TIDMIE1C
INGENIOUS ENTERTAINMENT VCT 1 plc ("the Company")
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2010
CHAIRMAN'S STATEMENT
I am delighted to present the Company's third Annual Report and
Accounts covering the year to 31 December 2010 (the Reporting
Period).
Overview of Activities
The Company has now completed its investment strategy and is
fully invested under the VCT regulations for the Ordinary Shares
and the management team will now focus on maximising the returns
from these investments.
The Company continued to actively source and review investment
opportunities during the Reporting Period for the C Shares and D
Shares. In total, the Company made eight investments across the
Ordinary Shares and C Shares during the Reporting Period. Details
of all investments can be found in the Manager's Review.
I am pleased to announce that the first investment made by the
Ordinary Shares, 80s Rewind Festival, performed well attracting in
excess of 35,000 people, making a good profit in its second
year.
Fund Raising
In October 2010, the Ingenious Entertainment VCTs launched the E
and F Share offers for subscription. As at 7 April 2011 the
Ingenious Entertainment VCTs have raised over GBP8 million in
respect of the E and F Share offers. The Ingenious Entertainment
VCTs have now raised in excess of GBP46 million through their
Ordinary, C Share, D Share, E Share and F Share classes. The E and
F Share offer will remain open for subscription until 29 July
2011.
Following the end of the Reporting Period, the Company made
further investments to back two new festivals, one based in
Bournemouth and the other in Brighton. These were the first deals
entered into through a co-investment of the funds raised by the C
Shares and the D Shares.
Results
The Ordinary Shares, C Shares and D Shares are accounted for as
separate pools of funds necessitating separate reporting.
The Ordinary Shares made a loss on ordinary activities of
GBP105,000 (31 December 2009: GBP173,000), the C Shares made a loss
on ordinary activities of GBP66,000 (31 December 2009: GBP83,000)
and the D Shares made a loss on ordinary activities of GBP163,000
(31 December 2009: GBPNil) in the Reporting Period.
The net asset value per Ordinary Share is 87.6 pence (31
December 2009: 93.6 pence) although this is after the deduction of
the interim dividend of 5.0 pence per share.
The net asset value per C Share is 84.4 pence (31 December 2009:
91.8 pence) although this is after the deduction of the interim
dividend of 5.0 pence per share.
The net asset value of each D Share is 92.9 pence (31 December
2009: GBPNil).
The Directors do not recommend the payment of a final dividend
in respect of the Reporting Period.
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 and we anticipate the expansion of the digital media
sector creating new markets for content creators.
We believe that the strategy of the Ingenious Live VCTs, which
are managed by Ingenious Ventures, shows strong signs of commercial
success. It is one that successfully balances equity risk with a
strong level of downside protection through minimum revenue
arrangements of at least 70% in respect 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 18 May
2011.
David MunnsChairman7 April 2011
MANAGER'S REVIEW
Investment Objective
The Company's main objective is to invest in companies
established to create and bring to market live events and premium
entertainment content which will provide Shareholders with an
attractive return. This strategy will aim to maximise the
opportunities for making tax-free dividends to Shareholders from
both the actual income received and capital profits on the sale of
the Investee Companies or their assets.
Festivals
80s Rewind Festival & 80s Rewind North
Investment amount (80s Rewind Festival): GBP272,598 (GBP545,196
across the Ingenious Entertainment VCTs, and GBP693,696 across the
Ingenious Live VCTs).
Investment amount (80s Rewind North): GBP500,000 (GBP1,000,000
across the Ingenious Entertainment VCTs).
In December 2008, the Company, alongside The Rival Organisation,
co-promoted 80s Rewind Festival, a two-day music event in
Henley-Upon-Thames. The 2010 event held in August experienced an
impressive increase in attendance figures, with a total audience of
over 35,000 across both days. Highlights included performances by
Boy George, Tony Hadley, Go West and Rick Astley.
We remain confident that 80s Rewind will continue to perform
strongly in the future. This year's event is to be held between 19
and 21 August and attendance levels are forecast at over 20,000 per
day.
The latest investment in the 80s Rewind brandwas made in October
2010 in order to co-promote 80s Rewind North, which will take place
between 29 and 31 July 2011 at Scone Palace in Perthshire,
Scotland. There is a star studded line up at both events, including
The Human League, Holly Johnson, Billy Ocean, The Bluebells, Ali
Campbell's UB40, along with many more. Tickets are now on sale and
have already exceeded their target at this stage.
With the Rewind brand developing from strength to strength, we
are now looking at an international rollout. It is anticipated that
2011 will see 80s Rewind festivals take place in Holland, South
Africa and Australia.
London Electronic Dance Festival (L.E.D.)
Investment amount: GBP500,000 (GBP1,000,000 across the Ingenious
Entertainment VCTs).
In August 2010 the Ingenious Entertainment VCTs agreed to
co-promote the London Electronic Dance Festival(L.E.D.) in
partnership with AEG Live, Cream and Loudsound. This year the event
hosted performances by some of the world's top dance acts including
David Guetta, Calvin Harris, Leftfield, Goldfrapp, Annie Mac and
many more.
The L.E.D. Festival was held over the August bank holiday
weekend in London's Victoria Park and attracted over 25,000 people.
However, these numbers were not enough to secure a profit for the
opening year. With such an impressive range of partners behind this
event, the Company is confident that this festival will prove a
success in coming years.
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 Festival is a broader type of festival
combining music, comedy, art, cinema, magic and spoken word.
Planning is currently underway for the first festival in London's
Victoria Park, during the summer of 2011.
Exhibitions
O2 Golf Live
Investment amount: GBP275,000 (GBP1,100,000 across the Ingenious
Entertainment VCTs and the Ingenious Live VCTs).
O2Golf Live is a new three-day interactive golf event which was
staged at Stoke Park in Buckinghamshire between 14 and 16 May 2010.
O2 Golf Live returns in 2011 and will be held at the prestigious
London Golf Club in Kent from 20 to 22 May. In conjunction with our
co-promoters Brand Events and IMG, the event will again be hosted
by last year's Ryder Cup captain, Colin Montgomerie. The 2010 event
was described by those who attended as the most exciting and
dynamic event to be added to the golfing calendar.
IMG invested into the event as an equity partner giving Brand
Events access to worldwide sporting talent. IMG Worldwide is a
global sports, fashion and media business and is excited to be
working with Brand Events, who together aim to roll the event out
to further prestigious golf courses around the world. O2, Jaguar
and the European Tour were amongst the partners for the initial UK
launch and have all agreed to continue to sponsor and support the
event in 2011.
The event made a loss in the first year, however it was
extremely well received by both the corporate partners and the
paying public. Sponsorship and exhibitor income are already ahead
of this year's budget and 2011 ticket sales are also ahead of where
they were in 2010. Both Brand Events and IMG are confident that the
event will move into profit in 2011, building on the significant
brand awareness that was created in its first year.
Live Venues
Scarborough Open Air Theatre
Investment amount: GBP1,000,000 (GBP4,000,000 across the
Ingenious Entertainment VCTs and the Ingenious Live VCTs).
The Ingenious Live VCTs along with Apollo Resorts and Leisure
Scarborough joined forces to co-promote a new venue in 2009 known
as the Scarborough Open Air Theatre. The theatre was originally
opened in 1932 and in 2009 Scarborough Council entered into a major
restoration programme as part of the North Bay Project to reinstate
the theatre, reopening it to the public in 2010. Further funding of
GBP2,000,000 was introduced by the Ingenious Entertainment VCTs in
December 2010.
Scarborough now has the largest open air theatre in Europe. It
was opened by the Queen on 20 May 2010 and this ceremony was
followed by a series of sell out events throughout the summer
season. These included the Gala Opening with performances by José
Carreras and DameKiri Te Kanawa as well as the 80s Rewind concert,
which included performances from Boy George, Rick Astley and Paul
Young. The second half of the season showcased an impressive range
of events, one of which included a number of shows by Justin
Fletcher, the Bafta award winning children's presenter and star of
CBeebies. This new venue also hosted some less successful events,
meaning that in its opening year the Scarborough theatre did not
generate a profit. Nonetheless, following the encouraging reception
the Scarborough theatre received over its first year, we are
confident that this venue will move into profit in 2011.
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,
in London's Shoreditch district.
XOYO is a 900 capacity live entertainment venue split over two
floors which books and promotes a broad and exciting range of live
music acts, 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.
The venue opened in September 2010 and has proved to be very
popular with an average of up to six shows a week, with over 14,000
people coming through the doors every month.
Jongleurs Comedy Live
Investment amount: GBP1,000,000 (GBP2,000,000 across the
Ingenious Entertainment VCTs).
In October 2010, it was agreed that the Ingenious Entertainment
VCTs would co-promote a variety of live comedy events throughout
the UK with Jongleurs Comedy Live. Over a period of 25 years
Jongleurs has grown to become one of the biggest names in the
comedy industry and the brand has helped to launch the careers of
some of the best names in show business including Eddie Izzard,
Harry Enfield, Al Murray, Jack Dee and Graham Norton.
Jongleurs is currently rolling out its brand through a number of
club partnerships and franchises across the UK. The Company expects
this development to generate positive returns in the course of
2011.
Television Format and Distribution
Let's Dance
Investment amount: GBP500,000 (GBP2,000,000 across the Ingenious
Entertainment VCTs and the Ingenious Live VCTs).
Originally commissioned by the BBC for Comic Relief in 2009 and
Sport Relief in 2010, the TV format Let's Dance is the celebrity
packed dance spectacular which sees well known celebrities such as
Rufus Hound and Jo Brand pay homage to some of the world's most
iconic dance routines in front of a live audience. Let's Dance has
started its international roll-out with deals in Russia, Holland,
Germany, Slovakia, Indonesia and Sweden.
In 2010 the show had a peak audience of over eight million
viewers and as a result, the programme has been recommissioned for
the third year, once again in conjunction with Comic Relief. The
series aired on 19 February 2011 and ran over four weeks, comprised
of three heats and culminated in a spectacular final dance off on
Red Nose Day weekend.
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 eight brands in the DRG 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, a
wide variety of children's programmes and factual documentaries.
The investment is anticipated to generate a small return for the
Company.
SuperVision
Investment amount: GBP1,000,000 (GBP2,000,000 across the
Ingenious Entertainment VCTs).
In 2010, an investment was made in SuperVision Media to
co-promote and co-distribute alternative content. SuperVision is
one of the leading owners and distributors of alternative content
for cinemas around the globe in both the sport and entertainment
fields. Their aim is to provide people with experiences that are
the next best thing to being at the event whilst screening live,
uninterrupted content mainly in 3D format, accompanied by surround
sound.
SuperVision has secured the exclusive rights to stage Formula 1
racing in cinemas and was also able to distribute the Football
World Cup in 3D in the UK during July 2010.
The company has more recently secured the exclusive rights to
screen Michael Flatley'sLord of the Dance in 3D which was released
on 17 March 2011. Major theatre chains in the US, UK, and Europe
supported the movie and SuperVision had a screen goal of roughly
1,500 locations (half in the US, with the balance in the UK and
Europe).
Saturn Explosion
Investment amount: GBP1,000,000 (GBP2,000,000 across Ingenious
Entertainment VCTs).
In December 2010, Ingenious Entertainment VCTs agreed with the
directors of Supervision Media to form a new company, Saturn
Explosion Limited, to carry on the trade of the production,
promotion and exploitation of alternative digital content
(including but not limited to event based entertainment and sport
content such as music concerts, festivals, theatrical productions
and sporting events) across a range of media including television
and cinema.
Supervision Media has recently acquired the rights to distribute
Michael Flatley's Lord of the Dance in 3D and is one of the leading
owners and distributors of alternative content for cinemas around
the globe. Saturn Explosion anticipates that it will be able to
acquire the rights to alternative digital content in respect of
live entertainment events either as a result of working with third
parties to create and develop the alternative digital content, such
as the 3D rights to theatrical shows, or by acquiring the rights to
exploit such content from third parties.
Outlook
The economic environment continues to display challenges for the
Company as a whole. However, we are pleased to report that the live
and entertainment events sector has performed resiliently in the
downturn. In addition the expansion of the digital media sector has
created new markets for content creators.
It appears that the industry's expectations in relation to the
pace of consumers' migration to the new digital platform are
progressing well ahead of what was originally expected. Changing
consumer behaviour is impacting on all segments of the
entertainment and media industry, and as a result the Company's
search for revenue positioning in the digital value chain is
extremely important. Therefore the decision was made to invest into
SuperVision Media who are one of the leading owners and
distributors of digital content. We therefore remain confident that
our ability to invest in the diverse portfolio of sectors coupled
with our proactive measures to further mitigate risk will continue
to stand us, and our investors, in good stead.
As a result, we are confident that the Company will continue to
add to its portfolio of good quality investments as the
entertainment industry is constantly expanding.
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 Ventures7 April 2011
BUSINESS REVIEW
The purpose of this review is to provide Shareholders with a
summary setting out the business objectives of the Company, the
Board's strategy to achieve those objectives, the risks faced, the
regulatory environment and the key performance indicators (KPIs)
used to measure performance.
1. Strategy for Achieving Objectives
Ingenious 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 agreement.
The Manager's review provides a review of the investment
portfolio and the market outlook.
2. Investment Policy
The Company's investment policy is to focus on investing in
companies established to create and bring to market live events and
premium entertainment content. These investments should be
Qualifying Investments for the purposes of the VCT legislation.
Each share class of each of the Ingenious Entertainment VCTs ('the
VCTs') represents a separate pool of capital and each such pool has
its own separate performance record and dividend history.
For the Ordinary Shares, C Shares and D Shares the Manager
intends to balance the risk profile by investing no more than 30%
of the respective funds raised under the respective offers in a
blend of low risk money market funds (OEICs) (which are
non-qualifying for the purposes of VCT legislation) and at least
70% of funds raised in VCT qualifying media content
investments.
For the E Shares, the Manager intends to balance the risk
profile of the fund by investing no more than 30% of funds raised
into a blend of low risk money market funds (which are
non-qualifying for the purposes of VCT legislation) in the same way
as for funds raised in the Ordinary Share Offer, the C Share Offer
and the D Share Offer and at least 70% of funds raised in VCT
qualifying media content investments.
In respect of F Shares, the Manager will deploy no more than 30%
of the funds in a balanced multi-asset management portfolio (which
is non-qualifying for the purposes of VCT legislation) and at least
70% of funds raised in VCT qualifying media content
investments.
The investment policy for VCT qualifying media content
investments is the same for all share classes, and is based upon a
rigorous selection process, together with a funding structure and
minimum revenue contractual arrangements specifically designed to
offer Investors downside protection whilst preserving the
considerable upside potential of the live events and entertainment
content within the portfolio.
Asset Allocation
The Manager will focus on investing in companies producing live
events or creating branded entertainment content with a view to
achieving a broad allocation of the VCTs' assets across the
entertainment sector. 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 Manager's objective will be to identify
projects in which the VCTs can participate in the revenues and in
the capital value of the content once the market is
established.
Ordinary Shares, 'C' Shares and 'D' Shares
The Directors believe that pending deployment into Qualifying
Investments funds should be deployed in a low risk, liquid
investment, which also provides moderate returns to VCT
Shareholders. The Manager intends to invest such capital raised in
the Ordinary Share Offer, the C Share Offer and the D Share Offer
and not deployed in Qualifying Investments in a number of low risk
money market funds (OEICs) with a rating of at least AAAm (S&P)
or Aaa/MR1+ (Moody's) or, where the fund is not rated by these
agencies, the average credit quality of portfolio is not less than
AA+ (S&P).
'E' Shares
Of the funds raised from the E Share Offer, at least 70% will be
invested in Qualifying Investments (companies in the media and
entertainment sector). The remaining 30% of the funds raised by the
E Share Offer will be retained in a blend of low risk money market
funds (OEICs) throughout the life of the VCT, creating a lower risk
profile for the E Shares than for the F Shares.
'F' Shares
Of the funds raised from the F Share Offer, at least 70% will be
invested in Qualifying Investments (companies in the media and
entertainment sector). The remaining 30% of the funds raised by the
F Share Offer will be retained in a balanced multi-asset management
portfolio throughout the life of the VCT.
Diversification
The Manager will seek to diversify the risk of Qualifying
Investments through investment in media content and live events
chosen from a broad spectrum of opportunities in the media and
entertainment sector. However, the principal focus will be on the
quality of the proposition, the experience of the production
partner and the returns that can be generated. There is, therefore,
no limitation on investments in any specific segment of the
entertainment sector. There will, however, be restrictions on the
size of investments (both Qualifying Investments and other
investments) made by the VCTs as set out in the VCT Status and
Maximum Exposures paragraph below.
Risk Mitigation
The following risk mitigation strategies will be utilised by the
Investee Companies, and in common with industry practice:
-- Each Investee Company will be required to put into place pre-sales or
similar minimum revenue arrangements providing for the
Investee
Company to receive at least 75% of the VCTs' investment
(Base
Revenues).
-- Each Investee Company will engage the services of an experienced
producer or promoter with a proven track record in bringing
media
projects to market and delivering the returns targeted by the
VCTs.
-- Each Investee Company will be required, where appropriate, to obtain
relevant insurance policies in order to protect against
normal
industry risks. After completion of its first project, each
Investee
Company may seek to undertake further projects (with at least
the same
level of downside protection) from its existing cash-flows.
However,
Investee Companies will not be permitted to undertake further
projects
which could reduce the Base Revenues generated from its first
project.
Each Investee Company will be expected to realise the capital
value of
its rights and goodwill after five years. This investment
policy
should ensure a high degree of downside protection whilst
preserving
the considerable upside potential of the premium media content
within
the portfolio.
Funding Structure, Gearing and Contractual Arrangements
Each Investee Company will initially be formed for the purpose
of engaging in the production and exploitation of premium media
content or a live event. At present, the VCTs' intention is to
invest in Qualifying Companies by subscribing for a minimum of 30%
of their investment in share capital and the remaining 70% through
loan stock instruments. However, there is legislation being
introduced this year by way of the Finance Bill (No 3) 2010 which
provides that at least 70% by value of Qualifying Investments must
be in equity. Depending on when this legislation comes into force
it will mean that the VCTs will instead invest a minimum of 70% of
their investment in share capital and the remaining 30% through
loan stock instruments. The VCTs will have a non-controlling
interest in each Investee Company and other shareholders may
include, amongst others, promoters, record labels, game developers
and charities. It is expected that the initial capital provided by
the VCTs will be sufficient to cover the Investee Company's
budgeted costs of creating and bringing to market the initial
project.
The VCTs can invest, under current VCT legislation, up to GBP1
million each (and, therefore, GBP2 million in aggregate) per tax
year in any one Investee Company and will always co-invest on equal
terms pro rata to the capital in each VCT. This should have the
advantage of enabling the VCTs to co-invest in larger projects than
if one VCT was investing by itself. The VCTs will not borrow money
in relation to their activities.
Liquidity
As was the case with each of the Ordinary Share Offer, the 'C'
Share Offer and the 'D' Share Offer, each of the VCTs intends to
create an 'E' Share reserve and an 'F' Share reserve which will
enable it to make share buy-backs in the market, subject to
liquidity restraints. The VCTs will operate a discount policy for
repurchasing Shares, which will be determined by the boards of the
VCTs at their discretion.
The VCTs intend to return funds to Shareholders after five years
if Shareholders so desire. In any event, the Articles of
Association of each of the VCTs currently contain a provision
requiring the Directors to propose an ordinary resolution at the
tenth annual general meeting of the VCTs to continue the life of
the VCTs. If any such resolution is not passed, the Directors will
draw up proposals for the re-organisation, reconstruction or
voluntary winding up of the VCTs for consideration of members at a
general meeting on a date not more than nine months after such
general meeting. Implementation of such proposals will require the
approval of Shareholders by special resolution.
VCT Status and Maximum Exposures
In order to obtain venture capital trust status, the VCTs must
be approved by HM Revenue & Customs. The conditions which must
be satisfied to obtain and retain such status include the following
restrictions on the maximum exposure of each VCT:
-- no holding in a company will represent more than 15% by value of each
VCT's total investments; and
-- each VCT is limited to investing up to GBP1 million per Investee Company
in any one tax year or in any six month period straddling two
tax
years.
The limits stated in the policy above in relation to the
percentage amount of the funds invested in Qualifying Investments
and non-qualifying investments will need to be met within the three
year VCT investment period in accordance with the VCT qualifying
rules. The boards of the VCTs do not intend to vary the VCTs'
investment policy, however, should a material change in the
investment policy (including the conditions above) be deemed
appropriate this will be done with Shareholders' approval and in
accordance with the Listing Rules.
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.
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 2010
Year ended 31 December 2010 Year ended 31 December 2009
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain - 211 211 - 1 1
on disposal
of investments
(Decrease)/increase - (244) (244) - 72 72
in fair
value
of investments
held
Investment 2 208 - 208 40 - 40
income
Arrangement 3 (74) - (74) (31) - (31)
fees
Investment 4 (140) (140) (280) (100) (100) (200)
management
fees
Other expenses 5 (155) - (155) (127) (11) (138)
Loss (161) (173) (334) (218) (38) (256)
on ordinary
activities
before
taxation
Tax 6 - - - - - -
on ordinary
activities
Loss (161) (173) (334) (218) (38) (256)
attributable
to
equity
shareholders
Basic and
diluted
return
per share
(pence)
Ordinary Share 7 0.3 (1.3) (1.0) (1.4) (0.3) (1.7)
C Share 7 (1.8) (0.5) (2.3) (3.9) (0.3) (4.2)
D Share 7 (3.0) (0.4) (3.4) - - -
The Company has no recognised gains and losses other than those
disclosed above.
The total column is the Income Statement of the Company for the
year. The supplementary capital and revenue columns are prepared
following guidance published by the Association of Investment
Companies (AIC).
All operations are considered to be continuing.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 2010
Year ended Year ended
31 December 31 December
2010 2009
GBP'000 GBP'000
Opening shareholders' funds 12,135 9,728
Capital subscribed 6,714 2,784
Issue costs (295) (121)
Dividends (651) -
Loss for the year (334) (256)
Closing shareholders' funds 17,569 12,135
The accompanying notes form an integral part of these financial
statements.
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C AND D SHARE
FUNDS
INCOME STATEMENT
for the year ended 31 December 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 - 202 202 - 7 7 - 2 2
on disposal
of investments
(Decrease)/increase - (260) (260) - (1) (1) - 17 17
in fair
value
of investments
held
Investment 203 - 203 5 - 5 - - -
income
Arrangement - - - - - - (74) - (74)
fees
Investment (81) (81) (162) (22) (22) (44) (37) (37) (74)
management
fees
Other expenses (88) - (88) (33) - (33) (34) - (34)
Profit/(loss) 34 (139) (105) (50) (16) (66) (145) (18) (163)
on ordinary
activities
before
taxation
Tax - - - - - - - - -
on ordinary
activities
Profit/(loss) 34 (139) (105) (50) (16) (66) (145) (18) (163)
attributable
to
equity
shareholders
Basic and 0.3 (1.3) (1.0) (1.8) (0.5) (2.3) (3.0) (0.4) (3.4)
diluted
return
per share
(pence)
The Company has no recognised gains and losses other than those
disclosed above.
The supplementary capital and revenue columns are prepared
following guidance published by the Association of Investment
Companies (AIC).
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 2010
Ordinary Shares C Shares D Shares Total Shares
GBP'000 GBP'000 GBP'000 GBP'000
Opening shareholders' 9,555 2,580 - 12,135
funds
Capital subscribed - - 6,714 6,714
Issue costs - - (295) (295)
Dividends (510) (141) - (651)
Loss for the year (105) (66) (163) (334)
Closing shareholders' 8,940 2,373 6,256 17,569
funds
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C AND D SHARE
FUNDS
INCOME STATEMENT
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 supplementary capital and revenue columns are prepared
following guidance published by the Association of Investment
Companies (AIC).
The Company had no D Shares in issue for the year ended 31
December 2009.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended 31 December 2009
Ordinary Shares C Shares D Shares Total Shares
GBP'000 GBP'000 GBP'000 GBP'000
Opening shareholders' 9,728 - - 9,728
funds
Capital subscribed - 2,784 - 2,784
Issue costs - (121) - (121)
Loss for the year (173) (83) - (256)
Closing shareholders' 9,555 2,580 - 12,135
funds
BALANCE SHEET
as at 31 December 2010
31 December 2010 31 December 2009
Note GBP'000 GBP'000
Fixed assets
Qualifying investments 8 7,670 2,048
Current assets
Debtors 10 81 31
Non-qualifying investments 11 9,753 10,029
Cash at bank and in hand 149 69
9,983 10,129
Creditors: amounts falling 12 (84) (42)
due within one year
Net current assets 9,899 10,087
Net assets 17,569 12,135
Capital and reserves
Called-up share capital 13 198 130
Share premium account 14 6,351 -
Other reserve account 14 11,615 12,266
Capital reserve 14 12 185
Revenue reserve 14 (607) (446)
Shareholders' funds 17,569 12,135
Net asset value per Ordinary Share 15 87.6 93.6
Net asset value per C Share 15 84.4 91.8
Net asset value per D Share 15 92.9 -
The accompanying notes form an integral part of these financial
statements.
The financial statements were approved by the Board of Directors
on 7 April 2011.
Signed on behalf of the Board of Directors:
David Munns
Chairman
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C AND D SHARE
FUNDS
BALANCE SHEET
As at 31 December 2010 As at 31 December 2009
Ordinary C D Ordinary C D
Shares Shares Shares Shares Shares Shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Qualifying 6,698 972 - 2,048 - -
investments
Current assets
Debtors 59 - 22 26 5 -
Non-qualifying 2,135 1,369 6,249 7,471 2,558 -
investments
Cash at bank 73 35 41 46 23 -
and in hand
2,267 1,404 6,312 7,543 2,586 -
Creditors: (25) (3) (56) (36) (6) -
amounts
falling
due within
one year
Net current 2,242 1,401 6,256 7,507 2,580 -
assets
Net assets 8,940 2,373 6,256 9,555 2,580 -
Capital and
reserves
Called-up share 102 28 68 102 28 -
capital
Share premium - - 6,351 - - -
account
Other reserve 9,121 2,494 - 9,631 2,635 -
account
Capital reserve 52 (22) (18) 191 (6) -
Revenue reserve (335) (127) (145) (369) (77) -
Shareholders' 8,940 2,373 6,256 9,555 2,580 -
funds
Net asset value 87.6 84.4 92.9 93.6 91.8 -
(pence
per share)
The Company had no D Shares in issue for the year ended 31
December 2009.
CASH FLOW STATEMENT
for the year ended 31 December 2010
Ordinary Shares C Shares D Shares Total Shares
Note GBP'000 GBP'000 GBP'000 GBP'000
Net cash outflow (76) (68) (146) (290)
from
operating
activities
Financial
investment
Purchase of 8 (4,553) (972) - (5,525)
qualifying
investments
Net cash outflow (4,553) (972) - (5,525)
from
financial
investment
Management
of liquid
resources
Purchase 11 (1,762) (564) (7,335) (9,661)
of
non-qualifying
investments
Disposal 11 6,928 1,757 1,103 9,788
of
non-qualifying
investments
Net 5,166 1,193 (6,232) 127
cash
inflow/(outflow)
from liquid
resources
Financing
Issue of - - 6,714 6,714
D Shares
Issue costs of - - (295) (295)
D Shares
Net cash inflow - - 6,419 6,419
from financing
Dividends
Payment of (510) (141) - (651)
dividends
Net cash outflow (510) (141) - (651)
from dividends
Increase in cash 27 12 41 80
Reconciliation of loss before taxation to net cash flow from
operating activities
GBP'000 GBP'000 GBP'000 GBP'000
Loss on ordinary activities before tax (105) (66) (163) (334)
(Increase)/decrease in fair 260 1 (17) 244
value of investments held
Investment income (187) (5) - (192)
(Increase)/decrease in receivables (33) 5 (22) (50)
Increase/(decrease) in payables (11) (3) 56 42
Net cash outflow from operating activities (76) (68) (146) (290)
Reconciliation of net cash flow to movement in net funds
GBP'000 GBP'000 GBP'000 GBP'000
Opening cash balances 46 23 - 69
Net cash inflow 27 12 41 80
Closing cash balances 73 35 41 149
Total net funds is cash of GBP149k (Ordinary Shares: GBP73k; C
Shares: GBP35k and D Shares GBP41k) and non-qualifying investments
of GBP9,753k (Ordinary Shares: GBP2,135k; C Shares: GBP1,369k and D
Shares: GBP6,249k). The accompanying notes form an integral part of
these financial statements.
CASH FLOW STATEMENT
for the year ended 31 December 2009
Ordinary Shares C Shares D Shares Total Shares
Note GBP'000 GBP'000 GBP'000 GBP'000
Net cash (247) (91) - (338)
outflow
from
operating
activities
Financial
investment
Purchase of 8 (1,775) - - (1,775)
qualifying
investments
Net cash (1,775) - - (1,775)
outflow
from
financial
investment
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 - 2,784 - 2,784
C Shares
Issue costs of - (121) - (121)
C Shares
Net cash - 2,663 - 2,663
inflow
from financing
Increase/(decrease) (61) 23 - (38)
in cash
Reconciliation of loss before taxation to net cash flow from
operating activities
GBP'000 GBP'000 GBP'000 GBP'000
Loss on ordinary activities before tax (173) (83) - (256)
Gain on investments (1) - - (1)
Increase in fair value of investments held 11 (63) (9) - (72)
Increase in receivables (19) (5) - (24)
Increase in payables 9 6 - 15
Net cash outflow from operating activities (247) (91) - (338)
Reconciliation of net cash flow to movement in net funds
GBP'000 GBP'000 GBP'000 GBP'000
Opening cash balances 107 - - 107
Net cash inflow/(outflow) (61) 23 - (38)
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.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2010
1. Accounting Policies
a) Basis of Accounting
The financial statements for the year ended 31 December 2010
have been prepared in compliance with UK Generally Accepted
Accounting Practice, and with the Statement of Recommended Practice
(the SORP) entitled "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" which was issued in January
2009.
The comparative figures are for the year, 1 January 2009 to 31
December 2009.
The financial statements have been prepared on a going concern
basis under the historical cost convention, except for the
measurement at fair value for investments. The principal accounting
policies have remained unchanged from those set out in the
Company's 2009 annual report and financial statements.
b) Valuation of Investments
The Company's business is investing in financial assets with a
view to profiting from their total return in the form of income and
capital growth. As set out in the prospectus all investments are
designated at fair value.
Investee Companies
Unquoted investments including equity and loan investments are
designated at fair value and valued in accordance with the
International Private Equity and Venture Capital Guidelines and
Financial Reporting Standard 26 "Financial Instruments: Recognition
and Measurement" (FRS 26). Investments are initially recognised at
fair value. The investments are subsequently re-measured at fair
value, as estimated by the Directors with prudence and good faith.
Investments 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 second 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 earnings
multiple basis using the latest available information on the
performance of the live event or entertainment content. Gains or
losses arising from changes in the fair value of the 'financial
assets at fair value through profit or loss' category are presented
in the Income Statement in the period in which they arise.
As a result of the above basis of valuation, there is
significant judgement associated with the valuation of
investments.
Non-qualifying Investments - Open Ended Investment Companies
The Company's non-qualifying investments in interest bearing
money market open ended investment companies (OEICs) are valued at
fair value, this is bid price. They have been designated as fair
value through profit and loss for the purposes of FRS 26.
Gains and losses arising from changes in fair value of
qualifying and non-qualifying investments 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 relating to loan note premiums is recognised in
the Income Statement as accrued on a time-apportionment basis so as
to reflect the effective interest rate. Where those loan note
premiums are charged in lieu of higher interest then they are
credited to income over the life of the advance to the extent those
premiums are anticipated to be collected.
d) Dividend Income
Dividend income is recognised in the Income Statement once
declared by any investee company.
e) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged to the revenue account within the Income Statement
except that:
-- expenses which are incidental to the acquisition or disposal of an
investment are charged to capital in the Income Statement as
incurred;
and
-- expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of
the
investments held can be demonstrated.
-- the management fee has been allocated 50% to revenue and 50% to
capital, which represents the split of the Company's long term
returns.
f) Deferred Taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance
sheet date where transactions or events that result in an
obligation to pay more, or a right to pay less, tax in the future
have occurred at the balance sheet date. This is subject to
deferred tax assets only being recognised if it is considered more
likely than not that there will be suitable profits from which the
future reversal of the underlying timing differences can be
deducted. Timing differences are differences arising between the
Company's taxable profits and its results as stated in the
financial statements which are capable of reversal in one or more
subsequent periods.
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. Investment Income
2010 2009
GBP'000 GBP'000
Bank deposit interest - 4
Interest from non-qualifying investments - 24
Dividend income from qualifying investments 8 -
Loan note interest from qualifying investments 200 12
208 40
3. Arrangement Fees
2010 2009
GBP'000 GBP'000
Arrangement fees 74 31
All costs arising out of the relevant 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 relevant 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..
4. Investment Management Fee
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management 140 140 280 100 100 200
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
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Directors' 38 - 38 39 - 39
remuneration
(excluding
employer's
national
insurance)
Auditors'
remuneration
- Audit fees 13 - 13 12 - 12
Legal 16 - 16 - 4 4
& professional
fees
Other 85 - 85 66 5 71
administration
expense
Irrecoverable VAT 3 - 3 10 2 12
155 - 155 127 11 138
The Company is not registered for VAT. Fees payable to the
Company's auditor for the audit of the Company's financial
statements are GBP13k (2009: GBP12k) excluding VAT.
6. Tax Charge on Ordinary Activities
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loss on ordinary (161) (173) (334) (218) (38) (256)
activities
before tax
Loss on ordinary (45) (48) (93) (61) (11) (72)
activities by
tax rate 28%
(2009: 28%)
Adjustments:
Non - 9 9 - (20) (20)
taxable
(gains)/losses
on investments
Disallowed expenses 1 42 43 1 31 32
Unutilised 46 (3) 43 60 - 60
losses for
the current year
UK dividends (2) - (2) - - -
not taxable
- - - - - -
As the Company is a VCT its capital gains are not taxable.
At 31 December 2010 the Company had surplus management expenses
of GBP602k (2009: GBP445k). 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 2010 2010 2010 2009 2009 2009
Shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Profit/(loss) 34 (139) (105) (141) (32) (173)
on
ordinary
activities
after
taxation
Weighted 10,205,011 10,205,011 10,205,011 10,205,011 10,205,011 10,205,011
average
shares
in issue
(number)
Profit/(loss) 0.3 (1.3) (1.0) (1.4) (0.3) (1.7)
attributable
per
share
(pence)
C 2010 2010 2010 2009 2009 2009
Shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loss (50) (16) (66) (77) (6) (83)
on
ordinary
activities
after
taxation
Weighted 2,810,596 2,810,596 2,810,596 1,980,118 1,980,118 1,980,118
average
shares
in
issue
(number)
Loss (1.8) (0.5) (2.3) (3.9) (0.3) (4.2)
attributable
per
share
(pence)
D Shares 2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Loss (145) (18) (163) - - -
on ordinary
activities
after
taxation
Weighted 4,773,028 4,773,028 4,773,028 - - -
average
shares
in issue
(number)
Loss (3.0) (0.4) (3.4) - - -
attributable
per
share
(pence)
There are no dilutive potential Ordinary, C or D Shares,
including convertible instruments, options or contingent share
agreements in issue for the Company.
8. Fixed Asset Investments
2010 2009
GBP'000 GBP'000
Unquoted investments 7,670 2,048
Equity shares 2,177 614
Unsecured loan notes 5,493 1,434
7,670 2,048
Qualifying Investments
GBP'000 GBP'000
Opening valuation 2,048 273
Purchases at cost 5,525 1,775
Fair value adjustment 97 -
Closing valuation 7,670 2,048
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
2010:
Trading Companies % class and share type % voting rights
Jetstream Events Limited 24.95% A Ordinary 24.95%
Essential Experience Limited 24.95% A Ordinary 24.95%
Crystal Star Limited 24.95% A Ordinary 24.95%
Saturn Explosion Limited 16.50% A Ordinary 16.50%
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 10.99% A Ordinary 10.99%
The Apple Cart Festival 12.50% A Ordinary 12.50%
Limited
CLS Concerts Limited 16.67% A Ordinary 16.67%
Supervision Media 10.00% A Ordinary 10.00%
Holdings Limited
Jongleurs Live Limited 20.00% A Ordinary 20.00%
It is considered that, as permitted by FRS9, "Associates and
Joint Ventures", the above investments are held as part of an
investment portfolio, and that, accordingly, their value to the
Company lies in their marketable value as part of that portfolio.
In view of this, it is not considered that any of the above
represents investments in associated undertakings.
Dormant Companies % class and share type % voting rights
Tremor Events Limited 100% A Ordinary 100%
Electric Ventures Limited 100% A Ordinary 100%
Diamond Ventures Limited 100% A Ordinary 100%
Callisto Moon Limited 100% A Ordinary 100%
Mercury Events Limited 100% A Ordinary 100%
Moda Events Limited 100% A Ordinary 100%
Neptune Nine Limited 100% A Ordinary 100%
Oscar Moment Limited 100% A Ordinary 100%
Saturn Six Limited 100% A Ordinary 100%
Solar Experience Limited 100% A Ordinary 100%
Total Definition 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 Company is not required to prepare consolidated accounts as
any remaining amounts in the above companies are dormant are
immaterial.
10. Debtors
2010 2009
GBP'000 GBP'000
Trade debtors 22 5
Prepayments and accrued income 59 26
81 31
11. Current Asset Investments
2010 2009
GBP'000 GBP'000
Funds held in listed money market instruments 9,753 10,029
Non-Qualifying Investments
GBP'000 GBP'000
Opening valuation 10,029 9,368
Purchases at cost 9,661 4,882
Disposal proceeds (9,788) (4,293)
Unrealised change in value of investment (149) 72
Closing valuation 9,753 10,029
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
2010 2009
GBP'000 GBP'000
Trade creditors 10 6
Accruals and deferred income 74 36
84 42
13. Called-Up Share Capital
2010 2009
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 28
6,735,624 D Shares of 1p each 68 -
198 130
In the current year 6,785,624 D Shares were issued and allotted
in accordance with the terms of the relevant Prospectus of which
6,735,624 D Shares were fully paid at year end. Share issue costs
amounted to GBP369k of which GBP295k has been set off against the
share proceeds.
In the year ended 31 December 2009, 2,810,596 C Shares were
issued and allotted in accordance with the terms of the relevant
Prospectus. Share issue costs amounting to GBP121k have been set
off against the share proceeds.
In the period ended 31 December 2008, 10,205,011 Ordinary Shares
were issued and allotted in accordance with the terms of the
relevant Prospectus. The one subscriber share created upon
incorporation was issued at par. Share issue costs amounting to
GBP448k have been set off against the share proceeds.
Ordinary Shares, C Shares and D Shares rank pari passu with each
other in terms of voting and other rights. The entire issued
Ordinary, C and D 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 D Aggregate nominal Aggregate consideration
Shares allotted value allotted received
and fully paid net of issue costs
GBP'000 GBP'000
1 April 2010 4,192,080 42 3,941
3 April 2010 1,635,734 17 1,569
30 July 2010 907,810 9 835
6,735,624 68 6,345
During the year 21,230 additional D Shares were issued and fully
paid in accordance with the terms of the relevant Prospectus.
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 - 12,266 185 (446) 12,005
2010
Issue of 6,646 - - - 6,646
equity
Dividends - (651) - - (651)
paid
Gain - - 211 - 211
on disposal
of
investments
Decrease in - - (244) - (244)
fair value
of
investments
held
Investment - - - 208 208
income
Arrangement (295) - - (74) (369)
fees
Investment - - (140) (140) (280)
management
fees
Other - - - (155) (155)
expenses
At 6,351 11,615 12 (607) 17,371
31 December
2010
The capital reserve includes realised investment holding losses
of GBP1k and unrealised investment holding gains of GBP13k.
As an investment company under section 833 of the Companies Act
2006, the other reserve account is the only distributable reserve
of the Company.
On 13 April 2010 and 28 May 2010, the Company paid dividends
amounting to GBP510k on Ordinary Shares (2009: GBPNil) and GBP141k
on C Shares (2009: GBPNil) respectively. Although the Company had
applied to the High Court to reduce its share premium account and
create distributable reserves, the Company had not complied with
certain technical requirements of the Companies Act 2006.
Specifically, prior to the payment of the dividends from capital
reserves, the Company was required to revoke to its investment
company status. The payments of the dividends received appropriate
pre-clearance from HMRC, to confirm the Company's VCT status was
not affected by the dividend payments. The Company is taking advice
from its advisors and will inform shareholders as soon as
practicable. The accounts have been drawn up on the basis that the
issue referred to above is regularised. The proposals do not affect
the results of the Company for the year to 31 December 2010, its
net assets at 31 December 2010, nor its ability to pay future
dividends.
15. Net Asset Value Per Share
2010 2009
Net assets attributable to Ordinary 8,940 9,555
Shareholders (GBP'000)
Ordinary Shares in 10,205,011 10,205,011
issue (number)
Net asset value per Ordinary 87.6 93.6
Share (pence)
2010 2009
Net assets attributable to C Shareholders (GBP'000) 2,373 2,580
C Shares in issue (number) 2,810,596 2,810,596
Net asset value per C Share (pence) 84.4 91.8
2010 2009
Net assets attributable to D Shareholders (GBP'000) 6,256 -
D Shares in issue (number) 6,735,624 -
Net asset value per D Share (pence) 92.9 -
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
2010 2009
GBP'000 GBP'000
Listed money market instruments (note 11) Level 1 9,753 10,029
Unquoted investments (note 8) Level 3 7,670 2,048
17,423 12,077
Level 3 investments include a GBP97k revaluation gain on Into
The Groove Limited during the period.
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 of the 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 GBP9,753k (2009: GBP10,029k). The benchmark
rate which determines the interest payments received on interest
bearing cash balances and debt investments in unquoted companies is
the bank base rate which was 0.5% as at 31 December 2010 (31
December 2009: 0.5%).
The following table illustrates the sensitivity of the impact on
ordinary activities for the year before taxation and total equity
to a change in interest rates of 50 basis points, with effect from
the beginning of the year. These changes are considered to be
reasonably possible based on observation of current market
conditions. The calculations are based on the Company's
Non-Qualifying Investments held at each balance sheet date. All
other variables are held constant.
31 December 2010 31 December 2009
GBP '000 GBP '000
+/- 50 basis points +/- 50 basis points
Impact on profit/(loss)
on ordinary
activities for the year
before taxation and 49 50
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
GBP5,493k (2009: GBP1,434k) 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 GBP5,493k (2009: GBP1,434k) unsecured loan notes are the
contractually agreed 75% 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 4.5% (2009: 1.5%, amended to
4.5% in April 2010), being 4% over the bank base rate which was
0.5% as at 31 December 2010 (2009: 0.5%), totalling GBP38k (2009:
GBP8k). 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
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 offer, amounting to
GBP369k (2009: C Share fee amounting to GBP152k) 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 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. This amounted to
GBP280k as at 31 December 2010 (2009: GBP200k). The Manager also
charges an administration fee of GBP53k (2009: GBP35k) per annum
and irrecoverable VAT.
c. The funds invested in OEICs are managed by the Asset
Management a division of Ingenious Asset Management Limited, of
which Patrick McKenna is a director. Ingenious Asset Management
Limited is a subsidiary of the Ingenious Group, which is controlled
by Patrick McKenna. There is no fee associated with this
transaction.
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).
f. 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).
g. 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, Supervision
Media Holdings Limited, to provide digital content to cinemas in
both the sport and entertainment fields. In August 2010 the Company
invested GBP1,000k for a total of 10.00% of the equity in
Supervision Media Holdings Limited. Ingenious Entertainment VCT 2
plc invested GBP1,000k for 10.00% of the equity in Supervision
Media Holdings Limited.
The investment of GBP1,000k in Supervision Media Holdings
Limited is a joint investment between the Ordinary Shares (GBP779k)
and the C Shares (GBP221k).
h. 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 a new company, Crystal Star
Limited, to promote a music festival in Scotland called 80s Rewind
North. In October 2010 the Company invested GBP500k for a total of
24.95% of the equity in Crystal Star Limited. Ingenious
Entertainment VCT 2 plc invested GBP500k for 24.95% of the equity
in Crystal Star Limited.
The investment of GBP500k in Crystal Star Limited is a joint
investment between the Ordinary Shares (GBP391k) and the C Shares
(GBP109k).
i. 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, Jongleurs
Live Limited, to promote live comedy venues. In October 2010 the
Company invested GBP1,000k for a total of 20.00% of the equity in
Jongleurs Live Limited. Ingenious Entertainment VCT 2 plc invested
GBP1,000k for 20.00% of the equity in Jongleurs Live Limited.
The investment of GBP1,000k in Jongleurs Live Limited is a joint
investment between the Ordinary Shares (GBP779k) and the C Shares
(GBP221k).
j. 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 a new company, Saturn Explosion
Limited, to provide digital content to cinemas. In December 2010
the Company invested GBP1,000k for a total of 16.50% of the equity
in Saturn Explosion Limited. Ingenious Entertainment VCT 2 plc
invested GBP1,000k for 16.50% of the equity in Saturn Explosion
Limited.
The investment of GBP1,000k in Saturn Explosion Limited is a
joint investment between the Ordinary Shares (GBP800k) and the C
Shares (GBP200k).
k. 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 a new company, Jetstream Events
Limited, to promote an event called Scarborough Open Air Theatre.
In December 2010 the Company invested GBP1,000k for a total of
24.95% of the equity in Jetstream Events Limited.
Ingenious Entertainment VCT 2 plc invested GBP1,000k for 24.95%
of the equity in Jetstream Events Limited.
Transactions Between Related Parties
2010 2010 2009 2009
Entity Expenditure paid Amounts due Expenditure Amounts due
GBP'000 GBP'000 paid/(received) GBP'000
GBP'000
Ingenious
Media
Investments
Limited
- 369 - 152 -
Arrangement
fee
Ingenious
Asset
Management
Limited
- 280 - 200 -
Investment
management
fee
- 53 - 35 -
Administration
fee
- - 3 9 3
Irrecoverable
VAT
During the year 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.
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 GBP89k excluding VAT (31 December 2009: GBP48k), have
been invoiced in the period, no amounts remain outstanding as at 31
December 2010 (31 December 2009: GBP3k).
19. Events After the Balance Sheet Date
The Company declared an interim dividend of 5.0 pence per
Ordinary Share on 17 January 2011 (2010: 5.0 pence). The dividend
was paid on 11 February 2011 by way of a capital distribution
reducing the Company's other reserves.
The Company declared an interim dividend of 5.0 pence per C
Share on 17 January 2011 (2010: 5.0 pence). The dividend was paid
on 11 February 2011 by way of a capital distribution reducing the
Company's other reserves.
Following the end of the Reporting Period, the Company made
further investments to back two new festivals, one based in
Bournemouth and the other in Brighton. These were the first deals
entered into through a co-investment of both the C Share and the D
Share funds.
On 5 April 2011, the Company allotted 51,662 E Shares of 1p and
51,662 F Shares of 1p to Patrick McKenna, a director and a related
party, for a consideration of GBP1 per share. On 5 April 2011 the
Company also allotted 25,875 E Shares of 1p and 25,875 F shares of
1p to Patrick McKenna's wife, Margaret McKenna for a consideration
of GBP1 per share.
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 2010 was
GBP17,569k (2009: GBP12,135k).
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
D Shares (see note 13) during the year.
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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