RNS Number:8269W
Ingenious Music VCT PLC
18 May 2007
INGENIOUS MUSIC VCT plc
PRELIMINARY STATEMENT OF ANNUAL RESULTS
For the year ended 31 January 2007
CHAIRMAN'S STATEMENT
I am delighted to present the Company's second annual report and accounts
covering the 12 months to 31 January 2007 (the "reporting period").
Overview of Activities
The reporting period has been an active one for the Company with the speed of
investment increasing as the year has progressed. Following the Company's first
investments in up-and-coming acts The Heights and Martina Topley-Bird, it made
its first co-investment with sister fund Ingenious Music VCT 2 plc in July 2006,
supporting the release of Travis's highly anticipated fifth album. The Company
has since proceeded to complete a further seven deals and committed a third more
(34%) of its available funds earmarked for qualifying investment purposes,
within the last six months.
The deals completed have contributed to creating a strong roster of diverse acts
across the musical genres. The Company has invested close to #6.5 million to
support the forthcoming albums of a range of top acts including the highly
acclaimed Peter Gabriel, 2006 World Cup song writers Embrace and renowned punk/
dance tribe The Prodigy, alongside up-and-coming acts including the bands
Passenger and Apartment and solo-artists Indiana Gregg and David Ford.
The investments were made alongside some of the most experienced players within
the industry and are testament to the relationships forged across the sector.
They include Real World Records (Peter Gabriel), Independiente (Embrace and
David Ford), Cooking Vinyl Records (The Prodigy), Kuba Music Limited (Apartment)
, and Gr8 Pop (Indiana Gregg), and IE: Music (Passenger), which is headed up by
Tim Clark and David Enthoven, the managers of Robbie Williams.
Since the year end, a further three investments have been made: the first was in
newcomers Vatican DC, who have supported the likes of The Prodigy and Bloc Party
; the second was in Ulrich Schnauss, an up-and-coming artist who we believe has
great potential following the critical acclaim received on his first album
released earlier this year; and the third saw a further #500,000 investment in
Travis's fifth album.
The Manager continues to actively source and review new investment propositions
and has a strong pipeline of opportunities which it should be well placed to
conclude in the coming months, well within the deadline to retain VCT status.
Results
The reporting period has been dominated by new investments, with #6.4 million
invested and committed to qualifying investments. The Company made a loss on
ordinary activities of #58,000 in the period to 31 January 2007, which was
expected given that these investments have not had time to mature. The Company's
net asset value, however, remained relatively constant during the period at
#14.3 million or 94.8 pence per share (2006: 95.2 pence per share).
Outlook
The outlook for the next financial year remains positive, with demand for the
Company's investment capital expected to be driven by sustained activity in the
independent sector, including music publishers migrating into wider rights
exploitation companies, and by the Majors.
I would like to take this opportunity to thank all shareholders for their
continued support of the Company and I look forward to meeting those of you that
are able to attend the AGM, scheduled for 11 July 2007.
Patrick McKenna
Chairman
17 May 2007
MANAGER'S REVIEW
Investment Objective
The investment objective of the Company is to provide shareholders with an
attractive return from investments in a portfolio of music companies that will
be engaged in the creation, development and exploitation of IP rights.
The reporting period has seen strong deal flow throughout and we expect this to
continue into the next financial year, with a large number of investment
opportunities already in the pipeline. We continue to focus our efforts on
identifying projects that we believe support the development of exciting acts,
with the potential to deliver superior returns for our investors.
Investments 2006
After closing its first two qualifying investments in up-and-coming acts The
Heights and Martina Topley-Bird, the Company joined forces with its sister fund
Ingenious Music VCT 2 plc, enabling it to pursue a range of co-investment
opportunities , and went on to close its third deal on this basis by investing
in Travis in July 2006. Since then the Company has continued to actively source
and review investment propositions and has subsequently closed a further seven
deals in the last six months.
INDIANA GREGG
The Company closed its fourth qualifying investment on 6 November 2006, by
investing #417,000 in the joint venture company, Thorpe Trading Ltd, set up
in-conjunction with GR8 Pop Limited, to provide funding for the support of all
recording costs and ancillary expenditure including video, tour support and
marketing expenditure required to launch Indiana Gregg's first solo album.
About Indiana Gregg
Indiana Gregg, who has already won numerous song writing awards, will be
launching her first solo album with GR8 Pop Limited, led by Ian Morrow, who has
previously worked with Seal, Wet Wet Wet, Lisa Stansfield and Nightcrawlers, and
Graham Marr, a 25-year veteran from Warner Music. Indiana will be collaborating
with several highly respected music industry figures on her new album including
Grammy award nominee Paul Wright, who has worked with George Michael, Tina
Turner and David Bowie.
PASSENGER AND APARTMENT
On 14 November 2006 the Company closed its fifth and sixth investments in
up-and-coming bands, Passenger and Apartment.
Passenger
The investment in Passenger (formerly known as Mike Rosenberg Band) will see a
financial commitment of #660,725 from the Company to support the band's debut
album to form a joint venture company, Genius Music Limited, in-conjunction with
IE: Music.
IE Music is run by Tim Clark and David Enthoven, the managers of Robbie
Williams, the UK's most successful solo artist whose albums have sold more than
32 million copies worldwide to date. Enthoven previously managed and named T.
Rex, while also taking on amongst others, Brian Eno and Roxy Music. He did this
with EG Records, the company he co-founded. Clark, as managing director of
Island Records, oversaw the careers of Bob Marley, Cat Stevens, Steve Winwood,
Jethro Tull and Mott the Hoople, amongst others.
About Passenger
Based in Brighton, the band is a creative partnership between lead vocalist,
22-year old Mike Rosenberg and BAFTA nominated composer Andrew Phillips. The
deal follows a year of successful touring for the band that made their debut
festival appearance at O2 Wireless and who have gone on to perform at sell-out
shows across Brighton as well as performing at Glastonbury, In The City and
various London gigs.
Apartment
The investment in Apartment sees a financial commitment of #227,647 from the
Company to form a joint venture company, Funwood Music Limited, alongside
independent record label Kuba Music Limited, to back the launch of Apartment's
debut album.
Kuba Music was founded and is run by Jack Steven, who has successfully launched
and developed a number of successful artists and bands including Eurythmics
before moving to Sony Records and later working with The Ministry of Sound.
About Apartment
Apartment has already released singles on the 'Fierce Panda' label, all of which
have received critical acclaim from Radio 1 and XFM. The band has built up a
strong live reputation and has previously supported The Killers, The Bravery and
The Editors on tour.
PETER GABRIEL
On 11 January 2007, the Company invested #1 million in High Level Recording
Limited, the joint venture company set up in conjunction with Real World Records
to provide funding for the support of all recording costs along with the artist,
video, tour support and marketing expenditure required to launch Peter Gabriel's
fifteenth album in North America.
Real World Records was founded by WOMAD and Peter Gabriel to provide talented
artists from around the world with access to state-of-the-art recording
facilities and access to audiences beyond their geographic region. Launched in
1989, Real World Records has grown into a label of wide-ranging, world-class
music from all corners of the globe.
About Peter Gabriel
Peter Gabriel has earned a worldwide reputation for his innovative work as a
musician, writer and video maker. When at school he co-founded the group Genesis
, which he left in 1975. Since then, his albums, live performances and videos
have won him a succession of awards. He launched his first solo album, released
in February 1977, when he was just 26 years of age and has gone on to carve out
a 25-year career in the music industry, releasing 14 albums with many grammy
award winning hits, including 'Sledgehammer', which has won the most music video
awards ever, including number one position in the 'Rolling Stones' top 100
videos of all time and the MTV most played video of all time.
THE PRODIGY
On 31 January 2007, the Company agreed to invest #1 million in joint venture
company, Cooking Vinyl Ventures Prodigy Limited, set up in conjunction with
Cooking Vinyl Records (the label behind musical luminaries such as Billy Bragg
and the Buzzcocks) to back The Prodigy's latest album release.
About The Prodigy
The Prodigy is a British band, whose music consists of various styles ranging
from rave, hardcore techno and industrial in the early 1990s to alternative rock
and bigbeat with punk vocal elements in later times. The current band members
include Liam Howlett (composer/keyboards), Keith Flint (dancer/vocalist) and
Maxim (MC/vocalist). The Prodigy first emerged on the underground rave scene in
the early 1990s, and has since achieved immense popularity and worldwide renown.
Some of their most popular songs include 'Charly', 'Out of Space', 'Smack My
Bitch Up', 'Voodoo People', 'No Good (Start the Dance)', 'Breathe' and '
Firestarter'.
EMBRACE and DAVID FORD
The Company has cemented its strong relationship with Independiente, one of the
UK's most prolific and successful independent record labels, after completing
its investment in multi-platinum band Travis, to launch the band's fifth album.
The Company has now secured a further two deals with the record label, all of
which are testimony to the strength of the relationship forged.
Embrace
On 31 January 2007, the Company agreed to invest #700,000 in successful Brit
band and World Cup 2006 anthem writer/performers, Embrace, forming the joint
venture company, Independiente Music Ventures - Embrace Limited.
About Embrace
Following in the footsteps of Oasis and The Verve, Embrace became a minor pop
sensation in post-Brit-pop Britain in the late 1990s. Like Oasis; the group has
a knack for big, anthemic hooks, which has contributed to their popularity and
allowed them to cultivate a strong fan base around the world, with hits such as
'The Good Will Out'.
David Ford
On 31 January 2007, the Company agreed to invest #387,500 in up and coming
artist David Ford, forming joint venture company, Independiente Music Ventures -
David Ford Limited.
Emulating the emotional sounds of Damien Rice, David Ford released an album
earlier this year to much critical acclaim.
Outlook
The UK music industry is unique among European nations, and second only to the
US in the world, in terms of having nurtured and developed a rich recorded music
heritage.
Whilst overall music sales have witnessed a decline, opportunities exist to
capitalise on the growing prominence of digital sales and participate in the
wider exploitation of music rights, such as live performances and merchandising.
The music business is hit-driven and it is this characteristic which underpins
the importance of partnering with the right people to create a roster of acts
across the musical genres. Ingenious will continue the policy of participating
in joint ventures with experienced industry players across a range of new and
established artists and will look, where possible, to benefit from a wide range
of income streams.
The UK continues to maintain a commanding position in online sales, accounting
for the largest number of digital downloads across Europe. Sales of new British
artists led to UK consumers buying a record 27.9 million artist albums in the
first three months of 2006 with album sales up by 1.5% to give the best ever
first quarter total sales of all artists on the global market, of which British
artists claimed eight of the top 10 sellers, with seven debut acts. The UK
charts have recognized the change in impact on sales brought about by the advent
of digital technologies, with a recent adjustment meaning that online sales are
now included in the calculation of chart position, bringing with it the
opportunity for all releases new and old to feature in the charts more than
once.
According to industry figures, British acts continued to dominate the European
album market in 2006. British acts scooped 19 of the year's 36 IFPI Platinum
Awards for selling one million copies. The British Phonographic Institute has
stated that the results underlined the current boom in new British music, with 6
of the 19 UK Platinum awards being 2006 releases. In the first half of 2006, CD
sales still accounted for nearly three quarters of all retail music sales,
out-earning digital sales by more than six to one. Retailers such as Target,
Best Buy and particularly Wal-Mart have accounted for a steadily increasing
share of CD sales.
The recently released IFPI 2007 Digital Music Report states that in the last
year alone (2006) consumers downloaded 795 million tracks, up 89% on 2005.
The Company believes it is well positioned to take advantage of the current
market developments and to capitalise on the full range of intellectual property
rights that attach to an artist.
Contact
If you have any questions on this review or would like to speak to a member of
the management team please do not hesitate to call us on 020 7319 4000.
Ingenious Ventures Limited
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 Music VCT plc is a tax efficient company listed on The London Stock
Exchange.
The investment policy of the Company is to invest in a portfolio of music
companies that will be engaged in the value-added creation, development and
exploitation of music-related intellectual property rights.
The investment objective is to achieve a combination of a high degree of
downside protection in an otherwise potentially high risk proposition and
long-term capital growth, maximising distributions in order to take advantage of
tax-free dividends.
The Board has delegated day-to-day investment management and administration of
the Company to Ingenious Ventures under the terms of a management deed and an
administration agreement.
2. Principal Risks, Risk Management and Regulatory Environment
The Board believes that the principal risks faced by the Company are:
* Investment and strategic - an investment in the recorded music sector is
tied to a certain degree to the fortunes of that industry generally. In
particular, there is a risk that the Company will not identify opportunities
where the Artists' success is sufficient to earn royalties over and above
minimum contractual income negotiated.
* Loss of approval as a Venture Capital Trust - the Company must comply
with section 842AA of the ICTA 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 having to repay the income tax relief they obtained and future
dividends paid by the Company becoming subject to tax. The Company would
also lose its exemption from corporation tax on capital gains.
* Regulatory - the Company is required to comply with the Companies Act,
the rules of the UK Listing Authority and United Kingdom Accounting
Standards. Breach of any of these regulatory rules might lead to suspension
of the Company's Stock Exchange listing, financial penalties or a qualified
audit report.
* Financial - inadequate internal controls might lead to misappropriation
of assets. Inappropriate accounting policies might lead to misreporting or
breaches of regulations.
* External inherent risks - The Company's investments will be in unquoted
companies which by their nature involve a higher degree of risk than
investment in the main market due to the fact there is no liquid market and
may, therefore, be difficult to realise. Furthermore, there may be further
constraints imposed on realisations because of the requirement to satisfy
certain conditions necessary for the Company to maintain its VCT status
(such as the obligation to have at least 70 per cent. by value of its
investments in qualifying holdings).
The Board seeks to mitigate the internal risks by setting clear policies,
including establishing a funding structure which provides for minimum royalty
payments equivalent to at least 70 per cent. of the investment, regular reviews
of performance, monitoring progress and compliance.
3. 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 period, the position of the
Company at the year end and the outlook for the coming year is contained within
the Chairman's Statement and Manager's Review
INVESTMENT PORTFOLIO
------------------------------------------------------------------------
The Heights Recording Limited
------------------------------------------------------------------------
Artist: The Heights
Date of investment: Jan-06
Initial investment: #200,000
Valuation: #200,000
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 49.90%
------------------------------------------------------------------------
Independiente Music Ventures - MTB Limited
------------------------------------------------------------------------
Artist: Martina Topley-Bird
Date of investment: Jun-06
Initial investment: #1,000,000
Valuation: #1,000,000
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 49.90%
------------------------------------------------------------------------
Independiente Music Ventures -
Travis Limited
------------------------------------------------------------------------
Artist: Travis
Date of investment: Jul-06
Initial investment: #1,000,000
Valuation: #1,000,000
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 24.95%
------------------------------------------------------------------------
Thorpe Trading Limited
------------------------------------------------------------------------
Artist: Indiana Gregg
Date of investment: Nov-06
Initial investment: #417,000
Valuation: #417,000
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 24.95%
------------------------------------------------------------------------
Funwood Music Limited
------------------------------------------------------------------------
Artist: Apartment
Date of investment: Nov-06
Initial investment: #227,647
Valuation: #227,647
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 24.95%
------------------------------------------------------------------------
Genius Music Limited
------------------------------------------------------------------------
Artist: Passenger (formally known as Mike Rosenberg Band)
Date of investment: Nov-06
Initial investment: #660,725
Valuation: #660,725
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 24.95%
------------------------------------------------------------------------
High Level Recording Limited
------------------------------------------------------------------------
Artist: Peter Gabriel
Date of investment: Jan-07
Initial investment: #1,000,000
Valuation: #1,000,000
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 24.95%
------------------------------------------------------------------------
Independiente Music Ventures - David Ford Limited
------------------------------------------------------------------------
Artist: David Ford
Date of investment: Jan-07
Initial investment: #387,500
Valuation: #387,500
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 24.95%
------------------------------------------------------------------------
Independiente Music Ventures -
Embrace Limited
------------------------------------------------------------------------
Artist: Embrace
Date of investment: Jan-07
Initial investment: #700,000
Valuation: #700,000
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 24.95%
------------------------------------------------------------------------
Cooking Vinyl Ventures
Prodigy Limited
------------------------------------------------------------------------
Artist: Prodigy
Date of investment: Jan-07
Initial investment: #1,000,000
Valuation: #1,000,000
Valuation basis: Fair value - Price of Recent Investment
Percentage of equity held: 24.95%
INCOME STATEMENT
for the year ended 31 January 2007
(16mth) (16mth) (16mth)
2007 2007 2007 2006 2006 2006
Revenue Capital Total Revenue Capital Total
Note #'000 #'000 #'000 #'000 #'000 #'000
--------------------------------------------------------------------------------------------
Gain on
disposal of
investments 10 - 96 96 - - -
Increase in
fair value of
investments
held 10 - 234 234 - 32 32
Investment
income 2 125 55 180 354 - 354
Arrangement
fees 3 - - - (151) - (151)
Investment
management
fees 4 (170) (170) (340) (63) (63) (126)
Other expenses 5 (190) (38) (228) (204) (24) (228)
--------------------------------------------------------------------------------------------
Loss on
ordinary
activities
before
taxation (235) 177 (58) (64) (55) (119)
Tax on
ordinary
activities 6 - - - - - -
--------------------------------------------------------------------------------------------
Loss
attributable
to equity
shareholders (235) 177 (58) (64) (55) (119)
--------------------------------------------------------------------------------------------
Basic and
diluted return
per share
(pence) 7 (1.56) 1.17 (0.39) (0.76) (0.64) (1.40)
--------------------------------------------------------------------------------------------
The Company has no recognised gains and losses other than those disclosed above.
The accompanying notes are an integral part of these financial statements.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 January 2007
(16mth)
2007 2006
#'000 #'000
-------------------------------------------------------------------------------
Opening equity shareholders' funds 14,370 -
Capital subscribed - 15,093
Issue costs - (604)
Loss for the period (58) (119)
-------------------------------------------------------------------------------
Equity shareholders' funds at 31 January 2007 14,312 14,370
-------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
BALANCE SHEET
As at 31 January 2007
2007 2006
-------------------------------------------------------------------------------
Note #'000 #'000
-------------------------------------------------------------------------------
Fixed assets
Qualifying investments 8 6,593 200
Current assets
Debtors 9 10 156
Non-Qualifying investments 10 7,414 1,532
Cash at bank and in hand 2,026 12,811
-------------------------------------------------------------------------------
Creditors: amounts falling due within one year 11 (1,731) (329)
-------------------------------------------------------------------------------
Net current assets 7,719 14,170
-------------------------------------------------------------------------------
Net assets 14,312 14,370
-------------------------------------------------------------------------------
Capital and reserves
Called-up share capital 12 151 151
Share premium account 13 6,867 6,867
Other Reserve Account 13 7,471 7,471
Capital reserves
realised 13 (144) (87)
unrealised 12 266 32
Revenue reserve 13 (299) (64)
-------------------------------------------------------------------------------
Equity shareholders' funds 14,312 14,370
-------------------------------------------------------------------------------
Net asset value (pence per share) 14 94.8 95.2
-------------------------------------------------------------------------------
The financial statements were approved by the Board of Directors on 17 May 2007.
Signed on behalf of the Board of Directors:
Patrick McKenna
Chairman
CASH FLOW STATEMENT
for the year ended 31 January 2007
(16mth)
2007 2006
#'000 #'000
--------------------------------------------------------------------------------------------------
Net cash outflow from operating activities (540) (178)
--------------------------------------------------------------------------------------------------
Capital expenditure and financial investment
Purchase of qualifying investments (4,693) -
Purchase of non-qualifying investments (12,549) (1,500)
Disposal of non-qualifying investments 6,997 -
--------------------------------------------------------------------------------------------------
Net cash outflow from capital expenditure and
financial investment (10,245) (1,500)
--------------------------------------------------------------------------------------------------
Financing
Issue of ordinary shares - 15,093
Expenses of the issue of ordinary shares - (604)
--------------------------------------------------------------------------------------------------
Net cash inflow from financing - 14,489
--------------------------------------------------------------------------------------------------
(Decrease)/Increase in cash (10,785) 12,811
--------------------------------------------------------------------------------------------------
Reconciliation of Loss Before Taxation to Net Cash Flow from Operating Activities
#'000 #'000
--------------------------------------------------------------------------------------------------
Loss on ordinary activities before taxation (58) (119)
Gain on disposal of investments (96) -
Increase in fair value of investments held (234) (32)
Decrease/(Increase) in receivables 146 (156)
(Decrease)/Increase in payables (298) 129
--------------------------------------------------------------------------------------------------
Net cash outflow from operating activities (540) (178)
--------------------------------------------------------------------------------------------------
Reconciliation of Net Cash Flow to Movement in Net Funds
#'000 #'000
--------------------------------------------------------------------------------------------------
Opening cash balances 12,811 -
Net cash outflow/inflow (10,785) 12,811
--------------------------------------------------------------------------------------------------
Closing cash balances 2,026 12,811
--------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 January 2007
1. Accounting policies
(a) Basis of Accounting
The results in respect of the 12 months to 31 January 2007 have been taken from
the company's full accounts which have not yet been delivered to the Registrar
of Companies. The comparative figures in respect of the 12 months to 31 January
2007 have been taken from the full accounts which have been delivered to the
Registrar of Companies and which contain an unqualified audit report. This
financial information does not constitute statutory accounts under section 240
of the Companies Act 1985.
The financial statements for the period ended 31 January 2007 have been prepared
in accordance with the UK Generally Accepted Accounting Practice, and with the
Statement of Recommended Practice (the SORP) entitled "Financial Statements of
Investment Trust Companies" which was issued in January 2003 and revised in
December 2005.
(b) Valuation of Investments
Qualifying Investments
Unquoted investments including equity and loan investments are stated at fair
value in accordance with the International Private Equity and Venture Capital
Guidelines and Financial Reporting Standard 26 "Financial Instruments
Measurement" (FRS 26). They are designated at fair value through profit and loss
in accordance with FRS 26.
The guidelines set out six permissible valuation methodologies, of these the two
methodologies most applicable to the VCT 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 of up to a year is often applied as the long stop date for
such a valuation.
2 - Discounted cash flows/earnings of the underlying business, calculating the
net present value of expected future cashflows of the investee companies. In
relation to the VCT 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 (i.e. pre-release) and therefore would not
be an appropriate methodology to apply in the early stage of the investment.
The adopted approach fair values the investments at the "price of recent
investment" (i.e. cost) in their first year of investment. Subsequently, the
portfolio of investments is fair valued on the discounted cash flow/earnings
basis using the latest available information following the release of the
artists' records/albums.
Non-Qualifying Investments
The Company's investments in interest bearing money market open ended investment
companies (OEIC's) are valued at mark-to-market. They have been designated as
fair value and recognised as revenue through the income statement for the
purposes of FRS26.
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 the capital return within the income statement.
(c) Investment Income
Interest income is included using the effective interest method.
(d) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged to the
revenue account within the income statement except that:
* expenses which are incidental to the acquisition or disposal of an
investment are charged to capital in the income statement as incurred; and
* expenses are split and presented partly as capital items where a
connection with the maintenance or enhancement of the value of the
investments held can be demonstrated.
(e) Deferred Taxation
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date where transactions or
events that result in an obligation to pay more, or a right to pay less, tax in
the future have occurred at the balance sheet date. This is subject to deferred
tax assets only being recognised if it is considered more likely than not that
there will be suitable profits from which the future reversal of the underlying
timing differences can be deducted. Timing differences are differences arising
between the Company's taxable profits and its results as stated in the financial
statements which are capable of reversal in one or more subsequent periods.
2. Investment Income
(16mth)
2007 2006
#'000 #'000
-------------------------------------------------------------------------------
Bank deposit interest 125 354
Reinvested interest from OEIC's 55 -
-------------------------------------------------------------------------------
180 354
-------------------------------------------------------------------------------
3. Arrangement Fees
(16mth)
2007 2006
#'000 #'000
-------------------------------------------------------------------------------
Arrangement fees - 151
-------------------------------------------------------------------------------
All direct and indirect expenses and costs arising out of the Offer were
incurred by the Promoter and a fee of 5% of the gross proceeds of the 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 FRS 26, the issue costs have been
deducted from the share premium account.
The remaining 20% reflected above has been taken to revenue.
4. Investment Management Fee
(16mth) (16mth) (16mth)
2007 2007 2007 2006 2006 2006
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
------------------------------------------------------------------------------------
Investment
management fee 145 145 290 54 54 108
Irrecoverable
VAT 25 25 50 9 9 18
------------------------------------------------------------------------------------
170 170 340 63 63 126
------------------------------------------------------------------------------------
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 proportion of the fee attributable to the management of the
investments of the Company.
5. Other Expenses
(16mth) (16mth) (16mth)
2007 2007 2007 2006 2006 2006
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
------------------------------------------------------------------------------------
Directors'
remuneration
(including
Employers
National
Insurance) 65 - 65 72 - 72
Auditors'
remuneration 15 - 15 12 - 12
Legal &
Professional
fees 4 38 42 34 24 58
Other
administration
expense 106 - 106 86 - 86
------------------------------------------------------------------------------------
190 38 228 204 24 228
------------------------------------------------------------------------------------
All figures include irrecoverable VAT, where applicable. The company is not
registered for VAT. Auditors' remuneration relates to audit services only.
Further details on the Directors' fee disclosures are given in the Directors'
Remuneration Report.
6. Tax Charge on Ordinary Activities
(16mth) (16mth) (16mth)
2007 2007 2007 2006 2006 2006
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
--------------------------------------------------------------------------------------
Loss on
ordinary
activities
before tax (235) 177 (58) (64) (55) (119)
Loss on
ordinary
activities 30%
(2006: 30%) (70) 53 (17) (19) (17) (36)
Adjustments:
Non taxable
gains on
investments - (80) (80) - (10) (10)
Non taxable
income - (8) (8) - - -
Disallowed
expenses 4 10 14 1 7 8
Unutilised
losses for the
current period 66 25 91 18 20 38
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- - - - - -
--------------------------------------------------------------------------------------
Capital returns are not included in the above as the Company is a VCT and its
capital gains are not taxable.
At 31 January 2007 the Company had surplus management expenses of #429,000 which
have not been recognised as a deferred tax asset. This is due to the fact that
the Company has only been investing for a short period of time, and future
taxable income can not be predicted with reasonable certainty. Due to the
Company's status as a VCT, and the intention to continue meeting the conditions
required to obtain approval in the foreseeable future the Company does not
provide deferred tax on any capital gains or losses which arise on the
revaluation of investments.
7. Basic and Diluted Return per Share
(16mth) (16mth) (16mth)
2007 2007 2007 2006 2006 2006
Revenue Capital Total Revenue Capital Total
#'000 #'000 #'000 #'000 #'000 #'000
----------------------------------------------------------------------------------------------
(Loss)/Profit
on ordinary
activities
after taxation
(#'000) (235) 177 (58) (64) (55) (119)
Weighted
average shares
in issue
(number) 15,093,281 15,093,281 15,093,281 8,481,868 8,481,868 8,481,868
----------------------------------------------------------------------------------------------
(Loss)/Profit
attributable
per share
(pence) (1.56) 1.17 (0.39) (0.76) (0.64) (1.40)
----------------------------------------------------------------------------------------------
There are no dilutive potential ordinary shares, including convertible
instruments, options or contingent share agreements in issue for the Company.
The basic return per share is therefore the same as the diluted return per
share.
8. Fixed Asset Investments
2007 2006
#'000 #'000
-------------------------------------------------------------------------------
Unquoted investments 6,593 200
-------------------------------------------------------------------------------
Equity shares 1,978 60
Unsecured loan notes 4,615 140
-------------------------------------------------------------------------------
6,593 200
-------------------------------------------------------------------------------
Qualifying Investments
#'000 #'000
-------------------------------------------------------------------------------
Opening valuation 200 -
Purchases at cost 6,393 200
-------------------------------------------------------------------------------
Closing valuation and book cost 6,593 200
-------------------------------------------------------------------------------
As at 31 January 2007 the unsecured loan notes of the Company are repayable in
2011 (#1,831,900) and in 2012 (#2,783,200).
Significant Interests
The Company has interests of greater than 20% of the nominal value of the
allotted shares of the following UK incorporated investee companies as at 31
January 2007:
% class and % voting rights
share type
-------------------------------------------------------------------------------
The Heights Recording Limited 49.90% A Ordinary 49.90%
Independiente Music Ventures - MTB 49.90% A Ordinary 49.90%
Limited
Independiente Music Ventures - 24.95% A Ordinary 24.95%
Travis Limited
Thorpe Trading Limited 24.95% A Ordinary 24.95%
Funwood Music Limited 24.95% A Ordinary 24.95%
Genius Music Limited 24.95% A Ordinary 24.95%
High Level Recording Limited 24.95% A Ordinary 24.95%
Independiente Music Ventures - 24.95% A Ordinary 24.95%
David Ford Limited
Independiente Music Ventures - 24.95% A Ordinary 24.95%
Embrace Limited
Cooking Vinyl Ventures Prodigy 24.95% A Ordinary 24.95%
Limited
-------------------------------------------------------------------------------
The investments made by the Company are part of its portfolio of investments. As
a VCT, the Company value those investments at fair value in accordance with FRS
26.
9. Debtors
2007 2006
#'000 #'000
-------------------------------------------------------------------------------
Prepayments and accrued income 9 156
Trade Debtors 1 -
-------------------------------------------------------------------------------
10 156
-------------------------------------------------------------------------------
10. Current Asset Investment
2007 2007
#'000 #'000
-------------------------------------------------------------------------------
Funds held in listed money market instruments 7,414 1,532
-------------------------------------------------------------------------------
Non-Qualifying
Investments
#'000 #'000
-------------------------------------------------------------------------------
Opening valuation 1,532 -
Purchases at cost 12,549 1,500
Disposal proceeds (6,997) -
Realised gains on disposal 96 -
Unrealised change in value of investment 234 32
-------------------------------------------------------------------------------
Closing valuation and book cost 7,414 1,532
-------------------------------------------------------------------------------
In order to safeguard the capital available for investment in Qualifying
Investments and balance this with the need to provide good returns to investors,
available funds from the net proceeds are invested in appropriate securities
(money market securities and cash funds) until required for Qualifying
Investment purposes.
Included within the total amount for Non-Qualifying Investments, #2.0m has been
invested in the Ingenious Enhanced Cash Fund managed by Ingenious Asset
Management.
11. Creditors: Amounts Falling Due Within One Year
2007 2006
#'000 #'000
-------------------------------------------------------------------------------
Trade Creditors 1 65
Accruals and deferred income 30 64
Amounts due to Investee company 1,700 200
-------------------------------------------------------------------------------
1,731 329
-------------------------------------------------------------------------------
12. Called-Up Share Capital
2007
Authorised #'000
-------------------------------------------------------------------------------
35,000,000 ordinary shares 1p each 350
-------------------------------------------------------------------------------
Allotted, called-up and fully paid
-------------------------------------------------------------------------------
15,093,283 ordinary shares 1p each 151
-------------------------------------------------------------------------------
15,093,281 shares were issued and allotted in accordance with the terms of the
Prospectus. The two subscriber shares created upon incorporation were issued at
par.
The entire issued ordinary share capital of the Company has been admitted to the
official list maintained by the Financial Services Authority and to trading on
the London Stock Exchange.
Number of Aggregate Aggregate
shares allotted nominal value consideration
allotted received net of
issue costs
#'000 #'000
Date of issue and allotment
17 November
2004 2 - -
4 April 2005 4,597,022 46 4,413
5 April 2005 341,300 3 327
29 April 2005 463,700 5 445
17 June 2005 1,302,400 13 1,250
28 June 2005 3,984,416 40 3,825
29 June 2005 4,024,443 40 3,864
30 June 2005 380,000 4 365
-------------------------------------------------------------------------------
15,093,283 151 14,489
-------------------------------------------------------------------------------
13. Reserves
Share Other Capital Capital Revenue Total
premium reserve realised unrealised reserve reserves
#'000 #'000 #'000 #'000 #'000 #'000
----------------------------------------------------------------------------------------------------------
At 1 February
2006 6,867 7,471 (87) 32 (64) 14,219
Issue of equity - - - - - -
Gain on
disposal of
investments - - 96 - - 96
Increase in
fair value of
investments
held - - - 234 - 234
Investment
income - - 55 - 125 180
Arrangement fees - - - - - -
Investment
management
fees - - (170) - (170) (340)
Other expenses - - (38) - (190) (228)
----------------------------------------------------------------------------------------------------------
At 31 January
2007 6,867 7,471 (144) 266 (299) 14,161
----------------------------------------------------------------------------------------------------------
On 31 October 2005, the Company registered the court order dated 26 October 2005
which confirmed the reduction of the Company's share premium account by
#7,471,174. The purpose of the reduction was to enable the Company to create a
distributable reserve for the purpose of purchasing shares in the market.
14. Net Asset Value Per Share
31 January 2007 31 January 2006
-------------------------------------------------------------------------------
Net assets attributable to
shareholders (#'000) 14,312 14,370
Shares in issue (number) 15,093,283 15,093,283
-------------------------------------------------------------------------------
Net asset value per share (pence) 94.8 95.2
-------------------------------------------------------------------------------
Enquiries to:
Sarah Cruickshank
Ingenious Ventures Limited
15 Golden Square
London
W1F 9JG
Tel: 020 7319 4000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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