TIDMGV1O
RNS Number : 5323J
Gresham House Renewable EnergyVCT1
22 December 2020
Gresham House Renewable Energy VCT 1 plc
(the "VCT" or the "Company")
Final results for the year ended 30 September 2020
The VCT is pleased to announce its final results for the year
ended 30 September 2020.
The Company's Annual Report and Financial Statements for the
year ended 30 September 2020 are linked to this announcement
http://www.rns-pdf.londonstockexchange.com/rns/5323J_1-2020-12-22.pdf
, available on the Company's website at:
https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/gresham-house-renewable-energy-vct-1-plc/
and can be found at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
LEI: 213800IVQHJXUQBAAC06
For further information, please contact:
Gresham House Asset Management t.hayes@greshamhouse.com
Tania Hayes Tel: 020 3875 9860
JTC (UK) Limited - Company Secretary GreshamVCTs@jtcgroup.com
Ruth Wright Tel: 44 203 846 9774
FINANCIAL HIGHLIGHTS
30 30 September
September 2019
2020 Pence
Pence
Net asset value per Ordinary
Share and 'A' Share 106.8 117.2
---------- ------------
Cumulative Dividends paid 51.3 45.5
---------- ------------
Total return per Ordinary Share
and 'A' Share 158.1 162.7
---------- ------------
CHAIR'S STATEMENT
From March 2020 the global economy has been rocked by the
extraordinary events of the coronavirus pandemic. The reduction in
economic activity has led to a material fall in power prices whilst
lockdowns have led to large changes in the way businesses function.
In spite of this, the Board has been able to meet virtually to
review the investments as well as go about its normal business,
whilst the Investment Adviser, Administrator and other key service
providers have been able to operate effectively with robust systems
and staff working from home.
Renewables remains an asset class which offers investors
exposure to highly defensive earnings, with a low correlation to
other asset classes. This has become increasingly important during
challenging market conditions such as those we have experienced
since the onset of the pandemic. The VCT continues to be well
positioned in this regard, given its large proportion of contracted
revenues, subsidies and diversified asset base.
Overall performance, both technical and in terms of income
received in the year has been slightly below budget as maintenance
issues occurred at some of the older assets, and these could not be
quickly resolved due to the restrictions on movements during
lockdown.
I am delighted to say that these problems are in the course of
being rectified and we expect the assets in question to perform
well in the future having been technically upgraded.
The valuation of the portfolio has fallen by 2.1% or 2.5p per
share before the payment of dividends. There are a number of
factors that affect the valuation of the portfolio and these are
described in more detail below and in the Investment Adviser's
report. The VCT has continued to offer investors a mature,
steady-yielding environmentally-friendly infrastructure investment
and has delivered the best total returns since inception when
compared to other Clean Energy VCTs launched in the same year, and
is in the top 40% of all VCTs of that vintage, on a NAV Total
Return basis.
Investment portfolio
At the year end, the VCT held a portfolio of 16 investments,
which were valued at GBP30.4 million. There were two additions to
the portfolio during the year, being a new investment of GBP0.6
million into bio- bean Limited in October 2019 and a new investment
of GBP1.0 million into Rezatec Limited in January 2020. The VCT
invested into these non-renewable energy assets to ensure that the
VCT continued to meet all the HMRC rules relating to qualifying
status which is clearly vital to protect shareholders' tax relief
on both dividends and investment. There have been no exits during
the year.
The portfolio is analysed (by value) between the different types
of assets as follows:
Ground-mounted
Solar 81.7%
Rooftop Solar 8.9%
Small Wind 3.9%
Non-renewable
assets 5.5%
The Board has reviewed the investment valuations at the year
end, with a particular focus on ensuring the discount factors
applied in the discounted cash flow model are in line with the
industry standard. By way of reminder, the NAV represents the fair
market valuation of the VCT's portfolio and, in the case of the
renewable energy assets, is based on a discounted cash flow
analysis over the life of each of the VCT's assets. The assumptions
which underpin the valuation are provided by the Investment Adviser
and the Board has satisfied itself as to the calculation
methodology and assumptions.
Focusing on the key assumptions a 50 to 75 basis point reduction
was applied to the discount rate used in the valuation of the
assets compared with the rate used last year, resulting in a range
of discount rates from 5.50% to 6.75% used across the portfolio
(2019: 6.0% to 6.75%). This reduction in discount rates increases
the holding value of the assets by GBP1.0 million, or 3.7p per
share. Offsetting the benefit of the lower discount rates is a
reduction in inflation expectations and as mentioned previously,
power prices. This has resulted in a net unrealised decline in the
value of the portfolio totalling GBP0.6 million, or 2.5p per share.
The Board considers that this is the fair value for the portfolio,
having discussed it at length with the Investment Adviser and
having compared the valuation metrics to those used by other market
participants. In addition, the Board commissioned an independent
valuation of the assets by a leading professional adviser
experienced in advising on renewables transactions in the UK which
confirmed the Board's judgement. The non-renewable energy
investments have been valued in line with the International Private
Equity Valuation ("IPEV") Guidelines and are held at a value of
GBP1.7 million.
Net asset value and results
At 30 September 2020, the Net Asset Value ("NAV") per Ordinary
Share stood at 106.7p and the NAV per 'A' Share stood at 0.1p,
producing a combined total of 106.8p per "pair" of Shares (2019:
NAV per Ordinary Share of 117.1p, NAV per A Share of 0.1p and a
combined total of 117.2p). This represents a decrease of 4.6p
(3.9%) per share, before the deduction of dividends. Following the
dividend payment of 5.3133p per Ordinary Share and 0.4867p per 'A'
Share in December 2019, this has resulted in an overall decrease of
10.4p (8.9%) per share.
Total dividends paid to date for a combined holding of one
Ordinary Share and one 'A' Share stand at 51.3p (2019: 45.5p). The
NAV Total Return (NAV plus cumulative dividends) has decreased by
2.8% in the last year and now stands at 158.1p, compared to the
cost to investors in the initial fundraising of GBP1.00 or 70.0p
net of income tax relief of 30%.
The loss on ordinary activities after taxation for the year was
GBP1.1 million (2019: profit of GBP808,000), comprising a revenue
loss of GBP358,000 (2019: GBP411,000) and a capital loss of
GBP754,000 (2019: capital gain of GBP1,219,000) as shown in the
Income Statement.
Dividends
On 3 December 2020, the Board declared dividends in respect of
the year ended 30 September 2020 of 5.3133p per Ordinary Share and
0.4867p per 'A' Share. These dividends will be paid on 31 December
2020 to Shareholders on the register at 11 December 2020.
Fundraising and investment activities
In March and September 2018, the VCT undertook two small top-up
offers for subscription and raised a total of GBP5.7 million.
As stated above the reason for raising these funds was to enable
the VCT to make a small number of new VCT qualifying investments to
protect its qualifying ratio in the face of changes to VCT
rules.
In October 2019, the VCT invested a portion of this funding into
bio-bean Limited, a company that recycles used coffee grounds into
efficient, sustainable products for both consumer and industrial
applications. In January 2020, the VCT invested a further GBP1.0
million into Rezatec Limited, a geospatial data analytics company.
Both companies have weathered the pandemic relatively well.
bio-bean lost its initial supply of waste coffee grounds, however
due to a large stockpile of waste coffee grounds and efforts by
management to diversify supply, the impact on the business is not
expected to be significant in the long term. Rezatec has continued
to win new clients and has not been materially affected by the
pandemic. bio-bean and Rezatec are being held at cost and slightly
above cost respectively.
The VCT continues to meet its VCT compliance tests and following
these investments does not need to make any further investments in
order to retain VCT qualifying status.
Continuation Vote
At the forthcoming Annual General Meeting in March 2021 the
Directors are required to put an ordinary resolution to
Shareholders that the VCT should continue as a venture capital
trust for a further five year period.
The Board highlights the fact that this VCT has performed very
well when compared to its peers in the VCT market. The VCT owns a
portfolio of assets that benefit from Government-backed incentive
schemes within a VCT wrapper providing tax-free dividends for
investors. Since the VCT was established, the VCT Regulations have
been changed so that they now preclude VCTs from investing in these
types of assets and it is, therefore, no longer possible to
replicate this portfolio, making renewable energy assets, with
index- linked revenue streams benefitting from a tax-free wrapper
increasingly rare. The duration of the structure is also
attractive, in that the returns are earned over almost 15 years. If
the VCT were to continue as a VCT, it is expected that it would
continue to offer Shareholders a steady tax free income stream
around the current level for a few more years, rising to higher
levels during the second half of the VCT's 25-year lifetime. The
current projections indicate cumulative dividends of between 150p
and 160p over the lifetime.
The Board therefore recommends a vote in support of the
resolution allowing the continuation of the VCT as a venture
capital trust for a further five years. If the resolution is
carried the Board will continue to operate the VCT in the existing
manner, although the Directors will review the investment strategy
and management arrangements at regular intervals with a particular
focus on the management of ageing assets to ensure that the maximum
possible return to shareholders is achieved.
A vote in favour of continuing does not preclude the VCT from
making arrangements to support the disposal of shares by some
Shareholders. However, Shareholders should be aware that the VCT
has little capacity to buy shares back and the investment therefore
has limited liquidity. This is expanded upon later in the
statement.
If the resolution is not passed, the Directors will be required
to draw up proposals for the voluntary liquidation, reconstruction
or other reorganisation of the VCT for submission to the members of
the VCT at a general meeting to be convened by the Directors for a
date not more than four months after the date of the Annual General
Meeting. The time frame for a liquidation, winding up or
reconstruction could be lengthy as the assets are held in a complex
structure with substantial loans embedded within it, making a rapid
sale unlikely. Shareholders should not expect any distribution of
funds for some time following any decision to discontinue the VCT.
Should a decision to wind up the VCT be taken, the Directors will
pay particular attention to those Shareholders who will still be in
their initial five-year holding period and arrange matters so as to
ensure that their income tax relief is not withdrawn.
In the event that the VCT votes to continue and VCT 2 not to
continue or vice versa, the Board of the VCT voting to continue
would consider what options were available to them. One of the
Directors' main priorities is to retain VCT status and it will be
very challenging to find a solution for one VCT to continue as a
qualifying VCT by itself.
Share Buybacks
The Board has decided that the VCT will not be buying in Shares
for the foreseeable future as highlighted in the Interim Results,
as the VCT needs to conserve such cash as it generates for the
running of the VCT and the payment of dividends.
The Board is however aware that from time to time some
Shareholders may wish to realise part or all of their investment
and has therefore taken steps to try to ensure that there is a
liquid market in the VCT's shares. Shareholders considering selling
their Shares should contact the broker for the VCT.
Board composition
The Board comprises four Non-executive directors with a broad
range of experience, and we continue to work closely with the Board
of the sister company, VCT2.
2020 Annual General Meeting
The VCT's 2020 Annual General Meeting ("AGM") was materially
affected by the COVID-19 pandemic. The VCT's AGM was originally
intended to proceed on 17 March 2020, but, in response to the
Government's guidance at the time and with the wellbeing of
Shareholders and other attendees in mind, the Directors resolved to
postpone the AGM.
The AGM was then rescheduled for 25 June 2020 and in light of
COVID-19 and in accordance with the Government guidance the VCT
implemented special measures, including the imposition of entry
restrictions. The Board did not take this decision easily, but
considered this to be in our Shareholders' best interests.
The majority of the resolutions proposed to the meeting were
passed at the AGM, however, Resolutions 8 and 9, which permitted
the directors to raise funds through the issue of new shares, were
not passed.
The Board was disappointed that Resolutions 8 and 9 were not
passed as the money raised would only have been used in exceptional
circumstances to protect the VCT status.
The VCT engaged with those Shareholders who had voted against
the resolutions and on review of the feedback provided by those
Shareholders, it appears that the Board's rationale for the
proposing of resolutions 8 and 9 has been misunderstood.
The Board is committed to transparency on all matters, and
intends to put Resolutions 8 and 9 forward at the 2021 AGM as it
believes this to be in the best interests of all Shareholders. The
Board will not raise funds unless this is required in order to
protect shareholders' tax position.
2021 Annual General Meeting
The continuing COVID-19 pandemic has led to the imposition of
severe restrictions on public gatherings. In light of the UK
Government's current guidance the Board has concluded that
Shareholders will therefore not be permitted to attend the AGM in
person for this financial year. The VCT understands and respects
the importance of the AGM to Shareholders however the health and
safety of our Shareholders and the broader community is of
paramount importance.
The AGM will instead be held online, and Shareholders will be
able to access the AGM by electronic means. To register to attend
the AGM, Shareholders can click here: https://
greshamhouse.com/gresham-house- renewable-vcts-agm-registration/.
The AGM will take place on 4 March 2021 at 11.00 a.m. and will
include a question and answer session with the Board and the
Investment Adviser. The live stream of the AGM will include a
facility for questions to be submitted, however in order to cover
as many questions as possible we would appreciate it if
Shareholders submit their questions to the Board before the
meeting. Shareholders are invited to submit questions via email at
renewablevcts@greshamhouse.com or by contacting Gresham House
Investor Relations by telephone on 020 3875 9862 by no later than
noon on 3 March 2021.
Shareholders are being asked to participate in the meeting and
ensure their votes are counted by submitting their proxy
electronically or by post as soon as possible, and these must be
received by no later than 11.00 a.m. on 2 March 2021.
We will continue to monitor the evolving impact of the COVID-19
pandemic and if it becomes necessary to make changes to the
proposed format of the AGM we will inform Shareholders as soon as
possible.
Outlook
Looking ahead to Brexit we do not expect this to have a
significant impact on the VCT's operations. The nature of the
investments held by the VCT, fixed assets with long term contracts
and subsidies, not reliant on significant human or other resources
for daily operations, limits the vulnerability to disruption. The
Investment Adviser and the Administrator are both well- resourced
and UK based. Key subcontractors and suppliers have been reviewed
to assess their robustness under any restrictions that might arise
under a no deal Brexit scenario and risks have been found to be
minimal and manageable. Power prices could rise in the event of
supply disruption from Europe but this event would generally be
positive for the VCT.
The Board and the Investment Adviser are mindful of all aspects
of Environmental, Social and Governance ("ESG") as they affect the
operation of the VCT. The Board reviews this regularly and is
delighted that the VCT was recently awarded the London Stock
Exchange Green Economy Mark.
While COVID-19 presents an unprecedented challenge to the
country and to the economy, any impact of COVID-19, and the
government's response to it, should remain relatively limited under
normal operations. The Board believes that the long-term outlook
for the portfolio as a whole remains positive, with returns from
the installed base of assets expected to continue to generate
steady cash flows, so enabling the payment of steady or rising
dividends.
Gill Nott
Chairman
15 December 2020
INVESTMENT ADVISER'S REPORT
Portfolio Highlights
Gresham House Renewable Energy VCT1 plc (the "VCT", formerly
Hazel Renewable Energy VCT1 plc) remains principally invested in
the renewable energy projects that it has owned for nine years on
average, with the value of these projects representing well over
90% of the value of the portfolio. The total generation capacity of
assets owned by the VCT is 34.8MWp. The VCT also has two venture
capital investments.
The vast majority of the assets held by the VCT generate solar
power. The solar assets are relatively old compared to other solar
farms across the UK - they are older than 95% of total solar
capacity in the UK. This means that the VCT's solar farms have
secured higher incentives than 95% of the solar installations in
the UK.
The total revenue from renewable energy generation was
GBP11,070,969 and of this, GBP10,041,130 was from government
incentives and inflation-linked contracts. The total revenue from
the renewable assets was 93% of budget, stemming from both lower
generation (97% of budget) and lower power prices (95% of
budget).
The downside of having older assets is that they break down and
require more maintenance to keep them operating effectively.
Technical issues at two of the sites which required significant
repair were exacerbated by delays in repairs in part caused by
COVID-19, whilst the economic impacts of the pandemic on the wider
economy reduced the revenue at two other sites which have exposure
to the wholesale power price. Both these issues are being resolved,
with the impacted sites undergoing significant works over Winter
2020 to replace older, obsolete equipment with newer designs whilst
the sales price for power is being locked-in at higher rates as
older variable price power purchase agreements expire.
In terms of performance, the solar irradiation has been stronger
than projected during the year but not all of the increase was
captured by the assets. The efficiency of solar photovoltaic panels
is lower in the heat and some of the older inverters, which are
approaching the end of their intended working life, have suffered
technical problems, including failures in cooling systems in the
hot weather associated with high-irradiation days. The VCT has
built up cash reserves in order to replace older or failed
equipment, mainly expected to be the inverters, after 10 years.
With some assets demonstrating poor performance and given the
challenges to maintain these sites during the COVID-19 lockdowns,
projects to repair or replace certain components have been
accelerated.
The COVID-19 pandemic began having a serious impact on the UK
economy in March 2020. This has had the following effects on the
value and operations of the portfolio:
- Power prices, which were already weakening towards the end of 2019, have fallen further and significantly since early 2020 and remain subdued compared to both last year and budget. The VCT is, however, to a great extent protected from this as only 9% of revenues come from wholesale power sales. This relatively low exposure to power prices for a renewable generating portfolio is considered to be a benefit that outweighs the corresponding challenges of having an older asset base that requires increased attention and maintenance.
- Government safe working guidelines caused delays in performing
repairs and Operations and Maintenance ("O&M") work. Whilst
solar generating assets can normally perform with relatively little
day-to-day human interaction, the age of the portfolio means human
intervention is required regularly. The portfolio has suffered
performance issues with some of this older equipment during the
year, and with certain suppliers and contractors having to travel
from overseas to make repairs, the travel restrictions have
impacted on output and performance, as repairs to failed equipment
were delayed substantially. The Investment Adviser ensured that the
O&M contractors adhered to safe working protocols and has
worked with them to mitigate the impacts of travel restrictions and
safe working obligations.
- In addition, all works had to be suspended on solar
installations on residential roof-mounted installations as
engineers were not permitted to enter properties during
lockdown.
- As a result of the expenditure required to combat the
pandemic, the Government reversed the cuts in Corporation Tax that
were set to apply from 1 April 2020, negatively impacting on future
distributable profits and cash flows from the underlying
investments.
- With much of the portfolio's revenue (as well as the
third-party debt owed by the portfolio) being inflation linked,
higher inflation increases the profitability of the assets and
therefore their value. With the significant economic shock and the
resulting Government actions to mitigate any long-term impacts,
there are likely to be effects on inflation. In the short term, the
inflation expectations have been reduced, having a negative impact
on valuation, with the long term remaining at the levels previously
projected.
During the year, the VCT made two new investments. GBP615,000
was invested in October 2019 into bio-bean Limited, the world's
largest recycler of waste coffee grounds, which produces
sustainable, clean fuels as well as advanced biochemical for use in
the food industry.
In January 2020, GBP1,000,000 was invested into Rezatec Limited,
a software developer that applies Artificial Intelligence based
algorithms to a range of earth observation data sources (satellite
imagery, soil data, weather data, topographic data etc.) to
generate an information services platform to help monitor
land-based assets in the forestry, agriculture and infrastructure
verticals.
The payment of an annual dividend of 5.8p (5.3133p per Ordinary
Share and 0.4867p per A Share) was announced on 3 December 2020,
and this will be paid on 31 December 2020.
Portfolio Composition
Portfolio Composition by Asset Type and Impact on NAV
30 September 2020 30 September 2019
Value % of Portfolio Value % of Portfolio
Asset Type kWp ('000) Value ('000) Value
------------------- -------------------- ------------------- --------------------- --------------
Ground-mounted Solar
(FIT) 20,325 GBP22,580 74.2% GBP22,387 75.7%
------------------- -------------------- ------------------- --------------------- --------------
Ground-mounted Solar
(ROC) 8,699 GBP2,276 7.5% GBP3,044 10.3%
------------------- -------------------- ------------------- --------------------- --------------
Total ground-mounted
Solar 29,024 GBP24,856 81.7% GBP25,431 86.0%
------------------- -------------------- ------------------- --------------------- --------------
Rooftop Solar (FIT) 4,314 GBP2,696 8.9% GBP2,920 9.9%
------------------- -------------------- ------------------- --------------------- --------------
Total Solar 33,338 GBP27,552 90.6% GBP28,351 95.9%
------------------- -------------------- ------------------- --------------------- --------------
Wind Assets (FIT) 1,420 GBP1,188 3.9% GBP1,221 4.1%
------------------- -------------------- ------------------- --------------------- --------------
Total renewable generating
assets 34,758 GBP28,740 94.5% GBP29,572 100.0%
------------------- -------------------- ------------------- --------------------- --------------
Venture Capital Investments N.A. GBP1,688 5.5% - 0.0%
TOTAL 34,758 GBP30,428 100.0% GBP29,572
------------------- -------------------- ------------------- --------------------- --------------
100.0%
------------------- -------------------- ------------------- --------------------- --------------
The 34.8MWp of renewable energy projects in the portfolio
generated 32,860,999 kilowatt-hours of electricity over the year,
sufficient to meet the annual electricity consumption of 9,500
homes. The Investment Adviser estimates that the carbon dioxide
savings achieved by generating this output from solar and wind
versus gas-fired power, are equivalent to what 19,000 mature trees
would remove from the atmosphere.
Portfolio Summary
Almost 95% of the portfolio value, and over 99% of the income
for the portfolio, is derived from the renewable energy generation
assets.
The performance against budget is shown below:
Portfolio Revenues by Asset Type (GBP Sterling)
Forecast Actual Revenue Revenue
Asset Type Revenue Performance
Ground-mounted Solar
(FIT) 8,985,321 8,247,893 91.8%
----------------- ------------------------ --------------------
Ground-mounted Solar
(ROC) 1,287,266 1,285,459 99.9%
----------------- ------------------------ --------------------
Rooftop Solar 1,239,757 1,174,688 94.8%
----------------- ------------------------ --------------------
Wind Assets 453,385 362,928 80.1%
TOTAL 11,965,729 11,070,968
----------------- ------------------------ --------------------
92.52%
----------------- ------------------------ --------------------
The revenue is affected by:
- Renewable energy resources (solar irradiation or wind, as relevant);
- The performance of the assets in converting the resources into
revenue (i.e. how the assets are performing, any technical issues,
etc); and
- The revenue per unit of energy generated.
It is clear from the table above that the variance at the
ground-mounted solar farms was most material, given their size,
accounting for GBP739,235 of the GBP894,760 revenue shortfall
compared to budget. The causes are shown in the chart below:
Ground-mounted Solar Revenues Variation of from Forecast to
Actual Revenue (GBP Sterling)
Impact Impact
Forecast of of Output Actual
Asset Type Revenue Price changes Revenue
changes
Ground-mounted Solar
(FIT) 8,985,321 (43,925) (693,503) 8,247,893
--------------- ----------------- -------------- ----------------
Ground-mounted Solar
(ROC) 1,287,266 (160,664) 158,857 1,285,459
--------------- ----------------- -------------- ----------------
TOTAL 10,272,587 (204,589) (534,646) 9,533,352
--------------- ----------------- -------------- ----------------
Overall, 91% of income is inflation linked (either through the
FIT, ROC or contracts for the sale of electricity), with those
assets having price exposure being the ROC projects. Thus, they
suffered a larger impact of the significant reduction in market
pricing for power. However, it was the high revenue FIT projects
that suffered the technical issues that caused significant fall in
output despite the high irradiation during the year.
These themes will be expanded on below.
Renewable energy resources
The portfolio is heavily weighted to solar (96% by capacity of
the renewable assets, and 91% of total portfolio).
During the year, the assets benefited from more solar resources
than budgeted, with solar irradiation being 107% of forecast for
the full year. Irradiation was below forecast from October 2019 to
February 2020, followed by a very strong spring, with the overall
outperformance partially surrendered through poor July and August
irradiation.
Technical Performance
The table below shows the technical performance for each of the
groups of assets.
Portfolio Technical Performance by Asset Type (kWh)
Forecast Actual Output Technical
Asset Type Output Performance
Ground-mounted Solar
(FIT) 20,373,397 18,800,941 92.3%
---------------- ----------------------- -------------------
Ground-mounted Solar
(ROC) 8,481,640 9,528,330 112.3%
---------------- ----------------------- -------------------
Total Ground-mounted
Solar 28,855,037 28,329,271 98.2%
---------------- ----------------------- -------------------
Rooftop Solar 3,620,429 3,475,577 96.0%
---------------- ----------------------- -------------------
Total Solar 32,475,466 31,804,848 97.9%
---------------- ----------------------- -------------------
Wind Assets 1,319,387 1,056,151 80.0%
TOTAL 33,794,853 32,860,999
---------------- ----------------------- -------------------
97.2%
---------------- ----------------------- -------------------
The old equipment that caused the reduction in output is being
replaced over winter 2020/21 which should improve both the
performance and reliability whilst removing the reliance on
overseas contractors.
It is worth noting that the impact of pricing and output was not
the same across the assets. This is shown by splitting the impacts
between the FIT and ROC assets, below.
The key variance in the technical performance is from the
Ground-mounted solar (FIT) performance that was significantly
behind budget. This is largely the result of technical issues at
Kingston Farm and Lake Farm (each solar farm with 4.98MW capacity).
Both of these assets have central inverters that were state- of-the
art when built in 2011, but which are now no longer the best
technical solution for solar farms. These inverters suffered
significant component breakdowns during the spring lock- down, when
irradiation was high. The supplier is not based in the UK and the
pandemic led to significant delays in being able to get their
specialist engineers and components on site in order to effect
repairs. This has significantly reduced the ability of the plants
to operate over the summer months. There were already projects
ongoing to replace these older inverters with newer, more efficient
and easier to maintain string inverters at these sites.
Contractors have been engaged to complete the repair and
replacement works this winter.
The performance at Kingston Farm was 84% of budget, with Lake
Farm at 79%. Between them, these assets represent over 27% of
forecast generation and so this poor technical performance has been
material overall.
As solar installations age some of the key components, e.g.
inverters, need to be replaced as they reach the end of their
expected useful life. All of the assets are now approaching this
stage and have experienced some loss of generation due to faults in
this older equipment. The Investment Adviser reviews the
performance of these components on a regular basis and is working
with contractors to arrange for the renewal and replacement of the
less reliable parts across all sites as required.
The work will be funded using cash reserves that have been built
up under the debt facility agreements to fund this type of
work.
During the pandemic, the Investment Adviser issued updated
health and safety guidance to contractors reflecting guidelines and
directives issued by the UK Government. There was a negative impact
on corrective and preventative maintenance work schedules as a
result of this. Some of these restrictions have been eased and
where possible, contractors have been instructed to find other
solutions that can be implemented without breaching health and
safety policies and Government directives.
Generation of the rooftop solar portfolio was 4% lower than
forecast. Irradiation cannot be measured at roof-mounted solar
installations as it is not cost effective to install pyranometers,
but there is no reason to assume that the irradiation at these
sites was materially below forecast. However, no access was
possible to any residential properties during the periods of
lockdown, unless it was for health and safety reasons (this was not
required). The Investment Adviser is working with the O&M
contractors to get access to the rooftop installations that are
underperforming, to effect repairs as soon as possible.
The small wind portfolio performed 20% lower than forecast,
continuing the poor performance experienced in recent years. Small
wind accounts for only 4.1% of the portfolio in terms of capacity.
There is an ongoing repair programme for this portfolio focused on
retaining the best assets in terms of future cashflow
expectations.
Revenue per kilowatt hour of renewable energy generated
The UK government has used several mechanisms to encourage
investment into renewable energy generation, including the Feed in
Tariff ("FIT") and Renewables Obligation Certificate ("ROC")
support mechanisms.
The VCT's renewable assets benefit from these schemes which
provide revenues predominantly linked to the Retail Price Index
("RPI"). As the costs, and perceived risks, of building new
renewable energy generating capacity have fallen, so have the value
of the incentives offered for new installations. For example, an
asset that generates electricity from solar power that was
commissioned and accredited for the FIT before the end of July 2011
currently receives over 39 pence for every kilowatt hour (kWh) of
electricity it produces (with the added extra of a floor price
support to ensure it may also sell this power at a reasonable
price). The incentives for new capacity have fallen consistently
since the assets owned by the VCT were commissioned, and new solar
installations built today receive no such incentives and must rely
on selling power for their income. In the 9 months to the end of
September 2020 the average spot price (day ahead) price of power
was 3.1 pence per kWh so a new asset selling power at the spot
price would earn 3.1 pence whereas an older solar asset, like some
of those owned by the VCT, could earn 3.9 pence per kWh for
exporting the power (given the FIT export price floor) plus 39.28
pence per kWh FIT generation revenue.
The significance of these government backed incentives is shown
by the following chart. VCT Portfolio, Revenue profile during
period 1 October 2019 - 30 September 2020
This shows that of the total revenues of GBP11,070,968 in the
year, GBP9,551,418 or 86% was earned from government backed
incentives for generating renewable electricity (GBP8,731,619 of
generation revenue provided under the FIT and GBP819,799 from
ROCs). A further GBP489,712 is inflation linked, either through the
FIT export floor price for selling electricity or contracts for the
sale of electricity, taking the government backed and RPI linked
revenues to 91% of total.
Such a high proportion of income that is fixed by Government, is
RPI linked and is not exposed to wholesale power prices, is a
significant driver of value in this portfolio. This has enabled it
to be largely insulated from the very significant reduction in the
wholesale price of electricity experienced since the new year, and
greatly exacerbated by the COVID-19 pandemic.
The majority of the price variance occurred in the
Ground-mounted Solar (ROC) plants at Ayshford Farm (5.47 MW
capacity) and Priory Farm (3.23 MW). Whilst the Ground- mounted
(FIT) assets have achieved their projected revenue of 44 pence per
kWh, the ROC assets only achieved 13 pence per kWh which was 89% of
the 15 pence per kWh budgeted. These assets were exposed to the
market prices and, when the pandemic hit (combined with
historically low gas prices), the power price fell significantly to
under 2 pence per kWh, compared to the budgeted price of over 4
pence per kWh. Ayshford Farm has now fixed its price at 4.4 pence
per kWh until mid-2021; Priory is already in a long term contract
but with market price exposure and a floor price for power.
Operating Costs
The vast majority of the cost base is fixed and/ or contracted
and includes rent, business rates, and regular O&M costs as the
major categories.
The main cost item that shows variability from year-to-year is
repair and maintenance costs. Repair and maintenance spend
involving solar panels and inverters, the key components of a solar
project, is covered by the maintenance reserves. These reserves
totalled GBP3.1 million and are in place for all the ground-mounted
solar assets and for the majority of the roof-mounted solar assets.
The other significant maintenance cost is for the small wind
portfolio that continues to suffer performance issues. The cost of
this maintenance has increased during the year as there are few
contractors capable of maintaining the turbines and the effort to
do so has increased with the age of the fleet.
New Investments
In October 2019, the VCT made a new investment of GBP615,000
into bio-bean Limited, the world's largest recycler of waste coffee
grounds. This investment represented 15% of the GBP4 million
funding round announced by bio-bean in April 2019. The VCTs'
investment formed the final part of that round, and valued bio-bean
at GBP7.6 million on an Enterprise Value basis. The investment
comprised of GBP400,000 of equity and GBP215,000 of debt.
Bio-bean sources waste coffee grounds from major retail coffee
chains by offering the cheapest and most sustainable avenue for
disposing of them. bio-bean then converts these into pellets for
combustion in biomass- fed energy generators or coffee logs for use
in wood burning stoves, which it sells through large supermarket
and home improvement chains as well as online. Natural Coffee
Extract for use in the food industry is also produced from the
waste coffee grounds.
The COVID-19 pandemic has had a negative impact on bio-bean as
the company is dependent on the continuous supply of waste coffee
grounds from major coffee retail chains. The lockdown meant that
these deliveries were completely suspended for a while and were at
reduced volumes afterwards. However, due to a large stockpile of
waste coffee grounds, efforts by management to diversify supply
(albeit at an increased acquisition price), robust demand for its
clean fuels, and a careful approach by management with a focus on
minimising cash burn, this has meant that the impact on the
business is not expected to be significant in the long term.
At the time of the VCT's investment, its advanced biochemicals
business centred around producing Natural Coffee Extract and
Natural Coffee Flavour (advanced biochemicals for use in the food
chain). This business was in its early stages of development, but
with significant growth projected following the investment as the
products and markets are developed. Natural Coffee Extract, made
from waste coffee grounds, has successfully gone through the
regulatory approval process that permits its use in the food chain,
and bio- bean has successfully made its first sale of the product
to a global flavour and fragrances company. This is a significant
milestone for the long-term development of the business.
In January 2020, the VCT invested GBP1 million into Rezatec
Limited, a software developer that applies Artificial Intelligence
based algorithms to a range of earth observation data sources
(satellite imagery, soil data, weather data, topographic data etc.)
to infrastructure verticals. Access to the platform is sold, on a
subscription-basis, to commercial forestry operators for inventory
management (analysis of current state of forest assets) and as an
ongoing monitoring tool, to utility infrastructure owners for water
pipeline, hydroelectric dam and power transmission network risk
analyses, and to agriculture companies processing crops, for yield
and logistics optimisation.
Rezatec has won over key industry players in countries around
the world that include the USA, Canada and India which have large
forestry and agricultural sectors as well as infrastructure over a
large physical footprint.
The VCT's investment was part of a GBP5.0 million round into
which the Baronsmead VCTs, managed by Gresham House Asset
Management Ltd, also invested.
Rezatec has not seen a meaningful impact on its business as a
result of the COVID-19 pandemic. Its platform is designed to help
its customers increase efficiency, and sales pipeline conversion
does not require physical meetings. It has sufficient funding in
place not to necessitate further fundraising until the end of 2021,
even if pipeline conversion slows down. The management team
nevertheless took the prudent approach of suspending new
hiring.
The pandemic and the uncertainty it brought has resulted in an
extended sales conversion time, but Rezatec has successfully won
new deals since the time of the investment.
Portfolio Valuation
The Net Asset Value ("NAV") of the renewable portfolio is
comprised of the valuation of future projected cash flows generated
by the renewable energy assets, as wel as the cash held by the
companies in the portfolio and the cash held by the VCT. The NAV of
the overall portfolio also includes the value of new investments in
bio-bean and Rezatec. The total return is the value of net assets
and the cash that has been distributed to shareholders since
launch.
The future cash flow projections for renewable assets are
impacted by:
- Renewable resources. Despite this year having higher solar
irradiation than budgeted, we have not changed the assumptions on
irradiation.
- Technical performance. As noted above, there were significant
performance issues at two of the ground-mounted FIT solar farms.
The failed inverters are to be replaced over the winter period and
so the output is projected to improve back to budgeted levels going
forward.
- Prices. Power price forecasts have been impacted by COVID-19
and so the forecasts have been updated to reflect this.
- Costs. Up-to-date costs for the assets are included,
reflecting all commercial negotiations and also expectations for
lower maintenance costs after the older assets are repaired.
- Corporation tax. The previously announced reduction in
corporation tax has been reversed, so the projections have also
reflected this.
- Inflation. With most of the revenues being linked to RPI, any
increase in inflation projections increases the overall
profitability, and therefore valuation of the assets. The
short-term projections for inflation have fallen, largely as a
result of COVID-19.
Once the free cash projected to be generated by the assets is
calculated, the value of these cash flows has to be estimated. The
Investment Adviser notes that these cash flows are supported by a
very high proportion of government backed and index linked
revenues. In the current financial market, such cash flows are
dependable and therefore valuable. This has resulted in a slight
reduction in the discount rates used (increasing the valuations)
which reflects the Investment Adviser's experience in the market
and evidence of third party transactions.
In particular, the discount rates used to value the future cash
flows from the ground mounted solar assets have been reduced by 50
to 75 basis points (0.5% - 0.75%) compared to the rates used last
year. These are the assets that have the highest levels of FiT and
ROC income and so the Investment Adviser believes that the stable
and predictable cash flows generated by these assets are very
attractive, justifying the lower discount rate. The discount rates
used to value the renewable assets are now in the range of 5.50% to
6.75% (2019: 6.0% to 6.75%). This reduction in discount rates
increases the holding value of the assets by GBP1.0 million. The
Investment Adviser notes that the VCT commissioned an independent
review of the valuation of the renewable assets to consider both
the Investment Adviser's valuation of the assets and the potential
realisation proceeds should the portfolio be sold. This exercise,
performed by a leading adviser involved with the sale of many
renewable assets in the UK, confirmed that valuation is reasonable,
in light of conservative asset life assumptions as well as
uncertain timings and costs to realise a portfolio that includes
long term, third party debt.
The value of new investments in bio-bean and Rezatec has been
determined using International Private Equity Valuation Guidelines
and are held at a valuation of GBP1.7 million, marginally higher
(GBP70,000) than the cost of investment.
Outlook
The Investment Adviser's immediate focus is to ensure that the
underperforming assets are repaired as quickly and cost effectively
as possible, despite the restrictions imposed by the COVID-19
pandemic.
Wholesale power prices, which have a small representation in the
portfolio's revenues, are outside the Investment Adviser's control,
however opportunities will be sought to enter long-term power
purchase agreements (contracts to sell the power) if prices spike
up in a quicker than anticipated fashion.
Contractors will continue to be monitored to assess whether they
are doing everything that is allowable within the rules and
regulations to improve performance at the older ground- mounted
sites that have suffered from a drop in technical performance, as
well as all the other sites that have continued to perform well.
Any changes to safe working regulations are monitored closely so
that generation can be restored at the small percentage of rooftop
solar installations that are offline as and when restrictions are
relaxed.
The COVID-19 pandemic is likely to have a long-lasting impact.
The renewable generation business, particularly assets with a high
degree of government subsidies, have only suffered a minor impact.
In the event of a prolonged economic slump, these assets may be
favoured to a higher degree than they have been to date by
financial markets, particularly if the unprecedented level of
government stimulus eventually triggers inflation.
Gresham House Asset Management Limited
December 2020
STRATEGIC REPORT
The Directors present the Strategic Report for the year ended 30
September 2020.
The Board have prepared this report in accordance with the
Companies Act 2006.
Business model
The VCT acts as an investment company, investing in a portfolio
of businesses within the renewable and clean energy sectors and
operating as a VCT to ensure that its Shareholders can benefit from
the tax reliefs available.
Business review and developments
The VCT's business review and developments during the year are
set out in the Chairman's Statement, Investment Adviser's Report,
and the Review of Investments.
During the year to 30 September 2020, the investments held
increased by a net value of GBP856,000, due to additions of
GBP1,615,000 offset by net unrealized losses of GBP629,000. Net
gains arising on investment realisations totalling GBP5,000.
The total operating loss for the year was GBP1,112,000 (2019:
GBP808,000 profit) and net assets at the year end were GBP27.3
million (2019: GBP29.9 million). The annual dividend for the year
to 30 September 2019 was paid on 20 December 2019. The annual
dividend for the year to 30 September 2020 was announced on 3
December 2020 and will be paid on 31 December 2020.
The Directors initially obtained provisional approval for the
VCT to act as a Venture Capital Trust from HM Revenue &
Customs. The Directors consider that the VCT has continued to
conduct its affairs in a manner such that it complies with Part 6
of the Income Tax Act 2007.
Investment advisory and administration fees
Gresham House Asset Management Limited ("Gresham House")
provides investment advisory services to the VCT, at a fee
equivalent to 1.15% of net assets. The agreement is for a minimum
term of two years, effective from 7 November 2017, with a nine
month notice period on either side thereafter.
The Board has reviewed the services to be provided by Gresham
House and has concluded that it is satisfied with the strategy,
approach and procedures which are to be implemented in providing
investment advisory services to the VCT. The Board is also of the
opinion that the allocation of the investment advisory fee between
capital and revenue of the VCT, as described in Note 2 to the
financial statements, is still appropriate.
On 22 May 2019 the Board engaged JTC (UK) Limited ("JTC") as
Administrator and Company Secretary, replacing Downing LLP. JTC
provides administration and accounting services to the VCT for a
fee of GBP40,000 (plus VAT, if applicable) per annum. It also
provides company secretarial services for a fee of GBP40,000 (plus
VAT, if applicable) per annum. The agreement, effective from 22 May
2019 shall continue in force until determined by either party, with
a six month notice period on either side.
Trail commission
Historically the VCT had an agreement to pay trail commission
annually to Hazel Capital LLP, in connection with the funds raised
under the Offers for subscription. This was calculated at 0.4% of
the net assets of the VCT at each year end. Out of these funds
Hazel Capital LLP was liable to pay trail commission to financial
intermediaries. The trail commission was payable to Hazel Capital
LLP until the earlier of (i) the sixth anniversary of the closing
of the Offers and (ii) the Investment Advisory Agreement being
terminated. Upon the appointment of Gresham House as Investment
Adviser on 7 November 2017, the agreement with Hazel Capital LLP
was reissued and the new Investment Adviser has agreed to pay
further trail commission to Haibun Partners LLP ("Haibun") and CH1
Investment Partners LLP ("CH1") with an agreement in place
effective 11 July 2019. Payment of trail commission under this
agreement is not deemed to be a related party transaction and is
therefore not disclosed in Note 20 to the financial statements.
Pursuant to historic financial intermediary arrangements with
Hazel Capital LLP, Haibun, of which Stuart Knight is a Designated
Member, and CH1, of which Matthew Evans (Director of Gresham House
Renewable Energy VCT2 plc) is a Designated Member, will continue to
receive trail commission from Gresham House. The trail commission
payable is equal to 0.15% of the net asset value of the shares
issued by the VCT and its sister company, Gresham House Renewable
Energy VCT2 plc ("VCT2"), to Haibun and CH1 clients under each of
the 2010, 2012 and 2014 Offers. The amounts payable to Haibun and
CH1 by Gresham House, in aggregate across both the VCT and VCT2,
are as follows:
Year ended 30 September
2020
Haibun CH1 Total
GBP GBP GBP
------------ ----------- ---------
2010 Offer 19,505 27,015 46,520
------------ ----------- ---------
2020 Offer 1,980 1,980 3,960
------------ ----------- ---------
2014 Offer 1,022 2,219 3,241
Total 22,507 31,214
------------ ----------- ---------
53,721
------------ ----------- ---------
Investment policy
General
The VCT's objectives are to maximise tax free capital gains and
income to Shareholders from dividends and capital distributions by
investing the VCT's funds in:
- a portfolio of clean technology and environmentally
sustainable investments, primarily in the UK and the EU, that have
attractive income and growth characteristics, with investments in
existing asset-backed renewable generation projects as the core of
the portfolio; and
- a range of non-qualifying investments, comprised from a
selection of cash deposits, fixed income funds, securities and
secured loans and which will have credit ratings of not less than A
minus (Standard & Poor's rated)/A3 (Moody's rated). In
addition, as the portfolio of VCT qualifying investments will
involve smaller start-up companies, loans could be made to these
companies to negate the need to borrow from banks and, therefore,
undermine the companies' security within the conditions imposed on
all VCTs under current and future VCT legislation applicable to the
VCT.
Investment strategy
Investee companies generally reflect the following criteria:
- a well-defined business plan and ability to demonstrate strong
demand for its products and services;
- products or services which are cash generative;
- objectives of management and shareholders which are similarly aligned;
- adequate capital resources or access to further resources to
achieve the targets set out in its business plan;
- high calibre management teams;
- companies where the Adviser believes there are reasonable
prospects of an exit, either through a trade sale or flotation in
the medium term; and
- a focus on small and long term renewable energy projects that utilise proven technology.
Asset allocation
During the period the VCT was required to hold 80% of its funds
in VCT qualifying investments. At 30 September 2020, the VCT had a
significant margin over the 80% qualifying holdings requirement.
The VCT aims to maintain a level of up to 90% and therefore its
maximum exposure to qualifying investments will be 90%. The VCT
intends to retain the remaining funds in non-qualifying investments
to fund the annual running costs of the VCT to reduce the risk
profile of the overall portfolio of its fund and to provide
investments which can be realised to fund any follow-on investments
in the investee companies.
It is expected that the VCT shall hold at least eight
investments to provide diversification and risk protection. In
relation to the VCT, no single investment (including most loans to
investee companies) will represent more than 15% of the aggregate
net asset value of its fund save where such investment is in an
investee company which has acquired or is to acquire, whether
directly or indirectly, securities in the following companies: AEE
Renewables UK 3 Limited, AEE Renewables UK 26 Limited, South
Marston Solar Limited, Beechgrove Solar Limited, New Energy Era
Limited and Vicarage Solar Limited.
Risk diversification
The structure of the VCT's funds, and its investment strategies,
have been designed to reduce risk as much as possible.
The main risk management features include:
- portfolio of investee companies - the VCT seeks to invest in
at least eight different companies, thereby reducing the potential
impact of poor performance by any individual investment;
- monitoring of investee companies - the Adviser will closely
monitor the performance of all the investments made by the VCT in
order to identify any issues and to enable necessary corrective
action to be taken; and
- the VCT will ensure that it has sufficient influence over the
management of the business of the investee companies, in
particular, through rights contained in the relevant investment
agreements and other shareholder/constitutional documents.
In respect of the VCT's investment in Lunar 1 Limited and Lunar
2 Limited the VCT has followed the above risk diversification
strategy with regard to their investments in AEE Renewables UK 3
Limited, AEE Renewables UK 26 Limited, South Marston Solar Limited,
Beechgrove Solar Limited, New Energy Era Limited and Vicarage Solar
Limited.
Gearing
The VCT has the ability to borrow up to 15% of its net asset
value* save that this limit shall not apply to any loan monies used
to facilitate the acquisition by the VCT, whether directly or
indirectly, of any shares or securities in certain operational
asset/holding companies**.
It is not intended that the VCT will borrow (other than from
investee companies). As at 30 September 2020, the VCT had the
ability to borrow GBP4.5 million (2019: GBP4.5 million) in
accordance with the articles, and had actual borrowings of GBPnil
(2019: GBPnil). The long-term creditors shown on the Balance Sheet
represent amounts owed to investee companies used to fund dividend
payments. The Board expect these creditors to be repaid in the
future by way of dividends being declared from these companies.
External debt is held by several of the VCT's investee
companies. The VCT has ensured that Lunar 1 Limited and Lunar 2
Limited have borrowed no more than 90% of their respective net
asset values to facilitate the acquisition, whether directly or
indirectly, of any shares or securities in certain operational
asset/holding companies**.
* Following the 2018 AGM the articles of the VCT were amended
such that amounts borrowed from investee companies are now excluded
from the calculation of the 15% borrowing restriction.
** AEE Renewables UK 3 Limited, AEE Renewables UK 26 Limited,
South Marston Solar Limited, Beechgrove Solar Limited, New Energy
Era Limited and Vicarage Solar Limited.
Listing rules
In accordance with the Listing Rules:
(i) the VCT may not invest more than 10%, in aggregate, of the
value of the total assets of the VCT at the time an investment is
made in other listed closed-ended investment funds except listed
closed- ended investment funds which have published investment
policies which permit them to invest no more than 15% of their
total assets in other listed closed- ended investment funds;
(ii) the VCT must not conduct any trading activity which is
significant in the context of the VCT; and
(iii) the VCT must, at all times, invest and manage its assets
in a way which is consistent with its objective of spreading
investment risk and in accordance with its published investment
policy set out in this document. This investment policy is in line
with Chapter 15 of the Listing Rules and Part 6 of the Income Tax
Act.
The Listing Rules have been complied with for the year ended 30
September 2020.
Directors and senior management
The VCT has four Non-executive Directors, comprising one female
and three males. The VCT has no employees.
Key performance indicators
At each Board meeting, the Directors consider a number of
performance measures to assess the VCT's success in meeting its
objectives. The Board believes the VCT's key performance indicators
are Net Asset Value (NAV) Total Return and dividends per share.
These are defined as follows:
Net Asset Value Total Return: the sum of NAV per Ordinary Share,
NAV per 'A' Share and cumulative dividends paid.
Net Asset Value per Ordinary Share: The closing total net asset
position of the VCT as at the reporting date less the total par
value of all 'A' Shares in issue at the reporting date divided by
the total number of Ordinary Shares in issue at the reporting
date.
Net Asset Value per 'A' Share: Par value per 'A' Share.
Cumulative dividends paid: The gross total of all dividends paid
for both Ordinary and 'A' Shares from inception up to the reporting
date.
The VCT aims to increase NAV Total Return each year. As at 30
September 2020, NAV Total Return was 158.1p per share; representing
a decrease of 2.8% (4.6p per share) since 30 September 2019 (NAV
Total Return of 162.7p) which the Directors are disappointed by,
but reflects the challenges faced by the VCT during the year.
The VCT's dividend policy is to distribute surplus funds
generated by the underlying investments, subject to maintaining an
appropriate cash reserve within the VCTs to meet anticipated future
requirements. The VCT has an objective of paying dividends of 5p
per share per annum. In the year ended 30 September 2020, the VCT
paid a dividend of 5.8p per share, therefore exceeding this
KPI.
Brexit
There continues to be uncertainty surrounding the future effects
of Brexit, which has deflated Sterling thus far, and has the
potential to impose restrictions on the free movement of people and
goods. However, as the VCT has, to date, invested solely in UK
assets which generate revenues from contracts with parties based in
the UK, the Board and Investment Adviser believe that, subject to
major economic disruption taking place, the potential impact of
Brexit on the VCT is limited.
COVID-19
COVID-19 has presented an unprecedented challenge to the country
and the economy in 2020, causing a significant drop in power prices
since February and likely long-term inflationary effects are still
to be seen.
Despite this challenging environment, the VCT's assets have
continued to generate steady cashflows and have not suffered any
significant operational disruptions as a result of the
government-imposed restrictions both locally and nationally. The
majority of the VCT's assets are concentrated in solar farms,
which, by their nature, require a relatively low level of human
presence. Furthermore, the VCT has been largely insulated from the
drop in power prices as only 9% of its revenues are generated by
wholesale power sales. As such, the Board and Investment Adviser
believe that COVID-19 will continue to have only a limited impact
on the VCT.
Principal risks and uncertainties
The principal financial risks faced by the VCT, which include
interest rate, market price, investment valuation, credit and
liquidity risks, are summarised within Note 17 to the financial
statements.
Note 17 includes an analysis of the sensitivity of the valuation
of the portfolio to changes in each of the key inputs to the
valuation model.
Other principal risks faced by the VCT have been assessed by the
Board and grouped into the key categories outlined below:
- Underperformance;
- Loss of VCT status;
- VCT Regulations
- Regulatory and compliance;
- Operational; and
- Economic, political and other external factors.
The Board considers the COVID-19 pandemic to be a factor which
exacerbates existing risks, rather than being a new emerging risk
itself. Its impact has been considered within the relevant risks
below.
Schedule of principal risks
The other principal risks faced by the VCT, along with the steps
taken to mitigate these risks, are shown in the table below.
Principal Context Specific risks Possible impact Mitigation
Risk
Investment The VCT holds Poor investment Reduction in The Investment Adviser
Performance investments in decisions or the NAV of the has significant
unquoted UK businesses strategy or poor VCT and the experience
in the renewable monitoring, management inability of in the renewable
energy sector. and realisation the VCT to pay energy
of investments. dividends. sector. The Investment
Adverse weather Adviser also actively
conditions, low manages the portfolio,
inflation rates engaging reputable and
and/or low power experienced Operations
prices due to and
the Maintenance (O&M)
COVID-19 pandemic contractors.
resulting in The assets have
below forecast limited
investment returns. exposure to power
prices,
due to the use of the
Feed in Tariff (FiT)
and Renewable
Obligation
Certificate (ROC)
regimes.
The Board regularly
reviews
the performance of the
portfolio, alongside
the Board of the
sister
company.
------------------------ ----------------------- ------------------------ -----------------------
Loss of The VCT must Breach of any The loss of VCT The VCT Qualification
VCT status maintain continued of the rules status would is actively monitored
compliance with could result result in dividends by the Investment
the VCT Regulations, in the loss of becoming taxable Adviser
which prescribe VCT status. and new Shareholders and the Administrator,
a number of tests losing their who liaise with the
and conditions. initial tax relief. designated
VCT Status Adviser.
The
VCT Status Adviser
also
produces twice yearly
reports for the Board.
------------------------ ----------------------- ------------------------ -----------------------
Legislative In recent years, Increasing difficulty The VCT is not Both the Investment
the changes to for the VCT in able to make Adviser
VCT Regulations making new Qualifying new Qualifying and the Administrator
have narrowed investments. investments. closely monitor
the breadth of A change in government The VCT may not developments
permitted investments. policy could be able to raise and attend AIC
VCTs were established result in a cessation any further funds. conferences.
to encourage of tax reliefs The VCT Status Adviser
private individuals or reduction also has significant
to invest in of the amount experience in this
early stage companies of tax relief field
that are considered available to and works closely with
to be risky and investors which HMRC.
have limited would make them The Investment Adviser
funding options. less attractive engages with HMT and
The state provides to investors. industry
these investors representative
with tax relief. bodies to demonstrate
the cost benefit of
VCTs
to the economy in
terms
of employment
generation
and taxation revenue.
------------------------ ----------------------- ------------------------ -----------------------
Regulatory As a listed entity, Any breaches Reduction in The VCT Secretary and
and compliance the VCT is subject of relevant the NAV of the Administrator have a
to the UK Listing regulations VCT due to financial long history of acting
Rules and related could result penalties and for VCTs. The Board,
regulations. in suspension a suspension Investment Adviser and
of trading in of trading in Administrator also
the VCT's shares its Shares, also employ
or financial leading to loss the services of
penalties. of VCT status. reputable
lawyers, auditors and
other advisers to
ensure
continued compliance
with its regulatory
obligations.
------------------------ ----------------------- ------------------------ -----------------------
Operational The VCT relies Inferior provision Errors in Shareholder The VCT, the
- VCT level on the Investment of these services, records, a loss Investment
Adviser, Administrator for example due of Shareholders' Adviser and the
and other third to working remotely personal data, Administrator
parties to provide during the COVID-19 incorrect mailings, engage experienced and
many of its services pandemic, thereby misuse of data, reputable service
at the VCT level. leading to inadequate non- compliance providers,
systems and controls with key legislation, the performance of
or inefficient loss of assets, which
management of breach of legal is reviewed on an
the VCT's assets duties and inadequate annual
and its reporting financial reporting. basis.
requirements. As a result of the
Service providers, COVID-19
predominantly pandemic the
the Registrar, Investment
hold Shareholders' Adviser reviewed all
personal data major service
and there is providers
a risk of a cyber to confirm they could
attack on a provider. operate as usual
through
government
restrictions.
The Directors and the
Investment Adviser
regularly
review the service
providers
and the procedures and
policies they have in
place for preventing
cyber attacks.
------------------------ ----------------------- ------------------------ -----------------------
Operational At the portfolio Inferior provision Poor investment The VCT, the
- portfolio level, the VCT of these services, performance due Investment
level uses third party thereby leading to assets being Adviser and the
O&M contractors to inadequate offline and non-revenue Administrator
to manage the systems and controls generating. engage experienced and
various sites. or inefficient reputable service
management of providers,
the VCT's assets. the performance of
Maintenance and which
repairs not carried is reviewed on an
out in a timely ongoing
manner as a result basis. At the
of travel restrictions portfolio
and social distancing level, technical
rules put in reviews
place due to and studies are
the COVID-19 conducted
pandemic. on the assets as
appropriate.
Repair and
reconfiguration
work is carried out
and
O&M procedures are
revised
to reduce dependence
on overseas
contractors
and specialists.
------------------------ ----------------------- ------------------------ -----------------------
Economic, The VCT's investments Retrospective A significant The Investment Adviser
political are heavily exposed changes to the negative impact and Board members
and other to the Feed in regimes. on performance. closely
external Tariff (FiT) monitor policy
factors and Renewable developments.
Obligation Certificate However, the UK
(ROC) regimes. Government
has a general policy
of not introducing
retrospective
legislation. The
Investment
Adviser and Board
regularly
review the valuation
model and its inputs.
------------------------ ----------------------- ------------------------ -----------------------
Viability statement
In accordance with Provisions 33 and 36 of the 2019 AIC Code of
Corporate Governance, the Directors have carried out a robust
assessment of the emerging and principal risks facing the VCT that
would threaten its business model, future performance, solvency or
liquidity, and have assessed the prospects of the VCT over a longer
period than the 12 months required by the 'Going Concern'
provision.
The Board has conducted this review for a period of five years
from the balance sheet date as developments are considered to be
reasonably foreseeable over this period. This is also the minimum
recommended holding period for new investors. If the continuation
vote at the March 2021 AGM were to result in a decision to wind up
the VCT, the Board still consider that the VCT would remain viable
up until the point at which its assets were sold, or the voluntary
liquidation completed, and as such the Board are satisfied that a
five-year viability assessment remains applicable. For further
detail on the continuation vote.
In making the viability assessment, the Board has taken the
following factors into consideration:
- The nature and liquidity of the VCT's portfolio (long-term,
revenue-generating fixed assets);
- The potential impact of the Principal Risks &
Uncertainties, including the potential impact of COVID-19 on these
risks; Maintaining VCT approval status;
- New investment activity;
- Operating expenditure; and
- Future dividends and share buybacks.
The Board paid particular attention to the impact of the
COVID-19 pandemic on the economic, regulatory and political
environment as well as its direct impact upon the VCT.
The Board has also evaluated the ability of third-party
suppliers to continue to deliver services to the VCT during
COVID-19.
The Board is satisfied that the underlying assets held by the
SPVs have been built to a sufficient quality and there is an
appropriate level of ongoing repairs and maintenance to prevent
substantial degradation. It is also considered highly unlikely that
the portfolio would suffer from such poor irradiation and severe
degradation that it would be unable to generate income over the
period. Asset life, along with the other inputs to the valuation
model, are discussed further in Note 17.
The Board also noted that the SPVs have sufficient debt cover
and that there are significant cash reserves at the SPV level,
available to be paid up to the VCT through dividends, reverse loans
or the repayment of existing shareholder loans.
The Board have assessed the VCT's ability to cover its annual
running costs under several scenarios, in which sensitivity
analysis has been performed over the value of the investment
portfolio. The Directors note that under none of these scenarios
was the VCT unable to cover its costs.
The Directors believe that the VCT is well placed to manage its
business risks successfully. Based upon this viability assessment,
the Board confirms that, taking into account the VCT's current
position and subject to the principal risks faced by the business,
the VCT will be able to continue in operation and meet its
liabilities as they fall due for a period of at least five years
from the balance sheet date.
Directors' remuneration
It is a requirement under The Companies Act 2006 for
Shareholders to vote on the Directors' remuneration every three
years, or sooner if the VCT wants to make changes to the
policy.
Annual running costs cap
The annual running costs for the year are capped at 3.0% of net
assets; any excess will either be paid by the Investment Adviser or
refunded by way of a reduction of the Investment Adviser's fees.
Annual running costs for the year to 30 September 2020 were 2.4%
(2019: 1.9%) and therefore less than 3.0% of net assets.
Performance Incentive
The structure of the 'A' Shares, whereby Management owns one
third of the 'A' Shares in issue (known as the "Management 'A'
Shares"), acts as a Performance Incentive mechanism. 'A' Share
dividends will be increased if, at the end of each year, the hurdle
is met, which is illustrated below:
i) Shareholders who invested under the offer for subscription
receive dividends in excess of 5.0p per Ordinary Share in any one
financial period; and
ii) one Ordinary Share and one 'A' Share has a combined net
asset value of at least 100.0p.
The Performance Incentive is calculated each year and is not
based on cumulative dividends paid.
A summary of how proceeds are allocated between Shareholders and
Management, before and after the hurdle is met, and as dividends
per Ordinary Share increase is as follows:
Hurdle criteria:
Annual dividend per Ordinary
Share 0-5p 5-10p >10p
------ ----- -----
Combined NAV Hurdle N/A >100p >100p
------ ----- -----
Allocation of dividend proceeds:
Shareholders 99.97% 80% 70%
------ ----- -----
Management 0.03% 20% 30%
------ ----- -----
As the NAV hurdle was met and the annual dividend to be paid on
31 December 2020 will exceed the dividend hurdle, Management will
receive a Performance Incentive in respect of the year ended 30
September 2020. The Performance Incentive will be equivalent to
0.2586p per Ordinary Share, or approximately GBP66,000 (2019:
0.2586p per Ordinary Share, or approximately GBP66,000). Payment of
the performance incentive fee is not deemed to be a related party
transaction and is therefore not disclosed in Note 20 to the
financial statements.
Pursuant to historic financial intermediary arrangements with
Hazel Capital LLP, Haibun Partners LLP ("Haibun"), of which Stuart
Knight is a Designated Member, and CH1 Investment Partners LLP
("CH1"), of which Matthew Evans (Director of Gresham House
Renewable Energy VCT2 plc) is a Designated Member, will receive a
proportion of the Performance Incentive payments made to Management
by the VCT and its sister company, Gresham House Renewable Energy
VCT2 plc ("VCT2"). Haibun and CH1 will share an amount equal to
approximately 8.0% of the Performance Incentive paid to Management
in respect of the "Management 'A' Shares" issued by the VCT and
VCT2 in connection with the Ordinary Shares issued to Haibun and
CH1 clients under the 2010, 2012 and 2014 Offers. The agreements
were put in place prior to the appointment of Stuart Knight and
Matthew Evans as Directors of the VCT and VCT2 respectively.
The Directors, with the help of the Investment Adviser, actively
monitor and ensure the investee companies have less than GBP5
million state backed financing in a 12-month period listed in order
to remain compliant with the VCT regulations.
Share buybacks
The VCT has a policy of buying shares that become available in
the market if liquidity and regulatory constraints permit. The VCT
is not currently buying in shares as the VCT needs to conserve such
cash as it generates for the running of the VCT and the payment of
dividends. The Board reviews the buyback policy from time to time
and may make changes if it considers that to be in the best
interests of Shareholders as a whole.
There were no share buybacks during the financial year. A
special resolution to
renew the authority to repurchase Shares is proposed for the
forthcoming AGM.
VCT status
The VCT has reappointed Philip Hare & Associates LLP
("Philip Hare") to advise it on compliance with VCT requirements,
including evaluation of investment opportunities as appropriate and
regular review of the portfolio. Although Philip Hare works closely
with the Investment Adviser, they report directly to the Board.
Compliance with the VCT regulations for the year under review is
summarised as follows:
Position
at the year
ended
30 September
2020
1. To ensure that the VCT's income in
the period has been derived wholly or
mainly (70% plus) from shares or securities; 100.0%
---------------
2. To ensure that the VCT has not retained
more than 15% of its income from shares
and securities; 0.0%
---------------
3. To ensure that the VCT has not made Complied
a prohibited payment to Shareholders
derived from an issue of shares since
6 April 2014;
---------------
4. To ensure that at least 80% by value
of the VCT's investments has been represented
throughout the period by shares or securities
comprised in qualifying holdings of
the VCT; 85.1%
---------------
5. To ensure that at least 70% by value
of the VCT's qualifying holdings has
been represented throughout the period
by holdings of eligible shares (disregarding
investments made prior to 6 April 2018
from funds raised before 6 April 2011); 92.9%
---------------
6. To ensure that of funds raised on
or after 1 October 2018, at least 30%
has been invested in qualifying holdings
by the anniversary of the end of the
accounting period in which the shares
were issued; 30.0%
---------------
7. To ensure that no holding in any Complied
company has at any time in the period
represented more than 15% by value of
the VCT's investments at the time of
investment;
---------------
8. To ensure that the VCT's ordinary Complied
capital has throughout the period been
listed on a regulated European market;
---------------
9. To ensure that the VCT has not made Complied
an investment in a company which causes
it to receive more than the permitted
investment from State Aid sources;
---------------
10. To ensure that since 17 November Complied
2015, the VCT has not made an investment
in a company which exceeds the maximum
permitted age requirement;
---------------
11. To ensure that since 17 November Complied
2015, funds invested by the VCT in another
company have not been used to make a
prohibited acquisition; and
---------------
12. To ensure that since 6 April 2016, Complied
the VCT has not made a prohibited non-qualifying
investment.
---------------
REPORT OF THE DIRECTORS
The Directors present the tenth Annual Report and Accounts of
the VCT for the year ended 30 September 2020. The Corporate
Governance Report forms part of this report.
Share capital
At the year end, the VCT had in issue 25,515,242 Ordinary Shares
and 38,512,032 'A' Shares. There are no other share classes in
issue.
All shares have voting rights; each Ordinary Share has 1,000
votes and each 'A' Share has one vote. Where there is a resolution
in respect of a variation of the rights of 'A' Shareholders or a
Takeover Offer, the voting rights of the 'A' Shares rank pari-
passu with those of Ordinary Shares.
Pursuant to the articles and subject to a special resolution,
the VCT is able to make market purchases of its own shares, up to a
maximum number of shares equivalent to 14.99% of the total number
of each class of issued shares from time to time.
At the Annual General Meeting ("AGM") that took place on 25 June
2020, the VCT was authorised to make market purchases of its
Ordinary Shares and 'A' Shares, up to a limit of 4,218,239 Ordinary
Shares and 6,166,429 'A' Shares which represented approximately
14.99% of the issued Ordinary Share capital and 'A' Share capital
at the date of the AGM. At the current date, authority remains for
883,596 Ordinary Shares and 2,722,436 'A' Shares. A resolution to
renew this authority will be put to Shareholders at the AGM taking
place on 4 March 2021.
The payment of an annual dividend of 5.8p (5.3133p per Ordinary
Share and 0.4867p per 'A' Share) was announced on 3 December, and
this will be paid on 31 December 2020.
The minimum price which may be paid for an Ordinary Share or an
'A' Share is 0.1p, exclusive of all expenses, and the maximum price
which may be paid for an Ordinary Share or an 'A' Share is an
amount, exclusive of all expenses, equal to 105% of the average of
the middle market quotations.
Substantial interests
As at 30 September 2020, and the date of this report, the VCT
had not been notified of any beneficial interest exceeding 3% of
the issued share capital.
Results and dividends
Pence Pence
per per
GBP'000 Ord 'A'
Share Share
(Loss)/Profit
for the year (1,112) 4.4 -
----------- ------- --------
20 Dec 2019
Dividend 1,543 5.3133 0.4867
----------- ------- --------
31 Dec 2020
Dividend 1,543 5.3133 0.4867
----------- ------- --------
Directors
The Directors of the VCT during the year and their beneficial
interests in the issued Ordinary Shares and 'A' Shares at 30
September 2020 and at the date of this report were as follows:
As at the As at 30 As at
date of Sept 30 Sept
Directors this report 2020 2019
Ord 24,953 24,953 24,953
Gill Nott
'A' 24,953 24,953 24,953
---------------------- ----------------- ---------------- ----------------
Ord 330,750 330,750 330,750
Stuart Knight
'A' 330,750 330,750 330,750
---------------------- ----------------- ---------------- ----------------
Ord 16,635 16,635 -
Duncan Grierson
'A' 16,635 16,635 -
---------------------- ----------------- ---------------- ----------------
Ord - - -
David Hunter
'A' - - -
---------------------- ----------------- ---------------- ----------------
It is the Board's policy that Directors do not have service
contracts, but each Director is provided with a letter of
appointment. The Directors' letters of appointment, which were
refreshed during the year and are terminable on three months'
notice by either side. They are available on request at the VCT's
registered office during business hours and will be available for
15 minutes prior to and during the forthcoming AGM.
The Articles of Association require that each Director retires
by rotation every three years and being eligible, offer themselves
for re-election. Accordingly, none of the directors are due to
stand for re-election. The Directors' appointment dates and the
date of their last election are shown below:
Date of Most recent
original date of
Director appointment re-election
Gill Nott
(Chairman) 01/05/2018 06/03/2019
------------------ ------------------
Stuart Knight 31/01/2017 25/06/2020
Duncan Grierson
David Hunter
------------------ ------------------
16/07/2018 06/03/2019
------------------ ------------------
18/09/2019 25/06/2020
------------------ ------------------
The Directors believe that the Board has an appropriate balance
of skills, experience, independence and knowledge of the VCT and
the sector in which it operates to enable it to provide effective
strategic leadership and proper guidance of the VCT. The Board
confirms that, following the evaluation process set out in the
Corporate Governance Statement, the performance of each of the
Directors is, and continues to be, effective and demonstrates
commitment to the role. Each Director is required to devote such
time to the affairs of the VCT as the Board reasonably
requires.
Annual general meeting
The VCT's tenth Annual General Meeting ("AGM") will be held on
Thursday 4 March 2021. The Notice of the Annual General Meeting and
Form of Proxy will be circulated with this Annual Report.
The Board has considered all options for the upcoming AGM in
2021 and in particular how best to manage the potential impact of
the COVID-19 pandemic and minimise disruption in convening the AGM.
The Board has taken into account Government guidance, including
evolving rules on staying at home, social distancing and avoiding
public gatherings ("COVID-19 Measures"). Given the possibility that
some level of restriction on public gatherings and maintaining
social distancing will remain in place in March 2021, the Board may
decide to amend the format of the AGM. Any change of format will be
notified via the VCT's website and Regulatory Information
Service.
Auditor
There is a requirement to undertake an audit tender for the year
ended 30 September 2021, and BDO LLP has indicated its willingness
to retender. Separate resolutions will be proposed at the AGM to
appoint the new auditor, or to re-appoint BDO LLP, and to authorise
the Directors to determine their remuneration.
Directors' responsibilities
The Directors are responsible for preparing the Strategic
Report, the Report of the Directors, the Directors' Remuneration
Report and the financial statements in accordance with applicable
law and regulations. They are also responsible for ensuring that
the Annual Report includes information required by the Listing
Rules of the Financial Conduct Authority.
Company law requires the Directors to prepare financial
statements for each financial year.
Under that law the Directors have elected to prepare the
financial statements in accordance with United Kingdom
Generally
Accepted Accounting Practice (United Kingdom accounting
standards and applicable law), including Financial Reporting
Standard 102,
the financial reporting standard applicable in the UK and
Republic of Ireland (FRS 102).
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the VCT and of the profit or loss
of the VCT for that period.
In preparing these financial statements the Directors are
required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and accounting estimates that are reasonable and prudent;
- state whether applicable UK accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the VCT will continue in
business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the VCT's
transactions, to disclose with reasonable accuracy at any time the
financial position of the VCT and to enable them to ensure that the
financial statements comply with the Companies Act 2006. They are
also responsible for safeguarding the assets of the VCT and hence
for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
In addition, each of the Directors considers that the Annual
Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for Shareholders to assess the
VCT's
performance, business model and strategy.
Directors' statement pursuant to the disclosure and transparency
rules
Each of the Directors confirms that, to the best of each
person's knowledge:
- the financial statements, which have been prepared in
accordance with UK Generally Accepted Accounting Practice and the
2014 Statement of Recommended Practice, 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' give a true
and fair view of the assets, liabilities, financial position and
profit or loss of the VCT; and
- that the management report, comprising the Chairman's
Statement, Investment Adviser's Report, Review of Investments,
Strategic Report, and Report of the Directors includes a fair
review of the development and performance of the business and the
position of the VCT together with a description of the principal
risks and uncertainties that it faces.
Insurance cover
Directors' and Officers' liability insurance cover is held by
the VCT in respect of the Directors.
Website publication
The Directors are responsible for ensuring the Annual Report and
the Financial Statements are made available on a website. Financial
statements are published on the website of the Investment Adviser
(https://greshamhouse. com/real-assets/new-energy-sustainable-
infrastructure/) in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial
statements, which may vary from legislation in other jurisdictions.
The Directors' responsibility also extends to the on-going
integrity of the financial statements contained therein.
Other matters
During the year, the VCT did not have any employees (2019: nil)
and therefore there is no comparison data available for the change
in the Directors' remuneration to average change in employee
remuneration.
Events after the end of the reporting period
Following the period end the VCT will pay dividends in respect
of the year ended 30 September 2020, of 5.3133p per Ordinary Share
and 0.4867p per 'A' Share. These dividends will be paid on 31
December 2020 to Shareholders on the register at 11 December
2020.
The VCT invested GBP12,500 into bio-bean Limited in October 2020
as part of a follow-on funding round alongside other investors,
including its sister company, VCT2.
Statement as to disclosure of information to the auditor
The Directors in office at the date of the report have
confirmed, as far as they are aware,
that there is no relevant audit information of which the Auditor
is unaware. Each of the
Directors has confirmed that they have taken all the steps that
they ought to have taken as Directors in order to make themselves
aware of any relevant audit information and to establish that it
has been communicated to the Auditor.
For and on behalf of the Board
Gill Nott
Chairman
21 December 2020
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's statutory accounts for the years ended 30 September 2019
and 2020 but is derived from those accounts. Statutory accounts for
2019 have been delivered to the Registrar of Companies, and those
for 2020 will be delivered in due course. The Auditors have
reported on those accounts; their report was (i) unqualified, (ii)
did not include a reference to any matters to which the Auditors
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under Section 498 (2) or (3)
of the Companies Act 2006. The text of the Auditors' report can be
found in the Company's full Annual Report and Accounts at
https://greshamhouse.com/real-assets/new-energy/gresham-house-renewable-energy-vct-1-plc/
.
INCOME STATEMENT
For the year ended 30 September 2020
Year ended 30 September Year ended 30 September
2020 2019
Revenue Capital Total Revenue Capital Total
---- ------- ------- --------- -------- -------- -------
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---- ------- ------- --------- -------- -------- -------
Income 3 256 - 256 86 - 86
---- ------- ------- --------- -------- -------- -------
(Loss)/gain on investments 10 - (624) (624) - 1,305 1,305
---- ------- ------- --------- -------- -------- -------
256 (624) (368) 86 1,305 1,391
---- ------- ------- --------- -------- -------- -------
Investment advisory
fees 4 (240) (80) (320) (260) (86) (346)
---- ------- ------- --------- -------- -------- -------
Other expenses 5 (374) (50) (424) (237) - (237)
---- ------- ------- --------- -------- -------- -------
(614) (130) (744) (497) (86) (583)
---- ------- ------- --------- -------- -------- -------
(Loss)/profit on ordinary
activities
before tax (358) (754) (1,112) (411) 1,219 808
---- ------- ------- --------- -------- -------- -------
Tax on total comprehensive
(loss)/income
and ordinary activities 7 - - - - - -
---- ------- ------- --------- -------- -------- -------
(Loss)/profit for
the year and total
comprehensive (loss)/income (358) (754) (1,112) (411) 1,219 808
---- ------- ------- --------- -------- -------- -------
Basic and diluted
(loss)/earnings per
share:
---- ------- ------- --------- -------- -------- -------
Ordinary Share 9 (1.4p) (3.0p) (4.4p) (1.7p) 5.1p 3.4p
---- ------- ------- --------- -------- -------- -------
'A' Share 9 - - - - - -
---- ------- ------- --------- -------- -------- -------
All Revenue and Capital items in the above statement derive from
continuing operations. No operations were discontinued during the
year. The total column within the Income Statement represents the
Statement of Total Comprehensive Income of the VCT prepared in
accordance with
Financial Reporting Standards ("FRS 102"). The supplementary
revenue and capital return columns are prepared in accordance with
the Statement of Recommended Practice issued in November 2014
(updated in October 2019) by the Association of Investment
Companies ("AIC SORP").
Other than revaluation movements arising on investments held at
fair value through the profit or loss, there were no differences
between the return/ loss as stated above and at historical
cost.
The accompanying notes form an integral part of these financial
statements.
BALANCE SHEET
As at 30 September 2020
2020 2019
Note GBP'000 GBP'000 GBP'000 GBP'000
---- ---------------- ------- ----------- -------
Fixed assets
---- ---------------- ------- ----------- -------
Investments 10 30,428 29,572
---- ---------------- ------- ----------- -------
Current assets
---- ---------------- ------- ----------- -------
Debtors 11 230 273
---- ---------------- ------- ----------- -------
Cash at bank and in hand 57 1,046
---- ---------------- ------- ----------- -------
287 1,319
---- ---------------- ------- ----------- -------
Creditors: amounts falling
due within one year 12 (367) (147)
---- ---------------- ------- ----------- -------
Net current (liabilities)/assets (80) 1,172
---- ---------------- ------- ----------- -------
Creditors: amounts falling
due after more than one year 13 (3,081) (822)
---- ---------------- ------- ----------- -------
Net assets 27,267 29,922
---- ---------------- ------- ----------- -------
Capital and reserves
---- ---------------- ------- ----------- -------
Called up Ordinary Share
capital 14 28 28
---- ---------------- ------- ----------- -------
Called up 'A' Share capital 14 41 41
---- ---------------- ------- ----------- -------
Share premium account 15 9,541 9,541
---- ---------------- ------- ----------- -------
Treasury Shares 15 (2,991) (2,991)
---- ---------------- ------- ----------- -------
Special reserve 15 5,714 7,257
---- ---------------- ------- ----------- -------
Revaluation reserve 15 16,893 17,522
---- ---------------- ------- ----------- -------
Capital redemption reserve 15 3 3
---- ---------------- ------- ----------- -------
Capital reserve - realised 15 (1,426) (1,301)
---- ---------------- ------- ----------- -------
Revenue reserve 15 (536) (178)
---- ---------------- ------- ----------- -------
Total Shareholders' funds 27,267 29,922
---- ---------------- ------- ----------- -------
Basic and diluted net asset
value per share
---- ---------------- ------- ----------- -------
Ordinary Share 16 106.7p 117.1p
---- ---------------- ------- ----------- -------
'A' Share 16 0.1p 0.1p
---- ---------------- ------- ----------- -------
The financial statements of Gresham House Renewable Energy VCT1
plc were approved and authorised for issue by the Board of
Directors and were signed on its behalf by:
Gill Nott
Chairman
Company number: 07378392
Date: 21 December 2020
The accompanying notes form an integral part of these financial
statements.
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 2020
Called Share Treasury Funds Special Reevaluation Capital Capital Revenue Total
up Premium Shares held reserve reserve redemption reserve reserve
share Account in reserve realised
capital respect
of
Shares
not yet
allotted
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
At 30 September
2018 66 8,187 (2,695) 515 8,920 16,257 2 (1,255) 233 30,230
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Total
comprehensive
income - - - - - 1,219 - - (411) 808
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Transfer of net
realised loss to
Capital
reserve-realised - - - - - 46 - (46) - -
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Transactions with
owners
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Dividend paid - - - - (1,612) - - - - (1,612)
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Repurchase of
Shares - - (296) - - - 1 - - (295)
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Issue of Shares 3 1,354 - - (51) - - - - 1,306
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Unallotted Shares - - - (515) - - - - - (515)
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
At 30 September
2019 69 9,541 (2,991) - 7,257 17,522 3 (1,301) (178) 29,922
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Total
comprehensive
loss - - - - - (754) - - (358) (1,112)
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Transfer of net
realised loss to
Capital
reserve-realised - - - - - 125 - (125) - -
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Transactions with
owners
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
Dividend paid - - - - (1,543) - - - - (1,543)
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
At 30 September
2020 69 9,541 (2,991) - 5,714 16,893 3 (1,426) (536) 27,267
------- ------- -------- -------- ------- ------------ ---------- -------------- ------- ---------
The accompanying notes form an integral part of these financial
statements.
CASH FLOW STATEMENT
For the year ended 30 September 2020
Year ended Year ended
30 September 30 September
2020 2019
------------- ---------------------------
Note GBP'000 GBP'000
---- ------------- ---------------------------
Cash flows from operating activities
(Loss)/profit for the financial year (1,112) 808
---- ------------- ---------------------------
Losses/(gains) on investments 624 (1,305)
---- ------------- ---------------------------
Decrease/(increase) in debtors 43 (31)
---- ------------- ---------------------------
Decrease in creditors (12) (48)
---- ------------- ---------------------------
Net cash outflow from operating activities (457) (576)
---- ------------- ---------------------------
Cash flows from investing activities
Proceeds from sale of investments/loan
note redemptions 135 546*
---- ------------- ---------------------------
Investments purchased at cost (1,615) (5)
---- ------------- ---------------------------
Net cash (outflow)/inflow from investing
activities (1,480) 541
---- ------------- ---------------------------
Net cash outflow before financing activities (1,937) (35)
---- ------------- ---------------------------
Cash flows from financing activities
Equity Dividends paid 8 (1,543) (1,612)
---- ------------- ---------------------------
Proceeds from/(repayment of) loans Issue 2,491
of Shares - (300)*
Purchase of own shares - 791^ (295)
---- ------------- ---------------------------
Net cash inflow/(outflow) from financing
activities 948 (1,416)
---- ------------- ---------------------------
Net decrease in cash (989) (1,451)
---- ------------- ---------------------------
Cash and cash equivalents at start of
year 1,046 2,497
---- ------------- ---------------------------
Cash and cash equivalents at end of year 57 1,046
---- ------------- ---------------------------
Cash and cash equivalents comprise
Cash at bank and in hand 57 1,046
---- ------------- ---------------------------
Total cash and cash equivalents 57 1,046
---- ------------- ---------------------------
*In December 2018 the loan note investment made in Lunar 2
Limited by the VCT was repaid. Instead of the VCT receiving the
cash proceeds from this repayment, the amount was instead credited
to various outstanding loans due to investee companies, including
Lunar 2 Limited, from the VCT and included within amounts falling
due after more than one year. Please refer to note 13.
^ In October 2018 the VCT issued additional shares to
participating investors. A portion of the cash proceeds for these
share subscriptions were received during the prior year and
accounted for as Funds held in respect of Shares not yet allotted
in the prior year. The remaining balance of the cash proceeds due
to the VCT for these share subscriptions was received during the
year ended 30 September 2019.
The accompanying notes form an integral part of these financial
statements.
NOTES TO THE ACCOUNTS
For the year ended 30 September 2020
1. General Information
Gresham House Renewable Energy VCT1 plc ("the VCT") is a Venture
Capital Trust established under the legislation introduced in the
Finance Act 1995 and is domiciled in the United Kingdom and
incorporated in England and Wales under the Companies Act 2006.
2. Accounting policies Basis of accounting
The VCT has prepared its financial statements under FRS 102 'The
Financial Reporting Standard applicable in the UK and Republic of
Ireland' and in accordance with the Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" issued by the Association of Investment
Companies ("AIC") in November 2014 and revised in October 2019
("SORP") as well as the Companies Act 2006.
The VCT implements new Financial Reporting Standards ("FRS")
issued by the Financial Reporting Council when they become
effective. The financial statements are presented in Sterling
(GBP).
Presentation of income statement
In order to better reflect the activities of a Venture Capital
Trust and in accordance with the SORP, supplementary information
which analyses the Income Statement between items of a revenue and
capital nature has been presented alongside the Income Statement.
The net revenue is the measure the Directors believe appropriate in
assessing the VCT's compliance with certain requirements set out in
Part 6 of the Income Tax Act 2007.
Investments
All investments are designated as "fair value through profit or
loss" assets due to investments being managed and performance
evaluated on a fair value basis. A financial asset is designated
within this category if it is both acquired and managed on a fair
value basis, in accordance with the VCT's documented investment
policy. The fair value of an investment upon acquisition is deemed
to be cost. Thereafter investments are measured at fair value in
accordance with the International Private Equity and Venture
Capital Valuation Guidelines ("IPEV") together with FRS 102
Sections 11 and 12.
For unquoted investments and subsequent to acquisition, fair
value is established by using the IPEV guidelines. The valuation
methodologies for unquoted entities used by the IPEV to ascertain
the fair value of an investment are as follows:
- Multiples;
- Net assets;
- Discounted cash flows or earnings (of underlying business);
- Discounted cash flows (from the investment); and
- Industry valuation benchmarks.
Effective 1 January 2019, the IPEV guidelines to establish fair
value were updated whereby the cost or price of a recent investment
are no longer considered valid valuation methodologies for
establishing the fair value of an investment. The VCT along with
its Investment Adviser may, under orderly market conditions, deem
the cost or recent price paid for an investment as an appropriate
fair value for an investment at the time of acquisition but
subsequent to recognition must reconsider the assigned fair value
based on up-to-date market conditions and performance of the
underlying investee company in order to assign a fair value in line
with the IPEV guidelines.
The methodology applied takes account of the nature, facts and
circumstances of the individual investment and uses reasonable
data, market inputs, assumptions and estimates in order to
ascertain fair value.
Gains and losses arising from changes in fair value are included
in the Income Statement for the year as a capital item and
transaction costs on acquisition or disposal of the investment are
expensed. Where an investee company has gone into receivership or
liquidation, or administration (where there is little likelihood of
recovery), the loss on the investment, although not physically
disposed of, is treated as being realised.
The investee companies held by the VCT are treated as a
portfolio of investments and are therefore measured at fair value
in accordance with section 9 of FRS 102. The results of these
companies are not incorporated into the Income Statement except to
the extent of any income accrued. This is in accordance with the
SORP and FRS 102 sections 14 and 15 that does not require portfolio
investments, where the interest held is greater than 20%, to be
accounted for using the equity method of accounting.
Income
Dividend income from investments is recognised when the
Shareholders' rights to receive payment have been established,
normally the ex-dividend date.
Interest income is accrued on a time apportionment basis, by
reference to the principal sum outstanding and at the effective
interest rate applicable and only where there is reasonable
certainty of collection in the foreseeable future.
Expenses
All expenses are accounted for on an accruals basis. In respect
of the analysis between revenue and capital items presented within
the Income Statement, all expenses have been presented as revenue
items except as follows:
Expenses which are incidental to the disposal of an investment
are deducted from the disposal proceeds of the investment; and
Expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the
investments held can be demonstrated. The VCT has adopted a policy
of charging 75% of the investment advisory fees to the revenue
account and 25% to the capital account to reflect the Board's
estimated split of investment returns which will be achieved by the
VCT over the long term.
Taxation
The tax effects on different items in the Income Statement are
allocated between capital and revenue on the same basis as the
particular item to which they relate, using the VCT's effective
rate of tax for the accounting period.
Due to the VCT's status as a Venture Capital Trust and the
continued intention to meet the conditions required to comply with
Part 6 of the Income Tax Act 2007, no provision for taxation is
required in respect of any realized or unrealised appreciation of
the VCT's investments which arises.
Deferred taxation, which is not discounted, is provided in full
on timing differences that result in an obligation at the balance
sheet date to pay more tax, or a right to pay less tax, at a future
date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the
inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are
included in the accounts.
Other debtors, other creditors and loan notes
Other debtors (including accrued income), other creditors and
loan notes (other than those held as part of the investment
portfolio as set out in Note 10) are included within the accounts
at amortised cost.
Issue costs
Issue costs in relation to the shares issued for each share
class have been deducted from the special reserve.
3. Income
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
Income from investments
------------- -------------
Loan stock interest 71 86
------------- -------------
Dividend income 185 -
------------- -------------
256 86
------------- -------------
4. Investment advisory fees
The investment advisory fees for the year ended 30 September
2020, which were charged quarterly to the VCT, were based on 1.15%
of the net assets as at the previous quarter end.
Year ended 30 September Year ended 30 September
2020 2019*
Revenue Capital Total Revenue Capital Total
------- ------- ------------ -------- -------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------------ -------- -------- -------
Investment advisory fees 240 80 320 260 86 346
------- ------- ------------ -------- -------- -------
* With effect from 7 November 2017, the Investment Advisory fee
percentage was reduced from 2.0% of net assets per annum to 1.4%,
for the period to 6 November 2018. With effect from 7 November
2018, the Investment Advisory fee has reduced further, to 1.15% of
net assets per annum.
5. Other expenses
Year ended 30 September Year ended 30 September
2020 2019
Revenue Capital Total Revenue Capital Total
-------- -------- ------- -------- -------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ------- -------- -------- -------
Administration services 138 - 138 50 - 50
-------- -------- ------- -------- -------- -------
Directors' remuneration 92 - 92 68 - 68
-------- -------- ------- -------- -------- -------
Social security costs 3 - 3 4 - 4
-------- -------- ------- -------- -------- -------
Auditor's remuneration for
audit 34 - 34 29 - 29
-------- -------- ------- -------- -------- -------
Transaction costs - 50 50 - - -
-------- -------- ------- -------- -------- -------
Other 107 - 107 86 - 86
-------- -------- ------- -------- -------- -------
374 50 424 237 - 237
-------- -------- ------- -------- -------- -------
The annual running costs of the VCT for the year are subject to
a cap of 3.0% of the net assets of the VCT. During the year ended
30 September 2020, the annual running costs came to 2.4% of net
assets (2019: 1.9%), therefore this cap has not been breached.
6. Directors' remuneration
Details of remuneration (excluding employer's NIC) are given in
the audited part of the Directors' Remuneration Report.
The VCT had no employees during the year. Costs in respect of
the Directors are referred to in Note 5 above. No other emoluments
or pension contributions were paid by the VCT to, or on behalf of,
any Director.
7. Tax on ordinary activities
Year ended Year ended
30 September 30 September
2020 2019
GBP'000 GBP'000
------------- -------------
(a) Tax charge for the year
------------- -------------
UK corporation tax at 19% (2019: 19%) - -
------------- -------------
Charge for the year - -
------------- -------------
(b) Factors affecting tax charge for the year
------------- -------------
(Loss)/profit on ordinary activities before taxation (1,112) 808
------------- -------------
Tax (credit)/charge calculated on (loss)/return
on ordinary activities before taxation at the applicable
rate of 19% (2019: 19%) (211) 154
------------- -------------
Effects of:
------------- -------------
UK dividend income (35) -
------------- -------------
Losses/(gains) on investments 118 (248)
------------- -------------
Excess management expenses on which deferred tax
not recognised 128 94
------------- -------------
Total tax charge - -
------------- -------------
Excess management fees, which are available to be carried
forward and set off against future taxable income, amounted to
4,376,000 (2019: GBP3,812,000). The associated deferred tax asset
of GBP831,000 (2019: GBP648,000) has not been recognised due to the
fact that it is unlikely that the excess management fees will be
set off against future taxable profits in the foreseeable
future.
8. Dividends
Year ended 30 September Year ended 30 September
2020 2019
Revenue Capital Total Revenue Capital Total
-------- -------- ------- -------- -------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- ------- -------- -------- -------
Payable
2020 Interim Ordinary -
5.3133p - 1,356 1,356 - - -
-------- -------- ------- -------- -------- -------
2020 Interim A - 0.4867p - 187 187 - - -
-------- -------- ------- -------- -------- -------
Paid
2019 Interim Ordinary -
5.3133p - - - - 1,356 1,356
-------- -------- ------- -------- -------- -------
2019 Interim A - 0.4867p - - - - 187 187
-------- -------- ------- -------- -------- -------
- 1,543 1,543 - 1,543 1,543
-------- -------- ------- -------- -------- -------
The Interim 2019 dividends were paid on 20 December 2019, to
Shareholders on the register as at 29 November 2019. The Interim
2020 dividends will be paid on 31 December 2020 to Shareholders on
the register as at 11 December 2020.
9. Basic and diluted earnings per share
Weighted Capital
average Revenue Pence (loss)/ Pence
number loss per return per
of shares GBP'000 share GBP'000 share
in issue
Year ended
30
September
2020 Ordinary Shares 25,515,242 (358) (1.4) (754) (3.0)
------------------------------------------------- --------- ------------- ------------- -------------
'A' Shares 38,512,032 - - - -
------------------------------------------------- --------- ------------- ------------- -------------
Year ended
30
September
2019 Ordinary Shares 23,957,228 (411) (1.7) 1,219 5.1
------------------------------------------------- --------- ------------- ------------- -------------
'A' Shares 36,912,555 - - - -
------------------------------------------------------------- --------- ------------- ------------- -------------
As the VCT has not issued any convertible securities or share
options, there is no dilutive effect on earnings per Ordinary Share
or 'A' Share. The earnings per share disclosed therefore represents
both the basic and diluted return per Ordinary Share or 'A'
Share.
10. Fixed assets - investments
2020 2019
Unquoted Unquoted
investments investments
---------------------------------------------
GBP'000 GBP'000
--------------------------------------------- --------------------------------------------------- ------------------
Opening cost at start of the year 12,050 14,196
Net unrealised gains at start of the year 17,522 16,257
--------------------------------------------- --------------------------------------------------- ------------------
Opening fair value at start of the year 29,572 30,453
Movement in the year:
Purchased at cost 1,615 5
Disposals proceeds/redemption of loan notes (135) (2,191)
Realised gains on disposals 5 40
Net unrealised (losses)/gains in the income
statement (629) 1,265
--------------------------------------------- --------------------------------------------------- ------------------
Closing fair value at year end 30,428 29,572
--------------------------------------------- --------------------------------------------------- ------------------
Closing cost at year end 13,536 12,050
Net unrealised gains at year end 16,892 17,522
--------------------------------------------- --------------------------------------------------- ------------------
Closing fair value at year end 30,428 29,572
--------------------------------------------- --------------------------------------------------- ------------------
During the year, the VCT received GBP135,000 (2019:
GBP2,191,000) from the disposal of investments comprising of both
equity and loan notes. The cost of these investments at the start
of the year was GBP130,000 (2019: GBP2,151,000). These investments
have been revalued and measured at fair value over time, and up
until the point of disposal any unrealised gains or losses were
included in the fair value of the investments.
The VCT has categorised its financial instruments using the fair
value hierarchy as follows:
Level 1 Reflects financial instruments quoted in an active
market;
Level 2 Reflects financial instruments that have prices that are
observable either directly or indirectly; and
Level 3 Reflects financial instruments that use valuation
techniques that are not based on observable market data (unquoted
equity investments and loan note investments).
Level 1 Level Level 2020 Level Level Level 2019
2 3 1 2 3
--------------------- ------- ------- ---------- ---------- ------- ------- ------- -------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ------- ------- ---------- ---------- ------- ------- ------- -------
Unquoted loan notes - - 1,960 1,960 - - 809 809
Unquoted equity - - 28,468 28,468 - - 28,763 28,763
--------------------- ------- ------- ---------- ---------- ------- ------- ------- -------
- - 30,428 30,428 - - 29,572 29,572
--------------------- ------- ------- ---------- ---------- ------- ------- ------- -------
During the years ended 30 September 2020 and 30 September 2019
there were no transfers between levels.
A reconciliation of fair value for Level 3 financial
instruments held at the year end is shown below:
Unquoted Unquoted
loan notes equity Total
GBP'000 GBP'000 GBP'000
----------------------------------------------------- ------------ ---------- -------
Balance at 30 September 2019 809 28,763 29,572
Movements in the income statement:
Unrealised gains/(losses) in the income statement 66 (695) (629)
Realised gains in the income statement 5 - 5
----------------------------------------------------- ------------ ---------- -------
71 (695) (624)
Additions at cost 1,215 400 1,615
Sales proceeds/redemption of loan notes (135) - (135)
----------------------------------------------------- ------------ ---------- -------
Balance at 30 September 2020 1,960 28,468 30,428
----------------------------------------------------- ------------ ---------- -------
FRS 102 sections 11 and 12 require disclosure to be made of the
possible effect of changing one or more of the inputs to reasonable
possible alternative assumptions where this would result in a
significant change in the fair value of the Level 3 investments.
There is an element of judgement in the choice of assumptions for
unquoted investments and it is possible that, if different
assumptions were used, different valuations could have been
attributed to some of the VCT's investments.
Investments which are reaching maturity or have an established
level of maintainable earnings are valued on a discounted cash flow
basis. This was also the case in the prior year.
The Board and the Investment Adviser believe that the valuation
as at 30 September 2020 reflects the most appropriate assumptions
at that date, giving due regard to all information available from
each investee company. Consequently, the variation in the spread of
reasonable, possible, alternative valuations is likely to be within
the range set out in Note 17.
11. Debtors
2020 2019
GBP'000 GBP'000
-------------------------------- -------- ----------------
Prepayments and accrued income 230 273
-------------------------------- -------- ----------------
230 273
-------------------------------- -------- ----------------
12. Creditors: amounts falling due within one year
2020 2019
GBP'000 GBP'000
---------------------------------- ------------------------- --------------------------------- ---------------
Other loans* 297 65
Taxation and social security 7 4
Accruals and deferred income 63 78
------------------------------------------------------------- --------------------------------- ---------------
367 147
------------------------------------------------------------ --------------------------------- ---------------
* Other loans falling due
within one year:
2020 2019
Investee company Repayment date GBP'000 GBP'000
---------------------------------- ------------------------- --------------------------------- ---------------
Hewas Solar Limited n/a^ 65 65
30 April 2021 66 (1) -
------------------------------------------------------------ --------------------------------- ---------------
131 65
------------------------------------------------------------ --------------------------------- ---------------
St Columb Solar Limited 30 April 2021 20 -
---------------------------------- ------------------------- --------------------------------- ---------------
20 -
------------------------------------------------------------ --------------------------------- ---------------
Ayshford Solar (Holding) Limited 23 September 2021 31 -
---------------------------------- ------------------------- --------------------------------- ---------------
31 -
------------------------------------------------------------ --------------------------------- ---------------
HRE Willow Limited 15 June 2021 18 -
12 September 2021 68
23 September 2021 29
------------------------------------------------------------ --------------------------------- ---------------
115 -
------------------------------------------------------------ --------------------------------- ---------------
^ In September 2015, the VCT and Hewas Solar Limited (the
"lender") entered into a loan agreement whereby the lender may
demand full repayment of all amounts outstanding at any time after
5 years and 1 day from the date of the initial drawdown of the
loan. The loan is interest free.
(1) The above loan amounts were included within amounts falling
due after one year in the prior year financial statements.
13. Creditors: amounts falling due after more than one year
2020 2019
GBP'000 GBP'000
Other loans 3,081 822
--------------------- ----------------
3,081 822
--------------------- ----------------
The balance of other loans is made up of amounts borrowed from
the underlying portfolio companies. An analysis of the maturity
dates of each of the loans is shown below. Whilst each loan has an
applicable repayment date, the VCT has the right to repay all or
any part of the loans at any time. All loans are interest free.
Creditors falling due after more than one year are repayable as
follows:
2020 2019
Investee company Repayment date GBP'000 GBP'000
HRE Willow Limited 15 June 2021 -* 18
--------------------- ------------------------------------ ---------------
12 September 2021 -* 68
------------------------------------------------ ------------------------------------ ---------------
23 September 2021 -* 29
------------------------------------------------ ------------------------------------ ---------------
- 115
------------------------------------------------ ------------------------------------ ---------------
Hewas Solar Limited 30 April 2021 -* 66
--------------------- ------------------------------------ ---------------
- 66
------------------------------------------------ ------------------------------------ ---------------
St Columb Solar Limited 30 April 2021 -* 20
--------------------- ------------------------------------ ---------------
2 February 2023 40 40
------------------------------------------------ ------------------------------------ ---------------
40 60
------------------------------------------------ ------------------------------------ ---------------
Ayshford Solar (Holding)
Limited 23 September 2021 -* 31
--------------------- ------------------------------------ ---------------
13 October 2021 20 20
------------------------------------------------ ------------------------------------ ---------------
11 September 2022 300 300
------------------------------------------------ ------------------------------------ ---------------
28 September 2022 50 50
------------------------------------------------ ------------------------------------ ---------------
22 February 2023 180 180
------------------------------------------------ ------------------------------------ ---------------
550 581
------------------------------------------------ ------------------------------------ ---------------
Amounts repayable in up
to five years 590 822
------------------------------------ ---------------
Lunar 2 Limited 18 December 2024 1,543 -
--------------------- ------------------------------------ ---------------
14 January 2025 473 -
------------------------------------------------ ------------------------------------ ---------------
1 April 2025 50 -
------------------------------------------------ ------------------------------------ ---------------
23 April 2025 100 -
------------------------------------------------ ------------------------------------ ---------------
2,166 -
------------------------------------------------ ------------------------------------ ---------------
Gloucester Wind Limited 14 January 2025 200 -
--------------------- ------------------------------------ ---------------
200 -
------------------------------------------------ ------------------------------------ ---------------
Penhale Solar Limited 14 January 2025 75 -
--------------------- ------------------------------------ ---------------
75 -
------------------------------------------------ ------------------------------------ ---------------
Minsmere Power Limited 14 January 2025 50 -
--------------------- ------------------------------------ ---------------
50 -
------------------------------------------------ ------------------------------------ ---------------
Amounts repayable after
more than five years 2,491 -
------------------------------------ ---------------
Other loans 3,081 822
------------------------------------ ---------------
14. Called up share capital
2020 2019
GBP'000 GBP'000
----------------------------------------------- -------- ----------------
Allotted, called up and fully-paid:
25,515,242 (2019: 25,515,242) Ordinary Shares
of 0.1p each 28 28
38,512,032 (2019: 38,512,032) 'A' Shares of
0.1p each 41 41
----------------------------------------------- -------- ----------------
69 69
----------------------------------------------- -------- ----------------
The VCT's capital is managed in accordance with its investment
policy as shown in the Strategic Report, in pursuit of its
principal investment objectives. There has been no significant
change in the objectives, policies or processes for managing
capital from the previous period.
The VCT has the authority to buy back shares as described in the
Report of the Directors. During the year ended 30 September 2020
the VCT did not repurchase any Ordinary Shares or 'A' Shares (2019:
264,048 Ordinary Shares and 264,048 'A' Shares, at an average
price, per combined holding, of 111.8p). All repurchased shares are
currently held in treasury.
During the year ended 30 September 2020, the VCT issued no
Ordinary Shares (2019: 1,084,848 Ordinary Shares at an average
price of 124.9p) and no 'A' Shares (2019: 1,741,728 'A' Shares at
an average price of 0.1p).
The holders of Ordinary Shares and 'A' Shares shall have rights
as regards to dividends and any other distributions or a return of
capital (otherwise than on a market purchase by the VCT of any of
its shares) which shall be applied on the following basis:
1) Unless and until Ordinary Shareholders receive a dividend of
at least 5.0p per Ordinary Share, and one Ordinary Share and one
'A' Share has a combined net asset value of 100p (the Hurdle),
distributions will be made as to 99.9% to Ordinary Shares and 0.1%
to 'A' Shares;
2) After (and to the extent that) the Hurdle has been met, and
subject to point 3 below, the balance of such amounts shall be
applied as to 40% to Ordinary Shares and 60% to 'A' Shares; and
3) Any amount of a dividend which, but for the entitlement of
'A' Shares pursuant to point 2 above, would have been in excess of
10p per Ordinary Share in any year shall be applied as to 10% to
Ordinary Shares and 90% to 'A' Shares.
If, on the date on which a dividend is to be declared on the
Ordinary Shares, the amount of any dividend which would have been
payable to the 'A' Shares (the "A' Dividend Amount'), together with
any previous amounts which were not paid as a result of this clause
(the "A' Share Entitlement'), would together:
a) in aggregate be less than GBP5,000; or
b) be less than an amount being equivalent to 0.25p per 'A' Share
then the 'A' Dividend amount shall not be declared and paid, but
shall be aggregated with any 'A' Share Entitlement and retained by
the VCT until either threshold is reached. No interest shall accrue
on any 'A' Share Entitlement.
The VCT does not have any externally imposed capital
requirements.
15. Reserves
2020 2019
GBP'000 GBP'000
---------------------------- -------- ----------------
Share premium account 9,541 9,541
Treasury shares (2,991) (2,991)
Special reserve 5,714 7,257
Revaluation reserve 16,893 17,522
Capital redemption reserve 3 3
Capital reserve - realised (1,426) (1,301)
Revenue reserve (536) (178)
---------------------------- -------- ----------------
27,198 29,853
---------------------------- -------- ----------------
The Special reserve is available to the VCT to enable the
purchase of its own shares in the market without affecting its
ability to pay dividends. The Special reserve, Capital reserve -
realised and Revenue reserve are all distributable reserves. At 30
September 2020, distributable reserves were GBP3,752,000 (2019:
GBP5,778,000).
Share premium account
This reserve accounts for the difference between the prices at
which shares are issued and the nominal value of the shares, less
issue costs and transfers to the other distributable reserves.
Treasury shares
This reserve represents the aggregate consideration paid for the
Shares repurchased by the VCT.
Revaluation reserve
Increases and decreases in the valuation of investments held at
the year end against cost are included in this reserve.
Capital redemption reserve
This reserve accounts for amounts by which the issued share
capital is diminished through the repurchase and cancellation of
the VCT's own shares.
Capital reserve - realised
The following are disclosed in this reserve:
- gains and losses compared to cost on the realisation of investments; and
- expenses, together with the related taxation effect, charged
in accordance with the above accounting policies
Revenue reserve
This reserve accounts for movements from the revenue column of
the Income Statement, the payment of dividends and other
non-capital realised movements.
16. Basic and diluted net asset value per share
2020 2019 2020 2019
Shares in issue Net asset value Net asset value
---------------------- -------------------------- --------------------------
Pence per share Pence per share
GBP'000 GBP'000
---------- ---------- --------------- --------- --------------- ---------
Ordinary
Shares 25,515,242 25,515,242 106.7 27,229 117.1 29,884
---------- ---------- --------------- --------- --------------- ---------
'A' Shares 38,512,032 38,512,032 0.1 38 0.1 38
---------- ---------- --------------- --------- --------------- ---------
The Directors allocate the assets and liabilities of the VCT
between the Ordinary Shares and 'A' Shares such that each share
class has sufficient net assets to represent its dividend and
return of capital rights as described in Note 14.
As the VCT has not issued any convertible shares or share
options, there is no dilutive effect on net asset value per
Ordinary Share or per 'A' Share. The net asset value per share
disclosed therefore represents both the basic and diluted net asset
value per Ordinary Share and per 'A' Share.
17. Financial Instruments
The VCT held the following categories of financial instruments
at 30 September 2020:
2020 2020 2019 2019
Cost Value Cost Value
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------------- -------------- --------------
Assets at fair value through
profit or loss 13,536 30,428 12,050 29,572
------------------------------ -------------- -------------- --------------
Other financial (liabilities)/assets (58) (58) (68) (68)
------------------------------ -------------- -------------- --------------
Cash at bank 57 57 1,046 1,046
------------------------------ -------------- -------------- --------------
Other loans (3,378) (3,378) (887) (887)
------------------------------ -------------- -------------- --------------
Total 10,157 27,049 12,141 29,663
------------------------------ -------------- -------------- --------------
The VCT's financial instruments comprise investments held at
fair value through profit or loss, being equity and loan stock
investments in unquoted companies, loans and receivables consisting
of short term debtors, cash deposits and financial liabilities
being creditors arising from its operations. Other financial
liabilities and assets include operational debtors and prepaid
expenses and short term creditors which are measured at amortised
cost. The main purpose of these financial instruments is to
generate cashflow and revenue and capital appreciation for the
VCT's operations. The VCT has no gearing or other financial
liabilities apart from short and long-term creditors and does not
use any derivatives.
The fair value of investments is determined using the detailed
accounting policy as shown in Note 2. The composition of the
investments is set out in Note 10.
The VCT's investment activities expose the VCT to a number of
risks associated with financial instruments and the sectors in
which the VCT invests. The principal financial risks arising from
the VCT's operations are:
- Market risks;
- Credit risk; and
- Liquidity risk.
The Board regularly reviews these risks and the policies in
place for managing them. There have been no significant changes to
the nature of the risks that the VCT was expected to be exposed to
over the year and there have also been no significant changes to
the policies for managing those risks during the year.
The risk management policies used by the VCT in respect of the
principal financial risks and a review of the financial instruments
held at the year end are provided overleaf.
Market risks
As a Venture Capital Trust, the VCT is exposed to investment
risks in the form of potential losses and gains that may arise on
the investments it holds in accordance with its investment policy.
The management of these investment risks is a fundamental part of
investment activities undertaken by the Investment Adviser and
overseen by the Board. The Adviser monitors investments through
regular contact with management of investee companies, regular
review of management accounts and other financial information and
attendance at investee company board meetings. This enables the
Adviser to manage the investment risk in respect of individual
investments. Investment risk is also mitigated by holding a
diversified portfolio spread across various operating sites across
several asset classes.
The key investment risks to which the VCT is exposed are:
- Investment price risk; and
- Interest rate risk.
Investment price risk
The VCT's investments which comprise both equity and debt
financial instruments in unquoted investments are concentrated in
renewable energy projects with predetermined expected returns.
Consequently, the investment price risk on these assets arises from
uncertainty about the future prices and valuations of financial
instruments held in accordance with the VCT's investment objectives
which can be influenced by many macro factors such as changes in
interest rates, electricity power prices and movements in
inflation. It represents the potential loss that the VCT might
suffer through changes in the fair value of unquoted investments
that it holds.
At 30 September 2020, the unquoted portfolio was valued at
GBP30,428,000 (2019: GBP29,572,000). The key inputs to the
renewable assets' valuation model are discount rates, inflation,
irradiation, degradation, power prices and asset life. The Board
has undertaken a sensitivity analysis into the effects of
fluctuations in these inputs.
The analysis below is provided to illustrate the sensitivity of
the fair value of these investments to an individual input, while
all other variables remain constant. The Board considers these
changes in inputs to be within reasonable expected ranges. This is
not intended to imply the likelihood of change or that possible
changes in value would be restricted to this range. The possible
effects are quantified below:
Change in Change
Change in fair value in NAV
Input Base case input of investments per share
GBP'000 pence
--------------- ------------------- ----------- --------------------------- ---------------
Discount rate 5.75% - 6.75% +0.5% (760) (3.0)
-0.5% 806 3.2
----------------------------------- ----------- --------------------------- ---------------
Inflation 1.20% - 3.00% +0.5% 877 3.4
-0.5% (930) (3.6)
----------------------------------- ----------- --------------------------- ---------------
Irradiation 785 - 1,270kWh/m 2 +1.0% 638 2.5
-1.0% (638) (2.5)
----------------------------------- ----------- --------------------------- ---------------
Degradation 0.30% - 0.40% +0.1% (707) (2.8)
-0.1% 716 2.8
----------------------------------- ----------- --------------------------- ---------------
Power prices GBP34 - GBP53/MWh +10.0% 563 2.2
-10.0% (534) (2.1)
----------------------------------- ----------- --------------------------- ---------------
Asset life
The Board has also considered the potential impact of changes to
the anticipated lives of assets in the portfolio. Close to ninety
percent of the VCT's value is in assets refinanced by debt, and
under the debt facility agreements, substantial reserves are in
place for renewing key equipment as and when required. Furthermore,
the underlying assets have leases that are valid for the lifetime
of the VCT, which cannot be terminated early, and any extensions to
the leases would require further planning permission. Accordingly,
the asset life assumption has been kept at 25 years and the Board
does not consider it appropriate to disclose a sensitivity analysis
in respect of asset life.
Non-renewable assets
Investment price risk has been considered separately for the
non-renewable energy investments, bio-bean and Rezatec, as these
have been valued using private-equity principles and in accordance
with the International Private Equity Valuation ("IPEV")
Guidelines. The estimation uncertainty for these unquoted
investments has been further increased by the COVID-19 pandemic and
associated government intervention.
In determining what level of risk applies to these investments a
range of factors have been considered, such as the availability and
extent of cash resources, the impact of COVID-19 on the relevant
industry, and operational impacts on the business. Based upon this
assessment, a sensitivity of +/- 20% has been applied to the
valuation of Rezatec and bio-bean as at 30 September 2020. This
would result in an increase or decrease of GBP161,500 to the fair
value of these investments and reflects both the potential positive
and negative impacts of COVID-19 on these businesses.
Interest rate risk
The VCT accepts exposure to interest rate risk on floating-rate
financial assets through the effect of changes in prevailing
interest rates. The VCT receives interest on its cash deposits at a
rate agreed with its bankers. Where investments in loan stock
attract interest, this is predominately charged at fixed rates. A
summary of the interest rate profile of the VCT's investments is
shown below.
There are three categories in respect of interest which are
attributable to the financial instruments held by the VCT as
follows:
- "Fixed rate" assets represent investments with predetermined
yield targets and comprise certain loan note investments and
preference shares;
- "Floating rate" assets predominantly bear interest at rates
linked to The Bank of England base rate or LIBOR and comprise cash
at bank; and
- "No interest rate" assets do not attract interest and comprise
equity investments, certain loan note investments, loans and
receivables and other financial liabilities.
-
Average Average 2020 2019
interest period GBP'000 GBP'000
rate until
maturity
767
Fixed rate 8% days 797 489
----------------------------------------------- --------------- ---------------- ----------------
Floating rate 0% 57 1,046
----------------------------------------------- --------------- ---------------- ----------------
No interest
rate 26,195 28,128
----------------------------------------------- --------------- ---------------- ----------------
27,049 29,663
----------------------------------------------- --------------- ---------------- ----------------
The VCT monitors the level of income received from fixed and
floating rate assets and, if appropriate, may make adjustments to
the allocation between the categories, in particular, should this
be required to ensure compliance with the VCT regulations.
It is estimated that an increase of 1% in interest rates would
have increased profit before tax for the year by GBP570 (2019:
GBP10,000). The Bank of England base rate increased from 0.5% to
0.75% on 2 August 2018; on 11 March 2020, the Bank of England opted
to reduce the base rate to 0.25%. On 19 March 2020, the base rate
was reduced further to 0.1%. Any potential change in the base rate,
at the current level, would have an immaterial impact on the net
assets and total return of the VCT.
Credit risk
Credit risk is the risk that a counterparty to a financial
instrument is unable to discharge a commitment to the VCT made
under that instrument. The VCT is exposed to credit risk through
its holdings of loan stock in investee companies, cash deposits and
debtors. Credit risk relating to loan stock in investee companies
is considered to be part of market risk as the performance of the
underlying SPVs impacts the carrying values.
The VCT's financial assets that are exposed to credit risk are
summarised as follows:
2020 2019
GBP'000 GBP'000
------------------------------------------- -------- --------
Investments in loan stocks 1,960 809
Cash and cash equivalents 57 1,046
Interest, dividends and other receivables 225 265
------------------------------------------- -------- --------
2,242 2,120
------------------------------------------- -------- --------
The Adviser manages credit risk in respect of loan stock with a
similar approach as described under "Market risks". Similarly, the
management of credit risk associated with interest, dividends and
other receivables is covered within the investment advisory
procedures. The level of security is a key means of managing credit
risk. Additionally, the risk is mitigated by the security of the
assets in the underlying investee companies.
Cash is held by the Royal Bank of Scotland plc which is an
investment grade rated financial institution. Consequently, the
Directors consider that the credit risk associated with cash
deposits is low.
There have been no changes in fair value during the year that
are directly attributable to changes in credit risk. Any balances
that are past due are disclosed further under liquidity risk.
There have been no loan investments for which the terms have
been renegotiated during the year.
Liquidity risk
Liquidity risk is the risk that the VCT encounters difficulties
in meeting obligations associated with its financial liabilities.
Liquidity risk may also arise from either the inability to sell
financial instruments when required at their fair values or from
the inability to generate cash inflows as required. As the VCT has
a relatively low level of creditors being GBP63,000 (2019:
GBP82,000) and has long term loans from investee companies (see
Note 13 for an analysis of the repayment terms), which have either
been repaid at the date of this report or are expected to be repaid
by way of future dividends from these companies, being GBP3,378,000
(2019: GBP887,000), the Board believes that the VCT's exposure to
liquidity risk is low. The VCT always holds sufficient levels of
funds as cash in order to meet expenses and other cash outflows as
they arise. For these reasons the Board believes that the VCT's
exposure to liquidity risk is minimal.
The VCT's liquidity risk is managed by the Investment Adviser in
line with guidance agreed with the Board and is reviewed by the
Board at
regular intervals.
The following table analyses the VCT's loan payables by
contractual maturity date:
Due Due between
in 1 year and Due after Total
less 5 years 5 years
than
1
year
As at 30 September 2020 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------------- ----------------- ----------------
Loans payable to investee
companies 297 590 2,491 3,378
------------------------------- ---------------- ----------------- ----------------
297 590 2,491 3,378
------------------------------- ---------------- ----------------- ----------------
Due Due between
in 1 year and Due after
less
than
------------------------------- ---------------- ----------------- ----------------
1 year 5 years 5 years Total
As at 30 September 2019 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- ---------------- ----------------- ----------------
Loans payable to investee
companies 65 822 - 887
------------------------------- ---------------- ----------------- ----------------
65 822 - 887
------------------------------- ---------------- ----------------- ----------------
Although the VCT's investments are not held to meet the VCT's
liquidity requirements, the table below shows an analysis of the
assets, highlighting the length of time that it could take the VCT
to realise its assets if it were required to do so.
The carrying value of loan stock investments held at fair value
through the profit or loss account at 30 September 2020 as analysed
by the expected maturity date is as follows:
Not Between Between Between More than
later 1 and 2 and 3 and 5 years Total
than 1 2 years 3 years 5 years
year
As at 30 September 2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- ------------------- -------
Fully performing loan
stock - - - 1,100 860 1,960
---------------------------- --------- --------- --------- ------------------- -------
Past due loan stock - - - - - -
---------------------------- --------- --------- --------- ------------------- -------
- - - 1,100 860 1,960
---------------------------- --------- --------- --------- ------------------- -------
Not Between Between Between More than
later 1 and 2 and 3 and 5 years
than 2 years 3 years 5 years Total
1
year
---------------------------- --------- --------- --------- ------------------- -------
As at 30 September 2019 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- --------- --------- --------- ------------------- -------
Fully performing loan
stock - - - - 809 809
---------------------------- --------- --------- --------- ------------------- -------
Past due loan stock - - - - - -
---------------------------- --------- --------- --------- ------------------- -------
- - - - 809 809
---------------------------- --------- --------- --------- ------------------- -------
18. Capital management
The VCT's objectives when managing capital are to safeguard the
VCT's ability to continue as a going concern, so that it can
continue to provide returns for Shareholders and to provide an
adequate return to Shareholders by allocating its capital to assets
commensurately with the level of risk.
By its nature, the VCT has an amount of capital, at least 80%
(as measured under the tax legislation; and for the VCT effective 1
October 2019) of which is and must be, and remain, invested in the
relatively high risk asset class of small UK companies within three
years of that capital being subscribed.
The VCT accordingly has limited scope to manage its capital
structure in the light of changes in economic conditions and the
risk characteristics of the underlying assets. Subject to this
overall constraint upon changing the capital structure, the VCT may
adjust the amount of dividends paid to Shareholders, return capital
to Shareholders, issue new shares, or sell assets if so required to
maintain a level of liquidity to remain a going concern.
As the Investment Policy implies, the Board would consider
levels of gearing. As at 30 September 2020 the VCT had loans from
investee companies of GBP3,378,000 (2019: GBP887,000). It regards
the net assets of the VCT as the VCT's capital, as the level of
liabilities are small and the management of them is not directly
related to managing the return to Shareholders. There has been no
change in this approach from the previous period.
19. Contingencies, guarantees and financial commitments
At 30 September 2020, the VCT had no contingencies, guarantees
or financial commitments.
20. Controlling party and related party transactions
In the opinion of the Directors there is no immediate or
ultimate controlling party. For total Directors' remuneration
during the year, please refer to note 5 as well as the Directors'
Remuneration Report.
21. Significant interests
Details of shareholdings in those companies where the VCT's
holding, as at 30 September 2020, represents more than 20% of the
nominal value of any class of shares issued by the portfolio
company are predominantly disclosed in the Review of Investments.
Relevant companies which do not feature in the Review of
Investments are listed below. All of the companies named are
incorporated in England and Wales. The percentage holding in each
class of shares also reflects the percentage voting rights in each
company as a whole.
Registered Class of Number Proportion Capital Profit/(loss)
Company office shares held of class and reserves for the
held year
------------------------- ----------- -------------- ------- ----------- ---------------- ---------------
Tumblewind Limited EC4A 3TW Ordinary 790,000 50% GBP852,000 (GBP102,000)
------------------------- ----------- -------------- ------- ----------- ---------------- ---------------
St Columb Solar Limited EC4A 3TW Ordinary 649,999 50% GBP1,100,000 (GBP36,000)
------------------------- ----------- -------------- ------- ----------- ---------------- ---------------
Minsmere Power Limited EC4A 3TW Ordinary 200,001 50% GBP191,000 (GBP122,000)
------------------------- ----------- -------------- ------- ----------- ---------------- ---------------
Penhale Solar Limited EC4A 3TW Ordinary 299,601 50% GBP545,000 GBP15,000
------------------------- ----------- -------------- ------- ----------- ---------------- ---------------
Small Wind Generation
Limited EC4A 3TW Ordinary 840,001 50% (GBP485,000) (GBP28,000)
------------------------- ----------- -------------- ------- ----------- ---------------- ---------------
Lunar 3 Limited EC4A 3TW Ordinary 100 50% GBPnil GBPnil
------------------------- ----------- -------------- ------- ----------- ---------------- ---------------
22. Events after the end of the reporting period
The Board is fully aware of the severity of the current COVID-19
pandemic and its significant impact on economic activity and the
ability of companies to continue to do business. The Board in
conjunction with the Investment Adviser continues to monitor the
current situation and its potential long term impact on the VCT's
investments.
The VCT invested GBP12,500 into bio-bean Limited in October 2020
as part of a follow-on funding round alongside other investors,
including its sister company, VCT2.
On 3 December 2020, the Board declared dividends in respect of
the year ended 30 September 2020 of 5.3133p per Ordinary Share and
0.4867p per 'A' Share. These dividends will be paid on 31 December
2020 to Shareholders on the register at 11 December 2020.
There are no other significant events which require disclosure
in these financial statements.
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END
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