TIDMILV1
RNS Number : 5766E
Ingenious Live VCT 1 plc
08 April 2011
For immediate release 8 April 2011
INGENIOUS LIVE VCT 1 plc ("the Company")
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2010
CHAIRMAN'S STATEMENT
I am delighted to present the Company's fourth Annual Report and
Accounts covering the year to 31 December 2010 (the Reporting
Period).
Overview of Activities
The Company has now completed its investment strategy and is
fully invested under the VCT regulations and it will now continue
to focus upon maximising the returns from these investments. The
Company is pleased to announce that 2010 followed on from the
successes of the previous year, indicating that the strategy of
identifying investments which provide both annual profits and
increased capital value continues to deliver commercial
success.
I am pleased to report that the Company enjoyed another
successful summer season with its three main festivals all
delivering strong profits.
Creamfields sold out for the second year in a row with an
increased attendance from 30,000 to 40,000 per day. The 80s Rewind
Festival had an exceptionally strong second year and also saw
record attendances in 2010. Underage and Field Day had a solid
third year.
The 80s Rewind Tour performed below expectations, although the
Company remains confident in terms of the overall strategy for the
80s Rewind brand.
Results
The Company made a profit on ordinary activities of GBP89,000 in
the year to 31 December 2010 (2009: profit of GBP104,000).
The net asset value per share is 91.0 pence (31 December 2009:
97.1 pence) although this is after the deduction of the interim
dividend paid during the year of 7.0 pence per share.
The Directors do not recommend the payment of a final dividend
in respect of the Reporting Period.
Outlook
Now four years old, we believe that the Company has a strong
portfolio of investments and has the potential to deliver
significant upside from its equity interests. It continues to
maintain downside protection through its minimum revenue
arrangements.
Following the end of the financial year the Company declared an
interim dividend of 7.0 pence per share for the year to 31 December
2011. The dividend was paid on 11 February 2011.
I would like to take this opportunity to thank all Shareholders
for their continued support of the Company and I look forward to
seeing those of you that are able to attend the AGM, scheduled for
18 May 2011.
Tim Clark
Chairman
7 April 2011
MANAGER'S REVIEW
Investment Objective
The Company's main objective is to invest in a portfolio of live
event companies engaged in the production of new and established
events providing Shareholders with an attractive return. This
strategy will aim to maximise the opportunities for making tax-free
dividends to Shareholders from both the actual income received and
capital profits on the sale of the Investee Companies or their
assets.
The Company has been fully invested since December 2009 and the
Manager continues to focus solely on the portfolio of investments
in order to deliver strong annual profits and, crucially, target
exceptional back-end values as the Company exits its investments
after the qualifying five-year period.
Festivals
Creamfields
Investment amount: GBP850,000 (GBP1,700,000 across the Ingenious
Live VCTs).
The success of Creamfields in 2009 was highlighted when the
event won 'Best Festival' at the 2010 Music Week Awards, beating
festivals including Glastonbury, Reading and Leeds. The 2010 event
took place on the weekend of 28 and 29 August and delivered strong
profitability for the Company as a result of the two-day dance
music festival expanding in size from a 30,000 to a 40,000 per day
capacity. Creamfields is now widely regarded as the leading dance
festival in the UK.
We are confident that 2011 will bring further expansion in
capacity as well as increased profitability over the bank holiday
weekend in August 2011. Based in Cheshire, Creamfields has in
previous years boasted an electrifying line up including the world
famous David Guetta, Swedish House Mafia, DeadMau5, Calvin Harris,
Tiesto, Eric Prydz and Laidback Luke.
Ticket sales for this year's event are already well ahead of
last year and we are confident that the festival will sell out in
advance for the third year running. This should generate further
returns to the Company and additional information will be provided
in the full year accounts to 31 December 2011.
80s Rewind Festival & 80s Rewind Tour
Investment amount (80s Rewind Festival): GBP346,348 (GBP692,696
across the Ingenious Live VCTs, and GBP545,196 across the Ingenious
Entertainment VCTs).
Investment amount (80s Rewind Tour): GBP328,350 (GBP656,700
across the Ingenious Live VCTs).
In its second year, the 80s Rewind Festival held in August 2010
experienced an impressive increase in attendance figures across
both days from 23,000 in 2009 to over 35,000 in 2010. Highlights
included performances from Boy George, Tony Hadley, Go West and
Rick Astley. As expected, the event proved profitable and as a
result of its success and in order to raise more brand awareness
across the Christmas period, the Ingenious Live VCTs also agreed to
invest in the 80s Rewind Tour, which visited major cities across
the UK. Even though this event performed below expectations, there
is now international interest in licensing the brand for events
outside the UK, in locations such as Holland, South Africa and
Australia.
As a result of this strong performance, the Company remains
confident that 80s Rewind will continue to perform strongly in the
future. Tickets for the 2011 event are already on sale and have
surpassed the target number of sales expected at this stage. The
festival will be held between 19 and 21 August and will host an
impressive line up including The Human League, Holly Johnson, Billy
Ocean and Ali Campbell's UB40, along with many more.
Underage and Field Day Festivals
Investment amount: GBP500,000 (GBP1,000,000 across the Ingenious
Live VCTs).
This year the event continued to move from strength to strength
with 2010 boasting an impressive line-up featuring artists such as
M.I.A., Tinie Tempah, Tinchy Stryder, Ellie Goulding and Crystal
Castles. Following four successful years the event has firmly
established its market niche as the summer music event for 13 to 17
year olds.
Meanwhile, Field Day, which is well established as the leading
alternative music festival in London, featured exciting and dynamic
performances from Phoenix, Moderat and The Fall. The 2010 events
delivered a good profit for the Company. Field Day and Underage
attracted over 28,000 people across the weekend.
We believe that the Underage and Field Day brands still have
strong potential to be 'rolled out', both in the UK and overseas.
This would assist in enhancing the capital value of the events,
which is key to our investment strategy.
Exhibitions
Brand Events - Taste of Christmas and the Taste Festivals
Investment amount (Taste of Christmas): GBP902,489 (GBP1,804,978
across the Ingenious Live VCTs).
Taste of Christmas, the festive food and drink event returned
for the third year to the ExCel Centre in London during December
2010 and attracted over 20,000 people. Despite the severe weather
conditions, the exhibition was extremely well attended and as a
result, the event became profitable for the first time in 2010. A
high proportion of exhibitors and sponsors have already signed up
for the next exhibition to be held in December 2011, which will
once again inspire and educate consumers while offering them the
very best in food shopping, fine wines and access to celebrity
chefs.
Investment amount (Taste Festivals): GBP1,000,000 (GBP2,000,000
across the Ingenious Live VCTs).
TheTaste Festivals are established as successful outdoor food
and wine events featuring a number of famous chefs including Gary
Rhodes, Michel Roux Jr, Giorgio Locatelli and Theo Randall who
serve up their signature dishes for the public to taste. The London
event took place in Regent's Park between 17 and 20 June 2010,
whilst the Edinburgh event was held in Inverleith Park between 28
and 29 May 2010.
Taste of London is the jewel in the Taste Festivals' crown,
attracting 50,000 visitors to Regent's Park every year. Taste
Festivals have set a new benchmark for food and drink events
worldwide with 13 Taste Festivals now being hosted around the world
including Dublin, Cape Town, Sydney and Dubai. The investment
generated a small profit to the Company.
Taste of Londonreturns to Regent's Park between 16 and 19 June
2011.
O(2) Golf Live
Investment amount: GBP275,000 (GBP1,100,000 across the Ingenious
Live VCTs and the Ingenious Entertainment VCTs).
O(2) Golf Live is a new three--day interactive golf event which
was staged at Stoke Park in Buckinghamshire between 14 and 16 May
2010. O(2) Golf Live returns in 2011 and will be held at the
prestigious London Golf Club in Kent from 20 to 22 May. In
conjunction with our co-promoters Brand Events and IMG, the event
will again be hosted by last year's Ryder Cup captain, Colin
Montgomerie. The 2010 event was described by those who attended as
the most exciting and dynamic event to be added to the golfing
calendar.
IMG invested into the event as an equity partner giving Brand
Events access to worldwide sporting talent. IMG Worldwide is a
global sports, fashion and media business and is excited to be
working with Brand Events, who together aim to roll the event out
to further prestigious golf courses around the world. O(2) , Jaguar
and the European Tour were amongst the partners for the initial UK
launch and have all agreed to continue to sponsor and support the
event in 2011.
The event made a loss in the first year, however it was
extremely well received by both the corporate partners and the
paying public. Sponsorship and exhibitor income are already ahead
of this year's budget and 2011 ticket sales are also ahead of where
they were in 2010. Both Brand Events and IMG are confident that the
event will move into profit in 2011, building on the significant
brand awareness that was created in its first year.
Live Venues
Scarborough Open Air Theatre
Investment amount: GBP1,000,000 (GBP4,000,000 across the
Ingenious Live VCTs and the Ingenious Entertainment VCTs).
The Ingenious Live VCTs along with Apollo Resorts and Leisure
Scarborough joined forces to co-promote a new venue in 2009 known
as the Scarborough Open Air Theatre. The theatre was originally
opened in 1932 and in 2009 Scarborough Council entered into a major
restoration programme as part of the North Bay Project to reinstate
the theatre, reopening it to the public in 2010.
Scarborough is now the largest open air theatre in Europe. It
was opened by the Queen on 20 May 2010 and this ceremony was
followed by a series of sell out events throughout the summer
season. These included the Gala Opening with performances by Jose
Carreras and Dame Kiri Te Kanawa as well as the 80s Rewind concert,
which included performances from Boy George, Rick Astley and Paul
Young.
The second half of the season showcased an impressive range of
events, which included a number of shows by Justin Fletcher, the
Bafta award winning children's presenter and star of CBeebies. This
new venue also hosted some less successful events, which meant that
in its opening year Scarborough did not generate a profit.
Nonetheless, following the encouraging reception Scarborough
received in its first year, we are confident that this venue will
move into profit in 2011.
Television Format
Let's Dance
Investment amount: GBP500,000 (GBP2,000,000 across the Ingenious
Live VCTs and the Ingenious Entertainment VCTs).
Originally commissioned by the BBC for Comic Relief in 2009 and
Sport Relief in 2010, the TV format Let's Dance is the celebrity
packed dance spectacular which sees well known celebrities such as
Rufus Hound and Jo Brand pay homage to some of the world's most
iconic dance routines in front of a live audience. Let's Dance has
started its international roll-out with deals in Russia, Holland,
Germany, Slovakia, Indonesia and Sweden.
In 2010 the show had a peak audience of over eight million
viewers and as a result, the programme was recommissioned in 2011
for the third year, once again in conjunction with Comic Relief.
The series aired during its usual prime time TV slot on BBC One on
Saturday 19 February 2011. The series ran over four weeks, featured
three heats and culminated in a spectacular final dance off on Red
Nose Day weekend.
Outlook
The economic environment continues to challenge the Company as a
whole, however we are pleased to report that the live events sector
has performed resiliently in the downturn and we anticipate that
the expansion of the digital media sector will also create new
markets for content creators.
Our business model is effective and we believe this is crucial
in order to stay ahead of the competition and produce successful
global brands. We aim to continue to raise the profile of the
Company's investments and to enhance their profitability which
enables the Company to achieve its investment strategy.
All our investments are backed by management teams with vast
experience in the live events sector. Examples include Brand
Events, the event production company behind Taste of Christmas and
all the Taste Festivals and Whizz Kid who have experience in
producing top quality programmes across a wide-range of genres
including factual entertainment; events and music such as Let's
Dance and The Orange British Academy Film Awards.
Contact
If you have any questions on this review or would like to speak
with a member of the management team, please do not hesitate to
contact us on 0207 319 4000.
Ingenious Ventures
7 April 2011
BUSINESS REVIEW
The purpose of this review is to provide Shareholders with a
summary setting out the business objectives of the Company, the
Board's strategy to achieve those objectives, the risks faced, the
regulatory environment and the key performance indicators (KPIs)
used to measure performance.
1. Strategy for Achieving Objectives
Ingenious Live VCT 1 plc is a tax efficient company listed on
The London Stock Exchange.
The investment objective is to achieve a combination of a high
degree of downside protection in an otherwise potentially high risk
proposition and long-term capital growth, maximising distributions
in order to take advantage of tax-free dividends.
The Board has delegated day-to-day investment management and
administration of the Company to Ingenious Ventures under the terms
of a Management Agreement.
The Manager's review provides a review of the investment
portfolio and the market outlook.
2. Investment Policy
The Company's investment policy is to invest in Investee
Companies that will produce and promote new and established events
whose revenues will be underpinned by warranties or other similar
contractual arrangements. The Ingenious Live VCTs will invest in
Investee Companies which are expected to participate in the
revenues and growth of events. The events produced and promoted by
the Investee Companies are likely to be held primarily in the UK
and may include concerts, festivals, exhibitions, theatrical shows,
conferences, trade fairs and sporting events.
The Company will only invest in an Investee Company:
-- where the event has been approved by the Manager through its
selection process; and
-- where the Investee Company has obtained performance
warranties or similar contractual arrangements that will provide
for the Investee Company to receive minimum revenues equivalent to
at least 75% of the Company's investment, although the Manager is
currently endeavouring to secure higher levels of minimum revenues
in the current economic environment.
The initial capital required by an Investee Company will be
provided by the Company. The majority of this initial capital will
be provided through loan finance which should provide additional
capital protection. The Company can invest, under current venture
capital trust legislation, up to GBP1million per tax year in any
one Investee Company.
The Company has the flexibility to retain up to 30% of its
assets in cash and cash equivalent instruments which the Directors
believe should provide a significant degree of downside protection
whilst preserving the upside potential of the Events within the
portfolio.
At 31 December 2010 the Company had made ten investments in
Qualifying Companies, with contractual arrangements that provide
for the Investee Company to receive minimum revenues equivalent to
at least 75% of the Company's investment, all of which had received
the prior approval of the Manager's investment committee.
3. Principal Risks, Risk Management and Regulatory
Environment
The Board believes that the principal risks faced by the Company
are:
-- Investment and strategic - the performance of an investment
in an event is tied to a certain degree to the fortunes of the
industry generally. In particular, there is a risk that the Company
will not identify opportunities where the commercial success of the
Event is sufficient to earn revenues over and above the minimum
contractual income negotiated.
-- Loss of approved status as a Venture Capital Trust - the
Company must comply with section 274 of the ITA which allows it to
be exempt from capital gains tax on investment gains realised by
Shareholders. Any breach of these rules may lead to the Company
losing its approval as a VCT, and qualifying Shareholders who have
not held their Shares for the designated holding period would have
to repay the income tax relief they obtained and future dividends
paid by the Company would become subject to tax. The Company would
also lose its exemption from corporation tax on capital gains.
-- Regulatory - the Company is required to comply with the
Companies Act, the rules of the UK Listing Authority and United
Kingdom Accounting Standards. Breach of any of these regulatory
rules might lead to suspension of the Company's Stock Exchange
listing, financial penalties or a qualified audit report.
-- Financial - inadequate internal controls might lead to
misappropriation of assets. Inappropriate accounting policies might
lead to misreporting or breaches of regulations.
-- External inherent risks - the Company's investments will be
in unquoted companies which by their nature involve a higher degree
of risk than investment in the main market due to the fact there is
no liquid market and may, therefore, be difficult to realise.
Furthermore, there may be further constraints imposed on
realisations because of the requirement to satisfy certain
conditions necessary for the Company to maintain its VCT status
(such as the obligation to have at least 70% by value of its
investments in qualifying holdings by the beginning of the
accounting period commencing three years after provisional VCT
approval).
The Board seeks to mitigate the internal risks by setting clear
policies, including establishing a funding structure which provides
for minimum revenues equivalent to at least 75% of the investment,
regular reviews of performance, monitoring progress and
compliance.
Key Performance Indicators (KPIs)
The primary KPI on which the Board assesses the performance of
the Manager in meeting the Company's objective is the change in net
asset value per share.
A review of the Company's performance during the year, the
position of the Company at the year end and the outlook for the
coming year is contained within the Chairman's Statement and the
Manager's Review.
INCOME STATEMENT
for the year ended 31 December 2010
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ----- -------- -------- -------- -------- -------- --------
Gain on disposal
of investments - 63 63 - 154 154
(Decrease)/increase
in fair value
of investments
held - (111) (111) - 178 178
Investment
income 2 410 - 410 68 - 68
Investment
management
fee 3 (86) (86) (172) (89) (89) (178)
Other expenses 4 (101) - (101) (105) (13) (118)
--------------------- ----- -------- -------- -------- -------- -------- --------
Profit/(loss)
on ordinary
activities
before taxation 223 (134) 89 (126) 230 104
Tax on ordinary
activities 5 - - - - - -
--------------------- ----- -------- -------- -------- -------- -------- --------
Profit/(loss)
on ordinary
activities
after taxation
attributable
to shareholders 223 (134) 89 (126) 230 104
Basic and diluted
return per
share (pence) 6 2.4 (1.4) 1.0 (1.4) 2.5 1.1
--------------------- ----- -------- -------- -------- -------- -------- --------
The Company has no recognised gains and losses other than those
disclosed above.
The total column is the Income Statement of the Company for the
year. The supplementary capital and revenue columns are prepared
following guidance published by the Association of Investment
Companies (AIC).
All operations are considered to be continuing.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 2010
31 December 2010 31 December 2009
GBP'000 GBP'000
----------------------------- ---------------- ----------------
Opening shareholders' funds 8,973 8,869
Dividends (647) -
Profit for the year 89 104
----------------------------- ---------------- ----------------
Closing shareholders' funds 8,415 8,973
----------------------------- ---------------- ----------------
The accompanying notes form an integral part of these financial
statements.
BALANCE SHEET
as at 31 December 2010
31 December 31 December
2010 2009
Note GBP'000 GBP'000
------------------------------------------- ----- ------------ ------------
Fixed assets
Qualifying investments 7 6,521 6,242
------------------------------------------- ----- ------------ ------------
Current assets
Debtors 9 138 68
Non-qualifying investments 10 1,717 2,598
Cash at bank and in hand 63 93
------------------------------------------- ----- ------------ ------------
1,918 2,759
Creditors: amounts falling due within one
year 11 (24) (28)
------------------------------------------- ----- ------------ ------------
Net current assets 1,894 2,731
------------------------------------------- ----- ------------ ------------
Net assets 8,415 8,973
------------------------------------------- ----- ------------ ------------
Capital and reserves
Called-up share capital 12 92 92
Share premium account 13 4,383 4,383
Other reserve 13 3,735 4,382
Capital reserve 13 482 616
Revenue reserve 13 (277) (500)
------------------------------------------- ----- ------------ ------------
Shareholders' funds 8,415 8,973
------------------------------------------- ----- ------------ ------------
Net asset value (pence per share) 14 91.0 97.1
------------------------------------------- ----- ------------ ------------
The accompanying notes form an integral part of these financial
statements.
The financial statements were approved by the Board of Directors
on 7 April 2011.
Signed on behalf of the Board of Directors:
Tim Clark
Chairman
CASH FLOW STATEMENT
for the year ended 31 December 2010
2010 2009
Note GBP'000 GBP'000
Net cash outflow from operating activities (211) (134)
-------------------------------------------- ----- --------- ---------
Financial investment
Purchase of qualifying investments 7 (74) (3,203)
Disposal of qualifying investments 7 74 -
Net cash outflow from financial investment - (3,203)
-------------------------------------------- ----- --------- ---------
Management of liquid resources
Disposal of non-qualifying investments 10 828 3,338
Net cash inflow from liquid resources 828 3,338
--------------------------------------------------- --------- ---------
Dividends
Payment of dividends 13 (647) -
Net cash outflow from dividends (647) -
-------------------------------------------- ----- --------- ---------
(Decrease)/increase in cash (30) 1
-------------------------------------------- ----- --------- ---------
Reconciliation of profit before taxation to net cash
flow
from operating activities Note GBP'000 GBP'000
----------------------------------------------------- ---- -------- -------
Profit on ordinary activities before tax 89 104
Decrease/(increase) in fair value of investments held 13 111 (178)
Investment income (337) -
Increase in receivables (70) (62)
(Decrease)/increase in payables (4) 2
Net cash outflow from operating activities (211) (134)
----------------------------------------------------- ---- -------- -------
Reconciliation of net cash flow to movement in net
funds GBP'000 GBP'000
--------------------------------------------------- -------- -------
Opening cash balances 93 92
Net cash (outflow)/inflow (30) 1
Closing cash balances 63 93
--------------------------------------------------- -------- -------
Total net funds is cash of GBP63k (2009: GBP93k) and
non-qualifying investments of GBP1,717k (2009: GBP2,598k).
The accompanying notes form an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2010
1. Accounting Policies
a) Basis of Accounting
The financial statements for the year ended 31 December 2010
have been prepared in compliance with UK Generally Accepted
Accounting Practice, and with the Statement of Recommended Practice
(the SORP) entitled "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" which was issued in January
2009.
The comparative figures are for the year 1 January 2009 to 31
December 2009.
The financial statements have been prepared on a going concern
basis under the historical cost convention, except for the
measurement at fair value for investments. The principal accounting
policies have remained unchanged from those set out in the
Company's 2009 annual report and financial statements.
b) Valuation of Investments
The Company's business is investing in financial assets with a
view to profiting from their total return in the form of income and
capital growth. As set out in the prospectus all investments are
designated at fair value.
Investee Companies
Unquoted investments including equity and loan investments are
designated at fair value and valued in accordance with the
International Private Equity and Venture Capital Guidelines and
Financial Reporting Standard 26 "Financial Instruments: Recognition
and Measurement" (FRS 26). Investments are initially recognised at
fair value. The investments are subsequently re-measured at fair
value, as estimated by the Directors with prudence and good faith.
Investment holding gains or losses arising from the revaluation of
investments are taken directly to the Income Statement. Fair value
is determined as follows:
-- Fair value is the amount for which an asset could be
exchanged between knowledgeable, willing parties in an arm's length
transaction.
-- In estimating fair value for an investment, the Investment
Manager will apply a methodology that is appropriate in light of
the nature, facts and circumstances of the investment and its
materiality in the context of the total investment portfolio and
will use reasonable assumptions and estimations.
-- An appropriate methodology incorporates available information
about all factors that are likely to materially affect the fair
value of the investment. The valuation methodologies are applied
consistently from period to period, except where a change would
result in a better estimate of fair value. Any changes in valuation
methodologies will be clearly disclosed in the financial
statements.
The most widely used methodologies are listed below. In
assessing which methodology is appropriate, the Directors are
predisposed towards those methodologies that draw upon market based
measures of risk and return.
-- Price of recent investment
-- Earnings multiple
-- Net assets
-- Available market prices
Of these the two methodologies most applicable to the Company's
investments are:
1. Price of recent investment
Where the investment being valued was made recently, its cost
will generally provide a good indication of value. It is generally
considered that this would only apply for a limited period; in
practice the period prior to the second live event which forms the
investment is often applied as the long stop date for such a
valuation.
2. Discounted cash flows/earnings of the underlying business
Investments can be valued by calculating the net present value
of expected future cashflows of the companies in which the Company
has invested (the Investee Companies). In relation to the Company's
investments, anticipating future cashflows in excess of the
guaranteed amounts would clearly require highly subjective
judgements to be made in the early stage of each investment and
therefore would not be an appropriate methodology to apply in the
early stage of the investment.
In the period prior to the second live event it is considered
appropriate to use the price paid for the recent investment as the
latest available information. Thereafter, the portfolio of
investments is fair valued on the earnings multiple basis using the
latest available information on the performance of the live event
or entertainment content. Gains or losses arising from changes in
the fair value of the 'financial assets at fair value through
profit or loss' category are presented in the Income Statement in
the period in which they arise.
As a result of the above basis of valuation, there is
significant judgement associated with the valuation of
investments.
Non-qualifying Investments - Open Ended Investment Companies
The Company's non-qualifying investments in interest bearing
money market open ended investment companies (OEICs) are valued at
fair value, this is bid price. They have been designated as fair
value through profit and loss for the purposes of FRS 26.
Gains and losses arising from changes in fair value of
qualifying and non-qualifying investments arerecognisedas part of
the capital return within the Income Statement and allocated to the
realised orunrealisedcapital reserve as appropriate. Transaction
costs attributable to the acquisition or disposal of investments
are charged to capital within the Income Statement.
c) Investment Income
Interest income relating to loan note premiums is recognised in
the Income Statement as accrued on a time-apportionment basis so as
to reflect the effective interest rate. Where those loan note
premiums are charged in lieu of higher interest then they are
credited to income over the life of the advance to the extent those
premiums are anticipated to be collected.
d) Dividend Income
Dividend income is recognised in the Income Statement once
declared by any investee company.
e) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged to the revenue account within the Income Statement
except that:
-- expenses which are incidental to the acquisition or disposal
of an investment are charged to capital in the Income Statement as
incurred; 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 management fee has been allocated 50% to revenue and 50%
to capital, which represents the expected split of the Company's
long term returns.
f) Deferred Taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the Balance
Sheet date where transactions or events that result in an
obligation to pay more, or a right to pay less, tax in the future
have occurred at the Balance Sheet date. This is subject to
deferred tax assets only being recognised if it is considered more
likely than not that there will be suitable profits from which the
future reversal of the underlying timing differences can be
deducted. Timing differences are differences arising between the
Company's taxable profits and its results as stated in the
financial statements which are capable of reversal in one or more
subsequent periods.
2. Investment Income
2010 2009
GBP'000 GBP'000
Bank deposit interest - 5
Dividend income from Qualifying Investments 25 11
Loan note interest from Qualifying
Investments 385 52
--------------------------------------------- --------- ---------
410 68
--------------------------------------------- --------- ---------
3. Investment Management Fee
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
management
fee 86 86 172 89 89 178
------------ --------- --------- --------- --------- --------- ---------
86 86 172 89 89 178
------------ --------- --------- --------- --------- --------- ---------
For the purposes of the revenue and capital columns in the
Income Statement, the management fee has been allocated 50% to
revenue and 50% to capital, which represents the expected split of
the Company's long term returns.
4. Other Expenses
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- -------- -------- --------
Directors'
remuneration
(excluding employer's
national insurance) 30 - 30 31 - 31
Auditors' remuneration
- Audit fees 13 - 13 13 - 13
Legal & professional
fees 6 - 6 5 8 13
Other administration
expenses 50 - 50 43 4 47
Irrecoverable VAT 2 - 2 13 1 14
----------------------- -------- -------- -------- -------- -------- --------
101 - 101 105 13 118
----------------------- -------- -------- -------- -------- -------- --------
The Company is not registered for VAT. Fees payable to the
Company's auditor for the audit of the Company's financial
statements are GBP13k excluding VAT. Further details on the
Directors' fee disclosures are given in the Directors' Remuneration
Report.
5. Tax Charge on Ordinary Activities
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------- -------- -------- -------- --------- ---------
Profit/(loss)
on ordinary
activities
before tax 223 (134) 89 (126) 230 104
Profit/(loss)
on ordinary
activities by
tax rate 28%
(2009: 28%) 62 (38) 24 (35) 64 29
---------------- -------- -------- -------- -------- --------- ---------
Adjustments:
---------------- -------- -------- -------- -------- --------- ---------
Non taxable
losses/(gains)
on
investments - 13 13 - (93) (93)
Disallowed
expenses - 25 25 - 29 29
UK dividends
not taxable (7) - (7) (3) - (3)
Utilisation of
brought
forward excess
management
expenses (55) - (55) 38 - 38
---------------- -------- -------- -------- -------- --------- ---------
- - - - - -
---------------- -------- -------- -------- -------- --------- ---------
As the Company is a VCT its capital gains are not taxable.
At 31 December 2010 the Company had surplus management expenses
of GBP382k (2009: GBP582k). A deferred tax asset has not been
recognised in respect of these surplus management expenses as the
Company has only been investing for a short period of time, and
future taxable income can not be predicted with reasonable
certainty. Due to the Company's status as a VCT, and the intention
to continue meeting the conditions required to obtain approval in
the foreseeable future, the Company does not recognise deferred tax
on any capital gains or losses which arise on the revaluation of
investments.
6. Basic and Diluted Return per Share
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------- ---------- ---------- ---------- ---------- ---------- ----------
Profit/(loss)
on ordinary
activities
after
taxation 223 (134) 89 (126) 230 104
Weighted
average
shares in
issue
(number) 9,242,845 9,242,845 9,242,845 9,242,845 9,242,845 9,242,845
-------------- ---------- ---------- ---------- ---------- ---------- ----------
Profit/(loss)
attributable
per share
(pence) 2.4 (1.4) 1.0 (1.4) 2.5 1.1
-------------- ---------- ---------- ---------- ---------- ---------- ----------
There are no dilutive potential ordinary shares, including
convertible instruments, options or contingent share agreements in
issue for the Company. The basic return per share is therefore the
same as the diluted return per share.
7. Fixed Asset Investments
2010 2009
Unquoted investments GBP'000 GBP'000
------------------------ --------- ---------
Equity shares 2,037 2,074
Unsecured loan notes 4,484 4,168
------------------------ --------- ---------
6,521 6,242
------------------------ --------- ---------
Qualifying Investments GBP'000 GBP'000
------------------------ --------- ---------
Opening valuation 6,242 2,752
Fair value adjustment 279 287
Purchases at cost 74 3,203
Repayment of loan note (74) -
------------------------ --------- ---------
Closing valuation 6,521 6,242
------------------------ --------- ---------
8. Significant Interests
The Company has interests of greater than 10% of the nominal
value of the allotted shares in the following Investee Companies
incorporated in the United Kingdom as at 31 December 2010:
Trading Companies % class and share type % voting rights
-------------------------- ------------------------ ----------------
Aurem Limited 24.95% A Ordinary 24.95%
IR Productions Limited 24.95% A Ordinary 24.95%
CFDT Limited 24.95% A Ordinary 24.95%
Taste Xmas Live Limited 24.95% A Ordinary 24.95%
Brand Events Live Limited 24.95% A Ordinary 24.95%
Annie Films Limited 24.95% A Ordinary 24.95%
Jetstream Events Limited 24.95% A Ordinary 24.95%
Dance Floor Limited 12.48% A Ordinary 12.48%
Golfmania Limited 12.48% A Ordinary 12.48%
Into The Groove Limited 13.97% A Ordinary 13.97%
-------------------------- ------------------------ ----------------
It is considered that, as permitted by FRS9, "Associates and
Joint Ventures", the above investments are held as part of an
investment portfolio, and that, accordingly, their value to the
Company lies in their marketable value as part of that portfolio.
In view of this, it is not considered that any of the above
represents investments in associated undertakings.
9. Debtors
2010 2009
GBP'000 GBP'000
-------------------------------- --------- ---------
Prepayments and accrued income 138 68
-------------------------------- --------- ---------
10. Current Asset Investments
2010 2009
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Funds held in listed money market instruments 1,717 2,598
----------------------------------------------- --------- ---------
Non-Qualifying Investments GBP'000 GBP'000
----------------------------------------------- --------- ---------
Opening valuation 2,598 6,045
Disposal proceeds (828) (3,338)
Unrealised change in value of investment (53) (109)
----------------------------------------------- --------- ---------
Closing valuation 1,717 2,598
----------------------------------------------- --------- ---------
In order to safeguard the capital available for investment in
Qualifying Investments and balance this with the need to provide
good returns to investors, available funds from the net proceeds
are invested in appropriate securities (money market securities and
cash funds) until required for Qualifying Investment purposes.
11. Creditors: Amounts Falling Due Within One Year
2010 2009
GBP'000 GBP'000
----------------------------- -------- --------
Trade creditors - 7
Accruals and deferred income 24 21
----------------------------- -------- --------
24 28
----------------------------- -------- --------
12. Called-Up Share Capital
2010 2009
Allotted, called-up and fully paid GBP'000 GBP'000
----------------------------------- --------- ---------
9,242,845 ordinary shares 1p each 92 92
----------------------------------- --------- ---------
The entire issued ordinary share capital of the Company has been
admitted to the official list maintained by the Financial Services
Authority and to trading on the London Stock Exchange.
13. Reserves
Share Other Capital Revenue Total
premium reserve reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- --------- --------- ----------
At 1 January 2010 4,383 4,382 616 (500) 8,881
Dividend payments - (647) - - (647)
Gain on disposal of
investments - - 63 - 63
Decrease in fair
value of investments
held - - (111) - (111)
Investment income - - - 410 410
Investment management
fees - - (86) (86) (172)
Other expenses - - - (101) (101)
---------------------- --------- --------- --------- --------- ----------
At 31 December 2010 4,383 3,735 482 (277) 8,323
---------------------- --------- --------- --------- --------- ----------
The capital reserve includes realised investment holding gains
of GBP88k and unrealised investment holding gains of GBP394k. As an
investment company under section 833 of the Companies Act 2006, the
other reserve account is the only distributable reserve of the
Company.
On 13 April 2010, the Company paid dividends amounting to
GBP647k (2009: GBPNil). Although the Company had applied to the
High Court to reduce its share premium account and create
distributable reserves, the Company had not complied with certain
technical requirements of the Companies Act 2006. Specifically,
prior to the payment of the dividends from capital reserves, the
Company was required to revoke its investment company status. The
payment of the dividends received appropriate pre-clearance from
HMRC, to confirm the Company's VCT status was not affected by the
dividend payment. The Company is taking advice from its advisers as
to any remedial action that is required, and will inform
shareholders as soon as practicable. The accounts have been drawn
up on the basis that the issue referred to above is regularised.
The proposals do not affect the results of the Company for the year
to 31 December 2010, its net assets at 31 December 2010, nor its
ability to pay future dividends.
14. Net Asset Value per Share
2010 2009
-------------------------------------------------- --------- ---------
Net assets attributable to shareholders (GBP'000) 8,415 8,973
Shares in issue (number) 9,242,845 9,242,845
-------------------------------------------------- --------- ---------
Net asset value per share (pence) 91.0 97.1
-------------------------------------------------- --------- ---------
15. Financial Instruments and Risk Management
The Company's financial instruments comprise equity and floating
rate debt investments in unquoted companies, cash balances and
listed money market instruments. The Company holds financial assets
in accordance with its investment policy.
Fixed asset investments (see note 7) are valued at fair value.
For quoted securities included in current asset non-qualifying
investments, this is bid price. In respect of unquoted investments,
these are fair valued in accordance with the International Private
Equity and Venture Capital Valuation Guidelines. The fair value of
all other financial assets and liabilities is represented by their
carrying value on the Balance Sheet.
Fair Value Hierarchy
2010 2009
GBP'000 GBP'000
---------------------------------------------------- -------- --------
Listed money market instruments (note 10) Level 1 1,717 2,598
Unquoted investments (note 7) Level 3 6,521 6,242
------------------------------------------ -------- -------- --------
8,238 8,840
--------------------------------------------------- -------- --------
The level 3 investments include net fair value gains of GBP279k
in the current year (2009: GBP287k), as disclosed in note 7.
In accordance with Financial Reporting Standard 29 'Financial
Instruments: Disclosures', the above table provides an analysis of
these investments based on the fair value hierarchy described below
which reflects the reliability and significance of the information
used to measure their fair value:
-- Level 1 - investments with quoted prices in active
markets;
-- Level 2 - investments whose fair value is based directly on
observable market prices or is indirectly drawn from observable
market prices; and
-- Level 3 - investments whose fair value is determined using a
valuation technique based on assumptions that are not supported by
observable current market prices or are not based on observable
market data.
The valuation techniques used by the Company are explained in
note 1 on accounting policies.
The Company's investing activities expose it to various types of
risk that are associated with the financial instruments and markets
in which it invests. The most important types of financial risk to
which the Company is exposed are:
-- Market risk;
-- Interest rate risk;
-- Credit risk; and
-- Liquidity risk.
The nature and extent of the financial instruments outstanding
at the Balance Sheet date and the risk management policies employed
by the Company are discussed below:
a) Market Risk
Market risk embodies the potential for both losses and gains and
includes interest rate risk and price risk.
The Company's strategy on the management of investment risk is
driven by the Company's investment objective. Investments in
unquoted companies, by their nature, involve a higher degree of
risk than investments in larger "blue chip" companies.
The risk of loss in value is managed through careful selection
in accordance with a formalised investment decision process, with
each investment proposal evaluated by the Investment Committee as
part of the due diligence stage. The Company's investment policy
can be found in the Business Review. The risk is also managed
through continuous monitoring of the performance of investments and
changes in their risk profile.
b) Interest Rate Risk
Some of the Company's financial assets are interest bearing, all
of which are at floating rates. As a result, the Company has
exposure to interest rate risk due to fluctuations in the
prevailing levels of market interest rate.
When the Company retains cash balances, the majority of cash is
held within interest bearing money market open ended investment
companies (OEICs). This is the Non-Qualifying Investments amount on
the Balance Sheet being GBP1,717k (2009: GBP2,598k). The benchmark
rate which determines the interest payments received on interest
bearing cash balances and debt investments in unquoted companies is
the bank base rate which was 0.5% as at 31 December 2010 (31
December 2009: 0.5%).
The following table illustrates the sensitivity of the impact on
ordinary activities for the year before taxation and total equity
to a change in interest rates of 50 basis points, with effect from
the beginning of the year. These changes are considered to be
reasonably possible based on observation of current market
conditions. The calculations are based on the Company's
Non-qualifying investments held at each balance sheet date. All
other variables are held constant.
31 December 2010 31 December 2009
GBP '000 GBP '000
+/- 50 basis points +/- 50 basis points
Impact on profit/(loss) on ordinary
activities for the year
before taxation and total equity 9 14
------------------------------------ ------------------- -------------------
c) Credit Risk
Credit risk is the risk that counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
Whilst the Company is exposed to credit risk due to its
GBP4,484k (2009: GBP4,168k) unsecured loan note instruments, this
risk is mitigated by the Company requiring that minimum royalty
arrangements are in place prior to the investment as set out in the
Company's investment policy. In addition, and in accordance with
the Company's monitoring procedure, the Manager closely monitors
progress (including financial expenditure) against the Investee
Companies' agreed business plans.
The GBP4,484k (2009: GBP4,168k) unsecured loan notes are the
contractually agreed 70% of initial investments.
d) Liquidity Risk
The Company's financial instruments include equity and debt
investments in unquoted companies, which are not traded in an
organised public market and which generally may be illiquid. As a
result, the Company may not be able to liquidate quickly some of
its investment in these instruments at an amount close to fair
value.
The Company maintains sufficient reserves of cash and readily
realisable marketable securities to meet its liquidity requirements
at all times. No numerical disclosures have been provided in
respect of liquidity risk as this is not considered to be
material.
16. Contingencies, Guarantees and Financial Commitments
There is currently interest income accruing on the unsecured
loan note instruments at a rate of 4.5% (2009: 1.5%, amended to
4.5% in April 2010), being 4% over the bank base rate which was
0.5% as at 31 December 2010 (2009: 0.5%), totalling GBP137k (2009:
GBP47k). The repayment of this interest is not deemed recoverable
based on current profits being derived by the Investee Companies,
which currently can not be determined with any certainty, therefore
the Directors have not recognised it in the financial
statements.
17. Related Party Transactions
a) Ingenious Ventures Limited was the investment manager until
28 February 2008, when the investment management agreement was
novated to Ingenious Asset Management Limited, and Ingenious
Ventures became a trading division of Ingenious Asset Management
Limited. Patrick McKenna is a director of Ingenious Asset
Management Limited and was a director of Ingenious Ventures Limited
until 1 June 2009, which are subsidiaries within the Ingenious
Media Holdings plc group of companies (the Ingenious Group), which
is controlled by Patrick McKenna. Ingenious Ventures (the Manager),
as per the management agreement, receives a management fee of 0.5%
of the net asset value payable quarterly in advance. This amounted
to GBP172k as at 31 December 2010 (2009: GBP178k). The Manager also
charges an administration fee of GBP19k (2009:GBP18k) per annum and
irrecoverable VAT.
b) The funds invested in OEICs are managed by the Asset
Management division of Ingenious Asset Management Limited, a
company of which Patrick McKenna is a director. Ingenious Asset
Management Limited is a subsidiary of the Ingenious Group, which is
controlled by Patrick McKenna. There is no fee associated with this
transaction.
c) Patrick McKenna is a director and a shareholder of Ingenious
Live VCT 2 plc. In January 2010, the Company made a further
investment of GBP74,000 into an existing company, Into the Groove
Limited, to co-promote 80's Rewind bringing its total investment to
GBP346,348 for 13.97% of the equity. Ingenious Live VCT 2 plc also
invested GBP74,000k bringing its total investment to GBP346,348 for
13.97% of the equity of Into the Groove Limited.
d) Patrick McKenna is a director and a shareholder of Ingenious
Live VCT 2 plc. In January 2010, an existing company, IR
Productions Limited, which co-promotes a music festival at
Powderham Castle, repaid GBP74,000 of unsecured loan notes to the
Company. This reduced the Company's total investment to GBP328,350
while retaining 24.95% of the equity. IR Productions Limited also
repaid GBP74,000 of unsecured loan notes to Ingenious Live VCT 2
plc reducing its total investment to GBP328,350 while retaining
24.95% of the equity.
During the period the Company has entered into transactions with
the above-mentioned related parties in the normal course of
business and on an arm's length basis:
2010 2010 2009 2009
Expenditure Amounts Expenditure Amounts
paid due paid due
Entity Note GBP'000 GBP'000 GBP'000 GBP'000
----------------- ------ ------------- --------- -------------- ---------
Ingenious Asset Management Limited
Investment
management fee a 172 - 178 -
Administration
fee a 19 - 18 -
Irrecoverable
VAT a 1 2 8 3
----------------- ------ ------------- --------- -------------- ---------
Transactions Between Related Parties
Ingenious Media Consulting Limited, a company which is a
wholly-owned subsidiary in the Ingenious Group, which is controlled
by Patrick McKenna, has entered into consultancy agreements with
each of the Company's investee companies to provide management
services. For the provision of such services, consulting fees
totalling GBP166k excluding VAT (31 December 2009: GBP242k), have
been invoiced in the year. No amounts remain outstanding as at 31
December 2010 (31 December 2009: GBP39k).
18. Events After the Balance Sheet Date
The Company declared an interim dividend of 7.0 pence per
ordinary share on 17 January 2011 (2010: 7.0 pence). The dividend
was paid on 11 February 2011 by way of a capital distribution
reducing the Company's other reserves.
19. Capital Management
The capital management objectives of the Company are:
-- To safeguard its ability to continue as a going concern so
that it can continue to provide returns to shareholders.
-- To ensure sufficient liquid resources are available to meet
the funding requirements of its investments and to fund new
investments where identified.
The Company has no external debt; consequently all capital is
represented by the value of share capital, distributable and other
reserves. Total shareholder equity at 31 December 2010 was
GBP8,415k (2009: GBP8,973k).
In order to maintain or adjust its capital structure the Company
may adjust the amount of dividends paid to the Shareholders, return
capital to Shareholders, issue new shares or sell assets.
There have been no changes to the capital management objectives
or the capital structure of the business from the previous
period.
The Company is subject to the following externally imposed
capital requirements:
-- As a public company Ingenious Live VCT 1 plc must have a
minimum of GBP50k of share capital.
The level of dividends may be influenced by the need to comply
with the VCT legislation which states that no more than 15% of
income from shares and securities may be retained.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMGGDLRKGMZG
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