TIDMIE1C
INGENIOUS ENTERTAINMENT VCT 1 PLC
21 August 2009
Half-yearly results for the six months to 30 June 2009
INTERIM MANAGEMENT REPORT
I am delighted to present the half-yearly financial report of Ingenious Entertainment VCT 1 plc (the Company) covering the six months ended 30 June 2009 (the Reporting Period).
The offer for subscription for C Shares made by the Company and Ingenious Entertainment VCT 2 plc (the Ingenious Entertainment VCTs) closed on 31 July 2009 having raised a total of GBP5.6 million. The funds are split equally between the Ingenious Entertainment VCTs therefore GBP2.8 million is attributable to C Shareholders of the Company. The additional fundraising will allow the fixed costs of the Company to be spread over a larger capital base, resulting in economies of scale to the benefit of both Ordinary and C shareholders.
Overview of activities
The Company has continued to actively source and review investment propositions during the Reporting Period. As outlined in the Annual Financial Report published in April 2009, the Company made an investment to back new television format, Let's Dance in January 2009. In addition, I am pleased to report that a new investment has been made in June 2009 to acquire, market and distribute a series of television programmes in conjunction with independent television distribution company Digital Rights Group Limited.
A number of exciting opportunities are in negotiation and we therefore look forward to reporting to you on further developments in due course.
80s Rewind Festival
We are pleased to report that the 80s Rewind Festival, a two day music festival to be held in Henley on Thames on 21 - 22 August 2009, is proving very popular. Over 20,000 tickets have already been sold across both days of the event which is a great achievement for a festival in its first year. The 80s Rewind Festival promises the biggest line up of 80s acts since Live Aid and include acts such as Kim Wilde, Rick Astley, Bananarama, Billy Ocean, Belinda Carlisle, Kid Creole, Heaven 17, Dr & The Medics, Cutting Crew and Toyah.
Let's Dance
The second co-investment between the Ingenious Entertainment VCTs, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc saw the Company invest GBP500,000 (GBP2 million across both the Ingenious Live VCTs and the Ingenious Entertainment VCTs) in January 2009 to back an exciting new entertainment format, Let's Dance, which was commissioned by the BBC for Comic Relief.
Following the huge ratings success of the UK series of new entertainment format Let's Dance, we are delighted to announce that the format has been sold to ABC in the US. The deal is for 5 x 60min episodes and will air in the US in November 2009, being co-produced by American Idol producer Fremantle Media. In addition, the Manager is in discussions in a number of other territories around the world regarding licensing the format and we have confirmation from both Germany and Holland that they wish to take the show. We are therefore confident that the format will generate a profit for the Company.
Digital Rights Group
In June 2009, the Company made an investment of GBP1 million (GBP2 million across both the Ingenious Entertainment VCTs) with independent television distributor Digital Rights Group Limited (DRG) to jointly acquire, market and distribute a series of television programmes.
DRG is the leading independent distributor of content in the UK with 8 brands in the group supporting all genres from drama to reality and formats to entertainment. DRG has worked on shows as diverse as The Inbetweeners, Kingdom starring Stephen Fry, the Martin Clunes drama Doc Martin, Australian series Sea Patrol and a wide variety of children's programmes and factual documentaries.
VCT qualifying status
The Company is managed as a venture capital trust, enabling shareholders to benefit from both the Income and Capital Gains Tax Relief available. Shareholders will be aware that in order to qualify for this tax relief 70% of net funds raised must be invested in VCT qualifying companies within three years. It is now a year since the close of the fundraising and the Manager has confirmed to the board that it remains confident that the Company will meet this condition given the number of investment opportunities being pursued.
Results
The Ordinary Shares and C Shares are accounted for as separate pools of funds necessitating dual reporting of financial information.
The Ordinary Shares made a loss on ordinary activities of GBP72,000 and the C Shares made a loss on ordinary activities of GBP45,000 in the period to 30 June 2009.
Outlook
It was noted in our review of the market in the last Annual Financial Report that, due to the challenging economic environment, the Manager will consider in certain cases increasing the minimum guarantee arrangements. As the severity of the downturn has become apparent, the Manager believes these steps were indeed correct as it will allow further protection of shareholders' capital.
We believe that many of the underlying trends that are driving change in the media and entertainment industry will continue despite the economic environment. These include lifestyle changes, de-regulation and changes in consumer behaviour demanding greater control over the content they view due to advances in digital technologies. This latter change is particularly visible with the development of mobile internet, proliferation of online communities and the ability to access movies on demand which are increasingly allowing consumers to decide when, where and how they consume content. The Company therefore remains well placed to capitalise on these evolving consumer behaviours as it continues to back the production and exploitation of media and entertainment content.
David Munns
Chairman
19 August 2009
DIRECTORS' RESPONSIBILITY STATEMENT
The directors are responsible for preparing the half yearly financial report and the condensed set of financial statements in accordance with the Accounting Standards Board's Statement 'Half-Yearly Financial Reports'.
In preparing these condensed financial statements, the directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable United Kingdom accounting standards have been
followed; and
-- prepare the condensed financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue
in business.
The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of the condensed financial statements may differ from legislation in other jurisdictions.
To the best of my knowledge
-- the condensed financial statements, prepared in accordance with the
applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the
Company; and
-- the interim management report includes a fair review of the
development and performance of the business and the position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
David Munns
Chairman
19 August 2009
INCOME STATEMENT (UNAUDITED)
for the six months ended 30 June 2009
Ordinary Shares C Shares Total shares
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Increase - 44 44 - 3 3 - 47 47
in
fair
value
of
investments
held
Investment 27 - 27 - - - 27 - 27
income
Arrangement - - - (27) - (27) (27) - (27)
fees
Investment (43) (42) (85) (5) (5) (10) (48) (47) (95)
management
fees
Other (53) (5) (58) (11) - (11) (64) (5) (69)
expenses
Loss (69) (3) (72) (43) (2) (45) (112) (5) (117)
on
ordinary
activities
before
taxation
Tax - - - - - - - - -
on
ordinary
activities
Loss (69) (3) (72) (43) (2) (45) (112) (5) (117)
attributable
to
equity
shareholders
Basic 2 (0.7) 0.0 (0.7) (5.2) (0.2) (5.4) (1.0) 0.0 (1.0)
and
diluted
return
per
share
(pence)
C Shares were first allotted by the Company on 3 April 2009.
The final total column of this statement is the profit and loss account for the Company.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (UNAUDITED)
as at 30 June 2009
Ordinary Shares C Shares Total Shares
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 9,728 - 9,728
Capital subscribed - 2,429 2,429
Issue costs - (107) (107)
Loss for the period (72) (45) (117)
Closing shareholders' funds 9,656 2,277 11,933
INCOME STATEMENT (AUDITED)
for the period ended 30 June 2008
Ordinary Shares C Shares Total shares
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Increase - 60 60 - - - - 60 60
in
fair
value
of
investments
held
Investment 34 16 50 - - - 34 16 50
income
Arrangement (109) - (109) - - - (109) - (109)
fees
Investment (22) (22) (44) - - - (22) (22) (44)
management
fees
Other (52) - (52) - - - (52) - (52)
expenses
(Loss)/profit (149) 54 (95) - - - (149) 54 (95)
on
ordinary
activities
before
taxation
Tax - - - - - - - - -
on
ordinary
activities
(Loss)/profit (149) 54 (95) - - - (149) 54 (95)
attributable
to
equity
shareholders
Basic 2 (4.6) 1.7 (2.9) - - - (4.6) 1.7 (2.9)
and
diluted
return
per
share
(pence)
The Company had no C Shares in issue during the period ended 30 June 2008.
The final total column of this statement is the profit and loss account for the Company.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (AUDITED)
as at 30 June 2008
Ordinary Shares C Shares Total Shares
GBP'000 GBP'000 GBP'000
Opening shareholders' funds - - -
Capital subscribed 9,930 - 9,930
Issue costs (437) - (437)
Loss for the period (95) - (95)
Closing shareholders' funds 9,398 - 9,398
INCOME STATEMENT (AUDITED)
for the period ended 31 December 2008
Ordinary Shares C Shares Total shares
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain - 24 24 - - - - 24 24
on
disposal
of
investments
Increase - 157 157 - - - - 157 157
in
fair
value
of
investments
held
Investment 44 110 154 - - - 44 110 154
income
Arrangement (112) - (112) - - - (112) - (112)
fees
Investment (61) (61) (122) - - - (61) (61) (122)
management
fees
Other (99) (7) (106) - - - (99) (7) (106)
expenses
(Loss)/profit (228) 223 (5) - - - (228) 223 (5)
on
ordinary
activities
before
taxation
Tax - - - - - - - - -
on
ordinary
activities
(Loss)/profit (228) 223 (5) - - - (228) 223 (5)
attributable
to
equity
shareholders
Basic 2 (3.8) 3.7 (0.1) - - - (3.8) 3.7 (0.1)
and
diluted
return
per
share
(pence)
The Company had no C Shares in issue during the period ended 31 December 2008.
The final total column of this statement is the profit and loss account for the Company.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (AUDITED)
as at 31 December 2008
Ordinary Shares C Shares Total Shares
GBP'000 GBP'000 GBP'000
Opening shareholders' funds - - -
Capital subscribed 10,181 - 10,181
Issue costs (448) - (448)
Loss for the period (5) - (5)
Closing shareholders' funds 9,728 - 9,728
BALANCE SHEET
as at 30 June 2009
As at 30 June 2009 (unaudited) As at 30 June 2008 (audited) As at 31 December 2008 (audited)
Ordinary C Total Ordinary C Total Ordinary C Total
Shares Shares shares Shares Shares shares Shares Shares shares
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Qualifying 1,773 - 1,773 - - - 273 - 273
investments
Current assets
Debtors 11 12 23 260 - 260 7 - 7
Non-Qualifying 3 7,841 2,252 10,093 8,776 - 8,776 9,368 - 9,368
investments
Cash at bank 58 25 83 389 - 389 107 - 107
and in hand
7,910 2,289 10,199 9,425 - 9,425 9,482 - 9,482
Creditors: (27) (12) (39) (27) - (27) (27) - (27)
amounts
falling
due within
one year
Net current 7,883 2,277 10,160 9,398 - 9,398 9,455 - 9,455
assets
Net assets 9,656 2,277 11,933 9,398 - 9,398 9,728 - 9,728
Capital and
reserves
Called-up share 102 25 127 100 - 100 102 - 102
capital
Share premium 4,816 2,297 7,113 9,393 - 9,393 4,816 - 4,816
account
Other reserve 4,815 - 4,815 - - - 4,815 - 4,815
account
Capital reserves
realised 19 (5) 14 (6) - (6) 66 - 66
unrealised 201 3 204 60 - 60 157 - 157
Revenue reserve (297) (43) (340) (149) - (149) (228) - (228)
Shareholders' 9,656 2,277 11,933 9,398 - 9,398 9,728 - 9,728
funds
Net asset value 4 94.6 92.9 94.3 94.4 - 94.4 95.3 - 95.3
(pence
per share)
CASH FLOW STATEMENT (UNAUDITED)
for the six months ended 30 June 2009
Ordinary Shares C Shares Total shares
GBP'000 GBP'000 GBP'000
Net cash outflow from (120) (48) (168)
operating activities
Capital expenditure
Purchase of qualifying (1,500) - (1,500)
investments
Net cash outflow from (1,500) - (1,500)
capital expenditure
Management of liquid
resources
Purchase of non-qualifying (3,478) (2,249) (5,727)
investments
Disposal of non-qualifying 5,049 - 5,049
investments
Net cash inflow/(outflow) 1,571 (2,249) (678)
from liquid resources
Financing
Issue of C Shares - 2,429 2,429
Expenses of the issue - (107) (107)
of C Shares
Net cash inflow - 2,322 2,322
from financing
(Decrease)/increase in cash (49) 25 (24)
Reconciliation of Loss
Before Taxation to
Net Cash Flow from Operating
Activities
GBP'000 GBP'000 GBP'000
Loss on ordinary activities (72) (45) (117)
before tax
Increase in fair value (44) (3) (47)
of investments held
Increase in receivables (4) (12) (16)
Increase in payables - 12 12
Net cash outflow from (120) (48) (168)
operating activities
Reconciliation of
Net Cash Flow
to Movement in Net Funds
GBP'000 GBP'000 GBP'000
Opening cash balances 107 - 107
Net cash (outflow)/inflow (49) 25 (24)
Closing cash balances 58 25 83
CASH FLOW STATEMENT (AUDITED)
for the period ended 30 June 2008
Ordinary Shares C Shares Total shares
GBP'000 GBP'000 GBP'000
Net cash outflow from (388) - (388)
operating activities
Management of liquid resources
Purchase of non-qualifying (8,716) - (8,716)
investments
Disposal of non-qualifying - - -
investments
Net cash outflow from (8,716) - (8,716)
liquid resources
Financing
Issue of redeemable 50 - 50
preference shares
Repurchase of redeemable (50) - (50)
preference shares
Issue of Ordinary Shares 9,930 - 9,930
Expenses of the issue (437) - (437)
of Ordinary Shares
Net cash inflow from financing 9,493 - 9,493
Increase in cash 389 - 389
Reconciliation of Loss
Before Taxation to
Net Cash Flow from Operating
Activities
GBP'000 GBP'000 GBP'000
Loss on ordinary activities (95) - (95)
before tax
Increase in fair value (60) - (60)
of investments held
Increase in receivables (260) - (260)
Increase in payables 27 - 27
Net cash outflow from (388) - (388)
operating activities
Reconciliation of Net Cash Flow
to Movement in Net Funds
GBP'000 GBP'000 GBP'000
Opening cash balances - - -
Net cash inflow 389 - 389
Closing cash balances 389 - 389
CASH FLOW STATEMENT (AUDITED)
for the period ended 31 December 2008
Ordinary Shares C Shares Total shares
GBP'000 GBP'000 GBP'000
Net cash outflow from (166) - (166)
operating activities
Capital expenditure
Purchase of qualifying (273) - (273)
investments
Net cash outflow from (273) - (273)
capital expenditure
Management of liquid
resources
Purchase of non-qualifying (10,400) - (10,400)
investments
Disposal of non-qualifying 1,213 - 1,213
investments
Net cash outflow from (9,187) - (9,187)
liquid resources
Financing
Issue of redeemable 50 - 50
preference shares
Repurchase of redeemable (50) - (50)
preference shares
Issue of Ordinary Shares 10,181 - 10,181
Expenses of the issue (448) - (448)
of Ordinary Shares
Net cash inflow 9,733 - 9,733
from financing
Increase in cash 107 - 107
Reconciliation of Loss
Before Taxation to
Net Cash Flow from Operating
Activities
GBP'000 GBP'000 GBP'000
Loss on ordinary activities (5) - (5)
before tax
Gains on investments (24) - (24)
Increase in fair value (157) - (157)
of investments held
Increase in receivables (7) - (7)
Increase in payables 27 - 27
Net cash outflow from (166) - (166)
operating activities
Reconciliation of
Net Cash Flow
to Movement in Net Funds
GBP'000 GBP'000 GBP'000
Opening cash balances - - -
Net cash inflow 107 - 107
Closing cash balances 107 - 107
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
for the six months ended 30 June 2009
1. Accounting Policies
(a) Basis of Accounting
The financial statements for the Reporting Period 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" which was issued in January 2003 and revised in December 2005.
These financial statements have been drawn up adopting the accounting policies set out in the statutory accounts for the period 10 October 2007 to 31 December 2008, with the exception of the accounting policy below on Ordinary Shares and C Shares.
(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 (published in connection with the offer) all investments are designated at fair value.
Investee Companies
Unquoted investments including equity and loan investments are stated at fair value in accordance with the International Private Equity and Venture Capital Guidelines and Financial Reporting Standard 26 "Financial Instruments: Recognition and Measurement" (FRS 26). They are designated at fair value through profit and loss in accordance with FRS 26.
The guidelines set out six permissible valuation methodologies, 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 a period of up to a year is often applied as the long stop date for such a valuation.
2 - Discounted cash flows/earnings of the underlying business, calculating the net present value of expected future cashflows of 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.
The adopted approach fair values the investments upon initial recognition at the "price of recent investment" (i.e. cost) in their first year of investment. Subsequently, the portfolio of investments is fair valued on the discounted cash flow/earnings basis using the latest available information.
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 at 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 are recognised as part of the capital return within the income statement and allocated to the realised or unrealised capital 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 is recognised in the income statement as it accrues.
(d) 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.
(e) Ordinary Shares and C Shares
The company has two classes of shares; Ordinary Shares and C Shares. Each share class has a separate pool of income and expenses as well as assets and liabilities attributable to it. Ordinary Shares and C Shares rank pari passu with each other in terms of voting and other rights.
2. Basic and Diluted Return per Share
The calculation of basic return per Ordinary Share is based on the return on ordinary activities after tax for the period and on a weighted average of 10,205,011 Ordinary Shares in issue for the six months ended 30 June 2009 (31 December 2008: 6,085,827; 30 June 2008: 3,231,219). The return per C Share activities after tax for the period has been calculated on a weighted average of 823,205 C Shares in issue for the six months ended 30 June 2009 (31 December 2008: Nil; 30 June 2008: Nil)
There are no dilutive potential Ordinary Shares or C 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.
3. Non-Qualifying Investments
In order to safeguard the capital available for investment in VCT 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.
4. Net Asset Value per Share
The net asset value per Ordinary Share has been calculated based on 10,205,011 Ordinary Shares being the number of Ordinary Shares in issue as at 30 June 2009 (31 December 2008: 10,205,011; 30 June 2008: 9,953,532).
The net asset value per C Share has been calculated based on 2,451,855 C Shares being the number of C Shares in issue as at 30 June 2009 (31 December 2008: Nil; 30 June 2008: Nil).
5. Related Party Transactions
The Company has appointed Ingenious Media Investments Limited, a company of which Patrick McKenna is a director, to be its promoter. Ingenious Media Investments Limited is a wholly owned subsidiary within the Ingenious Media Holdings plc group of companies, which is controlled by Patrick McKenna.
The Company has appointed Ingenious Ventures, a trading name of Ingenious Asset Management Limited, a company of which Patrick McKenna is a director, to be its Manager. Ingenious Asset Management Limited is a wholly owned subsidiary within the Ingenious Media Holdings plc group of companies, which is controlled by Patrick McKenna.
The funds invested in OEICs are also managed by Ingenious Asset Management Limited.
During the year the Company has carried out a number of transactions with the above-mentioned related parties in the normal course of the business and on an arm's length basis:
30 June 2009 30 June 2008 31 December 2008 30 June 2009 30 June 2008 31 December 2008
Entity Income/ (Expenditure) Income/ (Expenditure) Income/ (Expenditure) Amounts due Amounts due Amounts due
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Ingenious
Asset
Management
Limited
- (95) (44) (128) (10) - -
Investment
management
fee
- (18) (5) (14) - - -
Administration
fee
- (9) - - (9) - -
Irrecoverable
VAT
- - - 7 - - -
VAT
reclaimed
on
Management
and
Administration
fee
Ingenious
Media
Investments
Limited
- (133) (109) (560) - (3) -
Arrangement
fee
Further information regarding related party transactions is given below:
Ingenious Media Consulting Limited, a company of which Patrick McKenna was a director until 1 June 2009, 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 GBP29,237 excluding VAT (31 December 2008: Nil; 30 June 2008: Nil), have been invoiced for the period, GBP8,333 of which remains outstanding as at 30 June 2009 (31 December 2008: Nil; 30 June 2008: Nil).
Digital Rights Group Limited, which holds 49.9% of the equity of DRG Media Assets Limited, is a subsidiary of Ingenious Media Active Capital Limited (IMAC), a company of which Patrick McKenna is a director. The Company has invested GBP1,000,000 in DRG Media Assets Limited.
Whizz Kid Entertainment Limited which holds 49.9% of the equity of Dance Floor Limited is a subsidiary of IMAC, a company of which Patrick McKenna is a director. The Company has invested GBP500,000 in Dance Floor Limited.
Patrick McKenna is a director of The Young Vic (a registered charity) which holds 0.2% of the equity in each of the investee companies.
6. The unaudited half-yearly financial report for the period ended 30 June 2009 does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006 and has not been delivered to the Registrar of Companies.
7. Copies of the half-yearly financial report are being sent or made available electronically to all shareholders. Further copies can be downloaded from the Company's website: www.ingeniousvcts.co.uk
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