TIDMIE1C
INGENIOUS ENTERTAINMENT VCT 1 PLC
20 August 2010
Half-yearly results for the six months to 30 June 2010
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 2010 (the "Reporting Period").
The offer for subscription for D Shares made by the Company and Ingenious Entertainment VCT 2 plc (the "Ingenious Entertainment VCTs") closed on 30 July 2010 having raised a total of GBP13.5 million. The funds are split equally between the Ingenious Entertainment VCTs therefore GBP6.7 million is attributable to D Shareholders of the Company. The additional funds raised 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 Ordinary, C and D Shareholders.
Overview of Activities
The Company has continued to actively source and review investment propositions during the Reporting Period. The Company made an investment in March 2010 to co-promote events at an original new live venue in Shoreditch, London, XOYO. In addition, I am pleased to report that a new investment has been made in June 2010 to back a new music, arts and comedy festival in London, The Apple Cart, further information on this investment is provided below.
A number of exciting opportunities are currently in negotiation and we therefore look forward to reporting to you on further developments in due course.
Since the end of the Reporting Period, the Company made one further investment to back a new dance music festival in London called L.E.D. Festival.
Festivals
80s Rewind Festival
Investment amount: GBP272,598 (GBP545,196 across the Ingenious Entertainment VCTs, and GBP693,696 across Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc).
We are pleased to report that the 80s Rewind Festival, a two-day music festival to be held in Henley-on-Thames between 20 and 22 August 2010, is proving very popular with anticipated sales of over 35,000 tickets. The 2010 event hosts a list of 80s stars including Rick Astley, Boy George, T'Pau, Marc Almond, Level 42, Tony Hadley with ABC and Go West. We also anticipate that this event will generate a profit for the Company.
The Apple Cart Festival
Investment amount: GBP125,000 (GBP250,000 across the Ingenious Entertainment VCTs).
In June 2010, the Company made an investment in The Apple Cart Festival Limited to promote a one-day music and arts festival in London. The Apple Cart is a broader type of festival combining music, comedy, art, cinema, magic and spoken word. Planning is currently underway for a launch event in December 2010, which will expand the festival into Victoria Park, London in the summer of 2011.
Live Venues
XOYO
Investment amount: GBP400,000 (GBP800,000 across the Ingenious Entertainment VCTs).
In March 2010 the Company made an investment with Assorted Works Limited to co-promote events at a new live venue on Cowper Street, Shoreditch, London.
XOYO is a 900 capacity live entertainment venue split over two floors which will programme, book and promote a broad and exciting range of live music, club nights, visual art and other creative media events. XOYO has a prime location in Shoreditch; the hub of London's music, art and party scene. It is set to open in September 2010.
Television Format and Distribution
Let's Dance
Investment amount: GBP500,000 (GBP2,000,000 across the Ingenious Entertainment VCTs, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc).
Let's Dance was commissioned by the BBC for Comic Relief in 2009 and proved to be an instant hit, with audience ratings peaking at 8.6 million viewers for the final on BBC 1.
The show was recommissioned as Let's Dance for Sports Relief in 2010which aired for four weeks in February to equally impressive audience figures. Following the ratings success of both series the format has now been sold and aired in both Germany and Holland. The Investment Manager is in discussions in a number of other territories around the world regarding the licensing of this format and the Company expects these sales to return a profit in the near future.
Digital Rights Group
Investment amount: GBP1,000,000 (GBP2,000,000 across the Ingenious Entertainment VCTs).
In June 2009, the Ingenious Entertainment VCTs agreed 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. The investment is anticipated to generate a small return for the Company.
Exhibitions
Golf Live
Investment amount: GBP275,000 (GBP1,100,000 across the Ingenious Entertainment VCTs, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc).
In December 2009, the Ingenious Entertainment VCTs, Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc invested alongside Brand Events Limited to co-promote 02 Golf Live a new three-day interactive golf event which was staged at Stoke Park in Buckinghamshire between 14 and 16 May 2010.
Brand Events Limited has established a strong reputation within the UK for successfully launching new consumer shows. Brand Events Limited has now established two key shows: the Taste Festivals, food festivals celebrating different foods; and Top Gear Live, the Top Gear branded live motoring theatre format.
The event represents a creative way of bringing the Sports and Exhibition markets closely together, and the longer term aim is to role the event out to further prestigious golf courses around the world. O2, Jaguar and the European Tour were amongst the partners for the initial UK event.
The event made a loss in the first year, but was extremely well received by both the corporate partners and the paying public. The audience satisfaction rating was the highest that Brand Events Limited had ever received. Golf Live is considered to have strong long term potential to build on the significant brand awareness that it has created in its first year.
VCT Qualifying Status
The Company is managed as a venture capital trust ("VCT"), 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 two years since the close of fundraising for the Ordinary Shares and one year since the close of fundraising for the C Shares. The Investment Manager has confirmed to the board of directors that it remains confident that the Company will meet this condition given the number of investment opportunities being pursued.
Results
The Ordinary Shares, C Shares and D Shares are accounted for as separate pools of funds necessitating separate reporting of financial information.
The Ordinary Shares made a loss on ordinary activities of GBP111,000 (31 December 2009: GBP173,000 loss; 30 June 2009: GBP72,000 loss), the C Shares made a loss on ordinary activities of GBP34,000 (31 December 2009: GBP83,000 loss; 30 June 2009: GBP45,000 loss) and the D Shares made a loss on ordinary activities of GBP95,000 (31 December 2009: GBPNil; 30 June 2009: GBPNil) in the period to 30 June 2010.
The Company paid its first interim dividends of 5 pence per Ordinary Share and 5 pence per C Share in the period to 30 June 2010.
The net asset value of each Ordinary Share is 87.5 pence (31 December 2009: 93.6 pence; 30 June 2009: 94.6 pence), the 30 June 2010 net asset value reflects the payment of 5.0 pence per share interim dividend.
The net asset value of each C Share is 85.6 pence (31 December 2009: 91.8 pence; 30 June 2009: 92.9 pence), the 30 June 2010 net asset value reflects the payment of 5.0 pence per share interim dividend.
The net asset value of each D Share is 93.6 pence (31 December 2009: Nil; 30 June 2009: Nil).
Principal Risks and Uncertainties
The Company's assets consist of equities and interest bearing investments, cash and realisable marketable securities. Its principal risks and uncertainties for the remaining six months of the year are therefore market risk, interest rate risk, credit risk and liquidity risk. Other risks faced by the Company include investment and strategic risks, loss of approved status as a Venture Capital Trust, regulatory, financial and other external risks. These risks, and the way in which they are managed, are described in more detail in the Directors' Report and Business Review in the Annual Report and Accounts for the year ended 31 December 2009. The Company's principal risks and uncertainties have not changed materially since the date of that report.
Outlook
It was noted in our review of the market in the Annual Report and Accounts for the year ended 31 December 2009 that the challenging economic environment would be likely to adversely affect the live events sector as consumers became more cautious about their discretionary spending. However, I am pleased to report that the live events sector has performed resiliently in the downturn, while the expansion of the digital media sector creates new markets for content creators.
For example, a report from the Association of Independent Festivals released in the reporting period demonstrates that the music festival business remains strong and despite the economic downturn is contributing more than GBP1bn each year to the UK economy.
Our investment strategy of underpinning investments with contractual minimum guarantees, as well as working with only the very best partners in the entertainment industry, has ensured exposure to risks from the economic environment has been minimised. In fact, the portfolio has performed strongly in the Reporting Period with investments such as Let's Dance and 80s Rewind indicating that the entertainment sector continues to develop.
The Company is pleased to announce that it intends to launch a public offer for subscription for new ordinary E shares and new ordinary F shares in the share capital of the Company in September 2010.
I intend to report further on such activity in my full statement to accompany the Annual Report and Accounts for the year ending 31 December 2010.
David MunnsChairman19 August 2010
For further information, please visit: www.ingeniousvcts.com or contact:
Ingenious VenturesPaul Bedford
020 7319 4000
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 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 they face.
David MunnsChairman
19 August 2010
INCOME STATEMENT (UNAUDITED)
for the six months ended 30 June 2010
Six months ended Six months ended Year ended
30 June 2010 30 June 2009 31 December 2009
(unaudited) (unaudited) (audited)
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 - 105 105 - - - - 1 1
on disposal
of investments
(Decrease)/increase - (177 ) (177 ) - 47 47 - 72 72
in fair
value
of investments
held
Investment 98 - 98 27 - 27 40 - 40
income
Arrangement (64 ) - (64 ) (27 ) - (27 ) (31 ) - (31 )
fees
Investment (64 ) (64 ) (128 ) (48 ) (47 ) (95 ) (100 ) (100 ) (200 )
management
fees
Other expenses (74 ) - (74 ) (64 ) (5 ) (69 ) (127 ) (11 ) (138 )
Loss (104 ) (136 ) (240 ) (112 ) (5 ) (117 ) (218 ) (38 ) (256 )
on ordinary
activities
before
taxation
Tax - - - - - - - - -
on ordinary
activities
Loss (104 ) (136 ) (240 ) (112 ) (5 ) (117 ) (218 ) (38 ) (256 )
attributable
to
equity
shareholders
Basic and
diluted
return
per share
(pence)
Ordinary Share 2 0.1 (1.2 ) (1.1 ) (0.7 ) 0.0 (0.7 ) (1.4 ) (0.3 ) (1.7 )
C Share 2 (1.0 ) (0.2 ) (1.2 ) (5.2 ) (0.2 ) (5.4 ) (3.9 ) (0.3 ) (4.2 )
D Share 2 (3.0 ) (0.3 ) (3.3 ) - - - - - -
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").
The Company had no D Shares in issue for the year ended 31 December 2009.
The accompanying notes form an integral part of these financial statements.
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE ORDINARY, C AND D SHARE FUNDS
INCOME STATEMENT (UNAUDITED)for the six months ended 30 June 2010
Ordinary Shares C Shares D Shares
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain - 102 102 - 3 3 - - -
on disposal
of investments
(Decrease)/increase - (183 ) (183 ) - 3 3 - 3 3
in fair
value
of investments
held
Investment 98 - 98 - - - - - -
income
Arrangement - - - - - - (64 ) - (64 )
fees
Investment (42 ) (42 ) (84 ) (11 ) (11 ) (22 ) (11 ) (11 ) (22 )
management
fees
Other expenses (44 ) - (44 ) (18 ) - (18 ) (12 ) - (12 )
(Loss)/profit 12 (123 ) (111 ) (29 ) (5 ) (34 ) (87 ) (8 ) (95 )
on ordinary
activities
before
taxation
Tax - - - - - - - - -
on ordinary
activities
(Loss)/profit 12 (123 ) (111 ) (29 ) (5 ) (34 ) (87 ) (8 ) (95 )
attributable
to
equity
shareholders
Basic and 0.1 (1.2 ) (1.1 ) (1.0 ) (0.2 ) (1.2 ) (3.0 ) (0.3 ) (3.3 )
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").
The accompanying notes form an integral part of these financial statements.
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE ORDINARY, C AND D SHARE FUNDS
INCOME STATEMENT (UNAUDITED)for the six months ended 30 June 2009
Ordinary Shares C Shares D Shares
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Increase - 44 44 - 3 3 - - -
in
fair
value
of
investments
held
Investment 27 - 27 - - - - - -
income
Arrangement - - - (27 ) - (27 ) - - -
fees
Investment (43 ) (42 ) (85 ) (5 ) (5 ) (10 ) - - -
management
fees
Other (53 ) (5 ) (58 ) (11 ) - (11 ) - - -
expenses
Loss (69 ) (3 ) (72 ) (43 ) (2 ) (45 ) - - -
on
ordinary
activities
before
taxation
Tax - - - - - - - - -
on
ordinary
activities
Loss (69 ) (3 ) (72 ) (43 ) (2 ) (45 ) - - -
attributable
to
equity
shareholders
Basic (0.7 ) 0.0 (0.7 ) (5.2 ) (0.2 ) (5.4 ) - - -
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").
The Company had no D Shares in issue for the six months ended 30 June 2009.
The accompanying notes form an integral part of these financial statements.
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE ORDINARY, C AND D SHARE FUNDS
INCOME STATEMENT (UNAUDITED)for the year ended 31 December 2009
Ordinary Shares C Shares D Shares
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain - 1 1 - - - - - -
on
disposal
of
investments
Increase - 63 63 - 9 9 - - -
in
fair
value
of
investments
held
Investment 40 - 40 - - - - - -
income
Arrangement - - - (31 ) - (31 ) - - -
fees
Investment (85 ) (85 ) (170 ) (15 ) (15 ) (30 ) - - -
management
fees
Other (96 ) (11 ) (107 ) (31 ) - (31 ) - - -
expenses
Loss (141 ) (32 ) (173 ) (77 ) (6 ) (83 ) - - -
on
ordinary
activities
before
taxation
Tax - - - - - - - - -
on
ordinary
activities
Loss (141 ) (32 ) (173 ) (77 ) (6 ) (83 ) - - -
attributable
to
equity
shareholders
Basic (1.4 ) (0.3 ) (1.7 ) (3.9 ) (0.3 ) (4.2 ) - - -
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").
The Company had no D Shares in issue for the year ended 31 December 2009.
The accompanying notes form an integral part of these financial statements.
BALANCE SHEET (UNAUDITED)as at 30 June 2010
30 June 30 June 31 December
2010 2009 2009
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
Fixed assets
Qualifying 2,572 1,773 2,048
investments
Current assets
Debtors 46 23 31
Non-qualifying 3 13,282 10,093 10,029
investments
Cash at bank 958 83 69
and in hand
14,286 10,199 10,129
Creditors: (39 ) (39 ) (42 )
amounts
falling
due within
one year
Net current 14,247 10,160 10,087
assets
Net assets 16,819 11,933 12,135
Capital and
reserves
Called-up share 189 127 130
capital
Share premium 5,516 7,113 -
account
Other reserve 11,615 4,815 12,266
account
Capital reserve 49 218 185
Revenue reserve (550 ) (340 ) (446 )
Shareholders' 16,819 11,933 12,135
funds
Net asset value 4 87.5 94.6 93.6
per
Ordinary Share
Net asset value 4 85.6 92.9 91.8
per C Share
Net asset value 4 93.6 - -
per D Share
The accompanying notes form an integral part of these financial statements.
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE ORDINARY, C AND D SHARE FUNDS
BALANCE SHEET (UNAUDITED)
As at 30 June 2010 As at 30 June 2009 As at 31 December 2009
Ordinary C D Ordinary C D Ordinary C D
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 2,460 112 - 1,773 - - 2,048 - -
investments
Current
assets
Debtors 46 - - 11 12 - 26 5 -
Non-qualifying 5,741 2,109 5,432 7,841 2,252 - 7,471 2,558 -
investments
Cash at 711 192 55 58 25 - 46 23 -
bank
and in
hand
6,498 2,301 5,487 7,910 2,289 - 7,543 2,586 -
Creditors: (24 ) (8 ) (7 ) (27 ) (12 ) - (36 ) (6 ) -
amounts
falling
due
within
one year
Net 6,474 2,293 5,480 7,883 2,277 - 7,507 2,580 -
current
assets
Net 8,934 2,405 5,480 9,656 2,277 - 9,555 2,580 -
assets
Capital
and
reserves
Called-up 102 28 59 102 25 - 102 28 -
share
capital
Share - - 5,516 4,816 2,297 - - - -
premium
account
Other 9,121 2,494 - 4,815 - - 9,631 2,635 -
reserve
account
Capital 68 (11 ) (8 ) 220 (2 ) - 191 (6 ) -
reserve
Revenue (357 ) (106 ) (87 ) (297 ) (43 ) - (369 ) (77 ) -
reserve
Shareholders' 8,934 2,405 5,480 9,656 2,277 - 9,555 2,580 -
funds
Net asset 87.5 85.6 93.6 94.6 92.9 - 93.6 91.8 -
value
(pence
per
share)
The Company had no D Shares in issue for the year ended 31 December 2009.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (UNAUDITED)as at 30 June 2010
Six months ended Six months ended Year ended
30 June 2010 30 June 2009 31 December 2009
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Opening 12,135 9,728 9,728
shareholders'
funds
Capital 5,831 2,429 2,784
subscribed
Issue costs (256) (107) (121)
Dividends (651) - -
Loss for the (240) (117) (256)
period
Closing 16,819 11,933 12,135
shareholders'
funds
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE ORDINARY, C AND D SHARE FUNDS
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (UNAUDITED)as at 30 June 2010
Ordinary Shares C Shares D Shares
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 9,555 2,580 -
Capital subscribed - - 5,831
Issue costs - - (256 )
Dividends (510 ) (141 ) -
Loss for the period (111 ) (34 ) (95 )
Closing shareholders' funds 8,934 2,405 5,480
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE ORDINARY, C AND D SHARE FUNDS
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (UNAUDITED)as at 30 June 2009
Ordinary Shares C Shares D Shares
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 9,728 - -
Capital subscribed - 2,429 -
Issue costs - (107 ) -
Loss for the period (72 ) (45 ) -
Closing shareholders' funds 9,656 2,277 -
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE ORDINARY, C AND D SHARE FUNDS
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS (UNAUDITED)as at 31 December 2009
Ordinary Shares C Shares D Shares
GBP'000 GBP'000 GBP'000
Opening shareholders' funds 9,728 - -
Capital subscribed - 2,784 -
Issue costs - (121 ) -
Loss for the period (173 ) (83 ) -
Closing shareholders' funds 9,555 2,580 -
The Company had no D Shares in issue for the year ended 31 December 2009.
CASH FLOW STATEMENT (UNAUDITED)for the six months ended 30 June 2010
30 June 2010 30 June 2009 31 December 2009
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net cash outflow from (179 ) (168 ) (337 )
operating activities
Capital expenditure
Purchase of qualifying (524 ) (1,500 ) (1,775 )
investments
Net cash outflow from (524 ) (1,500 ) (1,775 )
capital expenditure
Management of liquid
resources
Purchase (5,430 ) (5,727 ) (4,882 )
of non-qualifying
investments
Disposal 2,098 5,049 4,293
of non-qualifying
investments
Net cash outflow from (3,332 ) (678 ) (589 )
liquid resources
Financing
Dividends (651 ) - -
Issue of Shares 5,831 2,429 2,784
Expenses of the issue (256 ) (107 ) (121 )
of Shares
Net cash inflow 4,924 2,322 2,663
from financing
Increase/(decrease) 889 (24 ) (38 )
in cash
Reconciliation of loss
before taxation to
net cash flow from
operating
activities
GBP'000 GBP'000 GBP'000
Loss on ordinary (240 ) (117 ) (256 )
activities
before tax
Decrease/(increase) 177 (47 ) (72 )
in fair
value of investments
held
Investment income (98 ) - -
Increase in receivables (15 ) (16 ) (24 )
(Decrease)/increase (3 ) 12 15
in payables
Net cash outflow from (179 ) (168 ) (337 )
operating activities
Reconciliation of
net cash flow
to movement in net funds
GBP'000 GBP'000 GBP'000
Opening cash balances 69 107 107
Net 889 (24 ) (38 )
cash inflow/(outflow)
Closing cash balances 958 83 69
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)for the six months ended 30 June 2010
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 and Venture Capital Trusts" which was issued in January 2009.
These financial statements have been drawn up adopting the accounting policies set out in the Annual Report and Accounts for the year to 31 December 2009, with the exception of the accounting policy below on Investment Income. The adoption of that policy has not led to an adjustment to the prior period financial statements as the effect is not significant.
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 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 companies in which the Company will invest (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 on investments is recognised in the income statement under the effective interest rate method. The effective interest rate is the rate required to discount the expected future income streams over the life of the loan to its initial carrying amount. The main impact for the Company in that regard is the accounting treatment of the loan note premiums. 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.
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.
g) Ordinary Shares, C Shares and D Shares
The Company has three classes of shares; Ordinary Shares, C Shares and D Shares. Each share class has a separate pool of income and expenses as well as assets and liabilities attributable to it. Ordinary Shares, C Shares and D 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 2010 (31 December 2009: 10,205,011; 30 June 2009: 10,205,011). The basic return per C Share has been calculated on a weighted average of 2,810,596 C Shares in issue for the six months ended 30 June 2010 (31 December 2009: 1,980,118; 30 June 2009: 823,205). The basic return per D Share has been calculated on a weighted average of 2,924,224 D Shares in issue for the six months ended 30 June 2010 (31 December 2009: Nil; 30 June 2009: Nil).
There are no dilutive potential Ordinary Shares, C Shares or D 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 2010 (31 December 2009: 10,205,011; 30 June 2009: 10,205,011).
The net asset value per C Share has been calculated based on 2,810,596 C Shares being the number of C Shares in issue as at 30 June 2010 (31 December 2009: 2,810,596; 30 June 2009: 2,451,855).
The net asset value per D Share has been calculated based on 5,852,814 D Shares being the number of D Shares in issue as at 30 June 2010 (31 December 2009: Nil; 30 June 2009: Nil).
5. Related Party Transactions
a) 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 (the "Ingenious Group") which is controlled by Patrick McKenna. The Company paid Ingenious Media Investments Limited a fee of 5.5% of the gross proceeds of the D Share (December 2009: C Share; June 2009: C Share) offer which was paid in consideration for services provided as promoter.
b) Ingenious Ventures Limited was the Company's 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 both wholly-owned subsidiaries within the Ingenious Group, which is controlled by Patrick McKenna.
Ingenious Ventures (the "Manager"), as per the investment 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 GBP54k 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 the Ingenious Group, 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. The Company and Ingenious Entertainment VCT 2 plc have jointly agreed with Assorted Works Limited to form a new company, Essential Experience Limited, to co-promote a new live venue called XOYO. In March 2010 the Company invested GBP400k for a total of 24.95% of the equity in Essential Experience Limited. Ingenious Entertainment VCT 2 plc also 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.
e) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have invested in an existing company, The Apple Cart Festival Limited, which will promote a festival in London called The Apple Cart. In June 2010 the Company invested GBP125k for a total of 12.5% of the equity in The Apple Cart Festival Limited. Ingenious Entertainment VCT 2 plc also invested GBP125k for 12.5% of the equity in The Apple Cart Festival Limited.
The investment of GBP125k in The Apple Cart Festival Limited is a joint investment between the Ordinary Shares (GBP98k) and the C Shares (GBP27k).
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:
Expenditure Paid Amounts Due
Entity Note 30 June 30 June 31 December 30 June 30 June 31 December
2010 2009 2009 2010 2009 2009
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Ingenious Asset Management
Limited
- Investment management b 128 95 200 - 10 -
fee
- Administration fee b 23 18 35 - - -
- Irrecoverable VAT b 1 9 9 2 9 3
Ingenious Media Investments
Limited
- Arrangement fee a 320 133 152 - - -
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 GBP22k excluding VAT (31 December 2009: GBP48k; 30 June 2009: GBP29k), have been invoiced in the period, no amounts remain outstanding as at 30 June 2010 (31 December 2009: GBP3k; 30 June 2009: GBP8k).
6. Events after the Balance Sheet Date
Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to invest in an existing company, CLS Concerts Limited, to promote a dance music festival called L.E.D. Festival. In August 2010 the Company invested GBP500k for a total of 16.67% of the equity in CLS Concerts Limited. Ingenious Entertainment VCT 2 plc invested GBP500k for 16.67% of the equity in CLS Concerts Limited.
The investment of GBP500k in CLS Concerts Limited is a joint investment between the Ordinary Shares (GBP391k) and the C Shares (GBP109k).
7. Comparative Information
The unaudited half-yearly financial report for the period ended 30 June 2010 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.
The Company's statutory financial statements for the year ended 31 December 2009 have been delivered to the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain statements under Section 498 (2) or section 498 (3) of the Companies Act 2006.
8. Availability of the Half-Yearly Financial Report
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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