TIDMIE1C
INGENIOUS ENTERTAINMENT VCT 1 plc ("the Company")
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2009
CHAIRMAN'S STATEMENT
I am delighted to present the Company's second annual report covering the year to 31 December 2009 (the "Reporting Period").
Overview Of Activities
The Company has continued to actively source and review investment opportunities during the Reporting Period. It has been an extremely challenging year for all companies in the field of investment and one that we approached with a good deal of caution, particularly in the early part of the year.
The Company did manage to close three investments in the period; O2 Golf Live, a three-day golf event at Stoke Park Golf Club in Buckinghamshire, an agreement to co-market and co-distribute TV programming with the highly experienced Digital Rights Group and Let's Dance for Comic Relief which peaked at 8.6 million viewers for the final on BBC 1 and we are delighted to say that the show was recommissioned as Let's Dance for Sports Relief which aired for four weeks from 20 February 2010.
Our one earlier investment, 80's Rewind Festival, performed well attracting in excess of 26,000 people and exceptionally made a profit in its first year.
Since the end of the Reporting Period, the Company made one further investment to back a new bar concept to be based in Shoreditch, London. This was the first deal entered into through a co-investment of both Ordinary Shareholders and C Shareholders.
Fund Raising
In November 2009, the Ingenious Entertainment VCTs launched a D Share offer for subscription. As at 1 April 2010 the Ingenious Entertainment VCTs have raised over GBP10 million in respect of the D Share offer. The Ingenious Entertainment VCTs have now raised in excess of GBP38 million through their Ordinary, C Share and D Share classes. The D Share offer will remain open for subscription until 31 July 2010.
Results
The Ordinary Shares and C Shares are accounted for as separate pools of funds necessitating dual reporting.
The Reporting Period has been dominated by new investments, with GBP1,775,000 invested and committed to qualifying investments. The Ordinary Shares made a loss on ordinary activities of GBP173,000 in the year to 31 December 2009 (2008: GBP5,000 loss), the C Shares made a loss on ordinary activities of GBP83,000 (2008: Nil). The net asset value of each Ordinary Share is 93.6 pence (2008: 95.3 pence), the net asset value of each C Share is 91.8 pence (2008: Nil). The Directors do not recommend the payment of a dividend in respect of the Reporting Period.
Outlook
As mentioned in the overview of activities, it was an extremely difficult year for those in the investment community. We do, however, feel cautiously optimistic that there is an increasing level of investment activity and we are currently engaged in negotiating a number of additional investments for both the Ordinary and C Shareholders.
Since the end of the financial year the Company has declared an interim dividend of 5.0 pence per Ordinary Share for the year to 31 December 2010. It has been proposed that the dividend is paid on 13 April 2010.
We believe that the strategy of the Ingenious Live VCTs, also managed by Ingenious Ventures, which are showing strong signs of commercial success, is one that successfully balances equity risk with a strong level of downside protection through minimum revenue arrangements of at least 75% of each investment. The Ingenious Entertainment VCTs will very much continue to replicate this strategy, albeit with the ability to diversify the investment portfolio.
I would like to take this opportunity to thank all Shareholders for their support of the Company and I look forward to seeing those of you that are able to attend the AGM, scheduled for 13 May 2010.
David MunnsChairman1 April 2010
MANAGER'S REVIEW
Investment Objective
Our objective is to invest in a portfolio of companies engaged in the production of live events and premium entertainment content which will provide Shareholders with an attractive return. This will be achieved by maximising the opportunities for making tax-free dividends to Shareholders from both the income received and capital profits on the sale of the Investee Companies or their assets.
A further three deals have been made during the Reporting Period and we expect that a number of investment opportunities already in the pipeline will lead to new deals being made in the next financial year. We continue to focus our efforts on identifying projects with the potential to deliver premium returns for our investors. All investments during the year have been made by the Ordinary Shareholders.
The Rival Organisation - 80's Rewind Festival
In December 2008, the Company made an investment of GBP272,598 (GBP1,090,390 across the Ingenious Live VCTs and the Ingenious Entertainment VCTs) to co-promote the 80's Rewind Festival in conjunction with The Rival Organisation. The 80's Rewind Festival is a two-day music festival held in August in Henley-upon-Thames.
The event attracted in excess of 26,000 people across the weekend with a line up including Kim Wilde; Rick Astley; Bananarama; Billy Ocean; Belinda Carlisle; Kid Creole and the Coconuts; Heaven 17; Toyah, Gloria Gaynor; Sister Sledge; ABC; Paul Young; Go West; Midge Ure; Nik Kershaw; T'Pau and Chas 'n' Dave. We are delighted to say that the event made a strong profit in its first year.
Tickets for the 2010 event to be held between 20-22 August are on sale and selling well already. The 2010 line up includes Boy George; Tony Hadley; Heaven 17; ABC; Level 42; Altered Images; Marc Almond; Odyssey; Jimmy Somerville; The Weather Girls; Chesney Hawkes; Kajagoogoo; Kid Creoleandthe Coconuts; 10cc and Rick Astley.
Let's Dance
The second co-investment between the Ingenious Live VCTs and Ingenious Entertainment VCTs, saw the Company invest GBP500,000 (GBP2,000,000 across 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.
The programme, hosted by Claudia Winkleman and Steve Jones, saw some of the nation's favourite celebrities paying homage to iconic dance routines. Over its four week run on Saturday evenings on BBC One in February and March 2009 the show's ratings increased week on week peaking at 8.6 million viewers for the final. This was a terrific result for a new series and the show has now been sold and aired in Holland and Germany and has received strong ratings in both territories.
We are pleased to report the show was recommissioned in the UK by the BBC in 2010 as Let's Dance for Sports Relief. A host of sport celebrities and comedians including the winner Rufus Hound took to the dance floor in an effort to beat Robert Webb's 2009 winning performance of 'Flashdance' and the viewing figures for this series peaked at 8.0 million for the final.
The Ingenious Live VCTs and the Ingenious Entertainment VCTs own 50% of the international format rights which are being represented by Fremantle Media who produce programming in numerous territories around the world. We firmly believe that a second UK airing will lead to increased international interest and will drive further format revenues for the Company.
Digital Rights Group
In June 2009, the Company made an investment of GBP1,000,000 (GBP2,000,000 across the Ingenious Entertainment VCTs) to co-distribute, co-market and fund advances for a series of television programmes such as 'The Inbetweeners', 'Kingdom' starring Stephen Fry and a wide variety of children's programmes and factual documentaries.
The television distribution rights market remains strong and there is the clear potential to generate consistent returns particularly from format rights. Digital Rights Group is highly experienced and is the leading independent distributor of content in the UK.
Golf Live
The third co-investment between the Ingenious Live VCTs and Ingenious Entertainment VCTs saw the Company fund GBP275,000 (GBP1,100,000 across both the Ingenious Live VCTs and the Ingenious Entertainment VCTs) in December 2009 to co-promote a three-day new interactive golf event known as O2 Golf Live. The event is to be staged at Stoke Park in Buckinghamshire from 14-16 May 2010. It is a brand new concept and addition to the golfing calendar, which we believe has excellent potential to be rolled out at prestigious golf courses around the world.
This unique event will deliver unprecedented access to the world of golf, with attendees able to 'get inside the heads' of some of the world's best players including Colin Montgomerie, Paul Casey, Retief Goosen and Ian Poulter in their own masterclass theatres. Visitors will also be able to enjoy intimate access to a three hole pro/celebrity tournament, test the latest kit and equipment from the best brands, receive expert tuition from world renowned PGA professionals and compete against other visitors at the hole-in-one challenge.
Outlook
Lifestyle changes, de-regulation and technological advances in the digital arena have created investment opportunities for knowledgeable investors.
While the expansion of the digital media sector creates new markets for content creators, the UK has also experienced tremendous growth in the popularity of the live events sector. A great deal of new entertainment and media content is now created with the view to exploitation across multiple platforms.
Nonetheless, the volatile economic environment presents challenges for the Company as consumers become more cautious about their discretionary spending on entertainment. We remain confident however, that our ability to invest in a diverse portfolio of sectors coupled with our proactive measures to further mitigate risk will stand us, and our investors, in good stead.
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
1 April 2010
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 Entertainment 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 deed.
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 producing live events or creating branded entertainment content, whose revenues will be underpinned by warranties or other similar contractual arrangements. The Ingenious Entertainment VCTs will invest in Investee Companies which are expected to participate in the revenues and in the capital value of the content once the market is established. The investments could include the production and promotion of a theatrical show or the launch of a music festival, the development and exploitation of new formats or the creation of online or mobile games.
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.
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 and branded entertainment content within the portfolio.
At the 31 December 2009 the Ordinary Shareholders of the Company had made four investments in Qualifying Companies, with contractual arrangements that provide 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.
At the 31 December 2009 C Shareholders of the Company are yet to make an investment in Qualifying Companies.
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 live event
or created branded content 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 exempted 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, 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. Details of the Company's internal controls are contained in the Corporate Governance Report.
4. Key Performance Indicators (KPIs)
The primary key performance indicator 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 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
Gain - 1 1 - - - - 1 1
on
disposal
of
investments
Increase - 63 63 - 9 9 - 72 72
in
fair
value
of
investments
held
Investment 2 40 - 40 - - - 40 - 40
income
Arrangement 3 - - - (31) - (31) (31) - (31)
fees
Investment 4 (85) (85) (170) (15) (15) (30) (100) (100) (200)
management
fees
Other 5 (96) (11) (107) (31) - (31) (127) (11) (138)
expenses
Loss (141) (32) (173) (77) (6) (83) (218) (38) (256)
on
ordinary
activities
before
taxation
Tax 6 - - - - - - - - -
on
ordinary
activities
Loss (141) (32) (173) (77) (6) (83) (218) (38) (256)
attributable
to
equity
shareholders
Basic 7 (1.4) (0.3) (1.7) (3.9) (0.3) (4.2) n/a n/a n/a
and
diluted
return
per
share
(pence)
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 with 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 2009
Ordinary Shares C Shares Total Shares
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 9,728 - 9,728
Capital subscribed - 2,784 2,784
Issue costs - (121) (121)
Loss for the year (173) (83) (256)
Closing shareholders' funds 9,555 2,580 12,135
The accompanying notes form an integral part of these financial statements.
INCOME STATEMENT (continued)
For the period 10 October 2007 to 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 2 44 110 154 - - - 44 110 154
income
Arrangement 3 (112) - (112) - - - (112) - (112)
fees
Investment 4 (61) (61) (122) - - - (61) (61) (122)
management
fees
Other 5 (99) (7) (106) - - - (99) (7) (106)
expenses
(Loss)/profit (228) 223 (5) - - - (228) 223 (5)
on
ordinary
activities
before
taxation
Tax 6 - - - - - - - - -
on
ordinary
activities
(Loss)/profit (228) 223 (5) - - - (228) 223 (5)
attributable
to
equity
shareholders
Basic 7 (3.8) 3.7 (0.1) - - - n/a n/a n/a
and
diluted
return
per
share
(pence)
The Company had no C Shares in issue during the period ended 31 December 2008.
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 period. The supplementary capital and revenue columns are prepared with guidance published by the Association of Investment Companies ("AIC").
All operations are considered to be continuing.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the period 10 October 2007 to 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
The accompanying notes form an integral part of these financial statements.
BALANCE SHEET
As at 31 December 2009
As at 31 December 2009 As at 31 December 2008
Ordinary C Total Ordinary C Total
Shares Shares Shares Shares Shares Shares
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed
assets
Qualifying 8 2,048 - 2,048 273 - 273
investments
Current
assets
Debtors 10 26 5 31 7 - 7
Non-Qualifying 11 7,471 2,558 10,029 9,368 - 9,368
investments
Cash at 46 23 69 107 - 107
bank
and in
hand
7,543 2,586 10,129 9,482 - 9,482
Creditors: 12 (36) (6) (42) (27) - (27)
amounts
falling
due
within
one year
Net 7,507 2,580 10,087 9,455 - 9,455
current
assets
Net 9,555 2,580 12,135 9,728 - 9,728
assets
Capital
and
reserves
Called-up 13 102 28 130 102 - 102
share
capital
Share 14 - - - 4,816 - 4,816
premium
account
Other 14 9,631 2,635 12,266 4,815 - 4,815
reserve
account
Capital 14 191 (6) 185 223 - 223
reserve
Revenue 14 (369) (77) (446) (228) - (228)
reserve
Shareholders' 9,555 2,580 12,135 9,728 - 9,728
funds
Net asset 15 93.6 91.8 n/a 95.3 - n/a
value
(pence
per
share)
The accompanying notes form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 1 April 2010.
Signed on behalf of the Board of Directors:
David MunnsChairman
CASH FLOW STATEMENT
For the year ended 31 December 2009
Ordinary Shares C Shares Total Shares
Note GBP'000 GBP'000 GBP'000
Net cash outflow from (247) (91) (338)
operating activities
Financial investments
Purchase of qualifying 8 (1,775) - (1,775)
investments
Net cash outflow (1,775) - (1,775)
from financial
investments
Management of liquid
resources
Purchase 11 (2,333) (2,549) (4,882)
of non(qualifying
investments
Disposal 11 4,294 - 4,294
of non(qualifying
investments
Net 1,961 (2,549) (588)
cash inflow/(outflow)
from liquid resources
Financing
Issue of C Shares - 2,784 2,784
Expenses of the issue - (121) (121)
of C Shares
Net cash inflow - 2,663 2,663
from financing
(Decrease)/increase (61) 23 (38)
in cash
Reconciliation of loss
before taxation to
net cash flow from
operating
activities
GBP'000 GBP'000 GBP'000
Loss on ordinary (173) (83) (256)
activities
before tax
Gain on investments 11 (1) - (1)
Increase in fair value 11 (63) (9) (72)
of investments held
Increase in receivables (19) (5) (24)
Increase in payables 9 6 15
Net cash outflow from (247) (91) (338)
operating activities
Reconciliation of
net cash flow
to movement in net funds
GBP'000 GBP'000 GBP'000
Opening cash balances 107 - 107
Net (61) 23 (38)
cash (outflow)/inflow
Closing cash balances 46 23 69
Total net funds is cash of GBP69k (Ordinary Shares: GBP46k; C Shares: GBP23k) and non-qualifying investments of GBP10,029k (Ordinary Shares: GBP7,471k; C Shares: GBP2,558k).
The accompanying notes form an integral part of these financial statements.
CASH FLOW STATEMENT (continued)
For the period 10 October 2007 to 31 December 2008
Ordinary Shares C Shares Total Shares
Note GBP'000 GBP'000 GBP'000
Net cash outflow from (166) - (166)
operating activities
Financial
investments
Purchase of 8 (273) - (273)
qualifying
investments
Net cash outflow (273) - (273)
from financial
investments
Management of liquid
resources
Purchase 11 (10,400) - (10,400)
of non-qualifying
investments
Disposal 11 1,213 - 1,213
of non-qualifying
investments
Net cash outflow from (9,187) - (9,187)
liquid resources
Financing
Issue of redeemable 50 - 50
preference shares
Repurchase of (50) - (50)
redeemable
preference shares
Issue of Ordinary 10,181 - 10,181
Shares
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 (5) - (5)
activities
before tax
Gain 11 (24) - (24)
on investments
Increase in 11 (157) - (157)
fair value
of investments held
Increase (7) - (7)
in receivables
Increase in 27 - 27
payables
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 107 - 107
balances
Total net funds is cash of GBP107k (Ordinary Shares: GBP107k; C Shares: Nil) and non-qualifying investments of GBP9,368k (Ordinary Shares: GBP9,368k; C Shares: Nil).
The accompanying notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2009
1. Accounting Policies
(a) Basis Of Accounting
The financial statements for the year ended 31 December 2009 have been prepared in accordance 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 period 10 October 2007 to 31 December 2008.
These financial statements have been prepared on the historical cost basis, except for the measurement at fair value of investments.
(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 Manager will apply a methodology that is appropriate in the 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 a period up to the start of the first live event or entertainment content 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 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 first live event or entertainment content 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 discounted cash flow/earnings 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 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) Dividend Income
Dividend income is recognised in the income statement once it is declared by the Investee Companies.
(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.
(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
2009 2008
GBP'000 GBP'000
Bank deposit interest 4 44
Interest from OEICs 24 110
Loan note interest from QualifyingInvestments 12 -
40 154
3. Arrangement Fees
2009 2008
GBP'000 GBP'000
Arrangement fees 31 112
All costs arising out of the Offer, including listing expenses and commissions, were incurred by the Promoter (Ingenious Media Investments Limited) and a fee of 5.5% of the gross proceeds of the Offer was paid in consideration of the service provided. The Directors believe that 80% of these fees relate directly to the raising of capital and have classified this proportion as issue costs. In accordance with Company law, the issue costs have been deducted from the share premium account. The remaining 20% reflected above has been taken to revenue.
Current year arrangement fees relate to the C Shares (2008: Ordinary Shares).
4. Investment Management Fee
2009 2009 2009 2008 2008 2008
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management 100 100 200 61 61 122
fee
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 split of the Company's long term returns.
5. Other Expenses
2009 2009 2009 2008 2008 2008
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' 39 - 39 45 - 45
remuneration
(including
employer's
national
insurance)
Auditors'
remuneration
- Audit fees 12 - 12 14 - 14
Legal - 4 4 - 4 4
& professional
fees
Other 66 5 71 33 3 36
administration
expense
Irrecoverable VAT 10 2 12 7 - 7
127 11 138 99 7 106
The Company is not registered for VAT. Fees payable to the Company's auditor for the audit of the Company's financial statements are GBP12k (2008: GBP14k) excluding VAT. Further details on the Directors' fee disclosures are given in the Directors' Remuneration Report.
6. Tax Charge On Ordinary Activities
2009 2009 2009 2008 2008 2008
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/profit (218) (38) (256) (228) 223 (5)
on ordinary
activities
before tax
(Loss)/profit (61) (11) (72) (65) 64 (1)
on ordinary
activities
by tax rate 28%
(2008: 28.5%)
Adjustments:
Non taxable gains - (20) (20) - (83) (83)
on investments
Disallowed expenses 1 31 32 - 19 19
Unutilised 60 - 60 65 - 65
losses for
the current year
- - - - - -
As the Company is a VCT its capital gains are not taxable.
At 31 December 2009 the Company had surplus management expenses of GBP445k (2008: GBP229k). 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.
7. Basic And Diluted Return Per Share
Ordinary 2009 2009 2009 2008 2008 2008
Shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/profit (141) (32) (173) (228) 223 (5)
on
ordinary
activities
after
taxation
Weighted 10,205,011 10,205,011 10,205,011 6,085,827 6,085,827 6,085,827
average
shares
in issue
(number)
(Loss)/profit (1.4) (0.3) (1.7) (3.8) 3.7 (0.1)
attributable
per
share
(pence)
C Shares 2009 2009 2009 2008 2008 2008
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loss (77) (6) (83) - - -
on ordinary
activities
after
taxation
Weighted 1,980,118 1,980,118 1,980,118 - - -
average
shares
in issue
(number)
Loss (3.9) (0.3) (4.2) - - -
attributable
per
share
(pence)
There are no dilutive potential Ordinary or C Shares, including convertible instruments, options or contingent share agreements in issue for the Company.
8. Fixed Asset Investments
2009 2008
GBP'000 GBP'000
Unquoted investments 2,048 273
Equity shares 614 82
Unsecured loan notes 1,434 191
2,048 273
Qualifying Investments
GBP'000 GBP'000
Opening valuation 273 -
Purchases at cost 1,775 273
Closing valuation 2,048 273
These investments are made by the Ordinary Shareholders.
9. Significant Interests
The Ordinary Shares have 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 2009:
Trading Companies % class and share type % voting rights
=-------------------------------------------------------------------
DRG Media Assets 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 12.48% A Ordinary 12.48%
=-------------------------------------------------------------------
Dormant Companies % class and share type % voting rights
=-----------------------------------------------------------------------
Callisto Moon Limited 100% A Ordinary 100%
=-----------------------------------------------------------------------
Diamond Ventures Limited 100% A Ordinary 100%
=-----------------------------------------------------------------------
Electric Ventures Limited 100% A Ordinary 100%
=-----------------------------------------------------------------------
Essential Experience Limited 100% A Ordinary 100%
=-----------------------------------------------------------------------
Saturn Explosion Limited 100% A Ordinary 100%
=-----------------------------------------------------------------------
The investments made by the Company are part of its portfolio of investments and the table above includes all portfolio investments. As a VCT, the Company values those investments at fair value in accordance with FRS 26.
The above companies are dormant and the Company is not required to prepare consolidated accounts.
10. Debtors
2009 2008
GBP'000 GBP'000
Trade debtors 5 -
Prepayments and accrued income 26 7
31 7
11. Current Asset Investments
2009 2008
GBP'000 GBP'000
Funds held in listed money market instruments 10,029 9,368
Non-Qualifying Investments
GBP'000 GBP'000
Opening valuation 9,368 -
Purchases at cost 4,882 10,400
Disposal proceeds (4,294) (1,213)
Realised gains on disposal 1 24
Unrealised change in value of investment 72 157
Closing valuation 10,029 9,368
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.
12. Creditors: Amounts Falling Due Within One Year
2009 2008
GBP'000 GBP'000
Trade creditors 6 5
Accruals and deferred income 36 22
42 27
13. Called-Up Share Capital
2009 2008
Authorised GBP'000 GBP'000
35,000,000 Ordinary Shares 1p each 350 350
35,000,000 C Shares 1p each 350 350
700 700
2009 2008
Allotted, called-up and fully paid GBP'000 GBP'000
10,205,011 Ordinary Shares 1p each 102 102
2,810,596 C Shares 1p each 28 -
130 102
In the current year 2,810,596 C Shares were issued and allotted in accordance with the terms of the Prospectus. Share issue costs amounting to GBP121k have been set off against share premium.
In the period ended 31 December 2008, 10,205,011 Ordinary Shares were issued and allotted in accordance with the terms of the Prospectus. The one subscriber share created upon incorporation was issued at par. Share issue costs amounting to GBP448k have been set off against share premium.
The entire issued Ordinary and C 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.
Number of Aggregate nominal Aggregate
C Shares value allotted consideration
allotted received
net of issue costs
GBP'000 GBP'000
Date of issue and
allotment
3 April 2009 2,386,055 24 2,232
4 April 2009 65,800 1 62
31 July 2009 358,741 3 338
2,810,596 28 2,632
During the year 25,000 bonus C Shares were issued in accordance with the terms of the Prospectus. The unpaid bonus shares were issued with a nominal value of 1p per C Share.
14. Reserves
Share premium Other reserve Capital Revenue Total
reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 4,816 4,815 223 (228) 9,626
2009
Issue of 2,756 - - - 2,756
equity
Reduction (7,451) 7,451 - - -
of share
premium
account
Gain - - 1 - 1
on disposal
of
investments
Increase in - - 72 - 72
fair value
of
investments
held
Investment - - - 40 40
income
Arrangement (121) - - (31) (152)
fees
Investment - - (100) (100) (200)
management
fees
Other - - (11) (127) (138)
expenses
At - 12,266 185 (446) 12,005
31 December
2009
On 12 December 2009, the Company registered the court order dated 9 December 2009, with the Registrar of Companies confirming the reduction of the Company's share premium account by GBP7,451k. The purpose of the reduction is to enable the Company to create a distributable reserve.
The capital reserve includes realised investment holding losses of GBP44k and unrealised investment holding gains of GBP229k.
As an investment company under section 833 of the Companies Act 2006, the other reserve account is the only distributable reserve of the Company.
15. Net Asset Value Per Share
2009 2008
Net assets attributable to Ordinary 9,555 9,728
Shareholders (GBP'000)
Ordinary Shares in 10,205,011 10,205,011
issue (number)
Net asset value per Ordinary 93.6 95.3
Share (pence)
2009 2008
Net assets attributable to C Shareholders (GBP'000) 2,580 -
C Shares in issue (number) 2,810,596 -
Net asset value per C Share (pence) 91.8 -
16. 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 8) 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
2009 2008
GBP'000 GBP'000
Listed money market instruments (note 11) Level 1 10,029 9,368
Unquoted investments (note 8) Level 3 2,048 273
12,077 9,641
There were no gains and losses on level 3 investments in the year.
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.
Risk Management
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 is subject to 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 of GBP10,029k (2008: GBP9,368k). 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 2009 (31 December 2008: 2%).
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 date. All other variables are held constant.
31 December 2009 31 December 2008
GBP '000 GBP '000
+/- 50 basis points +/- 50 basis points
Impact on profit/(loss)
on ordinary
activities for the year
/period before taxation 50 47
and total equity
c) Credit Risk
Credit risk is the risk that a 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 GBP1,434k (2008: GBP191k) 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 GBP1,434k (2008: GBP191k) 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.
17. Contingencies, Guarantees And Financial Commitments
There is currently interest income accruing on the unsecured loan note instruments at a rate of 1.5% (2008: 3%), being 1% over the bank base rate which was 0.5% as at 31 December 2009 (31 December 2008: 2%), totalling GBP8k (2008: Nil). 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.
18. Related Party Transactions
a. The Company has appointed Ingenious Media Investments Limited, a company of which Patrick McKenna is a director, to be their promoter. Ingenious Media Investments Limited is a wholly owned subsidiary of Ingenious Media Limited which is controlled by Patrick McKenna. The Company paid the Promoter (Ingenious Media Investments Limited) a fee of 5.5% of the gross proceeds of the Offer which was paid in consideration of the service provided.
b. Ingenious Ventures Limited was the 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 both wholly owned subsidiaries within the Ingenious Group, which is controlled by Patrick McKenna.
Ingenious Ventures (the manager), as per the management agreement, receives a management fee of 0.4375% of the net asset value payable quarterly in advance. The manager also charges an administration fee of GBP35k per annum and irrecoverable VAT.
c. The funds invested in OEICs, are managed by Ingenious Asset Management Limited, a company of which Patrick McKenna is a director. Ingenious Asset Management Limited is a wholly owned subsidiary of Ingenious Media Limited which is controlled by Patrick McKenna. There is no fee associated with this transaction.
d. Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc. The Company, Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc have jointly agreed with Brand Events Limited to form a new company, Golfmania Limited, to co-promote O2 Golf Live in the UK. During the year the Company invested GBP275,000 for a total of 12.475% of the equity in Golfmania Limited. Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc each invested GBP275,000 for 12.475% of the equity in Golfmania Limited. Brand Events Limited holds 49.9% of the equity in Golfmania Limited. Brand Events Limited is a subsidiary of Brand Events Holdings Limited which is a subsidiary of Ingenious Media Active Capital Limited ("IMAC"), a company of which Patrick McKenna is a director. Ingenious Media Limited, a company which is controlled by Patrick McKenna, is also a shareholder of IMAC. Ingenious Ventures is also the manager of IMAC.
e. Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc. The Company, Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc have jointly agreed with Whizz Kid Entertainment Limited to form a new company, Dance Floor Limited, to co-produce Let's Dance. During the year the Company invested GBP500,000 for a total of 12.475% of the equity in Dance Floor Limited. Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc each invested GBP500,000 for 12.475% of the equity in Dance Floor Limited. Whizz Kid Entertainment Limited holds 49.9% of the equity in Dance Floor Limited. Whizz Kid Entertainment Limited is a subsidiary of Ingenious Media Active Capital Limited ("IMAC"), a company of which Patrick McKenna is a director. Ingenious Media Limited, a company which is controlled by Patrick McKenna, is also a shareholder of IMAC. Ingenious Ventures is also the manager of IMAC.
f. Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have jointly agreed with Digital Rights Group Limited to form a new company, DRG Media Assets Limited, to co-distribute television programmes. During the year the Company invested GBP1,000,000 for a total of 24.95% of the equity in DRG Media Assets Limited. Ingenious Entertainment VCT 2 plc invested GBP1,000,000 for a total of 24.95% of the equity in DRG Media Assets Limited. Digital Rights Group Limited holds 49.9% of the equity in DRG Media Assets Limited. Digital Rights Group Limited is a subsidiary of Ingenious Media Active Capital Limited ("IMAC"), a company of which Patrick McKenna is a director. Ingenious Media Limited, a company which is controlled by Patrick McKenna, is also a shareholder of IMAC. Ingenious Ventures is also the manager of IMAC.
g. Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc. The Company, Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc have jointly agreed to form a new company, Into The Groove Limited, to co-promote 80's Rewind. In December 2008 the Company invested GBP272,598 for a total of 12.475% of the equity in Into The Groove Limited. Ingenious Entertainment VCT 2 plc, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc each invested GBP272,598 for 12.475% of the equity in Into The Groove Limited.
h. Patrick McKenna is a director and chairman of The Young Vic Company (a registered charity) which holds 0.2% of the equity of Golfmania Limited, Dance Floor Limited, DRG Media Assets Limited and Into The Groove Limited.
During the Reporting Period 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:
2009 2009 2008 2008
Entity Expenditure paid Amounts due Expenditure Amounts due
GBP'000 GBP'000 paid/(received) GBP'000
GBP'000
Ingenious a
Media
Investments
Limited
- 152 - 560 -
Arrangement
fee
Ingenious
Asset
Management
Limited
- b 200 - 128 -
Investment
management
fee
- b 35 - 14 -
Administration
fee
- b 9 3 - -
Irrecoverable
VAT
- b - - (7) -
VAT
reclaimed
on
Management
and
Administration
fee
Transactions Between Related Parties
a. Ingenious Media Consulting Limited, a company of which Patrick McKenna was a director during the year and 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 Investee Companies to provide management services. For the provision of such services, consulting fees totalling GBP48k including VAT (2008: Nil) have been invoiced in the year, GBP3k of which remains outstanding as at 31 December 2009 (2008: Nil).
19. Events After The Balance Sheet Date
a. The Company declared an interim dividend of 5.0 pence per Ordinary Share on 23 March 2010. It has been proposed that the dividend is paid on 13 April.
b. Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have jointly agreed to form a new company, Essential Experience Limited, to co-promote a nightclub in Shoreditch called XOYO. On 17 March 2010 the Company invested GBP400k for a total of 24.95% of the equity in Essential Experience Limited. Ingenious Entertainment VCT 2 plc invested GBP400k for 24.95% of the equity in Essential Experience Limited.
The investment of GBP400k in Essential Experience Limited is the first joint investment between the Ordinary Shares (GBP315k) and the C Shares (GBP85k).
Patrick McKenna is a director and chairman of The Young Vic Company (a registered charity) which holds 0.2% of the equity of Essential Experience Limited.
c. The Company allotted 4,192,080 D Shares on 1 April 2010.
20. 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 2009 was GBP12,135k (2008: GBP9,728k).
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 of the business from the previous period.
The capital structure of the Company was changed by the issue of C Shares (see note 13) during the year.
The Company has issued new share capital during the year which has changed the capital structure of the Company.
The Company is subject to the following externally imposed capital requirements:
-- As a public company Ingenious Entertainment 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.
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