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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Ingenious 1 | LSE:ILV1 | London | Ordinary Share | GB00B1G17L31 | ORD 1P |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 42.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
TIDMILV1
RNS Number : 3720A
Ingenious Live VCT 1 plc
29 March 2012
INGENIOUS LIVE VCT 1 PLC ("the Company")
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2011
CHAIRMAN'S STATEMENT
I am delighted to present the Company's fifth Annual Report and Accounts covering the year to 31 December 2011 (the Reporting Period).
Overview of Activities
The Company has continued its investment strategy during the year and we are delighted to announce that three of its music festivals sold out their full capacity in 2011. At the same time, the Company's exhibition portfolio including both Golf Live and Taste of Christmas took major steps forward with Taste of Christmas now making significant profits and Golf Live breaking even after only two years.
With Let's Dance having been recommissioned by the BBC for a fourth series, the Company's investment portfolio continues to go from strength to strength.
Liquidation Strategy
It was always the stated intention that once the Company's Shareholders had held their Shares for the minimum five years required under VCT regulations, the Company would seek to return capital to its Shareholders.
This anniversary is reached at the end of July 2012 and it is our intention to consult with the Shareholders regarding the future prospects of the Company.
Sale of Assets
In December 2011, the Company announced that it had agreed terms to sell its interest in the second day of Creamfields for total consideration of GBP2.78 million across the Live VCTs (GBP1.7 million to repay loan notes and GBP1.08 million to acquire the Live VCTs' share capital in CFDT Limited).
The deal formally closed on 13 February 2012 and the Company paid a special dividend to its Shareholders of 21.0 pence per Share on 24 February 2012 largely as a result of this transaction.
Results
The Company made a profit on ordinary activities of GBP204,000 in the year to 31 December 2011 (31 December 2010: profit of GBP89,000).
The net asset value per Share at 31 December 2011 was 86.3 pence (31 December 2010: 91.0 pence) although this is after the deduction of a dividend of 7.0 pence per Share in the Reporting Period and the deduction of a dividend of 7.0 pence per Share in the year to 31 December 2010. The net asset value as at 31 December 2011 including distributions was therefore 100.3 pence per Share (2010: 98.0 pence per Share).
Outlook
As mentioned above, the Company is fast approaching its fifth anniversary for VCT shareholding purposes and has already begun a strategy of seeking to exit investments and return value to its Shareholders.
The economic environment remains difficult, but the live sector has shown a robustness that I believe fully justifies the Manager's decision to focus upon these investments at the outset.
I would like to take this opportunity to thank all Shareholders for their continued support of the Company and I look forward to seeing those of you that are able to attend the AGM scheduled for 14 May 2012.
Timothy Clark
Chairman
29 March 2012
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 investments in Investee Companies or their assets.
The Company has been fully invested since December 2009 and the Manager continues to focus solely on the portfolio of investments in order to deliver strong annual profits and, crucially, target exceptional back--end values as the Company exits its investments after the qualifying five-year period.
Festivals
Creamfields
Ingenious Live VCT 1 Investment amount: GBP850,000
(GBP1,700,000 across the Ingenious Live VCTs)
The success of Creamfields as the country's leading dance festival has been highlighted through the numerous awards that it has earned over the past few years. In 2011 Creamfields was awarded 'Best Dance Event' at the prestigious UK Festival Awards for the third year running and it was also honoured as 'Best Festival' at the 2010 Music Week Awards, beating festivals such as Glastonbury, V Festival, Reading and Leeds.
The 2011 event delivered record profits and the event was extended to open on a Friday for the first time. With its increased capacity of 50,000 per day, the festival sold out for the third year in a row and generated record profitability.
Creamfields 2011 was headlined by The Chemical Brothers, Swedish House Mafia, Tiesto and David Guetta and included a vast array of electronic artists that has clearly once more struck a strong chord with its audience.
In December 2011 it was announced that the Ingenious Live VCTs had agreed to sell their investment in the event back to the Cream Group for a total consideration of GBP2.78 million. The transaction was finally completed on 13 February 2012.
Rewind Festival & Rewind Tour (rebranded from 80s Rewind Festival & 80s Rewind Tour)
Ingenious Live VCT 1 Investment amount (Rewind Festival): GBP346,598
(GBP693,196 across the Ingenious Live VCTs)
(GBP545,196 across the Ingenious Entertainment VCTs)
Ingenious Live VCT 1 Investment amount (Rewind Tour): GBP328,350
(GBP656,700 across the Ingenious Live VCTs)
In December 2008, the Company, alongside The Rival Organisation, co-promoted Rewind Festival, a two-day music festival in Henley-on-Thames. The 2010 festival which was held in August 2010 experienced an impressive increase in both attendance figures and, consequently, profitability with a total audience of over 35,000 across both days. Highlights included performances by Boy George and Tony Hadley.
The 2011 festival was held between 19 and 21 August 2011 and was a complete sell out (20,000 per day capacity). Highlights this year included Village People and The Human League and we are delighted that Rewind has very quickly established itself as the country's leading celebration of 80s music.
The brand creation strategy that the Manager very much focuses upon is further supported by the fact that Rewind has now expanded to include Rewind North which was held at Scone Palace in Perth in July 2011. The event has now been licensed to South Africa where the first festival took place in Durban on 25 February 2012.
Underage & Field Day Festivals
Ingenious Live VCT 1 Investment amount: GBP500,000
(GBP1,000,000 across the Ingenious Live VCTs)
Field Day Festival has become the festival of choice for those hoping to see 'the next big thing'. Over the years leading artists such as Florence and the Machine, Mumford and Sons and Laura Marling have all played at Field Day before making their big break. The 2010 event gave the impression that the Field Day brand had finally 'arrived' and this has been borne out by the fact that the attendance for the 2011 event far exceeded the previous year and generated record profitability.
Underage, the sister festival to Field Day, is equally unique in that it is the only festival in the country dedicated to 13 to 17 year olds. As in 2010, Underage 2011 was broadcast live on BBC Radio One and continues to hold its market niche as the key summer music festival for under 18 year olds.
We believe that the Underage and Field Day brands have strong potential to be 'rolled out', both in the UK and overseas, although they continue to make a good level of profit solely based upon the UK festivals.
Underage and Field Day are held each year in Victoria Park, London. Underage was held on 5 August 2011 and Field Day on 6 August 2011.
Exhibitions
Brand Events - Taste of Christmas & The Taste Festivals
Ingenious Live VCT 1 Investment amount (Taste of Christmas): GBP902,489
(GBP1,804,978 across the Ingenious Live VCTs)
Ingenious Live VCT 1 Investment amount (The Taste Festivals): GBP1,000,000
(GBP2,000,000 across the Ingenious Live VCTs)
Taste of Christmas, the festive food and drink event returned for the fourth year to the ExCel Centre in London during December 2011 and attracted in excess of 20,000 people. The event made a strong profit and was extremely well received with guest appearances from Jamie Oliver and a host of other 'A list' chefs.
The Taste Festivals are established as successful outdoor food and wine events featuring a number of famous chefs including Gary Rhodes, Michel Roux Jr., Giorgio Locatelli and Theo Randall who serve up their signature dishes for the public to taste. The London event took place in Regent's Park in June 2011, whilst the Edinburgh event was held in Inverleith Park in May 2011.
Taste of London is the jewel in The Taste Festivals' crown, attracting 50,000 visitors to Regent's Park every year. The Taste Festivals have set a new benchmark for food and drink events worldwide with 12 Taste Festivals now being hosted around the world including Dublin, Cape Town, Sydney and Dubai. The investment generated a small profit to the Company.
Golf Live
Ingenious Live VCT 1 Investment amount: GBP275,000
(GBP550,000 across the Ingenious Live VCTs)
(GBP550,000 across the Ingenious Entertainment VCTs)
Golf Live is a three day interactive golf event which was staged at The London Golf Club between 18 and 20 May 2011. IMG, manager to a large number of leading golfers, has also invested into the event. The long term aim is to roll the event out to further prestigious golf courses around the world and it has already attracted sponsorship partners of the quality of O2, Jaguar, Turkish Airlines and the European Golf Tour. The event represents a highly creative way of bringing the sports and exhibition markets closely together.
In 2011, Golf Live was hosted by the 2010 Ryder Cup captain, Colin Montgomerie, alongside many other stars from within the world of golf. The event was extremely well received by both the corporate partners as well as the paying public. Its audience satisfaction rating was the highest that Brand Events, our highly experienced co-promotion partners, had ever received for one of their events.
The partners were delighted with the financial performance of the event in its second year whereby it broke even. They feel very confident that Golf Live is poised to move into profitability during the 2012 event which is to be held on 18 to 20 May 2012 and will once again feature Colin Montgomerie, as well as Gary Player and an array of golfing talent still to be announced. The anticipated international roll-out of the brand is also likely to commence next year.
Live Venues
Scarborough Open Air Theatre
Ingenious Live VCT 1 Investment amount: GBP1,000,000
(GBP2,000,000 across the Ingenious Live VCTs)
(GBP2,000,000 across the Ingenious Entertainment VCTs)
In December 2009, the Ingenious Live VCTs entered into an arrangement to exclusively co-promote a variety of live events at Scarborough Open Air Theatre, the largest open air theatre in Europe. The theatre, which is situated on the Yorkshire coast, seats over 6,000 people and is a major venue in the North East of England for theatrical performances, concerts, opera and dance.
The venue was built by Scarborough Council, who has granted a 25 year license to operate the venue when it was opened by HRH the Queen in May 2010. The co-promoters of the venue are the Apollo Theatre Group, a very experienced live event promoter and the Manager feels that the venue has a great deal of potential.
The 2011 season was opened with a performance by the legendary Sir Elton John, who sold out the venue in a record breaking three hours. Other major shows to be staged this season include Rewind (returning after last year's sold out performance), Last Night of the Proms (featuring Dame Kiri Te Kanawa who also sold out the venue during 2010's Gala Opening), as well as popular chart stars N-Dubz.
The venue has proved challenging in terms of profitability, but the partners believe that they will be able to generate long term profits from their 25 year operators license.
Television Format
Let's Dance
Ingenious Live VCT 1 Investment amount: GBP500,000
(GBP1,000,000 across the Ingenious Live VCTs)
(GBP1,000,000 across the Ingenious Entertainment VCTs)
In January 2009, GBP2,000,000 was invested across both the Ingenious Live and Entertainment VCTs to back the television dance format Let's Dance. This was the second co-investment between the Ingenious Live and Entertainment VCTs.
For the past three years BBC One has commissioned Whizz Kid Entertainment to produce this hugely popular celebrity-led series for both Comic Relief and Sports Relief. In 2011 the programme was aired to over 8.3 million viewers and enjoyed the prime time Saturday night slot on BBC One. Following the ratings success of the UK series, the Let's Dance format has been sold and aired in a number of different countries including Germany, the Netherlands, Sweden, Russia, Slovakia and Indonesia.
The series has also been re-commissioned for a fourth UK series to be aired in 2012 and, as a result of this success, the international sales agents for both the US (William Morris) and the Rest of the World (Fremantle) are continuing to push forward with the international sale of the format. Our financial forecasts show that the format revenues already generated will at least cover the investment made and the Manager is hopeful that there will be some upside in the investment in future years.
Contact
If you have any questions on this review or would like to speak with a member of the management team, please do not hesitate to contact us on 0207 319 4000.
Ingenious Ventures
29 March 2012
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 Live 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 the Manager 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 invest in Investee Companies that will produce and promote new and established events whose revenues will be underpinned by warranties or other similar contractual arrangements. The Ingenious Live VCTs will invest in Investee Companies which are expected to participate in the revenues and growth of events. The events produced and promoted by the Investee Companies are likely to be held primarily in the UK and may include concerts, festivals, exhibitions, theatrical shows, conferences, trade fairs and sporting events.
The Company will only invest in an Investee Company:
-- where the event has been approved by the Manager through its selection process; and
-- where the Investee Company has obtained performance warranties or similar contractual arrangements that will provide for the Investee Company to receive minimum revenues equivalent to at least 70% of the Company's investment, although the Manager is currently endeavouring to secure higher levels of minimum revenues in the current economic environment.
The initial capital required by an Investee Company will be provided by the Company. The majority of this initial capital will be provided through loan finance which should provide additional capital protection. The Company can invest, under current venture capital trust legislation, up to GBP1 million per tax year in any one Investee Company.
The Company has the flexibility to retain up to 30% of its assets in cash and cash equivalent instruments which the Directors believe should provide a significant degree of downside protection whilst preserving the upside potential of the events within the portfolio.
At 31 December 2011 the Company had made ten investments in Qualifying Companies, with contractual arrangements that provide for the Investee Company to receive minimum revenues equivalent to at least 70% of the Company's investment, all of which had received the prior approval of the Manager's Investment Committee.
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 event 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 exempt 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, and 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 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 70% of the investment, regular reviews of performance, monitoring progress and compliance. Details of the Company's internal controls are contained in the Corporate Governance Report.
4. Key Performance Indicators (KPIs)
The primary KPI 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 are contained within the Chairman's Statement and the Manager's Review.
income statement
for the year ended 31 December 2011
2011 2011 2011 2010 2010 2010 Revenue Capital Total Revenue Capital Total Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------------- ----- -------- -------- -------- -------- -------- -------- Gain on disposal of investments - 80 80 - 63 63 Increase/(decrease) in fair value of investments held - 42 42 - (111) (111) Investment income 2 346 - 346 410 - 410 Investment management fees 3 (79) (79) (158) (86) (86) (172) Other expenses 4 (106) - (106) (101) - (101) --------------------- ----- -------- -------- -------- -------- -------- -------- Profit/(loss) on ordinary activities before taxation 161 43 204 223 (134) 89 Tax on ordinary 5 - - - - - - activities --------------------- ----- -------- -------- -------- -------- -------- -------- Profit/(loss) on ordinary activities after taxation 161 43 204 223 (134) 89 --------------------- ----- -------- -------- -------- -------- -------- -------- Basic and diluted return per share (pence) 6 1.7 0.5 2.2 2.4 (1.4) 1.0 --------------------- ----- -------- -------- -------- -------- -------- --------
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 2011
31 December 2011 31 December 2010 GBP'000 GBP'000 ----------------------------- ----------------- ----------------- Opening shareholders' funds 8,415 8,973 Dividends (647) (647) Profit for the year 204 89 ----------------------------- ----------------- ----------------- Closing shareholders' funds 7,972 8,415 ----------------------------- ----------------- -----------------
The accompanying notes form an integral part of these financial statements.
BALANCE SHEET
as at 31 December 2011
31 December 31 December 2011 2010 Note GBP'000 GBP'000 ----------------------------------------- ------ ------------ ------------ Fixed assets Qualifying Investments 7 6,843 6,521 ----------------------------------------- ------ ------------ ------------ Current assets Debtors 9 278 138 Non-qualifying Investments 10 873 1,717 Cash at bank and in hand 6 63 ----------------------------------------- ------ ------------ ------------ 1,157 1,918 Creditors: amounts falling due within one year 11 (28) (24) ----------------------------------------- ------ ------------ ------------ Net current assets 1,129 1,894 ----------------------------------------- ------ ------------ ------------ Net assets 7,972 8,415 ----------------------------------------- ------ ------------ ------------ Capital and reserves Called-up share capital 12 92 92 Share premium account 13 4,383 4,383 Other reserve 13 3,088 3,735 Capital reserve 13 525 482 Revenue reserve 13 (116) (277) ----------------------------------------- ------ ------------ ------------ Shareholders' funds 7,972 8,415 ----------------------------------------- ------ ------------ ------------ Net asset value excluding distributions to date (pence per share) 14 86.3 91.0 ----------------------------------------- ------ ------------ ------------ Net asset value including distributions to date (pence per share) 100.3 98.0 ----------------------------------------- ------ ------------ ------------
The accompanying notes form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 29 March 2012.
Signed on behalf of the Board of Directors:
Timothy Clark
Chairman
CASH FLOW STATEMENT
for the year ended 31 December 2011
31 December 2011 31 December 2010 Note GBP'000 GBP'000 -------------------------------------------- ----- ----------------- ----------------- Net cash outflow from operating activities (181) (211) -------------------------------------------- ----- ----------------- ----------------- Financial investment Purchase of Qualifying Investments 7 - (74) Disposal of Qualifying Investments 7 - 74 -------------------------------------------- ----- ----------------- ----------------- Net cash flow from financial investment - - -------------------------------------------- ----- ----------------- ----------------- Management of liquid resources Disposal of Non-qualifying Investments 10 771 828 -------------------------------------------- ----- ----------------- ----------------- Net cash inflow from liquid resources 771 828 --------------------------------------------------- ----------------- ----------------- Dividends Payment of dividends 13 (647) (647) -------------------------------------------- ----- ----------------- ----------------- Net cash outflow from dividends (647) (647) -------------------------------------------- ----- ----------------- ----------------- Decrease in cash (57) (30) -------------------------------------------- ----- ----------------- ----------------- Reconciliation of profit before taxation to net cash flow from operating activities Note 2011 GBP'000 2010 GBP'000 --------------------------------------------- ----- ------------- ------------- Profit on ordinary activities before taxation 204 89 (Increase)/decrease in fair value of investments held 13 (42) 111 Investment income (207) (337) Increase in receivables (140) (70) Increase/(decrease) in payables 4 (4) --------------------------------------------- ----- ------------- ------------- Net cash outflow from operating activities (181) (211) --------------------------------------------- ----- ------------- ------------- Reconciliation of net cash flow to movement in net funds 2011 GBP'000 2010 GBP'000 --------------------------------------------- ------------- ------------- Opening cash balances 63 93 Net cash outflow (57) (30) --------------------------------------------- ------------- ------------- Closing cash balances 6 63 --------------------------------------------- ------------- -------------
Total net funds comprises cash of GBP6k (31 December 2010: GBP63k) and Non-qualifying Investments of GBP873k (31 December 2010: GBP1,717k).
The accompanying notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2011
1. Accounting Policies a) Basis of Accounting
The financial statements for the Reporting Period have been prepared in compliance with UK Generally Accepted Accounting Practice, and with the Statement of Recommended Practice (the SORP) entitled "Financial Statements of Investment Trust Companies and Venture Capital Trusts" which was issued in January 2009.
The comparative figures are for the year 1 January 2010 to 31 December 2010.
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 2010 Annual Report and Accounts.
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.
International Private Equity and Venture Capital Valuation Guidelines
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 cost. The investments are subsequently re-measured at fair value, as estimated by the Directors with prudence and good faith. Investment holding gains or losses arising from the revaluation of investments are taken directly to the Income Statement. Fair value is determined as follows:
-- Fair value is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm's length transaction.
-- In estimating the fair value for an investment, the 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 -- Discounted cash flows/earnings multiple -- Net assets -- Available market prices
Of these the two methodologies most applicable to the Company's investments are:
1 - Price of recent investment
Where the investment being valued was made recently, its cost will generally provide a good indication of value. It is generally considered that this would only apply for a limited period; in practice a period up to the start of the first live event or entertainment content which forms the investment is often applied as the long stop date for such a valuation.
2 - Discounted cash flows/earnings of the underlying business
Investments can be valued by calculating the net present value of expected future cashflows of the Investee Companies. In relation to the Company's investments, anticipating future cashflows in excess of the guaranteed amounts would clearly require highly subjective judgements to be made in the early stage of each investment and therefore would not be an appropriate methodology to apply in the early stage of the investment.
In the period prior to the 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 discounted cash flow/earnings basis using the latest available information on the performance of the live event or entertainment content. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in the Income Statement in the period in which they arise.
As a result of the above basis of valuation, there is significant judgement associated with the valuation of investments.
Non-qualifying Investments - Open Ended Investment Companies (OEICs)
The Company's Non-qualifying Investments in interest bearing money market OEICs are valued at fair value which is mid price. They have been designated as fair value through profit and loss for the purposes of FRS 26.
Gains and losses arising from changes in fair value of Qualifying and Non-qualifying Investments are recognised as part of the capital return within the Income Statement and allocated to the realised or unrealised capital reserve as appropriate. Transaction costs attributable to the acquisition or disposal of investments are charged to capital within the Income Statement.
c) Investment Income
Interest income is recognised in the Income Statement under the effective interest rate method. The effective interest rate is the rate required to discount the expected future income streams over the life of the loan to its initial carrying amount. The main impact for the Company in that regard is the accounting treatment of the loan note premiums. Where those loan note premiums are charged in lieu of higher interest then they should be 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 it is declared by the Investee Companies.
e) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged to the revenue account within the Income Statement except that:
-- expenses which are incidental to the acquisition or disposal of an investment are charged to capital in the Income Statement as incurred;
-- 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; and
-- 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.
2. Investment Income 2011 2010 GBP'000 GBP'000 ------------------------------------------------ --------- --------- Dividend income from Qualifying Investments 25 25 Loan note interest from Qualifying Investments 321 385 ------------------------------------------------ --------- --------- 346 410 ------------------------------------------------ --------- --------- 3. Investment Management Fees 2011 2011 2011 2010 2010 2010 Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------- --------- --------- --------- --------- --------- --------- Investment management fees 79 79 158 86 86 172 ------------- --------- --------- --------- --------- --------- --------- 79 79 158 86 86 172 ------------- --------- --------- --------- --------- --------- ---------
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 expected split of the Company's long term returns.
4. Other Expenses 2011 2011 2011 2010 2010 2010 Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ---------------------------------------------------- --------- --------- --------- --------- --------- --------- Directors' remuneration (excluding employer's national insurance) 38 - 38 30 - 30 Auditor's remuneration - Audit fees 13 - 13 13 - 13 Legal and professional fees 6 - 6 6 - 6 Other administration expenses 48 - 48 50 - 50 Irrecoverable VAT 1 - 1 2 - 2 ---------------------------------------------------- --------- --------- --------- --------- --------- --------- 106 - 106 101 - 101 ---------------------------------------------------- --------- --------- --------- --------- --------- ---------
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 (31 December 2010: GBP13k) excluding VAT. Further details on the Directors' fee disclosures are given in the Directors' Remuneration Report.
5. Tax Charge on Ordinary Activities 2011 2011 2011 2010 2010 2010 Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 ------------------------- --------- --------- --------- --------- --------- --------- Profit/(loss) on ordinary activities before tax 161 43 204 223 (134) 89 Profit/(loss) on ordinary activities by tax rate 26.5% (31 December 2010: 28%) 43 11 54 62 (38) 24 ------------------------- --------- --------- --------- --------- --------- --------- Adjustments: ------------------------- --------- --------- --------- --------- --------- --------- Non taxable losses on investments - - - - 13 13 Disallowed expenses - 21 21 - 25 25 Non-taxable capital gains - (32) (32) - - - UK dividends not taxable (7) - (7) (7) - (7) Utilisation of brought forward excess management expenses (36) - (36) (55) - (55) ------------------------- --------- --------- --------- --------- --------- --------- - - - - - - ------------------------- --------- --------- --------- --------- --------- ---------
As the Company is a VCT its capital gains are not taxable.
At 31 December 2011 the Company had surplus management expenses of GBP244k (31 December 2010: GBP382k). A deferred tax asset has not been recognised in respect of these surplus management expenses as the future taxable income of the Company 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.
6. Basic and Diluted Return per Share 2011 2011 2011 2010 2010 2010 Revenue Capital Total Revenue Capital Total GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 -------------------- ---------- ---------- ---------- ---------- ---------- ---------- Profit/(loss) on ordinary activities after taxation 161 43 204 223 (134) 89 Weighted average shares in issue (number) 9,242,845 9,242,845 9,242,845 9,242,845 9,242,845 9,242,845 -------------------- ---------- ---------- ---------- ---------- ---------- ---------- Profit/(loss) attributable per share (pence) 1.7 0.5 2.2 2.4 (1.4) 1.0 -------------------- ---------- ---------- ---------- ---------- ---------- ----------
There are no dilutive potential Ordinary shares, including convertible instruments, options or contingent share agreements in issue for the Company. The basic return per Share is therefore the same as the diluted return per Share.
7. Fixed Asset Investments 2011 2010 Unquoted Investments GBP'000 GBP'000 Equity shares 2,153 2,037 Unsecured loan notes 4,690 4,484 ------------------------- --------- --------- 6,843 6,521 ------------------------- --------- --------- 2011 2010 Qualifying Investments GBP'000 GBP'000 ------------------------- --------- --------- Opening valuation 6,521 6,242 Fair value adjustment 322 279 Purchases at cost - 74 Repayment of loan note - (74) ------------------------- --------- --------- Closing valuation 6,843 6,521 ------------------------- --------- ---------
Included in the valuation above is an equal and opposite fair value gain and fair value loss amounting to GBP206k (31 December 2010: GBP337k). This represents the accounting treatment of the guaranteed loan note premium. The GBP206k is included in the Income Statement under Investment Income (refer to note 2).
8. Significant Interests
The Company has 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 2011:
Trading Companies % class and share type % voting rights --------------------------- ------------------------ ---------------- Aurem Limited 24.95% A Ordinary 24.95% IR Productions Limited 24.95% A Ordinary 24.95% CFDT Limited 24.95% A Ordinary 24.95% Taste Xmas Live Limited 24.95% A Ordinary 24.95% Brand Events Live Limited 24.95% A Ordinary 24.95% Annie Films Limited 24.95% A Ordinary 24.95% Jetstream Events 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 13.97% A Ordinary 13.97% --------------------------- ------------------------ ----------------
It is considered that, as permitted by FRS 9, "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.
9. Debtors 2011 2010 GBP'000 GBP'000 -------------------------------- --------- --------- Prepayments and accrued income 278 138 -------------------------------- --------- --------- 10. Current Asset Investments 2011 2010 GBP'000 GBP'000 ------------------------------------------ --------- --------- Funds held in listed money market OEICs 873 1,717 ------------------------------------------ --------- --------- 2011 2010 Non-Qualifying Investments GBP'000 GBP'000 ------------------------------------------ --------- --------- Opening valuation 1,717 2,598 Disposal proceeds (771) (828) Unrealised change in value of investment (73) (53) ------------------------------------------ --------- --------- Closing valuation 873 1,717 ------------------------------------------ --------- ---------
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 OEICs) until required for Qualifying Investment purposes.
11. Creditors: Amounts Falling Due Within One Year 2011 2010 GBP'000 GBP'000 ------------------------------ --------- --------- Trade creditors 4 - Accruals and deferred income 24 24 ------------------------------ --------- --------- 28 24 ------------------------------ --------- --------- 12. Called-Up Share Capital 2011 2010 Allotted, called-up and fully paid GBP'000 GBP'000 ------------------------------------- --------- --------- 9,242,845 Ordinary Shares 1p each 92 92 ------------------------------------- --------- ---------
The entire issued Ordinary 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.
13. Reserves Share Other Capital Revenue Total premium reserve reserve reserve reserves GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 --------------------------------- --------- --------- --------- --------- ---------- At 1 January 2011 4,383 3,735 482 (277) 8,323 Dividend payments - (647) - - (647) Gain on disposal of investments - - 80 - 80 Increase in fair value of investments held - - 42 - 42 Investment income - - - 346 346 Investment management fees - - (79) (79) (158) Other expenses - - - (106) (106) --------------------------------- --------- --------- --------- --------- ---------- At 31 December 2011 4,383 3,088 525 (116) 7,880 --------------------------------- --------- --------- --------- --------- ----------
The capital reserve includes realised investment holding gains of GBP89k and unrealised investment holding gains of GBP436k. The other reserve, capital reserve and revenue reserve accounts are the only distributable reserves of the Company.
On 11 February 2011, the Company paid dividends amounting to GBP647k on Ordinary shares (13 April 2010: GBP647k).
14. Net Asset Value Per Share Excluding Distributions to Date 2011 2010 --------------------------------------------------- ---------- ---------- Net assets attributable to Shareholders (GBP'000) 7,972 8,415 Shares in issue (number) 9,242,845 9,242,845 --------------------------------------------------- ---------- ---------- Net asset value per Share (pence) 86.3 91.0 --------------------------------------------------- ---------- ---------- 15. 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 OEICs. The Company holds financial assets in accordance with its investment policy.
Fixed asset investments (see note 7) are valued at fair value. For quoted securities included in current asset Non--qualifying Investments, this is mid 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
2011 2010 GBP'000 GBP'000 ------------------------------------------------ --------- --------- Listed money market OEICs (note 10) Level 1 873 1,717 Unquoted investments (note 7) Level 3 6,843 6,521 ------------------------------------- --------- --------- --------- 7,716 8,238 ----------------------------------------------- --------- ---------
The level 3 investments include net fair value gains of GBP322k in the current year (31 December 2010: GBP279k), as disclosed in note 7.
In accordance with FRS 29, "Financial Instruments: Disclosures", the above table provides an analysis of these investments based on the fair value hierarchy described below which reflects the reliability and significance of the information used to measure their fair value:
-- Level 1 - investments with quoted prices in active markets;
-- Level 2 - investments whose fair value is based directly on observable market prices or is indirectly drawn from observable market prices; and
-- Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data.
The valuation techniques used by the Company are explained in note 1 on accounting policies.
Risk Management
The Company's investing activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The most important types of financial risk to which the Company is exposed are:
-- Market risk; -- Interest rate risk; -- Credit risk; and -- Liquidity risk.
The nature and extent of the financial instruments outstanding at the balance sheet date and the risk management policies employed by the Company are discussed below:
a) Market Risk
Market risk embodies the potential for both losses and gains and includes interest rate risk and price risk.
The Company's strategy on the management of investment risk is driven by the Company's investment objective. Investments in unquoted companies, by their nature, involve a higher degree of risk than investments in larger "blue chip" companies.
The risk of loss in value is managed through careful selection in accordance with a formalised investment decision process, with each investment proposal evaluated by the Investment Committee as part of the due diligence stage. The Company's investment policy can be found in the Business Review. The risk is also managed through continuous monitoring of the performance of investments and changes in their risk profile.
b) Interest Rate Risk
Some of the Company's financial assets are interest bearing, all of which are at floating rates. As a result, the Company has 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 OEICs. This is the Non-qualifying Investments amount on the Balance Sheet being GBP873k (31 December 2010: GBP1,717k). 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 2011 (31 December 2010: 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 2011 31 December 2010 GBP'000 GBP'000 +/- 50 basis points +/- 50 basis points ------------------------------------------------------ -------------------- -------------------- Impact on profit on ordinary activities for the year before taxation and total equity 4 9 ------------------------------------------------------ -------------------- -------------------- c) Credit Risk
Credit risk is the risk that the 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 GBP4,690k (31 December 2010: GBP4,484k) 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 GBP4,690k (31 December 2010: GBP4,484k) unsecured loan notes are the contractually agreed 70% of initial investments.
d) Liquidity Risk
The Company's financial instruments include equity and debt investments in unquoted companies, which are not traded in an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investment in these instruments at an amount close to fair value.
The Company maintains sufficient reserves of cash and readily realisable marketable securities to meet its liquidity requirements at all times. No numerical disclosures have been provided in respect of liquidity risk as this is not considered to be material.
16. Contingent Assets
There is currently interest income accruing on the unsecured loan note instruments at a rate of 4.5%, being 4% over the bank base rate which was 0.5% as at 31 December 2011 (31 December 2010: 0.5%), totalling GBP216k (31 December 2010: GBP137k). 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.
17. Related Party Transactions
a) 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 which is a subsidiary within the Ingenious Group, which is controlled by Patrick McKenna.
The Manager, as per the management agreement, receives a management fee of 0.5% of the net asset value payable quarterly in advance. This amounted to GBP158k as at 31 December 2011 (31 December 2010: GBP172k). The Manager also charges an administration fee of GBP20k (31 December 2010: GBP19k) per annum and irrecoverable VAT.
b) The funds invested in OEICs are managed by 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.
During the period the Company has entered into transactions with the above-mentioned related parties in the normal course of business and on an arm's length basis as listed in the table below:
2011 2011 2010 2010 Expenditure Amounts Expenditure Amounts paid due paid due Entity Note GBP'000 GBP'000 GBP'000 GBP'000 ----------------------- ------ ------------- --------- -------------- --------- Ingenious Asset Management Limited Investment management fee a 158 - 172 - Administration fee a 20 - 19 - Irrecoverable VAT a 3 - 1 2 ----------------------- ------ ------------- --------- -------------- ---------
Transactions Between Related Parties
Ingenious Media Consulting Limited, a company which is a wholly-owned subsidiary in the Ingenious Group, which is controlled by Patrick McKenna, has entered into consultancy agreements with each of the Company's Investee Companies to provide management services. For the provision of such services, consulting fees totalling GBP306k excluding VAT (31 December 2010: GBP166k), have been invoiced in the year of which GBP48k remains outstanding as at 31 December 2011 (31 December 2010: GBPNil).
18. Events After the Balance Sheet Date
The Company declared an interim dividend of 21.0 pence per Ordinary share on 2 February 2012 (2011: 7.0 pence). The dividend was paid on 24 February 2012 by way of a capital distribution reducing the Company's other reserves.
19. 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 2011 was GBP7,972k (31 December 2010: GBP8,415k).
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 or the capital structure of the business from the previous period.
The Company is subject to the following externally imposed capital requirements:
-- As a public company Ingenious Live 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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