TIDMIMAC
RNS Number : 3627K
Ingenious Media Active Capital Ltd
19 April 2010
19 April 2010
Ingenious Media Active Capital Limited (AIM: IMAC) ("IMAC" or the "Company")
Proposed Change to Current Investing Policy, Investment Management Agreement,
Articles, and Reduction of Capital
The Board previously announced on 15 March 2010 that it was conducting a
strategic review of its activities. This exercise has now been completed and the
Board is pleased to announce its intention to make a return of capital to its
Shareholders of up to 35p per IMAC Share. In addition, the Board is proposing
certain changes to its investing policy, Articles and Investment Management
Agreement which, they believe, when combined with the return of capital, are
appropriate given the current economic climate and, in particular, the current
state of the media market. Accordingly, the Company posted a circular (the
"Circular") to its Shareholders on 17 April 2010 seeking, inter alia, approval
at an EGM in relation to unanimously recommended proposals to change its
Investing Policy, Articles of Association, Investment Management Agreement and
return of capital to shareholders.
The implementation of the Proposals remains subject to Shareholder approval of
not less than 75 per cent. of the total voting rights of the Shareholders who,
being entitled to do so, vote on the Resolution at the EGM, and the satisfaction
of a solvency test under Guernsey law by the Company following the EGM.
The following Directors, Mike Luckwell, Patrick McKenna and Neil Blackley have
each entered into irrevocable undertakings and intend to vote in favour of the
Proposals in respect of their own beneficial holdings (including shares held by
the Ingenious Group, which is controlled by Patrick McKenna) being 42,182,395
IMAC Shares (representing 29.46 per cent. of the current issued share capital of
the Company (excluding treasury shares)). Furthermore, the Company has also
received irrevocable undertakings from other Shareholders confirming their
intention to vote in favour of the Resolution. The Company has received
irrevocable undertakings from Shareholders holding, in total, 71,788,428 IMAC
Shares, representing 50.14 per cent. of the current issued share capital of the
Company (excluding treasury shares).
Shareholders should read and consider the Circular in full (and not rely on this
announcement) before they make any decision as to how they intend to vote on the
Resolution. The Circular will be available from today on the Company's website
(www.imaclimited.com). Shareholders are urged to complete the Form of Proxy
accompanying the Circular and fax it to +44 (0) 1481 711605as soon as possible,
but, in any event, so as to arrive no later than 11a.m. on 10 May 2010, being 48
hours before the time of the EGM. Alternatively, Shareholders are entitled to
attend the EGM on 12 May 2010. Further details are set out in the Circular.
NAV UPDATE
As at 31 March 2010, the Company's unaudited net asset value was
GBP89,680,977.05 with a value of 62.64 pence per IMAC Share (diluted and
undiluted), such figure being inclusive of 23.75 pence per IMAC Share of
investments and 38.95 pence per IMAC Share of cash.
For further information, please visit www.imaclimited.com or contact:
Ingenious Ventures, a trading division of the Investment Manager
Patrick
McKenna / Patrick Bradley
020 7319 4000
Canaccord Adams Limited
(Nomad to IMAC)
Mark Williams / Bhavesh Patel
020 7050 6500
Brunswick (PR advisor to IMAC)
Craig Breheny / David Yelland
020 7404 5959
EXTRACT FROM THE CIRCULAR - PROPOSED CHANGES TO THE INVESTING POLICY, ARTICLES
OF INCORPORATION AND INVESTMENT MANAGEMENT AGREEMENT & A REDUCTION OF CAPITAL
INGENIOUS MEDIA ACTIVE CAPITAL LIMITED
(a closed-ended investment company incorporated in Guernsey and registered with
number 44358)
+------------+------------+
| Directors: | Registered |
| Mike | office: |
| Luckwell | Isabelle |
| (Chairman) | Chambers |
| Neil | Route |
| Blackley | Isabelle |
| George | St. Peter |
| Bryan Dix | Port |
| David | Guernsey |
| Jeffreys | |
| Patrick | |
| McKenna | |
| William | |
| Simpson | |
| Serena | |
| Tremlett | |
+------------+------------+
17 April 2010
Dear Shareholder,
Proposed changes to the Current Investing Policy, the Investment Management
Agreement and the Articles, and a reduction of capital.
1. Introduction
IMAC has been reviewing its Current Investing Policy in respect of its potential
surplus cash position and investment opportunities in light of the current
economic climate. Based on recommendations it has received from its Investment
Manager, IMAC proposes to make certain changes to its Current Investing Policy
to allow it to return capital to its Shareholders of up to 35 pence per IMAC
Share by way of a capital reduction as an alternative to using the cash to make
further investments in any new portfolio companies. In connection with the
return of cash, the Board and the Investment Manager have agreed, subject to
Shareholder approval, revised terms of the Investment Management Agreement to
better reflect the strategy of the Company following implementation of the
Proposals. The purpose of the Circular is to explain those proposed changes, the
reasons for them and to call for an EGM.
IMAC is an "investing company" for the purposes of the AIM Rules. Rule 8 of the
AIM Rules requires an investing company to state and to follow an investing
policy and to seek the prior consent of its shareholders at a general meeting
for any material change to such policy. Accordingly, at the end of the Circular,
Shareholders will find a notice convening an Extraordinary General Meeting of
the Company, such meeting to be held at 11.00 am on 12 May 2010 at Isabelle
Chambers, Route Isabelle, St. Peter Port, Guernsey, at which a resolution in
relation to the Proposals, as explained in more detail at paragraph 2 below,
will be proposed as a special resolution (the "Resolution"). In order to be
passed, the Resolution requires the approval of not less than 75 per cent. of
the total voting rights of the Shareholders who, being entitled to do so, vote
on the Resolution. The Chairman intends to exercise his right to demand that
voting on the Resolution be conducted by way of a poll. To date, the Company has
received irrevocable undertakings to vote in favour of the Resolution from
Shareholders holding 56,923,632 IMAC Shares in total which represents 39.76 per
cent. of the issued and outstanding IMAC Shares not otherwise held in treasury.
2. Background and rationale for the Proposals
At the time of the Company's Admission in 2006, the economic environment
presented opportunities to invest in a broad range of 'mid-stage', high growth
companies within the media sector, in particular a new class of media companies,
which we termed 'progressive media' companies. Our investment strategy on
Admission anticipated that substantially all the funds raised on Admission would
be invested or committed for investment within two years. However, due to market
conditions, it has not been feasible for the funds to be substantially invested
while at the same time achieve a long-term return target of more than 15 per
cent. per annum.
As has been well documented, there was a serious adverse change to global
economic conditions throughout 2008 and most of 2009. The impact of the
recession and the dramatic decline in bank financing have hit the media sector
hard, which was itself already facing the challenges of structural shifts caused
by digitalisation and fragmentation of existing revenue models. This offered
fewer investment opportunities as well as resulting in longer timeframes to exit
investments. The Board was also conscious of the increased challenges faced by
the Portfolio Companies as their businesses had to make rapid adjustments to
meet the new trading conditions brought about by the recession.
On the recommendation of the Investment Manager, the Company took the positive
decision to make no new investments from the summer of 2008, anticipating the
economic turbulence and with the aim of preserving investors' cash in the
Company until economic conditions and the outlook for the media sector had
improved. This has resulted in the Company having a significant cash reserve and
one which, in the Investment Manager's opinion, is greater than the current
portfolio requires. Given that the conditions for the media sector remain very
challenging, the Investment Manager has advised the Board that it is in the
Shareholders' interests to distribute the majority of the Company's cash balance
while retaining sufficient working capital to provide an adequate follow on
capability to support the investment potential of the Portfolio Companies along
with meeting the Company's operating costs.
As further discussed in section 3 below, the Board expects the Returned Capital
to be GBP50,108,962, however, the exact amount of the Returned Capital will be
finalised by the Board following the passing of the Resolution, as the
distribution of the Returned Capital can only be made if the Board, in its
absolute discretion, concludes that the Company will, immediately after such
distribution, be able to satisfy the "Solvency Test" (as defined under The
Companies (Guernsey) Law 2008, as amended).
The Board and the Investment Manager have therefore reviewed the Current
Investing Policy in light of current conditions. On advice from the Investment
Manager, the Board recommends that the Company implements the following
proposals (the "Proposals"), to:
a.) adopt new articles of incorporation of the Company (the "New Articles")
(a summary of the material changes to the Articles is provided at Appendix IV of
the Circular), a copy of which is available for inspection at the Company's
registered office: Isabelle Chambers, Route Isabelle, St. Peter Port, Guernsey.
The New Articles are proposed to be adopted in order to, inter alia:
i.) extend the duration of the life of the Company to at least the eighth
anniversary following Admission; and
ii.) allow greater freedom for the Company to distribute both income and
capital;
b.) in connection with the Current Investing Policy:
i.) halt any new investments, other than investments relating to the
Portfolio Companies;
ii.) remove the investment restriction which prevents more than 15 per cent.
of the Company's net assets being invested in any one Portfolio Company at the
time of that investment; and
iii.) subject to Guernsey company law and the Company's ongoing working
capital requirements, make distributions to Shareholders as and when the
appropriate situations arise following the realisation of its Portfolio
Companies;
c.) return cash to Shareholders (in such manner and of such amount as the
Directors may determine), not being more than GBP50,108,962, by way of a
reduction of the Company's share capital (the "Returned Capital"); and
d.) amend the Investment Management Agreement (a summary of the Amended
Investment Management Agreement is set out at Appendix III), in particular:
i.) with deemed effect from 1 April 2010, to reduce the management fee from
2.0 per cent. of the total net asset value to 1.25 per cent. of the total net
asset value minus the cash held by IMAC per annum;
ii.) to reset the incentive fee payable by the Company to the Investment
Manager by fixing the base value at net asset value as at 31 December 2009 minus
the Returned Capital (being no less than GBP41,849,918 in total);
iii.) to extend the term of the Investment Management Agreement for a further
three years so that it expires no earlier than 11 April 2014 (rather than 11
April 2011); and
iv.) to allow the Investment Manager (and its subsidiaries and associated
companies) to make investments for itself, or on behalf of its clients or other
funds it may manage that would otherwise be caught within the Current Investing
Policy.
3. Consequences of implementing the Proposals
If the Resolution is approved by the Shareholders, the Company would implement
the Proposals, including adopting the Revised Investing Policy (which is set out
in full in Appendix II of the Circular) and enter into an Amended Investment
Management Agreement on the revised terms set out in the Circular.
Following the distribution of the Returned Capital to Shareholders, the
Investment Manager anticipates that the Company will have approximately GBP5.5
million of cash. The estimated future operating costs of the Company over the
next three years are GBP3.8 million. These costs are expected to be funded from
a combination of the Company's post-distribution cash balance, as well as cash
retained from future realisations, if required. In the unlikely scenario that no
realisations are made over this period, the Company will have sufficient cash to
meet its operating costs. The Directors are satisfied under The Companies
(Guernsey) Law 2008 as to the future solvency of the Company for the purposes of
distributing the Returned Capital.
A more detailed summary of the Portfolio Companies can be found at paragraph 6,
however, below is a summary of its current investment plan, and how much of this
has been invested as at 31 March 2010.
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Name of | Class | % | Country | Principal | Current | Paid | Paid |
| Subsidiary | of | of | of | Activity |Commitment | as | as |
| Undertaking | Share | Class |Incorporation | | (GBP'000) | at | at |
| | | Held | | | | 31 | 31 |
| | | | | | | March | March |
| | | | | | | 2010 | 2009 |
| | | | | | |(GBP'000) |(GBP'000) |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Whizz Kid | Ordinary |47.10% | UK | Television | 4,250 | 2,750 | 2,750 |
| Entertainment | | | | production | | | |
| Limited | | | | | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Digital | Ordinary |79.90% | UK | Television | 11,270 | 8,274 | 8,274 |
| Rights | | | | production & | | | |
| Group | | | | distribution | | | |
| Limited | | | | | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Outside | Ordinary2 | 0.00% | UK | Digital | 1,500 | 1,000 | 1,000 |
| Line | | | | marketing & | | | |
| Limited | | | | creative | | | |
| | | | | agency | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Two Way | Ordinary |84.30% | UK | Interactive | 4,935 | 4,655 | 4,561 |
| Media | | | | television | | | |
| Holdings | | | | company | | | |
| Limited | | | | | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Enigmas2 | Ordinary |43.80% | UK | Video games | 4,560 | 4,560 | 4,560 |
| Limited | | | | business | | | |
| (formerly | | | | | | | |
| In2Games | | | | | | | |
| Limited) | | | | | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Brand | Ordinary |67.00% | UK | Consumer | 9,080 | 8,583 | 6,620 |
| Events | | | | events | | | |
| Holdings | | | | business | | | |
| Limited | | | | | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| QobliQ | Preference |73.40% | UK | Marketing | 12,567 | 12,367 | 12,367 |
| Limited | | | | services | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Review | Ordinary |71.50% | UK | Internet/New | 7,034 | 7,034 | 7,034 |
| Centre | | | | media | | | |
| Limited | | | | | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| Ingenious | n/a |90.00% | UK | Investment | 6,065 | 4,826 | 4,728 |
| Ventures | | | | vehicle | | | |
| Limited | | | | | | | |
| Partnership3 | | | | | | | |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
| | | | | Total | 61,261 | 54,049 | 51,894 |
+---------------+------------+--------+---------------+--------------+------------+-----------+-----------+
1 This table contains only subsidiaries in which IMAC has a controlling
interest. There are no further undrawn commitments to other investments held by
IMAC.
2 Investment in Outside Line Limited is in the form of a convertible loan note.
This is convertible into up to 60 per cent. of ordinary equity.
3 IMAC's investment in Cream Holdings Limited and Stage Three Music Limited is
through Ingenious Ventures Limited Partnership.
The current commitment column in the table above shows the current funding
commitments that the Company has to each Portfolio Company (see note 1), of
which GBP7.2 million has yet to be drawn down. All outstanding funding
commitments are, however, at the discretion of the Company and the Investment
Manager. If the Company and Investment Manager were to approve draw down of
these outstanding commitments, the commitments to the Portfolio Companies would
be funded from a combination of the post-distribution cash balance of the
Company, as well as from additional cash retained from future realisations, if
required. Shareholders should note that the implementation of the Proposals also
attracts inherent risks to the Company, such as the Company not being able to
realise or realising less than expected for the Portfolio Companies. However, in
such a case, with respect to its current funding commitments, the Company will
retain the flexibility of choosing in which Portfolio Companies it will continue
to invest, with a view to maximising Shareholder value. Furthermore, in such a
case where the Company is unable to pay fees owing to the Investment Manager due
to having insufficient cash, the Investment Manager has agreed to defer such
payments until such time as the Company has sufficient cash following the
realisation of Portfolio Companies.
The Independent Directors have discussed the proposed changes to the Investment
Management Agreement with the Investment Manager and believe that the effect of
reducing the management fee, resetting the base value of the incentive fee,
extending the term of the Investment Management Agreement and allowing the
Investment Manager to pursue investments on a non-exclusive basis, taken as a
whole, will serve to incentivise the Investment Manager's commitment towards
developing and managing the Portfolio Companies to ensure that the Company and
its Shareholders achieve, over the mid-term, the maximum exit values possible.
The New Articles proposed to be adopted are considered necessary to enable,
inter alia, the Proposals to be implemented. For instance, the initial lifespan
of the Company (before a winding up resolution must be proposed) is to be
aligned with the Investment Management Agreement's term and, given that the
Company shall not be re-investing proceeds from realised Portfolio Companies in
new investments under the Revised Investing Policy, the proposed change set out
at Appendix IV (b) allows the Directors greater freedom to return both income
and capital based profits to Shareholders. A summary of the proposed material
changes to the Articles is set out at Appendix IV of the Circular and the
proposed New Articles are available to be viewed on display at the Company's
registered office located at Isabelle Chambers, Route Isabelle, St. Peter Port,
Guernsey.
4. AIM Rules Disclosures
The following disclosures are being made in accordance with the Note for
Investing Companies of the AIM Rules.
Expertise of the Directors in respect of the Revised Investing Policy
All of the current Directors are responsible for the determination of the
investing policy of the Company and the overall supervision of its activities.
As the Revised Investing Policy is to discontinue investing in new opportunities
and rather to focus on IMAC's current investments, the Directors possess all the
necessary and desirable expertise and experience to fulfil the requirements of
the Revised Investing Policy. The biographies of the Directors are as follows:
Mike Luckwell (aged 67) - Chairman
Mike Luckwell joined the Board in February 2007 having previously been a member
of the advisory board to the Investment Manager. He was appointed acting
Chairman with effect from 26 January 2008 and Chairman on 29 July 2009.
Mike has over 30 years' experience in the media sector. In 1970 he set up The
Moving Picture Company Limited, which he reversed into Carlton Communications
plc in 1983. He was also the largest single shareholder in HIT Entertainment plc
which was sold to Apax Partners Limited in March 2005.
Neil Blackley (aged 54) - Non-Independent Director
Neil Blackley is a non-executive director of Ingenious Media Holdings plc, a
non-executive director of World Archipelago and a non-executive director of
Stage Three Music. Neil was the head of the UK and European media research team
at Merrill Lynch. Neil joined Merrill Lynch from Goldman Sachs where he was the
lead analyst on the flotation of BSkyB in 1994.
Prior to joining Goldman Sachs in 1993, Neil was at James Capel, where he worked
for ten years and was consistently the No. 1 ranked media analyst in the Extel
Survey.
George Bryan Dix (aged 53) - Independent Director
Bryan Dix was a tax partner with Deloitte LLP. In 2003, he led a management buy
out of Deloitte's offshore business, Walbrook Group Ltd, which had offices in
Guernsey, Jersey and the Isle of Man and then employed 140 people. Walbrook
provided trust and company administration services.
In 2007, having added an office in Hong Kong and with staff numbers now over
200, Walbrook was sold to Barclays Wealth. Bryan subsequently took on the role
of Global Head of Wealth Advisory, the division of Barclays Wealth looking after
the trust and company structuring for wealthy families throughout the world.
Bryan retired from Barclays Wealth Advisory in March 2009. Bryan was appointed a
director of Barclays Private Clients International Limited on 6 August 2009.
Bryan is a chartered Tax Adviser and past president of the Guernsey Branch of
the Chartered Institute of Taxation.
David Jeffreys (aged 50) - Independent Director
David Jeffreys qualified as a chartered accountant with Deloitte Haskins & Sells
in 1985. He is a fellow of the Institute of Chartered Accountants in England and
Wales and works as an independent non-executive director to a number of
Guernsey-based investment fund companies and managers.
From 2007 to 2009, David was the managing director of EQT Funds Management
Limited, the Guernsey management office of the EQT group of private equity
funds. From 1993 to 2004, he was the managing director of Abacus Fund Managers
(Guernsey) Limited, a third party administration service provider to, primarily,
corporate and fund clients. Prior to 1993, David worked as an auditor.
David was born in 1959 and is a Guernsey resident.
Patrick McKenna (aged 53) - Non-Independent Director
Patrick is the founder and Chief Executive of Ingenious Media. Prior to forming
Ingenious in 1998, Patrick was Chairman and Chief Executive of The Really Useful
Group and prior to that was a Partner in Deloitte, where he ran the media group.
Patrick is Chairman of the television company Hat Trick Productions, the music
publisher Stage Three Music and sits on the Advisory Board of the advertising
agency BBH. He is also Chairman of The Young Vic Theatre, a Trustee of NESTA and
a Board Member of the British Council. In addition, he is a member of the Film
Business Academy Board at the Cass Business School and is an Ambassador for
C&binet, the Government's creative and business international network.
William Simpson (aged 53) - Independent Director
William Simpson is a partner of Ogier and head of its Guernsey office. Ogier are
Guernsey Advocates with associated offices in Bahrain, British Virgin Islands,
Cayman, Hong Kong, Ireland, Jersey, London and Tokyo, specialising in
establishing mutual funds and providing legal services to the finance industry.
Ogier are providing legal advice to the Company as to Guernsey law, and William
is a director of and beneficially interested in Ogier.
William practised at the Bar in England until 1987 prior to joining the
Attorney-General's Chambers in the Cayman Islands. Thereafter, following a
further period offshore in private practice in the British Virgin Islands,
William relocated to Guernsey in 1991 and in 1996 became a partner in a locally
based law firm. In 2002 he joined Ogier. William is a director of a number of
investment companies based in Guernsey and continues to advise regularly on
investment and finance related matters.
Serena Tremlett (aged 45) - Independent Director
Serena Tremlett has over 20 years' experience in financial services,
specialising in closed-ended property and private equity funds and fund
administration over the last 13 years.
She is a Guernsey resident and managing director of Morgan Sharpe Administration
Limited, a third party fund administrator which was acquired by her and her team
by way of management buy-out in April 2008 and is a non-executive director on
Alpha Pyrenees Trust, Alpha Tiger Property Trust and NewRiver Retail in addition
to various unlisted funds and general partners.
Serena was previously the company secretary (and formerly a director) of Assura
Group, a company listed on the London Stock Exchange investing in primary
healthcare property, pharmacy and medical businesses and ran Assura's Guernsey
head office.
Prior to working for Assura, Serena was head of Guernsey property funds at
Mourant Guernsey for two years and worked for Guernsey International Fund
Managers (now Northern Trust) for seven years where she sat on a number of
listed and unlisted fund boards.
Experience of the Investment Manager
The Company had originally appointed Ingenious Ventures Limited to provide
investment management services. Ingenious Ventures Limited was the investment
manager up until 29 February 2008, when the Investment Management Agreement was
novated to Ingenious Asset Management Limited. Ingenious Ventures, a trading
division of the Investment Manager, is now the private equity division of the
Investment Manager. Further information on the Investment Manager can be found
on its website, www.ingeniousmedia.co.uk.
Since its formation, the Investment Manager has engaged in the structuring and
management of a number of investment opportunities in the media sector.
The Board agrees with the Investment Manager that the Proposals should be
implemented, and believes that the Investment Manager and its team have the
necessary skills, contacts and experience to execute the Revised Investing
Policy for the Company.
The Investment Team
Subject to the overall supervision of the Board, the Investment Team is
responsible for managing and monitoring investments on behalf of the Company.
The senior members of the team are drawn principally from the Investment
Manager, but also include members of the board of Ingenious Media.
The current members of the Investment Team are as follows:
Patrick McKenna (53) - Chief Executive, Ingenious Group
Please see Patrick McKenna's biography above.
Guy Bowles (47) - Chief Executive Officer, Ingenious Asset Management Division
Guy Bowles began his career at Singer & Friedlander as a portfolio manager. He
then spent three years with Banque Paribas structuring derivative based
products. Prior to joining Ingenious Media, Guy was a director of Newton
Investment Management for nine years with responsibility for their institutional
division. In this role he built and led a team of forty people responsible for
product development, marketing and client service. Guy holds a degree in pure
mathematics and an MSC in mathematics and finance. Guy is a director of
Ingenious Media and chief executive officer of the Ingenious Asset Management
Division. Guy is a member of the Investment Manager's Investment Committee.
Patrick Bradley (49) - Director, Ingenious Ventures
Before joining Ingenious Media, Patrick Bradley had spent over 10 years in
senior operating positions within major media companies including: PolyGram,
Universal Pictures, @ Entertainment and UPC Media. During his career Patrick has
worked extensively throughout Europe and the US. He has worked on numerous
transactions including PolyGram's acquisition of 30 per cent. of the Really
Useful Group and its acquisition of Motown Records, A&M Records, Island Records,
Palace Pictures and Working Title. He was also General Counsel to Ilchester
Investments, a media investment company founded by Alain Levy and David Munns,
formally chairman and vice-chairman of EMI Music, respectively. Since joining
Ingenious Media in 2001, Patrick has been focused on its venture capital
activities, including the management of its first fund, Ingenious Ventures LP
and subsequently the management of IMAC's portfolio investment.
Prior to working in the media sector, Patrick practiced law in the City of
London and Brussels. He qualified as a solicitor in 1986 and holds both a
Bachelor of Law from King's College London (First Class Hons, Mackrell Law
Prize) and a Bachelor of Civil Laws from Worcester College, Oxford University.
Patrick is a non-executive director of Digital Rights Group Limited, Stage Three
Music Limited, Cream Holdings Limited, Outside Line Limited, QobliQ Limited and
Whizz Kid Entertainment Limited and sits on the Investment Manager's Investment
Committee.
Neil Forster (39) - Group Finance Director, Ingenious Group
Neil Forster is group finance director of Ingenious Media Holdings plc
responsible for all financial management and governance across the Ingenious
Group. Prior to joining the Ingenious Group in 2008, Neil was group finance
director at Hat Trick Productions for four years, one of the UK's most
successful producers of comedy and entertainment programming. Between 1996 and
2000 Neil held various senior finance roles at Walt Disney and was head of
finance for the EMEA sales arm of Disney-ABC International Television between
2000 and 2004. Neil qualified as a Chartered Accountant with KPMG and remains a
non executive director of Hat Trick Productions. He is a member of the Media and
Entertainment Special Interest Group of the ICAEW and sits on the Investment
Manager's Investment Committee.
Duncan Reid (50) - Commercial Director, Ingenious Group
Duncan started his career in the music industry before returning to his studies.
He qualified as a Chartered Accountant at Deloitte & Touche, where he worked as
a tax specialist in the media and entertainment group, with clients ranging
across music, film, television and theatre. In 1990 he joined Patrick McKenna at
The Really Useful Group as business development manager for the group and
finance director of The Really Useful Theatre Company, the main subsidiary. He
left The Really Useful Group in 1997 to become CFO of Nottingham Forest Football
Club, a listed UK football club. Duncan joined the Ingenious Group in 1998. He
is a non-executive director of Review Centre Limited, Brand Events Holdings
Limited and Two Way Media Holdings Limited, and sits on the Investment Manager's
Investment Committee.
Regulatory status
The Investment Manager is authorised and regulated by the FSA with registration
number 223074.
Amended Investment Management Agreement
The key terms of the Amended Investment Management Agreement are set out in
Appendix III of the Circular.
Policy on regular updates
The Company has, and will continue to, issue quarterly updates of the Company's
net asset value and details of its main investments in its annual reports.
5. Related Party Transaction - Amending the Investment Management Agreement
The Investment Manager is the private equity division of the Ingenious Group.
Patrick McKenna is a director of the Company and chief executive and controlling
shareholder of the Ingenious Group. Ingenious Media, which is a wholly-owned
subsidiary within the Ingenious Group, is the largest Shareholder of the
Company. Neil Blackley is a non-executive director of both Ingenious Media
Holdings plc and the Company. The proposed amendment of the Investment
Management Agreement (a summary of the proposed revised version is set out at
Appendix III of the Circular), whereby the Investment Manager has agreed to make
such amendments to the Investment Management Agreement as set out at paragraph
2(d) above, is therefore a Related Party Transaction for the purposes of the AIM
Rules.
The Independent Directors (being the Board, other than Patrick McKenna and Neil
Blackley who have an interest in the Related Party Transaction) consider, having
consulted with Canaccord Adams, as the Company's nominated adviser, that the
Related Party Transaction, in the context of the Proposals taken as a whole, is
fair and reasonable insofar as the Shareholders are concerned.
Canaccord Adams Limited of Cardinal Place, 7th Floor, 80 Victoria Street, London
SW1E 5JL, which is regulated in the UK by the Financial Services Authority, has
given and has not withdrawn its written consent to the issue of the Circular
with the inclusion herein of its name and references to it in the form and
context in which they appear.
6. IMAC Trading Update
In the financial year ended 31 March 2010, the Company made no new investments.
An additional GBP2.06 million was committed to Brand Events Holdings Limited.
This brings the total funds invested as at 31 March 2010 to GBP94.2 million. As
at 31 March 2010, the Company's unaudited net asset value was GBP89,680,977.05
with a per share value of 62.64 pence per IMAC Share (diluted and undiluted),
such figure being inclusive of 23.75 pence per IMAC Share of investments and
38.95 pence per IMAC Share of cash.
Whizz Kid Entertainment Limited
June 2006, GBP2.25 million
February 2008,
GBP2.00 million
Whizz Kid Entertainment Limited is an independent TV production company formed
by Malcolm Gerrie, former chief executive and co-founder of Initial, which was
sold in 1992 to what became Endemol. Whizz Kid Entertainment Limited creates and
produces audio-visual content across a range of genres including music, events
and entertainment. The company is able to exploit opportunities in digital
content through its digital arm, Tough Cookie, and in advertiser-funded content
through its investment in Precious Media with Peter Christiansen.
While the market conditions for independent TV production companies, especially
smaller companies, remain extremely tough, Whizz Kid Entertainment Limited has
been enjoying some success. In particular, its show, Let's Dance for BBC1,
received good ratings and was re-commissioned for this year.
The company also strengthened its online credentials by winning the commission
to produce coverage of the U2 concert in LA in October 2009. This was streamed
live on Youtube and attracted an online audience of over 10 million.
Whizz Kid Entertainment Limited currently has a strong pipeline of projects in
development across music, events and entertainment, including a number of
co-productions with international partners.
Digital Rights Group Limited
December 2006, GBP3.00 million
June 2007,
GBP3.00 million
November 2007, GBP5.27 million
Digital Rights Group Limited ("DRG") is a TV sales and rights distribution group
which provides TV producers with international distribution for their rights and
programmes, independently of the major broadcasters or other TV-producer-owned
distributors. DRG is now the largest independent TV distributor in the UK having
acquired the following companies: Portman Film & Television Group; Zeal
Entertainment, iRights and iD Distribution; and Channel 4 International (C4i).
Market conditions have been tough, with broadcasters' reduced budgets having a
corresponding impact on new programming being commissioned. Despite this, DRG
has been successful in acquiring the rights to leading programming including Doc
Martin, Collision, Underbelly and Sea Patrol.
The company has also completed a white-label distribution deal with Ovation in
the US, and has recently launched a catalogue of 3D programming (3DRG). The
management team is continuing to work on operational synergies within the
business and is also examining new investment opportunities in both TV and
digital rights.
Outside Line Limited
March 2007, GBP1.50 million
Founded by Ant Cauchi and Lloyd Salmons in 2000, Outside Line Limited is a
digital marketing and creative agency. The company has grown since IMAC's
investment, expanding its service offering from the design and development of
websites and mobile applications into other disciplines including online PR,
social-media marketing, and blogger outreach. A content division has also been
established to provide filming, editing, audio and copywriting services.
Since 2007, Outside Line Limited has also successfully transitioned its client
base from mainly entertainment clients (including The Beatles, Robbie Williams
and Sega Games) to other sectors, including leading consumer brands such as
Playstation, Adidas, Lynx and LG.
Two Way Media Holdings Limited
May 2007, GBP4.34 million
January 2009,
GBP0.60 million
Two Way Media Limited, the trading company, is a UK-based interactive television
company which has transitioned itself from being a supplier of red-button
technology and professional services to UK cable operators and channels to a
multiplatform interactive TV production and distribution company.
Subsequent to IMAC's investment, Two Way Media Limited established a
cross-platform gambling production company with the delivery of the Challenge
Jackpot gambling channel on TV/online in partnership with Virgin Media. This
joint venture was sold to Netplay in April 2009.
Two Way Media Limited is now focused on red-button gaming and is already the
largest supplier of this type of gaming and content to the UK cable platform. It
has a strong pipeline of opportunities both to supply similar red-button content
to IPTV operators across Europe as well as to develop branded casual games
content both online and for TV. ITV red button voting has recommenced and is
surpassing expectations. Two Way Media Limited has also created games for mobile
phones, social networks and won several commissions to create applications for
Connected televisions.
Brand Events Holdings Limited
June 2007, GBP7.02 million
March 2010 GBP2.06 million
A leader in the consumer exhibitions market, Brand Events Limited, the trading
company, has established a strong reputation within the UK for successfully
launching new consumer shows. The company's established operating model borrows
skills and techniques from the entertainment, media and leisure sectors and
combines them with traditional exhibition skills. The company 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. An international network has been built allowing Brand Events Limited to
license or run the shows with joint venture partners in Australia, South Africa,
The Netherlands, New Zealand, Ireland and Dubai.
A further working capital injection of GBP2.06 million was agreed with
management in order to expand the Top Gear Live shows into new territories such
as Dubai, two Scandinavian countries and other major cities in Australasia. A
new Golf Live show is launching in May 2010, adding to the portfolio of shows
that can then be licensed internationally through Brand Events Limited's
network.
QobliQ Limited
December 2007, GBP7.50 million
May 2008, GBP2.30
million
November 2008, GBP2.77 million
QobliQ Limited was formed with the aim of creating the leading international
innovative marketing services group, combining sponsorship, digital and
experiential marketing to provide brands with an integrated innovative marketing
solution. The company is exploiting a structural shift in spend away from
traditional above-the-line advertising into innovative below-the-line marketing
activities which enable brands to engage with their target audience on a more
personal level, whilst typically delivering higher return on investment for the
advertisers. The management team of QobliQ Limited is led by Xavier
Quattrocchi-Oubradous and Roland Giscard d'Estaing, who founded Sponsorclick
France SARL, a Paris-based sponsorship consultancy, and who both have
backgrounds in investment banking.
In December 2007, QobliQ Limited completed its first acquisition of brandRapport
Limited, an independent sponsorship agency in the UK. In May 2008, IMAC invested
a further GBP2.3 million in QobliQ Limited allowing the company to acquire
Paris-based experiential marketing agency, Nouveau Jour, and SponsorClick
France, an independent sponsorship marketing consultancy based in Paris. IMAC
invested an additional GBP2.8 million in November 2008 in order for the company
to acquire Arena International and Arena Sports Marketing (together, "Arena"), a
UK sponsorship consultancy specialising in football. The acquisition of Arena,
which has been re-branded brandRapport Arena, extended brandRapport's already
impressive track record into football partnerships through its work with the
Barclaycard Premiership and FA Cup (E.ON).
The business is expected to grow in FY10/11 on the back of the recovery in
marketing spend. In addition, the management of the QobliQ group is currently
reviewing its acquisition strategy in view of reduced prices in the market, and
is working with the existing group companies to extract synergies and develop
new business opportunities.
Review Centre Limited
June 2008, GBP7.03 million
Review Centre Limited (www.reviewcentre.com), a leading consumer generated
review site, was acquired in June 2008 by IMAC in a management buy-in ("MBI")
deal.
The MBI team was led by Nick Hynes as non-executive chairman and Glen Collins as
chief executive officer. Nick Hynes was previously chief executive officer of
The Search Works, the search engine marketing provider sold to Tradedoubler in
July 2007 for GBP56 million, and prior to that headed Overture Europe, Yahoo's
search advertising business. Glen Collins is a career online marketer who
founded and ran pioneering online marketing and web development agency Digital
Outlook, until exiting the business in 2006.
Review Centre was established in 1999 to allow internet users to post their
product reviews on online bulletin boards. It now provides reviews across a very
broad base of different products and services, encompassing automotive,
electrical, entertainment, finance, lifestyle, sport and travel. In 2002 it
switched its business model to pay-per-click advertising, significantly
enhancing revenues. The business has grown steadily, primarily due to an
expanding database of consumer reviews, a booming e-commerce market and
increased consumer interest in researching purchases online.
Since investment, the MBI team has pressed ahead with redesigning the website
and enhancing the user experience for both writing and reading reviews. The new
site build has allowed Review Centre to generate several new revenue streams.
These include price comparison, voucher codes and cash back revenues, display
advertising as well as the ability to deliver more targeted commercial deals.
Ingenious Ventures Limited Partnership
IMAC's investment in Cream Holdings Limited and Stage Three Music Limited is
through its limited partnership interest in the Ingenious Ventures Limited
Partnership ("IVLP") fund. This interest was purchased from UBS (Jersey) Limited
in August 2008. Ingenious Media Limited remains the other (minority) partner in
the limited partnership.
Cream Holdings Limited
August 2008, GBP1.03 million
Cream Holdings Limited is a live events company based around the Cream dance
brand and is run by James Barton. Its main activities are festivals in the UK
and licensed shows overseas. The company also operates club nights in both
Liverpool and Ibiza and a compilation record label.
Its best known event, Creamfields, is held in August every year. The 2009
festival was very successful, selling out in advance. Management believe that
this success can be replicated in 2010 as many of the factors driving the
performance of 2009's event, including a change of venue and a move to a two-day
format, will be continued.
Stage Three Music Limited
August 2008, GBP5.03 million
Stage Three Music Limited is an independent music publishing company which
acquires and exploits existing music catalogues as well as signing writers in
the creation of new copyright in songs. Since its inception it has acquired the
rights to Aerosmith, ZZ Top, Gerry Rafferty and many other songwriters. The
chief executive officer, Steve Lewis, formerly led Virgin Music Publishing and
then Chrysalis Music Publishing.
Stage Three Music Limited is provided with acquisition debt by Bank of Ireland,
as well as co-investment equity from Apax Partners, who are currently the
majority shareholder in the company. The Mike Oldfield catalogue was
successfully acquired in January 2010.
The company has performed well in the current market conditions, with weak synch
revenue being offset by better than expected performance and mechanical revenue,
in particular from the Duffy, James Morrison and Take That albums.
7. Tax
United Kingdom Taxation
General
The following summary is given as a general guide to the expected UK tax
treatment of the reduction of capital for UK based investors who are the
absolute beneficial owners of IMAC Shares and who hold such shares as an
investment. Unless indicated otherwise, the analysis assumes that such
Shareholder is resident or ordinarily resident and domiciled in the UK for UK
tax purposes during the period of investment.
This summary is based on current UK law and HMRC published practice, all of
which may change, but the summary is considered to be correct at the date of the
Circular.
Shareholders should seek their own advice on the taxation consequences of the
reduction of capital in the context of their own particular circumstances.
Neither the Company nor its advisers can take responsibility in this regard.
Where a distribution is received from a foreign company the nature of the
distribution is usually determined by reference to the laws of the territory in
which the foreign company is resident.
The Directors have been advised that, as the distribution will be debited to
share premium and solely represents application monies paid up in respect of the
issue of those shares, from a Guernsey perspective this should be considered a
payment out of capital of the Company, notwithstanding the fact that the shares
are not cancelled. However, it is noted that the Guernsey companies' law regime
is relatively new and untested in this area.
Taxation of UK Individual Shareholders
The Directors have been advised that, to the extent that the Returned Capital
represents under Guernsey law a repayment of all or part of the Company's share
capital, this should be taxed as a capital distribution for UK tax purposes.
This is treated as a part disposal of the individual's shareholding.
Gains on disposal of IMAC Shares by individual UK resident Shareholders may,
depending on the Shareholders' individual circumstances, give rise to a
liability to UK taxation on capital gains, currently at 18 per cent. for
individuals.
Non UK domiciled individuals who are resident in the UK may also be subject to
UK taxation on any gains on disposal of IMAC Shares, depending on their
individual circumstances.
Taxation of UK Corporate Shareholders
The Directors have been advised that, to the extent that the Returned Capital
represents under Guernsey law a repayment of all or part of the Company's share
capital, for the purposes of UK corporation tax, this should be taxed as a
capital distribution. This is treated as a part disposal of the Company's
shareholding.
Gains on disposal of IMAC Shares by UK corporate Shareholders may, depending on
the Shareholder's particular circumstances, give rise to liability to UK
corporation tax.
It should, however, be noted that the UK tax treatment of distributions paid out
of share premium accounts or distributable reserves created on the cancellation
or reduction of share capital is not entirely free from doubt. On 24 February
2010, the Financial Secretary to the Treasury said that legislation would be
introduced to clarify the corporation tax treatment of distributions from UK
companies. It is understood that proposals will be introduced into a future
Finance Bill in the new Parliament, however draft wording has not yet been
released publicly. It is also unclear whether the clarification will affect
overseas companies, although it is thought likely that it would.
Guernsey Taxation
As the Company has been granted exemption from income tax in Guernsey under the
Income Tax (Exempt Bodies) (Bailiwick of Guernsey) Ordinance 1989, Guernsey
resident Shareholders will only be taxed on actual distributions to the
Shareholder at the individual standard income tax rate of 20 per cent. A
"distribution" includes any distribution made out of the assets of a company
including a dividend, save that it does not include any repayment of capital to
the member.
The Directors have been advised that, to the extent that the Returned Capital
represents all or part of the Company's share capital, for the purposes of
Guernsey tax, this should be taxed as a repayment of capital.
Distributions made by the Company to non-Guernsey resident Shareholders, whether
made during the life of the Company or by distribution on liquidation, will not
be subject to Guernsey tax.
There is no capital gains tax in Guernsey.
Withholding tax
No withholding tax is due in Guernsey on repayments of capital, dividends or
other income distributions made by the Company.
8. Extraordinary General Meeting
A notice convening the EGM, which is to be held at Isabelle Chambers, Route
Isabelle, St. Peter Port, Guernsey on 12 May 2010 from 11.00 am, is set out at
the end of the Circular. The adoption and implementation of the Proposals is
conditional upon Shareholder approval of the Resolution at the EGM. The
Resolution is proposed as a special resolution requiring the approval of not
less than 75 per cent. of the total voting rights of the Shareholders who, being
entitled to do so, vote on the Resolution.
9. Action to be taken
You will find enclosed with the Circular a Form of Proxy for use at the EGM.
Whether or not you propose to attend the EGM in person, you are requested to
complete, sign and return the Form of Proxy in accordance with the instructions
printed thereon and return it to the Registrar at PXS, 34 Beckenham Road,
Beckenham, BR3 4TU, or by fax to +44 (0) 1481 711605, as soon as possible but,
in any event, so as to arrive no later than 11.00 am on 10 May 2010.
The completion and return of a Form of Proxy will not preclude you from
attending the EGM and voting in person if you wish to do so.
10. Recommendations and Irrevocable Undertakings
The Independent Directors consider, having consulted with Canaccord Adams in
respect of the Related Party Transaction in the context of the Proposals taken
as a whole, that the Related Party Transaction is fair and reasonable insofar as
the Shareholders are concerned. The Board further considers that the adoption of
the Proposals is in the best interests of the Shareholders as a whole and
unanimously recommends that the Shareholders vote in favour of the Resolution.
The following Directors, Mike Luckwell, Patrick McKenna and Neil Blackley have
each entered into irrevocable undertakings and intend to vote in favour of the
Proposals in respect of their own beneficial holdings (including shares held by
the Ingenious Group, which is controlled by Patrick McKenna) being 42,182,395
IMAC Shares (representing 29.46 per cent. of the current issued share capital of
the Company (excluding treasury shares)). Furthermore, the Company has also
received irrevocable undertakings from other Shareholders holding in total
14,741,237 IMAC Shares (representing 10.30 per cent. of the current issued share
capital of the Company (excluding treasury shares)) confirming their intention
to vote in favour of the Resolution.
Yours faithfully,
Mike Luckwell
Chairman
APPENDIX I: CURRENT INVESTING POLICY
Principal Activities and Investing Policy
Investing Policy
Principal Activities
IMAC is a company incorporated with limited liability under the laws of Guernsey
and is authorised under the Protection of Investors (Bailiwick of Guernsey) Law
1987, as amended, as a closed-ended collective investment scheme.
The Company aims to provide investors with capital growth through its investment
in significant minority (25 per cent. and above) or controlling equity and
equity-related investments, in lead or co-lead positions in a portfolio of
holdings in predominantly unquoted 'mid-stage' media companies with an
enterprise value of between GBP5 million and GBP25 million. The focus is across
the media sector, including marketing services, publishing, broadcasting,
distribution, internet and content sub-sectors, in which IMAC considers
significant growth opportunities exist. This strategy is to be implemented over
a period of five years from Admission. The investments will be actively managed.
Investments are likely to be predominantly, but not exclusively, in the UK.
Additionally, the Company may invest a small amount in early stage investments,
where there is visibility as to the route to near-term cash generation but these
types of investments will only be considered if they are effectively a
continuation of existing businesses with proven management.
IMAC's investments are structured through a range of equity and equity-related
instruments to create a portfolio which is balanced to manage risks, both in
terms of size, media sub-sector and stage of development. The Company may also
invest directly or indirectly in asset backed revenue streams, whether through
equity, equity related or other instruments, securities, participations,
commitments or interests including interests in collective investment schemes,
and, in particular but not limited to, film distribution opportunities.
It is the Company's aim to provide finance to assist investee companies to the
point where they become attractive to larger acquirors or suitable for IPO and
then to market them competitively to exit.
Restrictions
The Company has also imposed the following investment restrictions upon the
Investment Manager:
· no more that 15 per cent. of the Company's net assets may be invested in
any one portfolio company at the time of that investment;
· the Company will only invest in derivatives for the purpose of hedging
currency risk relating to non-sterling denominated investments;
· the Company may not write uncovered options;
· the Company will not invest directly in real estate;
· the Company will not invest in commodities;
· the Company may not make any investments where its liability in relation
to such investment is unlimited;
· in addition to short term borrowings (for not more than three months) the
Company will have the ability to borrow up to 25 per cent. of the value of its
net asset value; and
· in terms of gearing at the investee company level, the Company shall not
be restricted save that the Investment Manager shall consider the
appropriateness of an investee company's gearing on a case-by-case basis.
Due to the nature of the Company's investments, the Investment Manager does not
expect there to be significant (if any) cross-holdings among its investments.
Deal sourcing and strategy execution
There are four principal channels from which investment opportunities flow:
1. Where members of the Ingenious Group have been used as a "sounding board"
for a potential transaction. Ingenious Group often provides pre-transaction
consultancy advice to companies, acting as a "sounding board" for
owner-managers.
2. Where members of the Ingenious Group are aware of talent that is not
being fully developed commercially.
3. The Ingenious Group's knowledge of the industry landscape enables the
Investment Manager to identify opportunities for IMAC earlier than competing
investors.
4. The Investment Manager is able to compete in terms of its knowledge,
price and structure in competitive market opportunities and be the partner of
choice for management teams seeking a knowledgeable, active investor that can
add value beyond the provision of finance.
Investment procedures
Subject to the overall supervision of the Board, and within the scope of the
Company's investing policy, the Investment Manager adopts the following
investment procedures:
All new prospective investments are progressed by the originating principal
unless specific industry knowledge or relationships that sit elsewhere need to
be brought to bear to enhance the Company's ability to convert the opportunity.
At least two principals will meet to discuss every new prospect before devoting
a significant resource to developing the opportunity.
If an opportunity is sufficiently attractive to merit further consideration the
principal responsible for the opportunity will present an opportunity summary
for discussion at an Investment Team meeting. At this stage the intention is to
determine whether there are any fundamental objections to the proposal in terms
of commercial viability, proposed investment structure and investment rationale
(fit with fund objectives, portfolio weighting etc.). The Investment Manager
will perform initial due diligence using commercial expertise from within the
Ingenious Group. External advisers will be appointed to perform further due
diligence as appropriate. As part of any investment the Investment Manager will
partner with management team and will seek to take at least one board seat.
The Board reviews details of all investments which have been made by the
Investment Manager on behalf of the Company at regular meetings of the Board.
Dividend policy
The Directors intend to distribute, subject to the Company having sufficient
available profits, 75 per cent. of the Company's dividend and interest income to
Shareholders by way of dividend. Any capital profits generated by the Company on
disposal of its investments will be retained for reinvestment.
APPENDIX II: REVISED INVESTING POLICY
The Company shall continue to follow and adhere to its Current Investing Policy
save to the extent that: (i) such Current Investing Policy shall only apply to
investments and opportunities which lie within the Portfolio Companies and (ii)
the investment restriction preventing more that 15 per cent. of the Company's
net assets being invested in any one Portfolio Company at the time of that
investment shall no longer apply.
For the avoidance of doubt, the Company shall not make any new investments which
are unconnected with the Portfolio Companies.
Distribution Policy
The Directors intend to make distributions, subject to Guernsey company law and
the Company's ongoing working capital requirements, as and when the appropriate
situations arise in connection with the realisation of its Portfolio Companies.
APPENDIX III: SUMMARY OF THE AMENDED INVESTMENT MANAGEMENT AGREEMENT
The Amended and Restated Investment Management Agreement originally dated 4
April 2006 (as amended and novated from time to time) between the Company, the
Investment Manager and Ingenious Media (the "Amended Investment Management
Agreement") is a Related Party Transaction whereby the Investment Manager has
agreed (subject to the overall supervision and directions of, and investment
policy established by, the Board) to act as sole and exclusive discretionary
manager of the Company's investment portfolio. The Amended Investment Management
Agreement may be terminated by either the Company or the Investment Manager on
not less than twelve months' prior written notice to the other parties, not to
expire prior to the eighth anniversary of Admission (i.e. 11 April 2014).
The Amended Investment Management Agreement may also be terminated (a) by the
Company on not less than 12 months' prior written notice if the Investment
Manager shall cease to be a (direct or indirect) subsidiary of Ingenious Media
Holdings plc (or any successor parent company) or Patrick McKenna shall cease to
be a director of Ingenious Media Holdings plc (or any successor parent company);
(b) with immediate effect by the Company upon the Investment Manager's
insolvency, material breach of the Amended Investment Management Agreement by
the Investment Manager and failure to remedy within 30 days of being requested
to do so or the scope of the Investment Manager's Part IV permission under the
FSMA ceases to be sufficient to entitle it to carry out its duties in the
ordinary course of business and where such failure is not remedied within three
months of the Investment Manager being required to do so, or where the Amended
Investment Management Agreement is not assigned within such period to another
subsidiary of Ingenious Media which holds an appropriate Part IV permission; (c)
automatically if the Investment Manager ceases to be authorised by the FSA or
the members of the Company pass a resolution to wind up or reconstruct following
a continuation resolution not being passed; (d) by the Investment Manager
immediately upon the Company's insolvency or material breach by the Company and
failure to remedy within 30 days; and (e) by the Company or the Investment
Manager immediately if the other is prevented from performing its obligations
for more than 30 days by certain force majeure or circumstances.
The Amended Investment Management Agreement contains provisions excluding the
liability of the Investment Manager for any actions taken or not taken by it or
any other person, but provides that the Investment Manager shall remain liable
for any loss to the extent it arises from the fraud, wilful default or gross
negligence of, or material breach of the Amended Investment Management Agreement
by the Investment Manager or its delegates. It also provides for the Company to
indemnify, subject to Guernsey law, the Investment Manager, its delegates and
its and their members, directors, officers, employees and agents against claims
made against or damages, liabilities or losses suffered by them in connection
with the Investment Manager's services under the Amended Investment Management
Agreement, except to the extent that such claims, damages, liabilities or losses
arise as a result of their fraud, wilful default, gross negligence or material
breach of the Amended Investment Management Agreement.
The Amended Investment Management Agreement provides that the Investment Manager
(and its subsidiaries and associated companies) shall be free to make, advise on
or arrange any investments for its own account or on behalf of its clients or
funds that it manages.
Fees
With deemed effect from 1 April 2010, the Investment Manager will receive a fee
payable monthly in arrears for investment management services equal to 0.1042
per cent. of the amount equal to the net asset value of the Company (minus any
cash (or cash equivalents held by the Company)) as at the last day of the
relevant calender month. This fee is adjusted annually (either way) so that the
total amount received by the Investment Manager in any one year is equal to 1.25
per cent. of the amount equal to the net asset value of the Company as shown in
the audited accounts for that year (minus any cash (or cash equivalents held by
the Company)). In the event that a Portfolio Company is realised within the
relevant accounting period, the investment management fee will be adjusted
accordingly to ensure that the Investment Manager receives a pro-rata amount for
any such period of ownership by the Company of the Portfolio Company before its
realisation.
In addition to the base remuneration described above, the Investment Manager
will be paid an annual performance fee equal to 20 per cent. of any amount by
which the net asset value of the Company at the relevant year end (31 March)
exceeds the previous high water mark (less distributions made since that date)
subject to performance exceeding the previous high water mark plus a hurdle rate
equal to 10 year UK Gilts rate plus three per cent. Any fee payable will be
reduced to the extent that payment in full would reduce performance below the
previous high water mark plus the hurdle rate. The base value for calculating
the initial performance fee on 31 March 2011 is the net asset value of the
Company as at 31 December 2009 minus the Returned Capital. All fees which are
net asset value based are determined using the net asset value of the Company
alone and not the consolidated net asset position. Any further cash
distributions will likewise be adjusted against the net asset value base value.
In the event that the performance of the Company falls short of the hurdle
return in any period such shortfall must be made up before any further incentive
fee is payable in respect of subsequent periods.
In cases where the Company is unable to pay fees owing to the Investment Manager
due to solvency concerns, the Investment Manager has agreed to defer such
payments until such time as the Company is able to pay such amounts without
becoming insolvent.
APPENDIX IV: SUMMARY OF MATERIAL CHANGES TO THE ARTICLES
A summary of the material changes to the Articles is as follows, to:
a.) delete article 42 in its entirety to remove the requirement for a special
resolution to approve a reduction of capital by the Company;
b.) amend the wording in article 122 to allow greater freedom for the Company
to distribute both income and capital; and
c.) extend the duration of the life of the Company by deleting the word
"fifth" in the first line and the third line of article 149(A) and replacing it
with the word "eighth".
An entire copy of the New Articles is available for inspection at the Company's
registered office located at Isabelle Chambers, Route Isabelle, St. Peter Port,
Guernsey.
APPENDIX V: DEFINITIONS AND GLOSSARY
+-------------------------------+----------------------------------+
| Admission | admission of the IMAC Shares to |
| | trading on AIM on 11 April 2006; |
+-------------------------------+----------------------------------+
| AIM | the AIM market operated by the |
| | London Stock Exchange; |
+-------------------------------+----------------------------------+
| AIM Rules | the AlM Rules for Companies and |
| | guidance notes as published by |
| | the London Stock Exchange from |
| | time to time; |
+-------------------------------+----------------------------------+
| Amended Investment Management | proposed amended and restated |
| Agreement | investment management agreement |
| | to be entered into between the |
| | Company, the Investment Manager |
| | and Ingenious Media, a summary |
| | of which is set out at Appendix |
| | III of the Circular; |
+-------------------------------+----------------------------------+
| Articles | Articles of incorporation of the |
| | Company adopted on 29 July 2008; |
+-------------------------------+----------------------------------+
| Board or your Board | the Directors acting as a board; |
+-------------------------------+----------------------------------+
| Canaccord Adams or the | Canaccord Adams Limited; |
| Nominated Adviser | |
+-------------------------------+----------------------------------+
| Circular | the circular sent to |
| | Shareholders in connection with |
| | the Proposals dated 17 April |
| | 2010; |
+-------------------------------+----------------------------------+
| Capita Registrars | a trading name of Capita |
| | Registrars Limited; |
+-------------------------------+----------------------------------+
| Current Investing Policy | the Company's current investing |
| | policy as set out in Appendix I |
| | of the Circular; |
+-------------------------------+----------------------------------+
| Directors | the directors of IMAC, namely |
| | Mike Luckwell, Patrick McKenna, |
| | Neil Blackley, William Simpson, |
| | David Jeffreys, George Bryan Dix |
| | and Serena Tremlett; |
+-------------------------------+----------------------------------+
| Extraordinary General Meeting | the extraordinary general |
| or the EGM | meeting of the Company, convened |
| | for 11.00 am on 12 May 2010 or |
| | any adjournment thereof, notice |
| | of which is set out at the end |
| | of the Circular; |
+-------------------------------+----------------------------------+
| Form of Proxy | the form of proxy for use in |
| | relation to the Extraordinary |
| | General Meeting enclosed with |
| | the Circular; |
+-------------------------------+----------------------------------+
| FSA | the Financial Services |
| | Authority; |
+-------------------------------+----------------------------------+
| FSMA | the UK Financial Services and |
| | Markets Act 2000 and all rules |
| | and regulations made thereunder; |
+-------------------------------+----------------------------------+
| HMRC | UK HM Revenue & Customs; |
+-------------------------------+----------------------------------+
| Independent Directors | Mike Luckwell, Serena Tremlett, |
| | William Simpson, George Bryan |
| | Dix and David Jeffreys; |
+-------------------------------+----------------------------------+
| IMAC or the Company | Ingenious Media Active Capital |
| | Limited, a Guernsey incorporated |
| | closed-ended investment company |
| | with registered number 44358; |
+-------------------------------+----------------------------------+
| IMAC Shares | the issued ordinary shares of no |
| | par value in the share capital |
| | of IMAC; |
+-------------------------------+----------------------------------+
| Ingenious Asset Management | the asset management division of |
| Division | the Ingenious Group; |
+-------------------------------+----------------------------------+
| Ingenious Group | Ingenious Media and its parent |
| | company and subsidiaries from |
| | time to time; |
+-------------------------------+----------------------------------+
| Ingenious Investments | Ingenious Media Investments |
| | Limited; |
+-------------------------------+----------------------------------+
| Ingenious Media | Ingenious Media Limited; |
+-------------------------------+----------------------------------+
| Ingenious Ventures | the private equity division of |
| | the Investment Manager; |
+-------------------------------+----------------------------------+
| Investment Manager | Ingenious Asset Management |
| | Limited; |
+-------------------------------+----------------------------------+
| Investment Management | the investment management |
| Agreement | agreement dated 4 April 2006 |
| | between the Company, the |
| | Investment Manager and Ingenious |
| | Media as amended or novated from |
| | time to time; |
+-------------------------------+----------------------------------+
| Investment Team | as detailed in the disclosures |
| | at paragraph 4 of the Circular; |
+-------------------------------+----------------------------------+
| London Stock Exchange | London Stock Exchange plc; |
+-------------------------------+----------------------------------+
| New Articles | proposed new articles of |
| | incorporation of the Company |
| | incorporating the summary |
| | amendments detailed at Appendix |
| | IV of the Circular, a copy of |
| | which is available for |
| | inspection at the Company's |
| | registered office: Isabelle |
| | Chambers, Route Isabelle, St. |
| | Peter Port, Guernsey; |
+-------------------------------+----------------------------------+
| Note for Investing Companies | the Note for Investing Companies |
| | issued by the London Stock |
| | Exchange in June 2009 as amended |
| | from time to time; |
+-------------------------------+----------------------------------+
| Portfolio Companies | the Company's existing portfolio |
| | companies as more particularly |
| | described at paragraph 6 of the |
| | Circular; |
+-------------------------------+----------------------------------+
| Proposals | as defined at paragraph 2 of the |
| | Circular; |
+-------------------------------+----------------------------------+
| Registrar | the registrar of the Company, |
| | Capita Registrars; |
+-------------------------------+----------------------------------+
| Related Party Transaction | the entering into the Amended |
| | Investment Management Agreement, |
| | as more particularly described |
| | at paragraphs 2(d) and 5 of the |
| | Circular; |
+-------------------------------+----------------------------------+
| Resolution | the resolution set out in the |
| | notice of EGM in connection with |
| | the Proposals; |
+-------------------------------+----------------------------------+
| Returned Capital | the return of capital to the |
| | Shareholders (in such manner and |
| | of such amount as the Directors |
| | may determine, not being more |
| | than GBP50,108,962), by way of a |
| | reduction of the Company's share |
| | capital as set out in paragraph |
| | 2(c) of the Circular; |
+-------------------------------+----------------------------------+
| Revised Investing Policy | the revised investing policy |
| | proposed to be adopted by the |
| | Company, as set out in Appendix |
| | II of the Circular; |
+-------------------------------+----------------------------------+
| Shareholder, Shareholders or | the holders of IMAC Shares; and |
| IMAC Shareholders | |
+-------------------------------+----------------------------------+
| UK | The United Kingdom of Great |
| | Britain and Northern Ireland. |
+-------------------------------+----------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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