taken into
account in the valuation of this investment.
The Company's ordinary share fund also holds an investment in
Greenfield Wind Farm Limited as discussed above.
White Mill Windfarm Limited
The Company recognised a valuation gain of GBP15,000 on its
investment in White Mill Windfarm Limited in the six month period
ended 31 August 2014. The Company received no cash income from
White Mill Windfarm Limited in the six month period ended 31 August
2014.
AD Wind Farmers Limited
The Company recognised a valuation loss of GBP7,000 on its
investment in AD Wind Farmers Limited in the six month period ended
31 August 2014. The Company received no cash income from AD Wind
Farmers Limited in the six month period ended 31 August 2014.
Biggleswade Wind Farm Limited
The Company's "C" share fund recognised a valuation gain of
GBP51,000 on its investment in Biggleswade Wind Farm Limited in the
six month period ended 31 August 2014. The Company received no cash
income from Biggleswade Wind Farm Limited in the six month period
ended 31 August 2014.
The Company's ordinary share fund also holds an investment in
Biggleswade Wind Farm Limited as discussed above.
Weston Airfield Investments Limited
The Weston Airfield wind farm (in which Weston Airfield
Investments Limited holds a partnership interest) became fully
operational in April 2014. The wind farm was completed ahead of
schedule and under budget. The Company received no cash income from
Weston Airfield Investments Limited in the six month period ended
31 August 2014. The Company recognised a valuation gain of
GBP481,000 on its investment in Weston Airfield Investments Limited
in the six month period ended 31 August 2014 because the
investment, having been held at cost as at 28 February 2014, has
been revalued on a discounted cash flow basis in line with the
Company's accounting policy.
As discussed above, the Company's ordinary share fund holds an
investment in Bernard Matthews Green Energy Weston Limited, which
is Weston Airfield Investments Limited's partner in the Weston
Airfield wind farm.
North Pickenham Energy Limited
The North Pickenham Airfield wind farm (in which North Pickenham
Energy Limited holds a partnership interest) became fully
operational in April 2014. The wind farm was completed ahead of
schedule and under budget. The Company received no cash income from
North Pickenham Energy Limited in the six month period ended 31
August 2014. The Company recognised a valuation gain of GBP155,000
on its investment in North Pickenham Energy Limited in the six
month period ended 31 August 2014 because the investment, having
been held at cost as at 28 February 2014, has been revalued on a
discounted cash flow basis in line with the Company's accounting
policy.
As discussed above, the Company's ordinary share fund holds an
investment in Bernard Matthews Green Energy Pickenham Limited,
which is North Pickenham Energy Limited's partner in the North
Pickenham Airfield wind farm.
WIND UNDER CONSTRUCTION
Bernard Matthews Green Energy Halesworth Limited
Bernard Matthews Green Energy Halesworth Limited is constructing
a 10.25 megawatt wind farm at the Upper Holton Airfield near
Halesworth, Suffolk. The wind farm will operate five Senvion
(formerly REpower) MM82 2.05 megawatt turbines. The wind farm is
scheduled to be operational in March 2015. Initially, the Company's
"C" share fund made a loan investment of GBP301,000 in Bernard
Matthews Green Energy Halesworth Limited. During the period ended
31 August 2014 this loan investment was converted to equity. The
investment is held at GBP300,000, which represents the total cost
of the equity investment.
The Company's ordinary and "D" share funds also hold an
investment in Bernard Matthews Green Energy Halesworth Limited as
discussed above and below.
DEVELOPMENT AND PRE-PLANNING
Blawearie Wind Limited
Blawearie Wind Limited is developing a wind farm in the Scottish
Borders. The project is in the pre-planning phase. The investment
is held at GBP30,000, which is the cost of the investment for the
Company's "C" share fund.
REALISED INVESTMENTS
Eye Wind Power Limited
The Company's "C" share fund held a loan investment in Eye Wind
Power Limited of GBP500,000 which was repaid in full during the six
month period ended 31 August 2014. The Company received interest
cash payments of GBP65,000 from Eye Wind Power Limited in the six
month period ended 31 August 2014.
Iceni Renewables Limited
Iceni Renewables Limited is a company established to develop two
potential wind farms in Scotland. The first project, Craigannet (up
to six turbines), was submitted for planning in January 2012,
appealed for non-determination in August 2012 and then refused by
the Scottish Government in November 2012. The second site, Merkins
(up to ten turbines), was submitted for planning in January 2012
and turned down by West Dunbartonshire Council in October 2013. The
Investment Manager believes there is no prospect of Iceni
Renewables Limited obtaining value from either site. As such, the
Company's investment in Iceni Renewables Limited has been written
down to nil value and is considered to be a realised loss.
"D" share portfolio
The "D" share offer closed on 30 May 2014 having raised net
proceeds of GBP1.93 million. The "D" share fund made one investment
during the six month period ended 31 August 2014 which is discussed
below.
WIND UNDER CONSTRUCTION
Bernard Matthews Green Energy Halesworth Limited
Bernard Matthews Green Energy Halesworth Limited is constructing
a 10.25 megawatt wind farm at the Upper Holton Airfield near
Halesworth, Suffolk. The wind farm will operate five Senvion
(formerly REpower) MM82 2.05 megawatt turbines. The wind farm is
scheduled to be operational in March 2015. The Company's "D" share
fund made an equity investment of GBP712,000. The investment is
held at GBP712,000, which represents the total cost of the equity
investment.
The Company's ordinary and "C" share funds also hold an
investment in Bernard Matthews Green Energy Halesworth Limited as
discussed above.
Valuation of Investments
It is the accounting policy of the Company to hold its
investments at fair value. The Company's investments in investee
companies which operate renewable energy assets are valued using a
discounted cash flow methodology.
The key assumptions that have a significant impact on discounted
cash flow valuations for these assets are the discount rate, 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 BEL Holdco Limited is
discussed above.
Investment Policy
The Company is focused on investing in companies developing
renewable energy projects with installed capacities of up to 20
megawatts, although investments in companies developing 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 and hydroelectric.
Up to 10% of net proceeds raised from share offers may be allocated
to companies developing 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 the 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 VCT status of both companies,
concentration risk, expected timing of realisations and projected
dividend profiles.
When there is a conflict or potential conflict of interest
between the investment strategy of the Company and that of another
fund managed by Temporis Capital LLP, the matter is referred to the
Investment Manager's compliance officer who ensures any conflicts
are dealt with fairly. Any investment made in a company in which
another fund managed by the Investment Manager has invested or
intends to invest will be approved by the Directors who are
independent of the Investment Manager, unless the investment is
made at the same time and on the same terms or in accordance with a
specific pre-existing agreement between the Company and the
Investment Manager.
The Company's policy is to maintain cash reserves of at least 5%
of net proceeds raised from share offers 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 Company's 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.
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 debt which is non-recourse to the
Company. 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 for the duration of the 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 will restrict the borrowings of the
Company. The aggregate principal amount at any time outstanding in
respect of money borrowed by the Company will 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 Company to various
risks, the following can be used as a guide:
i) Investments in qualifying holdings
Under VCT regulations, at least 70% of the Company's funds
should be invested in qualifying holdings. When there is an issue
of new shares, the 70% requirement does not apply to the new funds
raised for any accounting periods which end earlier than three
years from the date of allotment of the new shares.
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 any requirement 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 share offers may be invested in
companies developing pre-planning projects.
VCT Regulations
The Finance Act 2014, which received Royal Assent on 17 July
2014, changed the definition of VCT qualifying investments to
exclude new investments in companies in the renewable energy space
benefitting from Renewable Obligation Certificates ("ROCs"). As
such, the Company will no longer be able to make new qualifying
investments in companies owning and operating wind farms. The new
rules do not affect any of the Company's existing investments,
including the investment in Bernard Matthews Green Energy
Halesworth Limited which was made in July 2014 before Royal Assent
of the Finance Act 2014.
Investments in companies holding hydroelectric projects which
benefit from the Feed-in Tariff are still qualifying investments
for VCT purposes.
Market Outlook
In light of the changes in the VCT regulations described above,
the Company will have limited opportunities for making further new
investments in renewable energy companies once the hydro
investments discussed earlier in this report have been completed.
Therefore, the discussion in this section relates primarily to the
potential impact of market and policy developments on future income
from current investments.
The Department of Energy and Climate Change ("DECC") estimates
that, over the next 30 years, electricity demand in the UK will
increase by between 30% and 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 significant changes in the mix of generation sources and in
the electricity grid. In the near to medium 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 in the period to
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 is
carrying out 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. The
measures in EMR, which represent a fundamental transformation of
the UK electricity market, 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. The Energy Act 2013, which implements EMR, received
Royal Assent on 18 December 2013. In the past year, the Government
has made considerable progress on the implementation of EMR.
EMR is built around three pillars: (i) sustainability and
decarbonisation, (ii) security of supply and (iii) affordability.
The affordability question is a major issue, and a key feature of
EMR is the Levy Control Framework which will serve as a cap on the
amount of subsidy that will be available to newly-commissioned
renewable energy generation plant.
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 ROCs after 31 March 2017. A
renewable energy project is entitled to earn ROCs (or an equivalent
subsidy) for 20 years, so the RO regime will not end completely
until 31 March 2037. All existing wind farms operated by the
Company's investee companies will continue to receive ROCs (or an
equivalent subsidy) for 20 years from the date they commenced
operations.
Wholesale electricity prices have been reasonably stable during
the past year. The Company's exposure to short-term wholesale
electricity prices is mitigated by the fact that investee companies
generally sell their electricity output pursuant to power purchase
agreements ("PPAs") with wholesale electricity prices that are
fixed over the medium- to long-term. It has recently become more
difficult to enter into PPAs with a fixed-price term of greater
than three years, which could have an impact on the ability of
investee companies to enter into long-term PPAs when the current
PPAs expire. The Investment Manager works closely with investee
companies to manage wholesale electricity price risk, and is
actively investigating alternatives for certain PPAs of investee
companies that are expiring within the next two years.
The banking market for renewable energy projects remains
challenging. There is limited availability of senior bank debt for
renewable energy projects of up to 20 megawatts, which is the
typical size range for investee companies of the Company. Lending
margins and arrangement fees remain high by historical standards,
and banks are unwilling to lend over the same term as they did in
the past. Although the reduced availability and increased cost of
senior bank debt have made it more difficult to finance renewable
energy projects, this 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 successfully with investee
companies to access non-bank sources of senior debt to finance
projects.
It should be noted that existing investments of the Company are
not impacted by the current lending environment for renewable
energy projects.
Temporis Capital LLP
Investment Manager
29 October 2014
Directors and Advisers
Directors
Alan Moore (Chairman)
Paul Thomas
Colin Wood
Company Secretary
The City Partnership (UK) Limited
Thistle House
21 Thistle Street
Edinburgh
EH2 1DF
Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
Principal Banker
Barclays Bank Plc
1 Churchill Place
London
E14 1DF
Investment Manager & Registered Office
Temporis Capital LLP
Berger House
36/38 Berkeley Square
London
W1J 5AE
Registrar
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Broker
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
VCT Taxation Adviser
PricewaterhouseCoopers LLP
1 Embankment Place
London
WC2N 6RH
Solicitors
Howard Kennedy LLP
No.1 London Bridge
London
SE1 9BG
Independent Review Report to Ventus 2 VCT plc
Introduction
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six month period ended 31 August 2014 which comprises the Condensed
Statement of Comprehensive Income, the Condensed Statement of
Financial Position, the Condensed Statement of Changes in Equity,
the Condensed Statement of Cash Flows and the related explanatory
notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of and
has been approved by the Directors. The Directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this half-yearly
financial report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Conduct Authority and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms
of engagement or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six month period ended
31 August 2014 is not prepared, in all material respects, in
accordance with International Accounting Standard 34, as adopted by
the European Union, and the Disclosure and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
BDO LLP
Chartered Accountants
London,
United Kingdom
29 October 2014
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Condensed Statement of Comprehensive Income
For the six month period ended 31 August 2014 (unaudited)
Ordinary Shares "C" Shares "D" Shares Total
Revenue Capital Total Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Realised gain
on
investments - 95 95 - - - - - - - 95 95
Net unrealised
gain on
investments - 671 671 - 519 519 - - - - 1,190 1,190
Income 596 - 596 417 - 417 - - - 1,013 - 1,013
Investment
management
fees 3 (55) (166) (221) (41) (123) (164) (5) (14) (19) (101) (303) (404)
Other expenses (104) (8) (112) (50) - (50) (7) - (7) (161) (8) (169)
-------- -------- ------- -------- -------- ------- -------- -------- ------- -------- -------- -------
Profit/(loss)
before
taxation 437 592 1,029 326 396 722 (12) (14) (26) 751 974 1,725
Taxation 4 (13) 13 - (26) 26 - 3 (3) - (36) 36 -
Profit/(loss)
and total
comprehensive
income
attributable
to equity
shareholders 424 605 1,029 300 422 722 (9) (17) (26) 715 1,010 1,725
-------- -------- ------- -------- -------- ------- -------- -------- ------- -------- -------- -------
Return per
share
Basic and
diluted
return per
share
(p) 5 1.74 2.48 4.21 2.65 3.73 6.38 (0.60) (1.14) (1.74)
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 Company's
Condensed Statement of Comprehensive Income, prepared in accordance
with the recognition and measurement principles of International
Financial Reporting Standards as adopted by the European Union. The
revenue and capital columns shown above constitute supplementary
information prepared under the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" 2009 ("SORP") published by the Association of
Investment Companies.
The accompanying notes below form an integral part of these
financial statements.
Condensed Statement of Comprehensive Income
For the six month period ended 31 August 2013 (unaudited)
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 - (126) (126) - - - - (126) (126)
Net unrealised gain
on investments - 330 330 - 188 188 - 518 518
Income 543 - 543 253 - 253 796 - 796
Investment management
fees 3 (56) (167) (223) (38) (113) (151) (94) (280) (374)
Other expenses (117) (48) (165) (55) - (55) (172) (48) (220)
-------- -------- ------- -------- -------- ------- -------- -------- -------
Profit/(loss) before
taxation 370 (11) 359 160 75 235 530 64 594
Taxation 4 (28) 39 11 (30) 28 (2) (58) 67 9
Profit and total
comprehensive income
attributable to
equity shareholders 342 28 370 130 103 233 472 131 603
-------- -------- ------- -------- -------- ------- -------- -------- -------
Return per share
Basic and diluted
return per share
(p) 5 1.40 0.12 1.52 1.15 0.91 2.06
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 Company's
Condensed Statement of Comprehensive Income, prepared in accordance
with the recognition and measurement principles of International
Financial Reporting Standards as adopted by the European Union. The
revenue and capital columns shown above constitute supplementary
information prepared under the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" 2009 ("SORP") published by the Association of
Investment Companies.
The accompanying notes below form an integral part of these
financial statements.
Condensed Statement of Financial Position
as at 31 August 2014 (unaudited)
As at 28 February
As at 31 August 2014 2014
(unaudited) (audited)
Ordinary "C" "D" Ordinary "C"
Shares Shares Shares Total Shares Shares Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Non-
current assets
Investments 6 16,405 12,939 712 30,056 16,339 12,941 29,280
Trade and other
receivables 7 771 - - 771 745 - 745
17,176 12,939 712 30,827 17,084 12,941 30,025
--------- -------- -------- --------- --------- -------- ---------
Current assets
Trade and other
receivables 272 528 5 805 287 419 706
Cash and cash
equivalents 925 808 1,203 2,936 562 519 1,081
1,197 1,336 1,208 3,741 849 938 1,787
--------- -------- -------- --------- --------- -------- ---------
Total assets 18,373 14,275 1,920 34,568 17,933 13,879 31,812
--------- -------- -------- --------- --------- -------- ---------
Current liabilities
Trade and other
payables (74) (48) (10) (132) (236) (46) (282)
Net current
assets 1,123 1,288 1,198 3,609 613 892 1,505
--------- -------- -------- --------- --------- -------- ---------
Net assets 18,299 14,227 1,910 34,436 17,697 13,833 31,530
--------- -------- -------- --------- --------- -------- ---------
Equity attributable
to equity holders
Share capital 6,097 2,832 498 9,427 6,097 2,832 8,929
Capital redemption
reserve 2,105 - - 2,105 2,105 - 2,105
Share premium - - 1,438 1,438 - - -
Special reserve 13,575 7,725 - 21,300 13,575 7,770 21,345
Capital reserve
- realised (10,716) (1,339) (17) (12,072) (10,860) (1,242) (12,102)
Capital reserve
- unrealised 7,014 4,744 - 11,758 6,553 4,225 10,778
Revenue reserve 224 265 (9) 480 227 248 475
Total equity 18,299 14,227 1,910 34,436 17,697 13,833 31,530
--------- -------- -------- --------- --------- -------- ---------
Basic and diluted
net asset value
per share (p) 8 75.0 126.1 95.9 72.6 122.1
Approved by the Board and authorised for issue on 29 October
2014.
Alan Moore
Chairman
Ventus 2 VCT plc. Registered No: 05667210
The accompanying notes below form an integral part of these
financial statements.
Condensed Statement of Changes in Equity
for the six month period ended 31 August 2014 (unaudited)
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
2014 6,097 2,105 - 13,575 (10,860) 6,553 227 17,697
Transfers of
unrealised
gains
on
investments
to realised
gains
on
investments - - - - 210 (210) - -
Profit/(loss)
and total
comprehensive
income for
the
period - - - - (66) 671 424 1,029
Dividends paid
in the period - - - - - - (427) (427)
------------------- ----------------------- ------------------- ------------------- ---------------------------- ------------------------------ ------------------- -------------------
At 31 August
2014 6,097 2,105 - 13,575 (10,716) 7,014 224 18,299
------------------- ----------------------- ------------------- ------------------- ---------------------------- ------------------------------ ------------------- -------------------
Capital Capital Capital
Share redemption Share Special reserve reserve Revenue
capital reserve premium reserve realised unrealised reserve Total
"C" Shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2014 2,832 - - 7,770 (1,242) 4,225 248 13,833
Shares buyback
for Treasury
in the period - - - (45) - - - (45)
Profit/(loss)
and total
comprehensive
income for
the
period - - - - (97) 519 300 722
Dividends paid
in the period - - - - - - (283) (283)
------------------- ----------------------- ------------------- ------------------- ---------------------------- ------------------------------ ------------------- -------------------
At 31 August
2014 2,832 - - 7,725 (1,339) 4,744 265 14,227
------------------- ----------------------- ------------------- ------------------- ---------------------------- ------------------------------ ------------------- -------------------
Capital Capital Capital
Share redemption Share Special reserve reserve Revenue
capital reserve premium reserve realised unrealised reserve Total
"D" Shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2014 - - - - - - - -
Shares issued
in the period 498 - 1,489 - - - - 1,987
Issue costs - - (51) - - - - (51)
Loss and total
comprehensive
income for
the
period - - - - (17) - (9) (26)
------------------- ----------------------- ------------------- ------------------- ---------------------------- ------------------------------ ------------------- -------------------
At 31 August
2014 498 - 1,438 - (17) - (9) 1,910
------------------- ----------------------- ------------------- ------------------- ---------------------------- ------------------------------ ------------------- -------------------
Capital Capital Capital
Share redemption Share Special reserve reserve Revenue
capital reserve premium reserve realised unrealised reserve Total
Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2014 8,929 2,105 - 21,345 (12,102) 10,778 475 31,530
Shares issued
in the period 498 - 1,489 - - - - 1,987
Issue costs - - (51) - - - - (51)
Transfers of
unrealised
gains
on
investments
to realised
gains
on
investments - - - - 210 (210) - -
Shares buyback
for Treasury
in the period - - - (45) - - - (45)
Profit/(loss)
and total
comprehensive
income for
the
period - - - - (180) 1,190 715 1,725
Dividends paid
in the period - - - - - - (710) (710)
------------------- ----------------------- ------------------- ------------------- ---------------------------- ------------------------------ ------------------- -------------------
At 31 August
2014 9,427 2,105 1,438 21,300 (12,072) 11,758 480 34,436
------------------- ----------------------- ------------------- ------------------- ---------------------------- ------------------------------ ------------------- -------------------
The ordinary share fund's revenue reserve includes GBP84,000 of
income which is considered to be unrealised.
The revenue reserve and realised capital reserve are
distributable reserves. The special reserves may be used to fund
buy-backs and pay dividends if they are considered by the Board to
be in the interests of the shareholders.
The accompanying notes below form an integral part of these
financial statements.
Condensed Statement of Changes in Equity
for the six month period ended 31 August 2013 (unaudited)
Capital Capital Capital
Share redemption Special reserve reserve Revenue
capital reserve reserve realised unrealised reserve Total
Ordinary
Shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2013 6,105 2,097 13,592 (10,367) 5,550 540 17,517
(Loss)/Profit
and total
comprehensive
income for
the
period - - - (302) 330 342 370
Dividends paid
in the period - - - - - (427) (427)
------------------- ----------------------- ----------------------- ------------------- ------------------- --------------- ---------------
At 31 August
2013 6,105 2,097 13,592 (10,669) 5,880 455 17,460
------------------- ----------------------- ----------------------- ------------------- ------------------- --------------- ---------------
Capital Capital Capital
Share redemption Special reserve reserve Revenue
capital reserve reserve realised unrealised reserve Total
"C" Shares GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2013 2,832 - 7,874 (591) 1,874 104 12,093
(Loss)/Profit
and total
comprehensive
income for
the
period - - - (85) 188 130 233
Dividends paid
in the period - - (100) - - (103) (203)
------------------- ----------------------- ----------------------- ------------------- ------------------- --------------- ---------------
At 31 August
2013 2,832 - 7,774 (676) 2,062 131 12,123
------------------- ----------------------- ----------------------- ------------------- ------------------- --------------- ---------------
Capital Capital Capital
Share redemption Special reserve reserve Revenue
capital reserve reserve realised unrealised reserve Total
Total GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 March
2013 8,937 2,097 21,466 (10,958) 7,424 644 29,610
(Loss)/Profit
and total
comprehensive
income for
the
period - - - (387) 518 472 603
Dividends paid
in the period - - (100) - - (530) (630)
------------------- ----------------------- ----------------------- ------------------- ------------------- ---------------
At 31 August
2013 8,937 2,097 21,366 (11,345) 7,942 586 29,583
------------------- ----------------------- ----------------------- ------------------- ------------------- --------------- ---------------
The accompanying notes below form an integral part of these
financial statements.
Condensed Statement of Cash Flows
for the six month period ended 31 August 2014 (unaudited)
Six months ended 31 August 2014 Six months ended 31 August 2013
(unaudited) (unaudited)
Ordinary Ordinary
Shares "C" Shares "D" Shares Total Shares "C" Shares Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cash flows from operating activities
Investment income
received 596 424 - 1,020 482 99 581
Deposit interest
received - - - - - 1 1
Investment
management fees
paid (222) (164) (18) (404) (222) (151) (373)
Other cash payments (284) (164) (2) (450) (165) (75) (240)
Net cash (used in)/
from operations 90 96 (20) 166 95 (126) (31)
Taxes paid - - - - (40) (6) (46)
Net cash (outflow)/
inflow from
operating
activities 90 96 (20) 166 55 (132) (77)
Cash flows from investing activities
Purchases of
investments (10) - (712) (722) (869) (107) (976)
Disposals of
investments - 1 - 1 - - -
Proceeds from
investments 710 520 - 1,230 352 - 352
Net cash
inflow/(outflow)
from investing
activities 700 521 (712) 509 (517) (107) (624)
Cash flows from financing activities
"D" shares issued - - 1,987 1,987 - - -
"D" share issue
costs - - (51) (51) - - -
Dividends paid (427) (283) - (710) (427) (203) (630)
"C" share repurchase - (45) - (45) - - -
Net cash
inflow/(outflow)
from financing
activities (427) (328) 1,936 1,181 (427) (203) (630)
Net
increase/(decrease)
in cash and cash
equivalents 363 289 1,203 1,855 (889) (442) (1,331)
Cash and cash
equivalents at the
beginning of the
period 562 519 - 1,081 1,637 1,248 2,885
Cash and cash
equivalents at the
end of the period 925 808 1,203 2,936 748 806 1,554
The accompanying notes below form an integral part of these
financial statements.
Explanatory Notes to the Condensed Financial Statements
for the six month period ended 31 August 2014 (unaudited)
1. Accounting convention and policies
The unaudited half-yearly results which cover the six month
period ended 31 August 2014 have been prepared on the basis of
accounting policies set out in the statutory accounts of the
Company for the year ended 28 February 2014. The half-yearly
financial statements have been prepared under IAS 34 Interim
Financial Reporting.
The accounting policies are consistent with those of the
previous financial year. The standards and interpretations
applicable for the first time that have been adopted are IFRS 10,
11, 12 and amendments to IAS 27 & 28. The Directors do not
expect the accounting policies to change over the current financial
year.
2. Publication of non-statutory accounts
These are not statutory accounts in accordance with S436 of the
Companies Act 2006 and the nancial information for the six month
period ended 31 August 2014 and 31 August 2013 have not been
audited but have been reviewed by the auditor.
Statutory accounts in respect of the year ended 28 February 2014
have been audited and reported on by the auditor and delivered to
the Registrar of Companies and included the report of the auditor
which was unquali ed and did not contain a statement under S498(2)
or S498(3) of the Companies Act 2006.
No statutory accounts in respect of any period after 28 February
2014 have been reported on by the auditor or delivered to the
Registrar of Companies.
3. Investment management fees
The Company pays the Investment Manager an annual management fee
equal to 2.5% of the Company's net assets. The fee is not subject
to VAT and is payable quarterly in advance. The annual management
fee is allocated 75% to capital and 25% to revenue. Total annual
running costs are in aggregate capped at 3.6% of NAV (excluding the
Investment Manager's performance fee, any irrecoverable VAT and
investment costs), with any excess being borne by the Investment
Manager.
The amount paid to the Investment Manager for the six month
period ended 31 August 2014 in respect of net asset value
attributable to ordinary shareholders was GBP221,000 (six month
period ended 31 August 2013: GBP223,000). The amount paid to the
Investment Manager for the six month period ended 31 August 2014 in
respect of the net assets attributable to the "C" shareholders was
GBP164,000 (six month period ended 31 August 2013: GBP151,000). The
amount paid to the Investment Manager for the six month period
ended 31 August 2014 in respect of the net assets attributable to
the "D" shareholders was GBP19,000 (six month period ended 31
August 2013: GBPnil).
4. Taxation
The Company has accrued GBPnil tax charge for the six month
period ended 31 August 2014 in the ordinary share fund (six month
period ended 31 August 2013: tax credit GBP11,000), GBPnil tax
charge in the "C" share fund (six month period ended 31 August
2013: tax charge GBP2,000) and GBPnil tax charge in the "D" share
fund. The tax charges are accrued using an effective tax rate of
23% for the 2013/14 tax year and 21% for the 2014/15 tax year,
however dividends and capital gains are not subject to tax
resulting in a lower effective tax rate than the standard
applicable rate in the UK.
A deferred tax asset of GBP13,000 has been recognised in the
ordinary share fund corresponding to a tax loss carried forward.
The Directors expect the Company to make sufficient taxable profits
in the future against which the tax loss may be offset.
5. Basic and diluted return per share
For the six month period ended 31 August 2014
(unaudited) Ordinary Shares "C" Shares "D" Shares
Revenue return for the period p per share 1.74 2.65 (0.60)
Based on:
Revenue return for the period GBP'000 424 300 (9)
Weighted average number of shares in issue number of shares 24,392,655 11,314,224 1,488,332
Capital gain for the period p per share 2.48 3.73 (1.14)
Based on:
Capital gain for the period GBP'000 605 422 (17)
Weighted average number of shares in issue number of shares 24,392,655 11,314,224 1,488,332
Net profit for the period p per share 4.21 6.38 (1.74)
Based on:
Net gain for the period GBP'000 1,029 722 (26)
Weighted average number of shares in issue number of shares 24,392,655 11,314,224 1,488,332
For the six month period ended 31 August 2013
(unaudited) Ordinary Shares "C" Shares
Revenue return for the period p per share 1.40 1.15
Based on:
Revenue return for the period GBP'000 342 130
Weighted average number of shares in issue number of shares 24,422,655 11,329,107
Capital gain for the period p per share 0.12 0.91
Based on:
Capital gain for the period GBP'000 28 103
Weighted average number of shares in issue number of shares 24,422,655 11,329,107
Net profit for the period p per share 1.52 2.06
Based on:
Net gain for the period GBP'000 370 233
Weighted average number of shares in issue number of shares 24,422,655 11,329,107
There were no differences between basic and diluted return per
ordinary share, per "C" share or per "D" share because no dilutive
instruments had been issued or granted.
6. Investments
Ordinary Shares "C" Shares "D" Shares Total
Six months
ended 31
August 2014 Shares Loan stock Total Shares Loan stock Total Shares Loan stock Total Shares Loan stock Total
(unaudited) GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening
position
Opening cost 10,042 5,893 15,935 5,457 3,740 9,197 - - - 15,499 9,633 25,132
Opening
realised
losses (4,234) (1,228) (5,462) (264) (17) (281) - - - (4,498) (1,245) (5,743)
Opening
unrealised
gains 5,397 469 5,866 3,784 241 4,025 - - - 9,181 710 9,891
Opening fair
value 11,205 5,134 16,339 8,977 3,964 12,941 - - - 20,182 9,098 29,280
During the
period
Purchases at
cost 12 - 12 - - - 712 - 712 724 - 724
Conversion
of loan to
equity 300 (300) - 300 (301) (1) - - - 600 (601) (1)
Investment
proceeds * (306) (406) (712) - (520) (520) - - - (306) (926) (1,232)
Realised
gains 95 - 95 - - - - - - 95 - 95
Unrealised
gains/
(losses) 694 (23) 671 520 (1) 519 - - - 1,214 (24) 1,190
Closing fair
value 12,000 4,405 16,405 9,797 3,142 12,939 712 - 712 22,509 7,547 30,056
Closing
position
Closing cost 10,354 5,187 15,541 5,757 2,919 8,676 712 - 712 16,823 8,106 24,929
Closing
realised
losses (4,139) (1,228) (5,367) (264) (17) (281) - - - (4,403) (1,245) (5,648)
Closing
unrealised
gains 5,785 446 6,231 4,304 240 4,544 - - - 10,089 686 10,775
Closing fair
value 12,000 4,405 16,405 9,797 3,142 12,939 712 - 712 22,509 7,547 30,056
* Investment proceeds in the period ended 31 August 2014
includes GBP306,000 of liquidation proceeds received from BEL
Holdco Limited. The Company retains the contractual rights to the
cash flows from the asset and so the asset has not been
derecognised.
During the period GBP210,000 of unrealised gains in the value of
shares held by the ordinary share fund were transferred to realised
gains.
Ordinary Shares "C" Shares Total
Year ended
28 February
2014 Shares Loan stock Total Shares Loan stock Total Shares Loan stock Total
(audited) GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening
position
Opening
cost 9,773 7,264 17,037 5,447 3,422 8,869 15,220 10,686 25,906
Opening
realised
losses (4,329) (1,740) (6,069) - - - (4,329) (1,740) (6,069)
Opening
unrealised
gains 4,543 320 4,863 1,788 86 1,874 6,331 406 6,737
Opening
fair value 9,987 5,844 15,831 7,235 3,508 10,743 17,222 9,352 26,574
During the
year
Purchases
at cost 50 692 742 10 401 411 60 1,093 1,153
Disposal
proceeds (352) (682) (1,034) - (83) (83) (352) (765) (1,117)
Conversion
of loan
stock to
shares 848 (848) - - - - 848 (848) -
Realised
losses (182) (21) (203) (264) (17) (281) (446) (38) (484)
Unrealised
gains 854 149 1,003 1,996 155 2,151 2,850 304 3,154
Closing
fair value 11,205 5,134 16,339 8,977 3,964 12,941 20,182 9,098 29,280
Closing
position
Closing
cost 10,042 5,893 15,935 5,457 3,740 9,197 15,499 9,633 25,132
Closing
realised
losses (4,234) (1,228) (5,462) (264) (17) (281) (4,498) (1,245) (5,743)
Closing
unrealised
gains 5,397 469 5,866 3,784 241 4,025 9,181 710 9,891
Closing
fair value 11,205 5,134 16,339 8,977 3,964 12,941 20,182 9,098 29,280
The shares held by the Company represent equity holdings in
unquoted UK companies. The Investment Manager's Report above
provides details in respect of the Company's shareholding in each
investment. The investments acquired and disposed of during the
period are detailed in the Investment Manager's Report.
Under IFRS 7 and IFRS 13, 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 31 August 2014, 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
factors used (which range from 9.5% to 11.5%), 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 (which are taken from specialist consultant reports).
As at 28 February 2014, the value of the Company's investment in
Eye Wind Power Limited, North Pickenham Energy Limited, Bernard
Matthews Green Energy Pickenham Limited, Weston Airfield
Investments Limited and Bernard Matthews Green Energy Weston
Limited were determined on a discounted cash flow basis, whereas
previously the investments were valued on the basis of the price of
recent investment. The impact of the change of valuation basis is
discussed in the Investment Manager's report.
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
GBP1,077,000 or 6.6% higher. The application of the downside
alternative discount factor would have resulted in the total value
of all investments having been GBP967,000 or 5.9% 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 GBP938,000 or 7.3% higher. The
application of the downside alternative discount factor would have
resulted in the total value of its investments having been
GBP838,000 or 6.5% 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.
7. Trade and other receivables (non-current)
At 31 August 2014, the ordinary share fund held non-current
trade receivables totalling GBP771,000 (28 February 2014:
GBP745,000) which represents the amortised cost value of the
outstanding balance of the consideration arising from the Company's
sale of Craig Wind Farm Limited plus the accrued interest on the
outstanding balance. The accrued interest in respect of the
deferred consideration amounted to GBP84,000 at 31 August 2014 (28
February 2014: GBPnil). This has been treated as unrealised revenue
in the revenue reserve.
8. Basic and diluted net asset value per share
The net asset value per ordinary share of 75.0p as at 31 August
2014 (31 August 2013: 71.5p; 28 February 2014: 72.6p) is based on
net assets attributable to the ordinary shareholders of
GBP18,299,000 (31 August 2013: GBP17,460,000; 28 February 2014:
GBP17,697,000) divided by 24,392,655 ordinary shares in issue at
that date (31 August 2013: 24,422,655 ordinary shares; 28 February
2014: 24,392,655 ordinary shares).
The net asset value per "C" share of 126.1p as at 31 August 2014
(31 August 2013: 107.0p; 28 February 2014: 122.1p) is based on net
assets attributable to the "C" shareholders of GBP14,227,000 (31
August 2013: GBP12,123,000; 28 February 2014: GBP13,833,000)
divided by 11,283,207 "C" shares in issue at that date (31 August
2013: 11,329,107 "C" shares; 28 February 2014: 11,329,107 "C"
shares).
The net asset value per "D" share of 95.9p as at 31 August 2014
is based on net assets attributable to the "D" shareholders of
GBP1,910,000 divided by 1,990,768 "D" shares in issue at that
date.
9. Dividends
A final dividend for the year ended 28 February 2014 of 1.75p
per ordinary share was paid to ordinary shareholders on 6 August
2014.
An interim dividend of 2.0p per ordinary share has been declared
for the six month period ended 31 August 2014 which will be paid on
14 January 2015 to all ordinary shareholders on the register as at
close of business on 12 December 2014.
A final dividend for the year ended 28 February 2014 of 2.50p
per "C" share was paid to "C" shareholders on 6 August 2014.
An interim dividend of 3.0p per "C" share has been declared for
the six month period ended 31 August 2014 which will be paid on 14
January 2015 to all "C" shareholders on the register as at close of
business on 12 December 2014.
10. Contingencies, guarantees and financial commitments
The contingencies, guarantees and financial commitments of the
Company were disclosed in the annual report and financial
statements for the year ended 28 February 2014. All the guarantees
disclosed therein remain in force, along with those described
below.
On 3 June August 2014, the Company registered a share charge
over its shares in Osspower Limited to GCP Hydro 1 Limited as
security for a senior loan facility of GBP7.0 million raised by
Osspower Limited to finance the construction costs of its hydro
projects. The liability of the Company under this charge of shares
is limited to the value of the Company's investment in shares of
Osspower Limited.
On 9 September 2014, the Company registered a share charge over
its shares in Bernard Matthews Green Energy Halesworth Limited to
GCP Onshore Wind 1 Limited as security for a senior loan facility
of GBP8.4 million raised by Bernard Matthews Green Energy
Halesworth Limited to finance the construction costs of its 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
Bernard Matthews Green Energy Halesworth Limited.
11. Related party transactions
The investee companies in which the Company has a shareholding
of 20% or more are considered to be related parties. The
significant changes to the balances and transactions with these
companies are presented in the Investment Manager's Report. The
aggregate balances at the period end and transactions with these
companies during the six month period ended 31 August 2014 are
summarised below.
As at 31 August 2014 (unaudited)
Ordinary Shares "C" shares "D" shares Total
GBP000 GBP000 GBP000 GBP000
Balances as at 31 August 2014 (unaudited)
Investments - shares 11,965 9,797 712 22,474
Investments - loan stock 4,405 3,142 - 7,547
Accrued interest income 215 385 - 600
Transactions in the six months ended 31
August 2014 (unaudited)
Loan stock interest income 272 210 - 482
Dividend income 294 206 - 500
As at 31 August 2013 (unaudited)
Ordinary Shares "C" shares Total
GBP000 GBP000 GBP000
Balances as at 31 August 2013 (unaudited)
Investments - shares 10,292 7,433 17,725
Investments - loan stock 5,123 3,605 8,728
Accrued interest income 219 200 419
Transactions in the six month period
ended 31 August 2013 (unaudited)
Loan stock interest income 287 217 504
Dividend income 227 35 262
As at 28 February 2014 (audited)
Ordinary Shares "C" shares Total
GBP000 GBP000 GBP000
Balances as at 28 February 2014 (audited)
Investments - shares 10,796 8,977 19,773
Investments - loan stock 5,134 3,964 9,098
Accrued interest income 244 303 547
Transactions in the year ended 28 February 2014 (audited)
Loan stock interest income 384 433 817
Dividend income 222 330 552
12. Report distribution
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 will also be available in the
Financial Reports section of the Company's website
www.ventusvct.com. Any shareholder who wishes to receive
notification of reports by email or post may request this by
contacting the Registrar, Capita Registrars, The Registry, 34
Beckenham Road, Beckenham, Kent, BR3 4TU.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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