Ventus 2 VCT plc Annual Report & Financial Statements for the year ended 28 February 2011 CONTENTS 01 Chairman’s Statement 26 Statement of Directors’ Responsibilities 33 Group Statement of Changes in Equity 04 Investment Manager’s Report 27 Directors and Advisers 34 Company Statement of Changes in Equity 15 Directors’ Report 28 Independent Auditor’s Report 36 Group Statement of Cash Flows 20 Directors’ Remuneration Report 29 Group Statement of Comprehensive Income 37 Company Statement of Cash Flows 22 Corporate Governance Statement 31 Group Balance Sheet 38 Notes to the Financial Statements 25 Directors’ Information 32 Company Balance Sheet 60 Notice of Annual General Meeting Ventus 2 VCT plc invests in companies that develop, construct and operate renewable energy projects. Registered No: 5667210 Cover and back cover: Greenfield Wind Farm Limited in West Lothian. (Photograph: José Vega-Lozano) CHAIRMAN’S STATEMENT I present the Annual Report and Financial Statements of Ventus 2 VCT plc (the “Company”) for the year ended 28 February 2011. Overview Group for the year ended 28 February 2011 was Net Asset Value and Results – “C” Shares £1,729,000 and was wholly attributable to the This has been a challenging year for the ordinary As reported in the Half-yearly Report, on 8 Company’s shareholders. share fund, principally as a result of technical February 2010 the Company launched a second problems which have arisen during joint “C” share offer with Ventus VCT plc. The commissioning of waste wood biomass fuelled offer closed on 31 May 2010, the Company Net Asset Value, Results and Dividends – projects in some of our investee companies. having allotted 4,404,421 “C” shares, resulting in Ordinary Shares This is covered in more detail on page 2. Issues net proceeds of £4,162,000 after issue costs. have also arisen involving internal control which At the year end, the net asset value of the At the year end, the net asset value of the “C” are being addressed by the Board together with ordinary share fund of the Company stood at share fund of the Company stood at the Investment Manager. Despite these £18,629,000 or 75.9p per ordinary share (2010: £10,468,000 or 92.4p per “C” share. The difficulties, the UK renewable market remains £10,356,000 or 84.3p per ordinary share). The revenue profit attributable to “C” shareholders attractive and the Company’s investment revenue profit attributable to ordinary for the year was £91,000 or 0.84p per “C” share. portfolio and pipeline offer promise for the future. shareholders for the year was £734,000 or 3.29p The capital loss attributable to “C” shareholders per ordinary share. The capital loss attributable for the year was £166,000 or 1.52p per “C” to ordinary shareholders for the year was share, resulting in a net loss to “C” shareholders Merger with Ventus 3 VCT plc £2,388,000 or 10.70p per ordinary share, for the year of £75,000 or 0.68p per “C” share resulting in a net loss to ordinary shareholders As explained in the Half-yearly Report, on 6 May (2010: net loss of £163,000 or 2.67p per “C” for the year of £1,654,000 or 7.41p per ordinary 2010 the Company completed a scheme of share). share (2010: net loss of £798,000 or 7.08p per reconstruction with Ventus 3 VCT plc (the ordinary share). The value of investments held by the “C” share “Scheme” or “Merger”). The terms of the fund of the Company at 28 February 2011 was Scheme were set out in a circular issued by the The value of investments and investments in £3,960,000 (2010: £325,000). The Investment Company on 8 February 2010. The Scheme was subsidiaries held by the ordinary share fund of Manager’s Report gives details of investments effected by Ventus 3 VCT plc transferring its the Company at 28 February 2011 was made during the year, together with information assets and liabilities to the Company, in £17,106,000 compared to £8,434,000 at 28 about the valuation of all investee company consideration for which the Company issued February 2010. The Investment Manager’s holdings within the portfolio. 12,250,311 new ordinary shares to the Report gives details of investments made during shareholders of Ventus 3 VCT plc. Further details the year, together with information about the The income generated in the “C” share fund of in respect of the Merger are presented in the valuation of all investee company holdings within the Company during the year comprised interest Directors’ Report on pages 15 to 19. the portfolio. earned on loan stock, UK treasury bills and cash deposits. Total income for the period to In acquiring the assets of Ventus 3 VCT plc, the The income generated in the ordinary share fund 28 February 2011 was £262,000, of which Company now has a shareholding of 60% of the of the Company during the year comprised £227,000 was derived from loan stock. This ordinary shares issued by each of Redeven dividend income and interest earned on loan compares with income generated by the “C” Energy Limited and Spurlens Rig Wind Limited. stock and cash deposits. Total income for the share fund of £31,000 in the year ended These shareholdings constitute controlling year to 28 February 2011 was £1,127,000 28 February 2010. The primary reason for the interests and therefore these companies are compared to £376,000 for the year ended 28 increase in income is the progress made in subsidiaries of the Company. The consolidated February 2010. The increased income was making investments over the year (as described financial statements of the Company and its primarily attributable to loan interest income and in more detail below) which has allowed the subsidiaries (the “Group”) are presented in this dividend income from investments, including share fund to accrue interest income from its report. those acquired from Ventus 3 VCT plc. loan stock investments. The Company has declared a final dividend of The Company has not declared a dividend in 1.00p per ordinary share to be paid on 10 Group Net Asset Value and Results respect of the “C” shares because, although the August 2011 to all ordinary shareholders on the share fund has made a net revenue profit for the At the year end, the net asset value of the Group register as at the close of business on 15 July year, it has yet to accumulate sufficient revenue attributable to equity shareholders stood at 2011. An interim dividend of 1.50p per ordinary reserves from which to make a significant £29,099,000. The Group was formed during the share was paid on 12 January 2011. Therefore, distribution. year as a result of the Company acquiring a the total annual dividend is 2.50p per ordinary controlling interest in two investee companies share. subsequent to the Merger. The net loss of the 01 CHAIRMAN’S STATEMENT Continued Investments PBM was the first of the three companies to in light of the issues encountered at the other construct its waste wood biomass plant and two plants and as such the Board has decided The Company’s Investment Manager, Climate commence generation. The plant at PBM has to record an unrealised write-down of £355,000 Change Capital Limited, continues to be actively experienced technical issues which have led to in respect of the Company’s investment in engaged in managing the portfolio and in unplanned outages and expenditure beyond Twinwoods. The Company now therefore values identifying and negotiating potential investment budget. These issues have led the Company its investments in Sandsfield and Twinwoods at opportunities to invest the remaining “C” share and the Investment Manager to re-assess the £2,096,000 and £2,045,000 respectively. The capital that has been raised. The investments electricity generation expectations and carrying value of these assets includes accrued made, dividends paid and capital raised operational expenditure requirements of the interest income on mezzanine loan stock with constitute the important events of the year. plant. The Company has an investment in the these companies of £250,000 and £45,000 As at 28 February 2011, the ordinary share fund ordinary shares of PBM of £574,000 and is owed respectively, which has not been recognised as of the Company held investments in 17 £530,000 by PBM in respect of amounts that revenue in the Statement of Comprehensive companies (2010: 18 companies) with a total have been advanced to fund PBM’s operating Income as the timing of receipt of these value of £17.1 million (2010: £8.4 million). During expenses. Your Board resolved that it was amounts is uncertain. the year the Company acquired investments appropriate at this stage to record write-downs It is important that the Board makes you aware from Ventus 3 VCT plc with a fair value of £9.4 of the full balances of both the investment in the of the basis on which the valuations were million. As at 28 February 2011, the “C” share ordinary shares of PBM and the amount determined for those investments. There are a fund held an investment in seven companies receivable relating to PBM’s operating expenses. number of key assumptions behind each (2010: one company) with a value of £4.0 million The write-down related to PBM is therefore valuation, the most important being the (2010: £0.3 million). £1,104,000. Further detail in respect of the availability of the plant, the generating capacity, impairment charge against the amount The Investment Manager’s Report provides operating expenses, the regime for sourcing receivable from PBM is presented in note 4 of details of the investments held as at waste wood as fuel for the sites, the discount the financial statements.