Last checked at 10 Apr 2013 07:00
INGENIOUS ENTERTAINMENT VCT 1 PLC (“the Company”)
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2012
CHAIRMAN’S STATEMENT
I am delighted to present the Company’s fifth Annual Report and Accounts covering the year to 31 December 2012 (the Reporting Period).
Overview of Activities
The Company has now completed its investment strategy and is fully invested under the VCT regulations for its Ordinary, C and D Share classes.
The Company continued to actively source and review investment opportunities during this Reporting Period for the D, E, F and G Share classes. In total the Company made three investments during the Reporting Period. Details of all investments can be found in the Manager’s Review.
The highlight of the year was the continued growth of the Rewind Festival brand. With 2012 seeing two UK and four international events being held, the brand’s overall profits increased to over £1 million for the first time. On 22 March 2013, the Company sold its stake in both of its Rewind investments to its co-promotion partner, The Rival Organisation. The sale saw the Company’s Ordinary Shares generate a total return of £1,007k against an original investment cost of £664k. The C Shares generated a total return of £128k against an original investment cost of £109k and the G shares generated a total return of £290k against an original investment cost of £273k. The G Shares acquired its stake in July 2012 as a Non-qualifying Investment.
One of the other strong performances seen in the investment portfolio was by Shakedown Festival. Launched in 2011, the second year event saw attendances more than double and the event moved into profitability. The promoters have also been given permission to stage a second day on the Brighton site this year and the Company agreed in early 2013 to make a further investment into this second day as both events should benefit from a significantly reduced cost base.
The Company is also co-promoting a number of new festival initiatives in 2013 with its new Love Supreme Jazz Festival having been well received. The Company is also currently negotiating investments in other areas where the Directors believe there to be the opportunity to create unique niche branded content such as the World of Comedy.
Fund Raising
The G Share Offer was open for subscription until 31 August 2012. During the Reporting Period, just over 3.5 million Shares were allotted by the Company under this Offer.
In December 2012, the Company launched the H Share Offer for subscription. On 5 April 2013, the Company allotted 1,735,921 H Shares in respect of this Offer. The Ingenious Entertainment VCTs have now raised in excess of £58.7 million through their seven Share classes. The H Share Offer will remain open for subscription until 30 August 2013.
Results
The Ordinary Shares, C Shares, D Shares, E Shares, F Shares and G Shares are accounted for as separate pools of funds necessitating separate reporting. This will also be the case for the H Shares.
The Directors and the Manager believe that the commercial investment portfolio remains robust and that the Company’s strategy of generating venture capital style returns blended with strong levels of downside protection should generate good longer term returns as the investment portfolio matures. The Directors and the Manager have taken a prudent approach in the valuation of investments with the view that it takes at least two to three years to build brand awareness in the live entertainment sector. They remain positive about the future performance and the long term outlook of the Company.
The Ordinary Shares made a loss on ordinary activities of £139k (31 December 2011: loss of £144k). The C Shares made a loss of £73k (31 December 2011: loss of £84k). The D Shares made a loss of £169k (31 December 2011: loss of £128k). The E Shares made a loss of £56k (31 December 2011: loss of £72k). The F Shares made a loss of £16k (31 December 2011: loss of £37k). The G Shares made a loss of £81k (31 December 2011: no G Shares allotted).
The net asset value per Ordinary Share at 31 December 2012 was 74.8 pence (31 December 2011: 81.2 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period and the deduction of a total of 10.0 pence per Share of dividends in previous years. The net asset value as at 31 December 2012 including distributions was therefore 89.8 pence per Ordinary Share (31 December 2011: 91.2 pence).
The net asset value per C Share at 31 December 2012 was 68.8 pence (31 December 2011: 76.4 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period and the deduction of a total of 10.0 pence per Share of dividends in previous years. The net asset value as at 31 December 2012 including distributions was therefore 83.8 pence per C Share (31 December 2011: 86.4 pence).
The net asset value per D Share at 31 December 2012 was 78.5 pence (31 December 2011: 86.0 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period and the deduction of a 5.0 pence per Share dividend in the previous year. The net asset value as at 31 December 2012 including distributions was therefore 88.5 pence per D Share (31 December 2011: 91.0 pence).
The net asset value per E Share at 31 December 2012 was 86.1 pence (31 December 2011: 93.1 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period (31 December 2011: Nil pence). The net asset value as at 31 December 2012 including this distribution was therefore 91.1 pence per E Share (31 December 2011: 93.1 pence).
The net asset value per F Share at 31 December 2012 was 87.2 pence (31 December 2011: 93.3 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period (31 December 2011: Nil pence). The net asset value as at 31 December 2012 including this distribution was therefore 92.2 pence per F Share (31 December 2011: 93.3 pence).
The net asset value per G Share at 31 December 2012 was 93.3 pence (31 December 2011: no G Shares allotted). No dividends have been paid to date.
Outlook
Clearly the economic environment remains as challenging as it has been over the last few years, but I am delighted to report that the live sector continues to be robust in spite of the pressures that remain in terms of discretionary spend.
Both the Board and the Manager feel that the sector in which the Company operates retains the potential for strong growth and that the current investment portfolio shows positive signs of delivering good upside across a number of its current investments.
David MunnsChairman9 April 2013
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.
Festivals
Rewind Festival & Rewind North (rebranded from 80s Rewind Festival & 80s Rewind North)
Entertainment VCT 1 Investment amount (Rewind Festival): £546,047
(£1,092,094 across the Ingenious Entertainment VCTs)
Entertainment VCT 1 Investment amount (Rewind North): £500,000
(£1,000,000 across the Ingenious Entertainment VCTs)
In December 2008, the Entertainment VCTs, alongside The Rival Organisation, co-promoted the Rewind Festival, a two-day music festival in Henley-on-Thames. A follow on investment was made in October 2010 to co-promote Rewind North to be held in Perth, Scotland.
The 2012 Henley festival was held in August and was, for the second year in a row, a complete sell out (20,000 per day capacity). Highlights included OMD and Kool and the Gang. 2012 also saw ticket sales increase by over 40% for Rewind North with headline performances from Adam Ant and Holly Johnson. The success of both events very much cemented Rewind’s position in the UK as the foremost 80s music festival series.
In January 2013 the Directors agreed, in principle, to sell the Company’s investments in the Rewind Festival and Rewind North to the event co-promoter (the Rival Organisation), contingent upon the co-promoter selling the whole of the Rewind brand to a third party (Impresario Festivals plc). Both transactions were based upon the same overall valuation of Rewind and the deal completed on 22 March 2013.
London Electronic Dance (LED) Festival
Entertainment VCT 1 Investment amount: £500,000
(£1,000,000 across the Ingenious Entertainment VCTs)
In August 2010 the Ingenious Entertainment VCTs agreed to co-promote the LED Festival in partnership with AEG Live, Cream and Loudsound.
After 2011’s profitable performance (with over 23,000 tickets sold), which virtually recovered any losses incurred during the first LED Festival, the decision was taken by all of the event co-promoters to not hold LED in 2012. Festivals in London faced increased competition from free music events as well as uncertainty over the impact on ticket sales created by the Olympics. The Directors are currently discussing future prospects for LED in light of recent announcements concerning live event activities taking place in London during 2013, specifically Hyde Park and the Olympic Park.
Shakedown Festival
Entertainment VCT 1 Investment amount: £1,250,000
(£2,500,000 across the Ingenious Entertainment VCTs)
In February 2011 the Ingenious Entertainment VCTs invested £1,500,000 in Venn Music Ltd to stage and promote new music festivals. These innovative festivals are managed by Venn director Matt Priest, who worked as an executive at Radio One for 10 years and has many years’ experience in the live entertainment industry.
Shakedown Festival was first held at Stanmer Park in Brighton in September 2011 to positive public and press reception and returned in 2012 with an expanded capacity and larger line-up of artists. With performances from Dizzee Rascal, Chase and Status and Professor Green, over 18,000 tickets were sold. This was an increase of over 100% on the previous year’s sales.
The Manager is confident that the 2013 event will see further growth, both in terms of ticket sales and profitability. In December 2012, the VCTs made a follow on investment of £1 million into Venn Music Ltd to promote a second day at the venue. This second day, which will look to cater for a very different, more family orientated audience, is expected to help defray the costs of Shakedown and significantly improve the potential profitability of both events.
Love Supreme Jazz Festival
Entertainment VCT 1 Investment amount £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
In December 2011, the Entertainment VCTs teamed up with Jazz FM and Neapolitan Music to co-promote what will be the UK’s only camping Jazz festival, the Love Supreme Jazz Festival. The event is planned for July 2013 and the Manager is encouraged by the level of ‘early bird’ sales to date.
A strong talent bill has been assembled for the first year of the festival with headline performances from Bryan Ferry, Jools Holland, Chic featuring Nile Rogers, Esperanza Spalding and Robert Glasper Experiment to be accompanied by an array of talent representing Jazz in all its glories.
Liverpool Sound City Limited
Entertainment VCT 1 Investment amount £600,000
(£1,200,000 across the Ingenious Entertainment VCTs)
In March 2012, the Entertainment VCTs made an investment into Liverpool Sound City Limited. This company has been producing and promoting the Sound City concept which combines the best elements of a music festival, conference and expo across an entire city centre.
In 2012 the event saw record numbers of tickets sold as well as the staging of the inaugural New York Sound City. With international expansion expected to be one of the core drivers behind the growth of this brand, the Manager is confident that 2013 will see further improvements in revenue for the brand as Sound City returns to New York in March 2013 and has also added Athens, Georgia (USA) to the roster later in the year. Ticket sales for the Liverpool event are already significantly ahead of 2012 levels and the Sound City team feel confident that 2013 will be another record year for the event.
Field Day Festival
Entertainment VCT 1 Investment amount £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
In November 2012, the Entertainment VCTs invested into Waxarch Ltd to promote London’s premier festival for up and coming talent, Field Day Festival. The event has sold out its 30,000 capacity for the past two years, and the Manager expects to see further growth in this festival with an increased capacity for 2013 to 40,000 which should also help to drive increased profitability.
The Manager and event partners are also looking to expand Field Day internationally, with a number of conversations with international promoters currently taking place.
Exhibitions
Golf Live
Entertainment VCT 1 Investment amount: £275,250
(£550,500 across the Ingenious Entertainment VCTs)
Golf Live is a three day interactive golf event which staged its third annual event at The London Golf Club, Kent in May 2012. IMG who manage a large number of leading golfers, have also invested into the event which combines elements of golf exhibition, live golf shows and the opportunity for golfers to interactively participate in all aspects of the game. The event has seen appearances from leading golf professionals including Colin Montgomerie, Ian Poulter, Darren Clarke and Gary Player.
The Golf Live concept has struggled to establish itself commercially, however, with its best performance reaching breakeven. In light of this, the event partners are discussing the opportunity to radically restructure and relocate the event to encompass a more ‘celebrity driven’ offering.
Titans of Cricket
Entertainment VCT 1 Investment amount: £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
In June 2011 an investment of £2,000,000 was made by the Ingenious Entertainment VCTs into Titans of Sport Limited (formerly This is Cricket Limited) to promote a new sports event, Titans of Cricket.
Titans of Cricket takes the best of Twenty20, the Indian Premier League and World Cup Cricket and combines them in a new format that demonstrates the skills of some of the world’s top cricketing stars both past and present. The first event took place at the O2 in London in October 2011 and attracted 8,000 fans, with appearances from Andrew Flintoff and Adam Gilchrist plus a host of other international cricket stars. The first year event was loss making and the Manager and event partners are now considering how the brand can be redeveloped.
Live Venues and Venue Content
XOYO
Entertainment VCT 1 Investment amount: £400,000
(£800,000 across the Ingenious Entertainment VCTs)
In March 2010, an investment of £800,000 was made with Assorted Works Limited to open a new live venue in Shoreditch, East London. XOYO is a 900 capacity live entertainment venue split over two floors. The venue programs, books and promotes an exciting range of live music, club nights, visual art and other creative media events. The XOYO location is in the hub of London’s music, art and party scene.
The venue received a positive reception from the media and strong public attendance figures but, in spite of this, was unable to generate the utilisation required to become significantly profitable. In July 2012, the shareholders in the venue unanimously agreed to sell their shareholding to a third party, generating a small overall profit for the Company.
Jongleurs Comedy Live
Entertainment VCT 1 Investment amount: £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
In October 2010 an investment of £2,000,000 was made by the Ingenious Entertainment VCTs into Jongleurs Comedy Live Limited to promote a variety of comedy events.
In June 2011 it was agreed that the partners had differing views as to the direction of the company and an agreement was entered into that has now seen the Ingenious Entertainment VCTs withdraw from the investment. The original capital invested has now been fully recouped.
Jetstream Live Events
Entertainment VCT 1 Investment amount: £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
In December 2010, the Ingenious Entertainment VCTs agreed with the directors of Apollo Resorts and Leisure Limited (the Apollo Group) to invest further funding into Jetstream Events Limited to co-promote potential new projects with a highly experienced team in the Live Sector. A number of projects have been considered since the investment was made, although upon detailed consideration none of these were considered to be commercially viable enough to proceed with. In Autumn 2012, however, the parties agreed to proceed with co-promoting an exciting new event to be held in London in Summer 2013 involving a brand that is renowned throughout the world in its genre. Unfortunately, commercial sensitivities currently prevent us from announcing this exciting new partnership, although we would hope to be able to make an announcement in the very near future.
Television Format and Distribution
Let’s Dance
Entertainment VCT 1 Investment amount: £502,500
(£1,005,000 across the Ingenious Entertainment VCTs)
In January 2009, the Ingenious Entertainment VCTs invested £1,000,000 to back the television dance format Let’s Dance. A further investment of £5,000 was made when the Entertainment VCTs bought out the stake of Ingenious Live VCT 1 plc and Ingenious Live VCT 2 plc.
For the past four years BBC One has commissioned Whizz Kid Entertainment to produce this hugely popular celebrity-led series for both Comic Relief and Sports Relief. In 2012 the programme was aired to over 6 million viewers and enjoyed a 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.
Let’s Dance has also been re-commissioned for a fifth UK series which was aired in early 2013 (on behalf of Comic Relief) and, as a result of this success, the Manager is hopeful that further international revenues may be achieved by the format. The revenues generated to date have already covered the initial investment made.
Digital Rights Group
Entertainment VCT 1 Investment amount: £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
In June 2009, the Ingenious Entertainment VCTs agreed with independent television distributor Digital Rights Group Limited (DRG or DRG Group) to jointly acquire, market and distribute a series of television programmes.
DRG is the leading independent distributor of content in the UK with various brands in the DRG Group supporting all genres including drama, comedy, reality and other TV formats. DRG has worked on shows as diverse as The Inbetweeners, Kingdom starring Stephen Fry, the Martin Clunes drama Doc Martin, Australian series Sea Patrol, a wide variety of children’s programmes and factual documentaries. The investment has generated a small positive return for the Company.
SuperVision Media
Entertainment VCT 1 Investment amount: £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
In August 2010, an investment was made in SuperVision Media to co-promote and co-distribute alternative content. SuperVision Media is one of the leading owners and distributors of alternative content for cinemas around the globe in both the sport and entertainment fields. The Company aims to provide viewers with experiences that are the next best thing to being at the event whilst screening live, uninterrupted content, mainly in 3D format, accompanied by surround sound. 2012 saw Supervision screen the Wimbledon Gentlemen’s Singles Tennis Final and the Haye vs. Chisora boxing match in selected cinemas across the country.
Unfortunately the investment has not proven successful and Supervision has struggled to successfully monetise digital content in cinemas, incurring significant losses. The Manager has reviewed the future prospects for the Company and has concluded that it should make a full provision for any unsecured element of this investment.
Saturn Explosion
Entertainment VCT 1 Investment amount: £1,000,000
(£2,000,000 across Ingenious Entertainment VCTs)
In December 2010, the Ingenious Entertainment VCTs agreed with the directors of SuperVision Media to form a new company, Saturn Explosion Limited, to carry on the trade of the production, promotion and exploitation of alternative digital content (including, but not limited to, event based entertainment and sport content such as music concerts, festivals, theatrical productions and live sporting events) across a range of media including television and cinema.
The purpose of this funding was to acquire content that could be exploited across the various platforms but whereby any investment would be underpinned by minimum revenues through third party advances from distributors as well as potential payments by sponsorship partners wishing to be connected with the content.
The Manager has considered a number of potential investment opportunities over the last 12 months, but has yet to agree appropriate terms on any of these and, as a result of the lack of commercial success in the SuperVision Media investment above, has decided that its best course of action would be to return the funds back to the Company rather than risking making potential losses through investing these monies.
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
9 April 2013
BUSINESS REVIEW
The purpose of this review is to provide Shareholders with a summary setting out the business objectives of the Company, the Board’s strategy to achieve those objectives, the risks faced, the regulatory environment and the key performance indicators (KPIs) used to measure performance.
1. Strategy for Achieving Objectives
Ingenious Entertainment VCT 1 plc is a tax efficient company listed on The London Stock Exchange.
The investment objective is to achieve a combination of a substantial 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 focus on investing in companies established to create and bring to market live events and premium entertainment content. These investments should be Qualifying Investments for the purposes of the VCT legislation. Each Share class of each of the Ingenious Entertainment VCTs (the VCTs) represents a separate pool of capital and each such pool has its own separate performance record and dividend history.
For the Ordinary Shares, C Shares, D Shares and E Shares, the Manager intends to balance the risk profile by investing no more than 30% of the respective funds raised under the respective Offers in a blend of low risk money market open ended investment companies (OEICs) (which are Non-qualifying for the purposes of VCT legislation) and at least 70% of funds raised in VCT qualifying media content investments.
In respect of the F Shares, the Manager will deploy no more than 30% of the funds in a balanced multi-asset management portfolio (which is Non-qualifying for the purposes of VCT legislation) and at least 70% of funds raised in VCT qualifying media content investments.
As with the G Shares, in relation to the H Shares, the Manager intends to balance the risk profile of the fund by investing at least 70% of the funds raised in VCT qualifying media content investments with the remaining funds to be invested into a blend of low risk money market OEICs and other investments including, but not limited to, cash deposits, money market funds, fixed interest securities, secured loans, corporate bonds and corporate bond funds (which are Non-qualifying for the purposes of VCT legislation).
The investment policy for VCT qualifying media content investments is based upon the same core aims for all Share classes, incorporating a rigorous selection process, together with a funding structure and minimum revenue contractual arrangements specifically designed to offer investors downside protection whilst preserving the considerable upside potential of the live events and entertainment content within the portfolio.
Asset Allocation
The Manager will focus on investing in companies producing live events or creating branded entertainment content with a view to achieving a broad allocation of the VCTs’ assets across the entertainment sector. Investments could include the production and promotion of a theatrical show or the launch of a music festival, the development and exploitation of new formats or the creation of online or mobile games. The Manager’s objective will be to identify projects in which the VCTs can participate in the revenues and in the capital value of the content once the market is established.
Ordinary Shares, C Shares, D Shares and E Shares
The Directors believe that pending deployment into Qualifying Investments, funds should be deployed in a low risk, liquid investment, which also provides moderate returns to VCT Shareholders. The Manager intends to invest such capital raised in the Ordinary Share Offer, the C Share Offer, the D Share Offer and the E Share Offer and not deployed in Qualifying Investments in a number of low risk money market OEICs with a rating of at least AAAm (S&P) or Aaa/MR1+ (Moody’s) or, where the fund is not rated by these agencies, the average credit quality of the portfolio is not less than AA+ (S&P).
F Shares
The Manager will invest capital raised in the F Share Offer as follows: at least 70% will be invested in Qualifying Investments (companies in the media and entertainment sector) throughout the life of the Company and no more than 30% of funds will be retained in a balanced multi-asset management portfolio throughout the life of the Company.
G Shares and H Shares
Of the funds raised from the G Share Offer and the H Share Offer, at least 70% will be invested in Qualifying Investments (companies in the media and entertainment sector). The remaining 30% of the funds raised by these Offers will be retained in a blend of low risk money market OEICs and other investments including, but not limited to, cash deposits, money market funds, fixed interest securities, secured loans, corporate bonds, and corporate bond funds throughout the life of the VCTs, creating a lower risk profile for the G Shares and the H Shares.
Diversification
The Manager will seek to diversify the risk of Qualifying Investments through investment in media content and live events chosen from a broad spectrum of opportunities in the media and entertainment sector. However, the principal focus will be on the quality of the proposition, the experience of the production partner and the returns that can be generated. There is, therefore, no limitation on investments in any specific segment of the entertainment sector.
There will, however, be restrictions on the size of investments (both Qualifying Investments and other investments) made by the VCTs as set out in the VCT Status and Maximum Exposures paragraph below.
Risk Mitigation
The following risk mitigation strategies will be utilised by the Investee Companies, and in common with industry practice:
each Investee Company will be required to put in place pre-sales or similar minimum revenue arrangements providing for the Investee Company to receive at least 75% of the VCTs’ investment (and in the case of the H Share class, at least 50% of the VCTs’ investment) (Base Revenues). Each Investee Company will engage the services of an experienced producer or promoter with a proven track record in bringing media projects to market and delivering the returns targeted by the VCTs. Each Investee Company will be required, where appropriate, to obtain relevant insurance policies in order to protect against normal industry risks. After completion of its first project, each Investee Company may seek to undertake further projects (with at least the same level of downside protection) from its existing cash-flows. However, Investee Companies will not be permitted to undertake further projects which could reduce the Base Revenues generated from its first project. Each Investee Company will be expected to realise the capital value of its rights and goodwill after five years. This investment policy should ensure a high degree of downside protection whilst preserving the considerable upside potential of the premium media content within the portfolio.Funding Structure, Gearing and Contractual Arrangements
Each Qualifying Company in which the VCTs invest will have been formed for the purpose of engaging in the production and exploitation of premium media content or a live event.
In respect of the funds raised by the Company prior to 6 April 2011 under the Ordinary Share Offer, the C Share Offer, the D Share Offer, the E Share Offer and the F Share Offer, the VCTs’ policy has been to invest in Qualifying Companies by subscribing for a minimum of 30% of their investment in share capital and the remaining amount through loan stock instruments. However, changes introduced by the Finance Act (No. 3) 2010 mean that for funds raised on or after 6 April 2011 (the G Share Offer and the H Share Offer) the VCTs will instead invest a minimum of 70% of their investment in share capital and the remaining amount through loan stock instruments.
The VCTs will have a non-controlling interest in each Investee Company and other shareholders may include, amongst others, promoters, record labels, game developers and charities. It is expected that the initial capital provided by the VCTs will be sufficient to cover the Investee Company’s budgeted costs of creating and bringing to market the initial project.
The VCTs can invest, under current VCT legislation, up to £2.5 million each (and, therefore, £5 million in aggregate) per tax year in any one Investee Company (provided that such an Investee Company does not receive any funds from other State Aid sources, including from VCTs and the Enterprise Investment Scheme) and will always co-invest on equal terms pro rata to the capital in each VCT. This should have the advantage of enabling the VCTs to co-invest in larger projects than if one VCT was investing by itself. The VCTs will not borrow money in relation to their activities.
Liquidity
As was the case with each of the Ordinary Share Offer, the C Share Offer, the D Share Offer, the E Share Offer, the F Share Offer and the G Share Offer, each of the VCTs intends to create an H Share reserve which will enable it to make Share buy-backs in the market, subject to liquidity and regulatory restraints. The VCTs will operate a discount policy for repurchasing Shares, which will be determined by the Boards of the VCTs at their discretion.
The VCTs intend to return funds to Shareholders after five years if Shareholders so desire. In any event, the Articles of each of the VCTs currently contain a provision requiring the Directors to propose an ordinary resolution at the tenth AGM of the VCTs to continue the life of the VCTs. If any such resolution is not passed, the Directors will draw up proposals for the re-organisation, reconstruction or voluntary winding up of the VCTs for consideration of members at a general meeting on a date not more than nine months after such general meeting. Implementation of such proposals will require the approval of Shareholders by special resolution.
VCT Status and Maximum Exposures
In order to obtain venture capital trust status, the VCTs must be approved by HMRC. The conditions which must be satisfied to obtain and retain such status include the following restrictions on the maximum exposure of each VCT:
no holding in a company will represent more than 15% by value of each VCT’s total investments; and each VCT is limited to investing up to £2.5 million per Investee Company in any one tax year or in any six month period straddling two tax years (provided that such a company does not receive any funds from other State Aid sources, including from VCTs and the Enterprise Investment Scheme).The limits stated in the policy above in relation to the percentage amount of the funds invested in Qualifying Investments and Non-qualifying Investments will need to be met within the three year VCT investment period in accordance with the VCT qualifying rules. The Boards of the VCTs do not intend to vary the VCTs’ investment policy, however, should a material change in the investment policy (including the conditions above) be deemed appropriate this will be completed with Shareholders’ approval and in accordance with the Listing Rules.
3. Principal Risks, Risk Management and Regulatory Environment
The Board believes that the principal risks faced by the Company are:
Investment and strategic – the performance of an investment in an event is tied to a certain degree to the fortunes of the industry generally. In particular, there is a risk that the Company will not identify opportunities where the commercial success of the live event or created branded content is sufficient to earn revenues over and above the minimum contractual income negotiated. Loss of approved status as a Venture Capital Trust – the Company must comply with section 274 of the ITA which allows it to be exempted from capital gains tax on investment gains realised by Shareholders. Any breach of these rules may lead to the Company losing its approval as a VCT, qualifying Shareholders who have not held their Shares for the designated holding period would have to repay the income tax relief they obtained and future dividends paid by the Company would become subject to tax. The Company would also lose its exemption from corporation tax on capital gains. Regulatory – the Company is required to comply with the 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 of between 50% and 75% of the investment (depending on which Share class the investment is made from), regular reviews of performance, monitoring progress and compliance. Details of the Company’s internal controls are contained in the Corporate Governance Report.
4. Key Performance Indicators (KPIs)
The primary key performance indicator on which the Board assesses the performance of the Manager in meeting the Company’s objective is the change in net asset value per Share.
A review of the Company’s performance during the year, the position of the Company at the year end and the outlook for the coming year are contained within the Chairman’s Statement and the Manager’s Review.
INCOME STATEMENT
for the year ended 31 December 2012
| Year ended 31 December 2012 | Year ended 31 December 2011 | |||||||||||||||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | |||||||||||||||||||||||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||||||||||||||
| Gain on disposal of investments | - | 54 | 54 | - | 91 | 91 | ||||||||||||||||||||||
| Decrease in fair value of investments held | - | (289) | (289) | - | (282) | (282) | ||||||||||||||||||||||
| Investment income | 2 | 318 | - | 318 | 297 | - | 297 | |||||||||||||||||||||
| Arrangement fees | 3 | (39) | - | (39) | (49) | - | (49) | |||||||||||||||||||||
| Investment management fees | 4 | (187) | (187) | (374) | (174) | (174) | (348) | |||||||||||||||||||||
| Other expenses | 5 | (204) | - | (204) | (174) | - | (174) | |||||||||||||||||||||
| Loss on ordinary activities before taxation | (112) | (422) | (534) | (100) | (365) | (465) | ||||||||||||||||||||||
| Tax on ordinary activities | 6 | - | - | - | - | - | - | |||||||||||||||||||||
| Loss attributable to equity Shareholders | (112) | (422) | (534) | (100) | (365) | (465) | ||||||||||||||||||||||
| Basic and diluted return per share (pence) | ||||||||||||||||||||||||||||
| Ordinary Share | 7 | 1.2 | (2.5) | (1.3) | 1.2 | (2.6) | (1.4) | |||||||||||||||||||||
| C Share | 7 | (0.6) | (2.0) | (2.6) | (1.0) | (2.0) | (3.0) | |||||||||||||||||||||
| D Share | 7 | (0.8) | (1.7) | (2.5) | (1.3) | (0.6) | (1.9) | |||||||||||||||||||||
| E Share | 7 | (1.6) | (0.4) | (2.0) | (3.1) | (0.3) | (3.4) | |||||||||||||||||||||
| F Share | 7 | (2.1) | 1.1 | (1.0) | (3.3) | 0.2 | (3.1) | |||||||||||||||||||||
| G Share | 7 | (3.6) | - | (3.6) | - | - | - | |||||||||||||||||||||
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.
The accompanying notes form an integral part of these financial statements.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
for the year ended 31 December 2012
|
| Year ended 31 December 2012 £'000 | Year ended 31 December 2011 £'000 | ||||||
| Opening Shareholders’ funds | 20,340 | 17,569 | ||||||
| Capital subscribed | 3,518 | 4,418 | ||||||
| Issue costs | (155) | (194) | ||||||
| Dividends | (1,209) | (988) | ||||||
| Loss for the year | (534) | (465) | ||||||
| Closing Shareholders’ funds | 21,960 | 20,340 | ||||||
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F AND G SHARE FUNDS (UNAUDITED)
INCOME STATEMENT
for the year ended 31 December 2012
| Ordinary Shares | C Shares | |||||||||||||||||||||||
| Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |||||||||||||||||||
| Gain on disposal of investments | - | 11 | 11 | - | 3 | 3 | ||||||||||||||||||
| Decrease in fair value of investments held | - | (201) | (201) | - | (42) | (42) | ||||||||||||||||||
| Investment income | 246 | - | 246 | 29 | - | 29 | ||||||||||||||||||
| Arrangement fees | - | - | - | - | - | - | ||||||||||||||||||
| Investment management fees | (69) | (69) | (138) | (18) | (18) | (36) | ||||||||||||||||||
| Other expenses | (57) | - | (57) | (27) | - | (27) | ||||||||||||||||||
| Profit/(loss) on ordinary activities before taxation | 120 | (259) | (139) | (16) | (57) | (73) | ||||||||||||||||||
| Tax on ordinary activities | - | - | - | - | - | - | ||||||||||||||||||
| Profit/(loss) attributable to equity Shareholders | 120 | (259) | (139) | (16) | (57) | (73) | ||||||||||||||||||
| Basic and diluted return per share (pence) | 1.2 | (2.5) | (1.3) | (0.6) | (2.0) | (2.6) | ||||||||||||||||||
| D Shares | E Shares | |||||||||||||||||||||||
| Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |||||||||||||||||||
| Gain on disposal of investments | - | 31 | 31 | - | 4 | 4 | ||||||||||||||||||
| (Decrease)/increase in fair value of investments held | - | (96) | (96) | - | 7 | 7 | ||||||||||||||||||
| Investment income | 40 | - | 40 | 1 | - | 1 | ||||||||||||||||||
| Arrangement fees | - | - | - | - | - | - | ||||||||||||||||||
| Investment management fees | (48) | (48) | (96) | (22) | (22) | (44) | ||||||||||||||||||
| Other expenses | (48) | - | (48) | (24) | - | (24) | ||||||||||||||||||
| Loss on ordinary activities before taxation | (56) | (113) | (169) | (45) | (11) | (56) | ||||||||||||||||||
| Tax on ordinary activities | - | - | - | - | - | - | ||||||||||||||||||
| Loss attributable to equity Shareholders | (56) | (113) | (169) | (45) | (11) | (56) | ||||||||||||||||||
| Basic and diluted return per share (pence) | (0.8) | (1.7) | (2.5) | (1.6) | (0.4) | (2.0) | ||||||||||||||||||
| F Shares | G Shares | |||||||||||||||||||||||
| Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |||||||||||||||||||
| Gain on disposal of investments | - | 5 | 5 | - | - | - | ||||||||||||||||||
| Increase in fair value of investments held | - | 24 | 24 | - | 19 | 19 | ||||||||||||||||||
| Investment income | 1 | - | 1 | 1 | - | 1 | ||||||||||||||||||
| Arrangement fees | - | - | - | (39) | - | (39) | ||||||||||||||||||
| Investment management fees | (12) | (12) | (24) | (18) | (18) | (36) | ||||||||||||||||||
| Other expenses | (22) | - | (22) | (26) | - | (26) | ||||||||||||||||||
| (Loss)/profit on ordinary activities before taxation | (33) | 17 | (16) | (82) | 1 | (81) | ||||||||||||||||||
| Tax on ordinary activities | - | - | - | - | - | - | ||||||||||||||||||
| (Loss)/profit attributable to equity Shareholders | (33) | 17 | (16) | (82) | 1 | (81) | ||||||||||||||||||
| Basic and diluted return per share (pence) | (2.1) | 1.1 | (1.0) | (3.6) | - | (3.6) | ||||||||||||||||||
The Share classes have no recognised gains and losses other than those disclosed above.
The total column is the Income Statement per Share class for the year. The supplementary capital and revenue columns are prepared following guidance published by the Association of Investment Companies (AIC).
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F AND G SHARE FUNDS (UNAUDITED)
INCOME STATEMENT
for the year ended 31 December 2011
| Ordinary Shares | C Shares | |||||||||||||||||||||||
| Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |||||||||||||||||||
| Gain on disposal of investments | - | 55 | 55 | - | 16 | 16 | ||||||||||||||||||
| Decrease in fair value of investments held | - | (245) | (245) | - | (53) | (53) | ||||||||||||||||||
| Investment income | 257 | - | 257 | 24 | - | 24 | ||||||||||||||||||
| Arrangement fees | - | - | - | - | - | - | ||||||||||||||||||
| Investment management fees | (74) | (74) | (148) | (20) | (20) | (40) | ||||||||||||||||||
| Other expenses | (63) | - | (63) | (31) | - | (31) | ||||||||||||||||||
| Profit/(loss) on ordinary activities before taxation | 120 | (264) | (144) | (27) | (57) | (84) | ||||||||||||||||||
| Tax on ordinary activities | - | - | - | - | - | - | ||||||||||||||||||
| Profit/(loss) attributable to equity Shareholders | 120 | (264) | (144) | (27) | (57) | (84) | ||||||||||||||||||
| Basic and diluted return per share (pence) | 1.2 | (2.6) | (1.4) | (1.0) | (2.0) | (3.0) | ||||||||||||||||||
| D Shares | E Shares | |||||||||||||||||||||||
| Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |||||||||||||||||||
| Gain on disposal of investments | - | 18 | 18 | - | 2 | 2 | ||||||||||||||||||
| (Decrease)/increase in fair value of investments held | - | (3) | (3) | - | 8 | 8 | ||||||||||||||||||
| Investment income | 16 | - | 16 | - | - | - | ||||||||||||||||||
| Arrangement fees | - | - | - | (32) | - | (32) | ||||||||||||||||||
| Investment management fees | (54) | (54) | (108) | (17) | (17) | (34) | ||||||||||||||||||
| Other expenses | (51) | - | (51) | (16) | - | (16) | ||||||||||||||||||
| Loss on ordinary activities before taxation | (89) | (39) | (128) | (65) | (7) | (72) | ||||||||||||||||||
| Tax on ordinary activities | - | - | - | - | - | - | ||||||||||||||||||
| Loss attributable to equity Shareholders | (89) | (39) | (128) | (65) | (7) | (72) | ||||||||||||||||||
| Basic and diluted return per share (pence) | (1.3) | (0.6) | (1.9) | (3.1) | (0.3) | (3.4) | ||||||||||||||||||
| F Shares | G Shares | |||||||||||||||||||||||
| Revenue£'000 | Capital£'000 | Total£'000 | Revenue£'000 | Capital£'000 | Total£'000 | |||||||||||||||||||
| Gain on disposal of investments | - | - | - | - | - | - | ||||||||||||||||||
| Increase in fair value of investments held | - | 11 | 11 | - | - | - | ||||||||||||||||||
| Investment income | - | - | - | - | - | - | ||||||||||||||||||
| Arrangement fees | (17) | - | (17) | - | - | - | ||||||||||||||||||
| Investment management fees | (9) | (9) | (18) | - | - | - | ||||||||||||||||||
| Other expenses | (13) | - | (13) | - | - | - | ||||||||||||||||||
| (Loss)/profit on ordinary activities before taxation | (39) | 2 | (37) | - | - | - | ||||||||||||||||||
| Tax on ordinary activities | - | - | - | - | - | - | ||||||||||||||||||
| (Loss)/profit attributable to equity Shareholders | (39) | 2 | (37) | - | - | - | ||||||||||||||||||
| Basic and diluted return per share (pence) | (3.3) | 0.2 | (3.1) | - | - | - | ||||||||||||||||||
The Company had no G Shares in issue during the year ended 31 December 2011.
The Share classes have no recognised gains and losses other than those disclosed above.
The total column is the Income Statement per Share class for the year. The supplementary capital and revenue columns are prepared following guidance published by the Association of Investment Companies (AIC).
BALANCE SHEET
as at 31 December 2012
| Note | 31 December 2012 £'000 | 31 December 2011 £'000 | ||||||||||
| Fixed assets | ||||||||||||
| Qualifying Investments | 8 | 11,949 | 10,309 | |||||||||
| Current assets | ||||||||||||
| Debtors | 10 | 139 | 80 | |||||||||
| Non-qualifying Investments | 11 | 8,734 | 9,823 | |||||||||
| Cash at bank and in hand | 1,225 | 181 | ||||||||||
| 10,098 | 10,084 | |||||||||||
| Creditors: amounts falling due within one year | 12 | (87) | (53) | |||||||||
| Net current assets | 10,011 | 10,031 | ||||||||||
| Net assets | 21,960 | 20,340 | ||||||||||
| Capital and reserves | ||||||||||||
| Called-up Share capital | 13 | 277 | 242 | |||||||||
| Share premium account | 14 | - | - | |||||||||
| Other reserve account | 14 | 23,277 | 21,158 | |||||||||
| Capital reserve | 14 | (775) | (353) | |||||||||
| Revenue reserve | 14 | (819) | (707) | |||||||||
| Shareholders’ funds | 21,960 | 20,340 | ||||||||||
| Net asset value per Ordinary Share | 15 | 74.8 | 81.2 | |||||||||
| Net asset value per C Share | 15 | 68.8 | 76.4 | |||||||||
| Net asset value per D Share | 15 | 78.5 | 86.0 | |||||||||
| Net asset value per E Share | 15 | 86.1 | 93.1 | |||||||||
| Net asset value per F Share | 15 | 87.2 | 93.3 | |||||||||
| Net asset value per G Share | 15 | 93.3 | - | |||||||||
| 15 |
The accompanying notes form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 9 April 2013.
Signed on behalf of the Board of Directors:
David Munns
Chairman
Company Registration Number: 6395011 (England & Wales)
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F AND G SHARE FUNDS (UNAUDITED)
BALANCE SHEET
as at 31 December 2012
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | |||||||||||||||||||
| Fixed assets | ||||||||||||||||||||||||
| Qualifying Investments | 6,314 | 1,628 | 3,757 | 125 | 125 | - | ||||||||||||||||||
| Current assets | ||||||||||||||||||||||||
| Debtors | 139 | - | - | - | - | - | ||||||||||||||||||
| Non-qualifying Investments | 897 | 221 | 1,528 | 1,845 | 980 | 3,263 | ||||||||||||||||||
| Cash at bank and in hand | 338 | 89 | 11 | 488 | 272 | 27 | ||||||||||||||||||
| 1,374 | 310 | 1,539 | 2,333 | 1,252 | 3,290 | |||||||||||||||||||
| Creditors: amounts falling due within one year | (51) | (4) | (11) | (7) | (6) | (8) | ||||||||||||||||||
| Net current assets | 1,323 | 306 | 1,528 | 2,326 | 1,246 | 3,282 | ||||||||||||||||||
| Net assets | 7,637 | 1,934 | 5,285 | 2,451 | 1,371 | 3,282 | ||||||||||||||||||
| Capital and reserves | ||||||||||||||||||||||||
| Called-up Share capital | 102 | 28 | 68 | 28 | 16 | 35 | ||||||||||||||||||
| Share premium account | - | - | - | - | - | - | ||||||||||||||||||
| Other reserve account | 8,101 | 2,212 | 5,677 | 2,551 | 1,408 | 3,328 | ||||||||||||||||||
| Capital reserve | (471) | (136) | (170) | (18) | 19 | 1 | ||||||||||||||||||
| Revenue reserve | (95) | (170) | (290) | (110) | (72) | (82) | ||||||||||||||||||
| Shareholders’ funds | 7,637 | 1,934 | 5,285 | 2,451 | 1,371 | 3,282 | ||||||||||||||||||
| Net asset value excluding distributions to date (pence per share) | 74.8 | 68.8 | 78.5 | 86.1 | 87.2 | 93.3 | ||||||||||||||||||
| Net asset value including distributions to date (pence per share) | 89.8 | 83.8 | 88.5 | 91.1 | 92.2 | 93.3 | ||||||||||||||||||
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F AND G SHARE FUNDS (UNAUDITED)
BALANCE SHEET
as at 31 December 2011
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | |||||||||||||||||||
| Fixed assets | ||||||||||||||||||||||||
| Qualifying Investments | 6,632 | 1,727 | 1,700 | 125 | 125 | - | ||||||||||||||||||
| Current assets | ||||||||||||||||||||||||
| Debtors | 80 | - | - | - | - | - | ||||||||||||||||||
| Non-qualifying Investments | 1,588 | 374 | 4,090 | 2,478 | 1,293 | - | ||||||||||||||||||
| Cash at bank and in hand | 21 | 51 | 8 | 51 | 50 | - | ||||||||||||||||||
| 1,689 | 425 | 4,098 | 2,529 | 1,343 | - | |||||||||||||||||||
| Creditors: amounts falling due within one year | (35) | (4) | (7) | (5) | (2) | - | ||||||||||||||||||
| Net current assets | 1,654 | 421 | 4,091 | 2,524 | 1,341 | - | ||||||||||||||||||
| Net assets | 8,286 | 2,148 | 5,791 | 2,649 | 1,466 | - | ||||||||||||||||||
| Capital and reserves | ||||||||||||||||||||||||
| Called-up Share capital | 102 | 28 | 68 | 28 | 16 | - | ||||||||||||||||||
| Share premium account | - | - | - | - | - | - | ||||||||||||||||||
| Other reserve account | 8,611 | 2,353 | 6,014 | 2,693 | 1,487 | - | ||||||||||||||||||
| Capital reserve | (212) | (79) | (57) | (7) | 2 | - | ||||||||||||||||||
| Revenue reserve | (215) | (154) | (234) | (65) | (39) | - | ||||||||||||||||||
| Shareholders’ funds | 8,286 | 2,148 | 5,791 | 2,649 | 1,466 | - | ||||||||||||||||||
| Net asset value excluding distributions to date (pence per share) | 81.2 | 76.4 | 86.0 | 93.1 | 93.3 | - | ||||||||||||||||||
| Net asset value including distributions to date (pence per share) | 91.2 | 86.4 | 91.0 | 93.1 | 93.3 | - | ||||||||||||||||||
The Company had no G Shares in issue during the year ended 31 December 2011.
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F AND G SHARE FUNDS RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS (UNAUDITED)
for the year ended 31 December 2012
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | |||||||||||||||||||
| Opening Shareholders’ funds | 8,286 | 2,148 | 5,791 | 2,649 | 1,466 | - | ||||||||||||||||||
| Capital subscribed | - | - | - | - | - | 3,518 | ||||||||||||||||||
| Issue costs | - | - | - | - | - | (155) | ||||||||||||||||||
| Dividends | (510) | (141) | (337) | (142) | (79) | - | ||||||||||||||||||
| Loss for the year | (139) | (73) | (169) | (56) | (16) | (81) | ||||||||||||||||||
| Closing Shareholders’ funds | 7,637 | 1,934 | 5,285 | 2,451 | 1,371 | 3,282 | ||||||||||||||||||
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F AND G SHARE FUNDS RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS (UNAUDITED)
for the year ended 31 December 2011
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | |||||||||||||||||||
| Opening Shareholders’ funds | 8,940 | 2,373 | 6,256 | - | - | - | ||||||||||||||||||
| Capital subscribed | - | - | - | 2,846 | 1,572 | - | ||||||||||||||||||
| Issue costs | - | - | - | (125) | (69) | - | ||||||||||||||||||
| Dividends | (510) | (141) | (337) | - | - | - | ||||||||||||||||||
| Loss for the year | (144) | (84) | (128) | (72) | (37) | - | ||||||||||||||||||
| Closing Shareholders’ funds | 8,286 | 2,148 | 5,791 | 2,649 | 1,466 | - | ||||||||||||||||||
CASH FLOW STATEMENT
for the year ended 31 December 2012
| 31 December 2012 | 31 December 2011 | |||||||||||
| Note | £'000 | £'000 | ||||||||||
| Net cash flow from operating activities | (545) | (477) | ||||||||||
| Financial investment | ||||||||||||
| Purchase of Qualifying Investments | 8 | (2,100) | (2,750) | |||||||||
| Return of Qualifying Investments | 8 | 400 | 119 | |||||||||
| Net cash flow from financial investment | (1,700) | (2,631) | ||||||||||
| Management of liquid resources | ||||||||||||
| Purchase of Non-qualifying Investments | 11 | (3,389) | (6,999) | |||||||||
| Disposal of Non-qualifying Investments | 11 | 4,524 | 6,903 | |||||||||
| Net cash flow from liquid resources | 1,135 | (96) | ||||||||||
|
| ||||||||||||
| Financing | ||||||||||||
| Issue of Shares | 3,518 | 4,418 | ||||||||||
| Issue costs of Shares | 14 | (155) | (194) | |||||||||
| Net cash flow from financing | 3,363 | 4,224 | ||||||||||
| Dividends | ||||||||||||
| Payment of dividends | 14 | (1,209) | (988) | |||||||||
| Net cash flow from dividends | (1,209) | (988) | ||||||||||
| Increase in cash | 1,044 | 32 | ||||||||||
Reconciliation of loss before taxation to net cash flow from operating activities
| 2012 £'000 | 2011 £'000 | |||||||
| Loss on ordinary activities before taxation | (534) | (465) | ||||||
| Decrease in fair value of investments held | 289 | 282 | ||||||
| Investment income | (275) | (264) | ||||||
| (Increase)/decrease in receivables | (59) | 1 | ||||||
| Increase/(decrease) in payables | 34 | (31) | ||||||
| Net cash flow from operating activities | (545) | (477) | ||||||
Reconciliation of net cash flow to movement in net funds
| 2012 £'000 | 2011 £'000 | |||||||||
| Increase in cash in the period | 1,044 | 32 | ||||||||
| (Disposal)/purchase of Non-qualifying investments | 11 | (1,412) | 96 | |||||||
| Fair value adjustment on Non-qualifying investments | 11 | 30 | (26) | |||||||
| Change in net funds | (338) | 102 | ||||||||
| Net funds at 1 January 2012 | 10,004 | 9,902 | ||||||||
| Net funds at 31 December 2012 | 9,666 | 10,004 | ||||||||
Net funds comprise cash of £1,225k (31 December 2011: £181k) and Non-qualifying assets, excluding Investment in Investee Companies of £8,441k (31 December 2011: £9,823k).
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F AND G SHARE FUNDS (UNAUDITED)
CASH FLOW STATEMENT
for the year ended 31 December 2012
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | |||||||||||||||||||
| Net cash flow from operating activities | (187) | (60) | (109) | (61) | (36) | (92) | ||||||||||||||||||
| Financial investment | ||||||||||||||||||||||||
| Purchase of Qualifying Investments | - | - | (2,100) | - | - | - | ||||||||||||||||||
| Return of Qualifying Investments | 315 | 85 | - | - | - | - | ||||||||||||||||||
| Net cash flow from financial investment | 315 | 85 | (2,100) | - | - | - | ||||||||||||||||||
| Management of liquid resources | ||||||||||||||||||||||||
| Purchase of Non-qualifying Investments | - | - | - | - | (145) | (3,244) | ||||||||||||||||||
| Disposal of Non-qualifying Investments | 699 | 154 | 2,549 | 640 | 482 | - | ||||||||||||||||||
| Net cash flow from liquid resources | 699 | 154 | 2,549 | 640 | 337 | (3,244) | ||||||||||||||||||
| Financing | ||||||||||||||||||||||||
| Issue of Shares | - | - | - | - | - | 3,518 | ||||||||||||||||||
| Issue costs of Shares | - | - | - | - | - | (155) | ||||||||||||||||||
| Net cash flow from financing | - | - | - | - | - | 3,363 | ||||||||||||||||||
| Dividends | ||||||||||||||||||||||||
| Payment of dividends | (510) | (141) | (337) | (142) | (79) | - | ||||||||||||||||||
| Net cash flow from dividends | (510) | (141) | (337) | (142) | (79) | - | ||||||||||||||||||
| Increase in cash | 317 | 38 | 3 | 437 | 222 | 27 | ||||||||||||||||||
Reconciliation of loss before taxation to net cash flow from operating activities
| OrdinaryShares£'000 | CShares£'000 | DShares£'000 | EShares£'000 | FShares£'000 | GShares£'000 | |||||||||||||||||||
| Loss on ordinary activities before taxation | (139) | (73) | (169) | (56) | (16) | (81) | ||||||||||||||||||
| Decrease/(increase) in fair value of investments held | 201 | 42 | 96 | (7) | (24) | (19) | ||||||||||||||||||
| Investment income | (206) | (29) | (40) | - | - | - | ||||||||||||||||||
| Increase in receivables | (59) | - | - | - | - | - | ||||||||||||||||||
| Increase in payables | 16 | - | 4 | 2 | 4 | 8 | ||||||||||||||||||
| Net cash flow from operating activities | (187) | (60) | (109) | (61) | (36) | (92) | ||||||||||||||||||
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F AND G SHARE FUNDS (UNAUDITED)
CASH FLOW STATEMENT
for the year ended 31 December 2011
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | |||||||||||||||||||
| Net cash flow from operating activities | (140) | (48) | (168) | (75) | (46) | - | ||||||||||||||||||
| Financial investment | ||||||||||||||||||||||||
| Purchase of Qualifying Investments | - | (800) | (1,700) | (125) | (125) | - | ||||||||||||||||||
| Return of Qualifying Investments | 97 | 22 | - | - | - | - | ||||||||||||||||||
| Net cash flow from financial investment | 97 | (778) | (1,700) | (125) | (125) | - | ||||||||||||||||||
| Management of liquid resources | ||||||||||||||||||||||||
| Purchase of Non-qualifying Investments | (1,583) | (372) | (551) | (2,846) | (1,647) | - | ||||||||||||||||||
| Disposal of Non-qualifying Investments | 2,084 | 1,355 | 2,723 | 376 | 365 | - | ||||||||||||||||||
| Net cash flow from liquid resources | 501 | 983 | 2,172 | (2,470) | (1,282) | - | ||||||||||||||||||
| Financing | ||||||||||||||||||||||||
| Issue of Shares | - | - | - | 2,846 | 1,572 | - | ||||||||||||||||||
| Issue costs of Shares | - | - | - | (125) | (69) | - | ||||||||||||||||||
| Net cash flow from financing | - | - | - | 2,721 | 1,503 | - | ||||||||||||||||||
| Dividends | ||||||||||||||||||||||||
| Payment of dividends | (510) | (141) | (337) | - | - | - | ||||||||||||||||||
| Net cash flow from dividends | (510) | (141) | (337) | - | - | - | ||||||||||||||||||
| (Decrease)/increase in cash | (52) | 16 | (33) | 51 | 50 | - | ||||||||||||||||||
Reconciliation of loss before taxation to net cash flow from operating activities
| OrdinaryShares£'000 | CShares£'000 | DShares£'000 | EShares£'000 | FShares£'000 | GShares£'000 | |||||||||||||||||||
| Loss on ordinary activities before taxation | (144) | (84) | (128) | (72) | (37) | - | ||||||||||||||||||
| Decrease/(increase) in fair value of investments held | 245 | 53 | 3 | (8) | (11) | - | ||||||||||||||||||
| Investment income | (230) | (18) | (16) | - | - | - | ||||||||||||||||||
| (Increase)/decrease in receivables | (21) | - | 22 | - | - | - | ||||||||||||||||||
| Increase/(decrease) in payables | 10 | 1 | (49) | 5 | 2 | - | ||||||||||||||||||
| Net cash flow from operating activities | (140) | (48) | (168) | (75) | (46) | - | ||||||||||||||||||
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2012
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” (with the exception of paragraph 80 of the SORP regarding detailed disclosure of financial and operational performance of the Company’s unquoted investments due to their confidential nature) which was issued in January 2009.
The comparative figures are for the year 1 January 2011 to 31 December 2011.
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 2011 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 through profit and loss and are 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. 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 pricesOf 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 - 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 or 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 method. The effective interest rate is the rate required to discount the expected future income streams over the life of the loan to its initial carrying amount. The main impact for the Company in that regard is the accounting treatment of the loan note premiums. Where those loan note premiums are charged in lieu of higher interest then they are credited to income over the life of the advance to the extent those premiums are anticipated to be collected.
d) Dividend Income
Dividend income is recognised in the Income Statement once 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.General expenses are paid for by the Ordinary Share class and recharged on a quarterly basis to the other Share classes based on the proportional net asset value per Share class as at the last day of the previous quarter.
f) Deferred Taxation
Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the Balance Sheet date where transactions or events that result in an obligation to pay more, or a right to pay less, tax in the future have occurred at the Balance Sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company’s taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods.
g) Ordinary Shares, C Shares, D Shares, E Shares, F Shares, G Shares and H Shares
The Company has seven classes of Shares: Ordinary Shares, C Shares, D Shares, E Shares, F Shares, G Shares and H Shares. Each Share class has a separate pool of income and expenses as well as assets and liabilities attributable to it. All Share classes rank pari passu with each other in terms of voting and other rights. No H Shares had been allotted as at 31 December 2012.
2. Investment Income
| 2012 £'000 | 2011 £'000 | |||||||
| Bank deposit interest | 1 | 1 | ||||||
| Dividend income from Qualifying Investments | - | 10 | ||||||
| Loan note interest from Qualifying Investments | 42 | 17 | ||||||
| Loan note premium from Qualifying Investments (note 8) | 275 | 269 | ||||||
| 318 | 297 | |||||||
3. Arrangement Fees
| 2012 £'000 | 2011 £'000 | |||||||
| Arrangement fees | 39 | 49 |
All costs arising out of the relevant G Share Offer (included in 2012), and E and F Share Offers (included in 2011), including listing expenses and commissions, were incurred by Ingenious Media Investments Limited (IMIL) and a fee of 5.5% of the gross proceeds of the relevant Offer was paid in consideration of the service provided. The Directors believe that 80% of these fees relate directly to the raising of capital and have classified this proportion as issue costs. In accordance with Company law, the issue costs have been deducted from the Share premium account. The remaining 20% reflected above has been taken to revenue.
4. Investment Management Fees
| 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | |||||||||||||||||||
| Investment management fees | 187 | 187 | 374 | 174 | 174 | 348 |
For the purposes of the revenue and capital columns in the Income Statement, the management fee has been allocated 50% to revenue and 50% to capital, which represents the split of the Company’s long term returns.
5. Other Expenses
| 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | |||||||||||||||||||
| Directors’ remuneration (excluding employer’s national insurance) | 38 | - | 38 | 38 | - | 38 | ||||||||||||||||||
| Auditor’s remuneration | ||||||||||||||||||||||||
| - Audit fees | 14 | - | 14 | 13 | - | 13 | ||||||||||||||||||
| - Non-audit fees | 1 | - | 1 | 4 | - | 4 | ||||||||||||||||||
| Legal and professional fees | 21 | - | 21 | 10 | - | 10 | ||||||||||||||||||
| Other administration expense | 124 | - | 124 | 108 | - | 108 | ||||||||||||||||||
| Irrecoverable VAT | 6 | - | 6 | 1 | - | 1 | ||||||||||||||||||
| 204 | - | 204 | 174 | - | 174 | |||||||||||||||||||
The Company is not registered for VAT. Fees payable to the Company’s auditor for the audit of the Company’s financial statements are £14k (31 December 2011: £13k) excluding VAT. Non-audit fees in 2012 and 2011 related to accounting advice. Further details on the Directors’ fee disclosures are given in the Directors’ Remuneration Report.
6. Tax Charge on Ordinary Activities
| 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | |||||||||||||||||||
| Loss on ordinary activities before tax | (112) | (422) | (534) | (100) | (365) | (465) | ||||||||||||||||||
| Loss on ordinary activities by taxrate 24.5% (31 December 2011:26.5%) | (27) | (103) | (130) | (27) | (97) | (124) | ||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||
| Non taxable losses on investments | - | 57 | 57 | - | 51 | 51 | ||||||||||||||||||
| Disallowed expenses | 4 | 46 | 50 | 1 | 46 | 47 | ||||||||||||||||||
| Unutilised losses for the current year | 23 | - | 23 | 29 | - | 29 | ||||||||||||||||||
| UK dividends not taxable | - | - | - | (3) | - | (3) | ||||||||||||||||||
| - | - | - | - | - | - | |||||||||||||||||||
As the Company is a VCT its capital gains are not taxable.
At 31 December 2012 the Company had surplus management expenses of £806k (31 December 2011: £710k). A deferred tax asset has not been recognised in respect of these surplus management expenses as the future taxable income of the Company cannot be predicted with reasonable certainty. Due to the Company’s status as a VCT, and the intention to continue meeting the conditions required to obtain approval in the foreseeable future the Company does not recognise deferred tax on any capital gains or losses which arise on the revaluation of investments.
7. Basic and Diluted Return per Share
| Ordinary Shares | 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | ||||||||||||||||||
| Profit/(loss) on ordinary activities after taxation | 120 | (259) | (139) | 120 | (264) | (144) | ||||||||||||||||||
| Weighted average Shares in issue (number) | 10,205,011 | 10,205,011 | 10,205,011 | 10,205,011 | 10,205,011 | 10,205,011 | ||||||||||||||||||
| Profit/(loss) attributable per Share (pence) | 1.2 | (2.5) | (1.3) | 1.2 | (2.6) | (1.4) | ||||||||||||||||||
|
| ||||||||||||||||||||||||
| C Shares | 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | ||||||||||||||||||
| Loss on ordinary activities after taxation | (16) | (57) | (73) | (27) | (57) | (84) | ||||||||||||||||||
| Weighted average Shares in issue (number) | 2,810,596 | 2,810,596 | 2,810,596 | 2,810,596 | 2,810,596 | 2,810,596 | ||||||||||||||||||
| Loss attributable per Share (pence) | (0.6) | (2.0) | (2.6) | (1.0) | (2.0) | (3.0) | ||||||||||||||||||
|
| ||||||||||||||||||||||||
| D Shares | 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | ||||||||||||||||||
| Loss on ordinary activities after taxation | (56) | (113) | (169) | (89) | (39) | (128) | ||||||||||||||||||
| Weighted average Shares in issue (number) | 6,735,624 | 6,735,624 | 6,735,624 | 6,735,624 | 6,735,624 | 6,735,624 | ||||||||||||||||||
| Loss attributable per Share (pence) | (0.8) | (1.7) | (2.5) | (1.3) | (0.6) | (1.9) | ||||||||||||||||||
|
| ||||||||||||||||||||||||
| E Shares | 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | ||||||||||||||||||
| Loss on ordinary activities after taxation | (45) | (11) | (56) | (65) | (7) | (72) | ||||||||||||||||||
| Weighted average Shares in issue (number) | 2,846,122 | 2,846,122 | 2,846,122 | 2,123,163 | 2,123,163 | 2,123,163 | ||||||||||||||||||
| Loss attributable per Share (pence) | (1.6) | (0.4) | (2.0) | (3.1) | (0.3) | (3.4) | ||||||||||||||||||
|
| ||||||||||||||||||||||||
| F Shares | 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | ||||||||||||||||||
| (Loss)/profit on ordinary activities after taxation | (33) | 17 | (16) | (39) | 2 | (37) | ||||||||||||||||||
| Weighted average Shares in issue (number) | 1,572,095 | 1,572,095 | 1,572,095 | 1,184,388 | 1,184,388 | 1,184,388 | ||||||||||||||||||
| (Loss)/profit attributable per Share (pence) | (2.1) | 1.1 | (1.0) | (3.3) | 0.2 | (3.1) | ||||||||||||||||||
|
| ||||||||||||||||||||||||
| G Shares | 2012Revenue£'000 | 2012Capital£'000 | 2012Total£'000 | 2011Revenue£'000 | 2011Capital£'000 | 2011Total£'000 | ||||||||||||||||||
| (Loss)/profit on ordinary activities after taxation | (82) | 1 | (81) | - | - | - | ||||||||||||||||||
| Weighted average Shares in issue (number) | 2,302,126 | 2,302,126 | 2,302,126 | - | - | - | ||||||||||||||||||
| Loss attributable per Share (pence) | (3.6) | - | (3.6) | - | - | - | ||||||||||||||||||
There are no dilutive potential Ordinary, C, D, E, F or G 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.
8. Fixed Asset Investments
| 2012 £'000 | 2011 £'000 | |||||||
| Unquoted investments | 11,949 | 10,309 | ||||||
| Equity shares | 2,884 | 2,733 | ||||||
| Unsecured loan notes | 9,065 | 7,576 | ||||||
| 11,949 | 10,309 | |||||||
| Qualifying Investments | 2012 £'000 | 2011 £'000 | ||||||
| Opening valuation | 10,309 | 7,670 | ||||||
| Purchases at cost | 2,100 | 2,750 | ||||||
| Return of investment | (400) | (119) | ||||||
| Fair value adjustment | (60) | 8 | ||||||
| Closing valuation | 11,949 | 10,309 | ||||||
Included in the valuation above is an equal and opposite fair value gain and fair value loss amounting to £275k (31 December 2011: £269k). This represents the accounting treatment of the guaranteed loan note premium. The £275k is included in the Income Statement under Investment Income (refer to note 2).
9. Significant Interests
The Company has interests of 10%, or greater, of the nominal value of the allotted shares in the following Investee Companies incorporated in the United Kingdom as at 31 December 2012:
| Trading Companies | % class and share type | % voting rights | ||||||
| Jetstream Events Limited | 24.95% A Ordinary | 24.95% | ||||||
| Crystal Star Limited | 24.95% A Ordinary | 24.95% | ||||||
| Saturn Explosion Limited | 16.66% A Ordinary | 16.66% | ||||||
| DRG Media Assets Limited | 24.95% A Ordinary | 24.95% | ||||||
| Dance Floor Limited | 24.96% A Ordinary | 24.96% | ||||||
| Golfmania Limited | 24.96% A Ordinary | 24.96% | ||||||
| Into The Groove Limited | 24.96% A Ordinary | 24.96% | ||||||
| CLS Concerts Limited | 16.67% A Ordinary | 16.67% | ||||||
| Supervision Media Holdings Limited | 10.00% A Ordinary | 10.00% | ||||||
| Jongleurs Comedy Live Limited | 20.00% A Ordinary | 20.00% | ||||||
| Venn Music Ltd | 15.00% A Ordinary | 15.00% | ||||||
| Titans of Sport Limited | 15.00% A Ordinary | 15.00% | ||||||
| Love Supreme Festival Limited | 12.50% A Ordinary | 12.50% | ||||||
| Waxarch Ltd | 15.00% A Ordinary | 15.00% | ||||||
| Liverpool Sound City Limited | 15.00% A Ordinary | 15.00% | ||||||
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.
| Dormant Companies | % class and share type | % voting rights | ||||||
| Tremor Events Limited | 100% A Ordinary | 100% | ||||||
| Diamond Ventures Limited | 100% A Ordinary | 100% | ||||||
| Callisto Moon Limited | 100% A Ordinary | 100% | ||||||
| Moda Events Limited | 100% A Ordinary | 100% | ||||||
| Comedy Carnival Limited (previously NeptuneNine) Limited | 100% A Ordinary | 100% | ||||||
| Oscar Moment Limited | 100% A Ordinary | 100% | ||||||
| Saturn Six Limited | 100% A Ordinary | 100% | ||||||
| Solar Experience Limited | 100% A Ordinary | 100% | ||||||
| Total Definition Limited | 100% A Ordinary | 100% | ||||||
The investments made by the Company are part of its portfolio of investments and the table above includes all portfolio investments.
The Company is not required to prepare consolidated accounts as any remaining amounts in the above dormant companies are of no value.
10. Debtors
| 2012£'000 | 2011£'000 | |||||||
| Trade debtors | 36 | 19 | ||||||
| Prepayments and accrued income | 103 | 61 | ||||||
| 139 | 80 | |||||||
11. Current Asset Investments
| 2012£'000 | 2011£'000 | |||||||
| Funds held in listed money market OEICs | 8,441 | 9,823 | ||||||
| Investment in Investee Companies | 293 | - | ||||||
| 8,734 | 9,823 | |||||||
| Non-Qualifying Investments | ||||||||
| 2012£'000 | 2011£'000 | |||||||
| Opening valuation | 9,823 | 9,753 | ||||||
| Purchases at cost – Investment in Investee Companies | 277 | - | ||||||
| Fair value gain on investment in Investee Companies | 16 | - | ||||||
| Purchases at cost – listed money market OEICs | 3,112 | 6,999 | ||||||
| Disposal proceeds - listed money market OEICs | (4,524) | (6,903) | ||||||
| Unrealised change in value - listed money market OEICs | 30 | (26) | ||||||
| Closing valuation | 8,734 | 9,823 | ||||||
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.
12. Creditors: Amounts Falling Due Within One Year
| 2012£'000 | 2011£'000 | |||||||
| Trade creditors | 17 | 24 | ||||||
| Accruals and deferred income | 70 | 29 | ||||||
| 87 | 53 | |||||||
13. Called-up Share Capital
| Allotted, called-up and fully paid | 2012£'000 | 2011£'000 | ||||||
| 10,205,011 Ordinary Shares 1p each | 102 | 102 | ||||||
| 2,810,596 C Shares 1p each | 28 | 28 | ||||||
| 6,735,624 D Shares 1p each | 68 | 68 | ||||||
| 2,846,122 E Shares 1p each | 28 | 28 | ||||||
| 1,572,095 F Shares 1p each | 16 | 16 | ||||||
| 3,518,044 G Shares 1p each | 35 | - | ||||||
| 277 | 242 | |||||||
In the current year, 3,518,044 G Shares were issued and allotted in accordance with the terms of the relevant Prospectus. Share issue costs amounted to £194k of which £155k have been set off against the share proceeds.
In the prior year, 2,846,122 E Shares and 1,572,095 F Shares were issued and allotted in accordance with the terms of the relevant Prospectus. Share issue costs amounted to £157k and £86k respectively of which £125k and £69k have been set off against the share proceeds.
In the year ended 31 December 2010, 6,785,624 D Shares were issued and allotted in accordance with the terms of the relevant Prospectus. 6,735,624 D Shares were fully paid at that year end. Share issue costs amounting to £295k have been set off against the share proceeds.
In the year ended 31 December 2009, 2,810,596 C Shares were issued and allotted in accordance with the terms of the relevant Prospectus. Share issue costs amounting to £121k have been set off against the share proceeds.
In the period ended 31 December 2008, 10,205,010 Ordinary Shares were issued and allotted in accordance with the terms of the relevant Prospectus. The one subscriber share created upon incorporation was issued at par. Share issue costs amounting to £448k have been set off against the share proceeds.
Ordinary Shares, C Shares, D Shares, E Shares, F Shares and G Shares rank pari passu with each other in terms of voting and other rights. The entire issued Ordinary, C, D, E, F and G Share capital of the Company has been admitted to the official list maintained by the Financial Services Authority and to trading on the London Stock Exchange.
|
| Number of GShares allotted andfully paid | Aggregate value ofShare premiumallotted£'000 | Aggregate Share premiumnet of issue costs£'000 | |||||||||
| 2 April 2012 | 2,141,918 | 2,120 | 2,026 | |||||||||
| 5 April 2012 | 614,842 | 609 | 582 | |||||||||
| 6 September 2012 | 761,284 | 754 | 720 | |||||||||
| 3,518,044 | 3,483 | 3,328 | ||||||||||
14. Reserves
| Share premium£'000 | Other reserve£'000 | Capital reserve£'000 | Revenue reserve£'000 | Total reserves£'000 | ||||||||||||||||
| At 1 January 2012 | - | 21,158 | (353) | (707) | 20,098 | |||||||||||||||
| Issue of equity | 3,483 | - | - | - | 3,483 | |||||||||||||||
| Dividends paid | - | (1,209) | - | - | (1,209) | |||||||||||||||
| Reduction of Share premium account | (3,328) | 3,328 | - | - | - | |||||||||||||||
| Gain on disposal of investments | - | - | 54 | - | 54 | |||||||||||||||
| Decrease in fair value of investments held | - | - | (289) | - | (289) | |||||||||||||||
| Investment income | - | - | - | 318 | 318 | |||||||||||||||
| Arrangement fees | (155) | - | - | (39) | (194) | |||||||||||||||
| Investment management fees | - | - | (187) | (187) | (374) | |||||||||||||||
| Other expenses | - | - | - | (204) | (204) | |||||||||||||||
| At 31 December 2012 | - | 23,277 | (775) | (819) | 21,683 | |||||||||||||||
The capital reserve includes realised investment holding losses of £217k and unrealised investment holding losses of £558k. The other reserve, capital reserve and revenue reserve accounts are the only distributable reserves of the Company.
On 24 February 2012, the Company paid dividends amounting to £510k on Ordinary Shares (11 February 2011: £510k), £141k on C Shares (11 February 2011: £141k) and £337k on D Shares (31 August 2012: £337k). On 1 May 2012, the Company paid dividends amounting to £142k on E Shares (31 December 2011: £Nil) and 79k on F Shares (31 December 2011: £Nil).
15. Net Asset Value Per Share Excluding Distributions to Date
| 2012 | 2011 | |||||||
| Net assets attributable to Ordinary Shareholders (£'000) | 7,637 | 8,286 | ||||||
| Ordinary Shares in issue (number) | 10,205,011 | 10,205,011 | ||||||
| Net asset value per Ordinary Share (pence) | 74.8 | 81.2 | ||||||
| 2012 | 2011 | |||||||
| Net assets attributable to C Shareholders (£'000) | 1,934 | 2,148 | ||||||
| C Shares in issue (number) | 2,810,596 | 2,810,596 | ||||||
| Net asset value per C Share (pence) | 68.8 | 76.4 | ||||||
| 2012 | 2011 | |||||||
| Net assets attributable to D Shareholders (£'000) | 5,285 | 5,791 | ||||||
| D Shares in issue (number) | 6,735,624 | 6,735,624 | ||||||
| Net asset value per D Share (pence) | 78.5 | 86 | ||||||
| 2012 | 2011 | |||||||
| Net assets attributable to E Shareholders (£'000) | 2,451 | 2,649 | ||||||
| E Shares in issue (number) | 2,846,122 | 2,846,122 | ||||||
| Net asset value per E Share (pence) | 86.1 | 93.1 | ||||||
| 2012 | 2011 | |||||||
| Net assets attributable to F Shareholders (£'000) | 1,371 | 1,466 | ||||||
| F Shares in issue (number) | 1,572,095 | 1,572,095 | ||||||
| Net asset value per F Share (pence) | 87.2 | 93.3 | ||||||
| 2012 | 2011 | |||||||
| Net assets attributable to G Shareholders (£'000) | 3,282 | - | ||||||
| G Shares in issue (number) | 3,518,044 | - | ||||||
| Net asset value per G Share (pence) | 93.3 | - | ||||||
16. Financial Instruments and Risk Management
The Company’s financial instruments comprise equity and floating rate debt investments in unquoted companies, cash balances and listed money market OEICs. The Company holds financial assets in accordance with its investment policy.
Fixed asset investments (see note 8) are valued at fair value. For quoted securities included in current asset Non-qualifying Investments, this is 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
| 2012 £'000 | 2011 £'000 | |||||||||||
| Listed money market OEICs (note 11) | Level 1 | 8,441 | 9,823 | |||||||||
| Investment in investee companies (note 11) | Level 3 | 293 | - | |||||||||
| Unquoted investments (note 8) | Level 3 | 11,949 | 10,309 | |||||||||
| 20,683 | 20,132 | |||||||||||
Level 3 investments include a £52k revaluation gain on Into The Groove Limited, an £89k revaluation gain on Crystal Star Limited, a revaluation loss of £24k on Golfmania Limited, a £54k revaluation loss on Titans of Sport Limited and a £107k write off on Supervision Media Limited during the year.
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(b) - Accounting Policies.
The effect on the valuation of the Level 3 investments, if the profit multiple element of the valuation method were to change by a factor of one, would be as follows:
| 31 December 2012£'000 +/- 1 Profit Multiple | 31 December 2011£'000 +/- 1 Profit Multiple | |||||||
| Impact on loss on ordinary activities for the year | ||||||||
| before taxation and total equity | 106 | 32 | ||||||
Risk Management
The Company’s investing activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The most important types of financial risk to which the Company is exposed are:
Market risk; Interest rate risk; Credit risk; and Liquidity risk.The nature and extent of the financial instruments outstanding at the Balance Sheet date and the risk management policies employed by the Company are discussed below:
a) Market Risk
Market risk embodies the potential for both losses and gains and includes interest rate risk and price risk.
The Company’s strategy on the management of investment risk is driven by the Company’s investment objective. Investments in unquoted companies, by their nature, involve a higher degree of risk than investments in larger “blue chip” companies.
The risk of loss in value is managed through careful selection in accordance with a formalised investment decision process, with each investment proposal evaluated by the Investment Committee as part of the due diligence stage.
The Company’s investment policy can be found in the Business Review. The risk is also managed through continuous monitoring of the performance of investments and changes in their risk profile.
b) Interest Rate Risk
Some of the Company’s financial assets are interest bearing, all of which are at floating rates. As a result, the Company is subject to exposure to interest rate risk due to fluctuations in the prevailing levels of market interest rate.
When the Company retains cash balances, the majority of cash is held within interest bearing money market OEICs. This is the Non-qualifying Investments amount on the Balance Sheet of £8,734k (31 December 2011: £9,823k). 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 2012 (31 December 2011: 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 2012£'000+/- 50 basis points | 31 December 2011£'000+/- 50 basis points | |||||||
| Impact on loss on ordinary activities for the year | ||||||||
| before taxation and total equity | 46 | 49 | ||||||
c) Credit Risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company.
Whilst the Company is exposed to credit risk due to its £9,065k (31 December 2011: £7,576k) 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 £9,065k (31 December 2011: £7,576k) unsecured loan notes are the contractually agreed 70% of initial investments.
d) Liquidity Risk
The Company’s financial instruments include equity and debt investments in unquoted companies, which are not traded in an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investment in these instruments at an amount close to fair value.
The Company maintains sufficient reserves of cash and readily realisable marketable securities to meet its liquidity requirements at all times. No numerical disclosures have been provided in respect of liquidity risk as this is not considered to be material.
17. Contingent Assets
There is currently interest income accruing on the unsecured loan note instruments at a rate of 4.5% (31 December 2011: 4.5%), being 4% over the bank base rate which was 0.5% as at 31 December 2012 (31 December 2011: 0.5%), totalling £343k (31 December 2011: £165k). The repayment of this interest is not deemed recoverable based on current profits being derived by the Investee Companies, which currently cannot be determined with any certainty, therefore the Directors have not recognised it in the financial statements.
18. Related Party Transactions
a) Under an offer agreement dated 14 December 2012 between the Company, Ingenious Entertainment VCT 2 plc, IMIL and Howard Kennedy Corporate Services LLP, the Company and Ingenious Entertainment VCT 2 plc appointed IMIL, a company of which Patrick McKenna is a director, to be the promoter of the H Share Offer. IMIL is a wholly-owned subsidiary within the Ingenious Media Holdings plc group of companies (the Ingenious Group) which is controlled by Patrick McKenna and is, therefore, considered a related party to the Company under the Listing Rules. A variable arrangement fee equivalent to an amount of between 0.6288% to 5.5% of the subscription monies of an investor (the relevant percentage depending on the category of the investor) will be paid by the Company to IMIL in consideration for the services provided as promoter, such fees becoming payable upon the allotment of the Shares under that Offer. This disclosure is being made pursuant to the Listing Rules.
During the Reporting Period, the Company paid IMIL a fee of 5.5% of the gross proceeds of the G Share Offer in consideration for services provided as promoter on the G Share Offer, amounting to £194k (31 December 2011: E and F Share fee amounting to £243k in consideration for services provided as promoter of the E and F Share Offers).
b) Under the G Share Offer, Patrick McKenna, and his wife Margaret, subscribed in aggregate for 235,660 G Shares in the Company. Of these, 65,080 G Shares were applied for by each of Patrick and Margaret on 22 August 2012, and those shares were allotted to each of them on 6 September 2012. Such shares were allotted at an issue price of £1 per share. For the purposes of the Listing Rules, Patrick and his wife are both considered to be related parties of the Company (as Patrick was a director of the Company at the time of the allotment, and as Margaret was his ‘associate’ by virtue of being his wife). The disclosure in relation to these August 2012 applications is being made pursuant to the requirements of the Listing Rules.
c) 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 Board approved a deed of novation which, with effect from 6 April 2012, novated the management agreement so that Ingenious Capital Management Limited replaced Ingenious Asset Management Limited as Manager to the Company. Ingenious Capital Management Limited, trading as Ingenious Ventures, undertakes the same duties as Ingenious Asset Management Limited and, save for the change of name of the Manager, there has been no other change to the terms of the management agreement. The reason for this change was to effect an administrative reorganisation within the Ingenious Group.
The Manager, as per the investment management agreement, receives a management fee of 0.4375% of the net asset value per Share class, payable quarterly in advance. In aggregate, this amounted to £374k as at 31 December 2012 (31 December 2011: £348k). The Manager also charges an administration fee of £90k (31 December 2011: £69k) per annum (adjusted for inflation and additional Share classes, if any) and irrecoverable VAT.
d) 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.
e) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to invest in an existing company, Waxarch Ltd, to promote the Field Day Festival. In November 2012 the Company invested £1 million for a total of 15.00% of the equity in Waxarch Ltd. Ingenious Entertainment VCT 2 plc invested £1 million for 15.00% of the equity in Waxarch Ltd. The investment was made in the D Share class.
f) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to invest in an existing company, Liverpool Sound City Limited, to promote a new music concept called Sound City. In March 2012 the Company invested £600k for a total of 15.00% of the equity in Liverpool Sound City Limited. Ingenious Entertainment VCT 2 plc invested £600k for 15.00% of the equity in Liverpool Sound City Limited. The investment was made in the D Share class.
g) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to further invest in an existing company, Venn Music Ltd, to promote an existing music festival called Shakedown Festival. In December 2012 the Company invested £500k in Venn Music Ltd. Ingenious Entertainment VCT 2 plc invested £500k in Venn Music Ltd. The investment was made in the D Share class.
During the year the Company has entered into transactions with the above-mentioned related parties in the normal course of business and on an arm’s length basis as listed in the table below.
| Entity | Note | 2012Expenditurepaid£'000 | 2012Amountsdue£'000 | 2011Expenditurepaid£'000 | 2011Amountsdue£'000 | |||||||||||||||
| Ingenious Media Investments Limited | ||||||||||||||||||||
| - Arrangement fee | a | 194 | - | 243 | - | |||||||||||||||
| Ingenious Asset Management Limited | ||||||||||||||||||||
| - Investment management fee | c | 55 | - | 348 | - | |||||||||||||||
| - Administration fee | c | 12 | - | 69 | - | |||||||||||||||
| - Irrecoverable VAT | - | - | 4 | - | ||||||||||||||||
| Ingenious Capital Management Limited | ||||||||||||||||||||
| - Investment management fee | c | 319 | - | - | - | |||||||||||||||
| - Administration fee | c | 78 | - | - | - | |||||||||||||||
| - Irrecoverable VAT | - | 6 | - | - | ||||||||||||||||
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 £116k excluding VAT (31 December 2011: £172k), have been invoiced to the Investee Companies in the period of which £24k remained outstanding as at 31 December 2012 (31 December 2011: £50k).
19. Events After the Balance Sheet Date
a) The Company declared an interim dividend of 20.0 pence per Ordinary Share on 30 January 2013 (2012: 5.0 pence). The dividend was paid on 28 February 2013 by way of a capital distribution reducing the Company’s other reserves.
b) The Company declared an interim dividend of 5.0 pence per C Share on 30 January 2013 (2012: 5.0 pence). The dividend was paid on 28 February 2013 by way of a capital distribution reducing the Company’s other reserves.
c) The Company declared an interim dividend of 5.0 pence per D Share on 30 January 2013 (2012: 5.0 pence). The dividend was paid on 28 February 2013 by way of a capital distribution reducing the Company’s other reserves.
d) The Company declared an interim dividend of 5.0 pence per E Share on 30 January 2013 (2012: 5.0 pence). The dividend was paid on 28 February 2013 by way of a capital distribution reducing the Company’s other reserves.
e) The Company declared an interim dividend of 5.0 pence per F Share on 30 January 2013 (2012: 5.0 pence). The dividend was paid on 28 February 2013 by way of a capital distribution reducing the Company’s other reserves.
f) The Company allotted 1,735,921 H Shares on 5 April 2013. The H Share Offer is open for subscription until 30 August 2013.
g) On 4 April 2013, Patrick McKenna applied for, in aggregate, 69,840 H Shares in the Company and Ingenious Entertainment VCT 2 plc under the H Share Offer. Further to this, 34,920 H Shares in the Company were allotted to him at an issue price of £1 per Share (together with a further 1,047 H Shares as waiver shares pursuant to the terms of the H Share Offer). For the purposes of the Listing Rules, Patrick is considered to be a related party of the Company (as he was a Director of the Company at the time of the allotment). The disclosure in relation to this application is made pursuant to the requirements of the Listing Rules.
h) In January 2013 the Directors agreed, in principle, to sell the Company’s investments in the Rewind Festival and Rewind North to the event co-promoter (the Rival Organisation), contingent upon the co-promoter selling the whole of the Rewind brand to a third party (Impresario Festivals plc). Both transactions were based upon the same overall valuation of Rewind and the deal completed on 22 March 2013.
20. Capital Management
The capital management objectives of the Company are:
To safeguard its ability to continue as a going concern so that it can continue to provide returns to Shareholders. To ensure sufficient liquid resources are available to meet the funding requirements of its investments and to fund new investments where identified.The Company has no external debt; consequently all capital is represented by the value of Share capital, distributable and other reserves. Total Shareholder equity at 31 December 2012 was £21,960k (31 December 2011: £20,340k).
In order to maintain or adjust its capital structure the Company may adjust the amount of dividends paid to the Shareholders, return capital to Shareholders, issue new shares or sell assets.
There have been no changes to the capital management objectives of the business from the previous period.
The capital structure of the Company was changed by the issue of G Shares (see note 13) during the year.
The Company is subject to the following externally imposed capital requirements:
As a public company Ingenious Entertainment VCT 1 plc must have a minimum of £50k 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.
Copyright Business Wire 2013