TIDMILV2
RNS Number : 3727A
Ingenious Live VCT 2 plc
29 March 2012
INGENIOUS LIVE VCT 2 PLC ("the Company")
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2011
CHAIRMAN'S STATEMENT
I am delighted to present the Company's fifth Annual Report and
Accounts covering the year to 31 December 2011 (the Reporting
Period).
Overview of Activities
The Company has continued its investment strategy during the
year and we are delighted to announce that three of its music
festivals sold out their full capacity in 2011. At the same time,
the Company's exhibition portfolio including both Golf Live and
Taste of Christmas took major steps forward with Taste of Christmas
now making significant profits and Golf Live breaking even after
only two years.
With Let's Dance having been recommissioned by the BBC for a
fourth series, the Company's investment portfolio continues to go
from strength to strength.
Liquidation Strategy
It was always the stated intention that once the Company's
Shareholders had held their Shares for the minimum five years
required under VCT regulations, the Company would seek to return
capital to its Shareholders.
This anniversary is reached at the end of July 2012 and it is
our intention to consult with the Shareholders regarding the future
prospects of the Company.
Sale of Assets
In December 2011, the Company announced that it had agreed terms
to sell its interest in the second day of Creamfields for total
consideration of GBP2.78 million across the Live VCTs (GBP1.7
million to repay loan notes and GBP1.08 million to acquire the Live
VCTs' share capital in CFDT Limited).
The deal formally closed on 13 February 2012 and the Company
paid a special dividend to its Shareholders of 21.0 pence per Share
on 24 February 2012 largely as a result of this transaction.
Results
The Company made a profit on ordinary activities of GBP204,000
in the year to 31 December 2011 (31 December 2010: profit of
GBP89,000).
The net asset value per Share at 31 December 2011 was 86.3 pence
(31 December 2010: 91.0 pence) although this is after the deduction
of a dividend of 7.0 pence per Share in the Reporting Period and
the deduction of a dividend of 7.0 pence per Share in the year to
31 December 2010. The net asset value as at 31 December 2011
including distributions was therefore 100.3 pence per Share (2010:
98.0 pence per Share).
Outlook
As mentioned above, the Company is fast approaching its fifth
anniversary for VCT shareholding purposes and has already begun a
strategy of seeking to exit investments and return value to its
Shareholders.
The economic environment remains difficult, but the live sector
has shown a robustness that I believe fully justifies the Manager's
decision to focus upon these investments at the outset.
I would like to take this opportunity to thank all Shareholders
for their continued support of the Company and I look forward to
seeing those of you that are able to attend the AGM scheduled for
14 May 2012.
Gavin Hamilton-Deeley
Chairman
29 March 2012
MANAGER'S REVIEW
Investment Objective
The Company's main objective is to invest in companies
established to create and bring to market live events and premium
entertainment content which will provide Shareholders with an
attractive return. This strategy will aim to maximise the
opportunities for making tax-free dividends to Shareholders from
both the actual income received and capital profits on the sale of
investments in Investee Companies or their assets.
The Company has been fully invested since December 2009 and the
Manager continues to focus solely on the portfolio of investments
in order to deliver strong annual profits and, crucially, target
exceptional back--end values as the Company exits its investments
after the qualifying five-year period.
Festivals
Creamfields
Ingenious Live VCT 2 Investment amount: GBP850,000
(GBP1,700,000 across the Ingenious Live VCTs)
The success of Creamfields as the country's leading dance
festival has been highlighted through the numerous awards that it
has earned over the past few years. In 2011 Creamfields was awarded
'Best Dance Event' at the prestigious UK Festival Awards for the
third year running and it was also honoured as 'Best Festival' at
the 2010 Music Week Awards, beating festivals such as Glastonbury,
V Festival, Reading and Leeds.
The 2011 event delivered record profits and the event was
extended to open on a Friday for the first time. With its increased
capacity of 50,000 per day, the festival sold out for the third
year in a row and generated record profitability.
Creamfields 2011 was headlined by The Chemical Brothers, Swedish
House Mafia, Tiesto and David Guetta and included a vast array of
electronic artists that has clearly once more struck a strong chord
with its audience.
In December 2011 it was announced that the Ingenious Live VCTs
had agreed to sell their investment in the event back to the Cream
Group for a total consideration of GBP2.78 million. The transaction
was finally completed on 13 February 2012.
Rewind Festival & Rewind Tour (rebranded from 80s Rewind
Festival & 80s Rewind Tour)
Ingenious Live VCT 2 Investment amount (Rewind Festival):
GBP346,598
(GBP693,196 across the Ingenious Live VCTs)
(GBP545,196 across the Ingenious Entertainment VCTs)
Ingenious Live VCT 2 Investment amount (Rewind Tour):
GBP328,350
(GBP656,700 across the Ingenious Live VCTs)
In December 2008, the Company, alongside The Rival Organisation,
co-promoted Rewind Festival, a two-day music festival in
Henley-on-Thames. The 2010 festival which was held in August 2010
experienced an impressive increase in both attendance figures and,
consequently, profitability with a total audience of over 35,000
across both days. Highlights included performances by Boy George
and Tony Hadley.
The 2011 festival was held between 19 and 21 August 2011 and was
a complete sell out (20,000 per day capacity). Highlights this year
included Village People and The Human League and we are delighted
that Rewind has very quickly established itself as the country's
leading celebration of 80s music.
The brand creation strategy that the Manager very much focuses
upon is further supported by the fact that Rewind has now expanded
to include Rewind North which was held at Scone Palace in Perth in
July 2011. The event has now been licensed to South Africa where
the first festival took place in Durban on 25 February 2012.
Underage & Field Day Festivals
Ingenious Live VCT 2 Investment amount: GBP500,000
(GBP1,000,000 across the Ingenious Live VCTs)
Field Day Festival has become the festival of choice for those
hoping to see 'the next big thing'. Over the years leading artists
such as Florence and the Machine, Mumford and Sons and Laura
Marling have all played at Field Day before making their big break.
The 2010 event gave the impression that the Field Day brand had
finally 'arrived' and this has been borne out by the fact that the
attendance for the 2011 event far exceeded the previous year and
generated record profitability.
Underage, the sister festival to Field Day, is equally unique in
that it is the only festival in the country dedicated to 13 to 17
year olds. As in 2010, Underage 2011 was broadcast live on BBC
Radio One and continues to hold its market niche as the key summer
music festival for under 18 year olds.
We believe that the Underage and Field Day brands have strong
potential to be 'rolled out', both in the UK and overseas, although
they continue to make a good level of profit solely based upon the
UK festivals.
Underage and Field Day are held each year in Victoria Park,
London. Underage was held on 5 August 2011 and Field Day on 6
August 2011.
Exhibitions
Brand Events - Taste of Christmas & The Taste Festivals
Ingenious Live VCT 2 Investment amount (Taste of Christmas):
GBP902,489
(GBP1,804,978 across the Ingenious Live VCTs)
Ingenious Live VCT 2 Investment amount (The Taste Festivals):
GBP1,000,000
(GBP2,000,000 across the Ingenious Live VCTs)
Taste of Christmas, the festive food and drink event returned
for the fourth year to the ExCel Centre in London during December
2011 and attracted in excess of 20,000 people. The event made a
strong profit and was extremely well received with guest
appearances from Jamie Oliver and a host of other 'A list'
chefs.
The Taste Festivals are established as successful outdoor food
and wine events featuring a number of famous chefs including Gary
Rhodes, Michel Roux Jr., Giorgio Locatelli and Theo Randall who
serve up their signature dishes for the public to taste. The London
event took place in Regent's Park in June 2011, whilst the
Edinburgh event was held in Inverleith Park in May 2011.
Taste of London is the jewel in The Taste Festivals' crown,
attracting 50,000 visitors to Regent's Park every year. The Taste
Festivals have set a new benchmark for food and drink events
worldwide with 12 Taste Festivals now being hosted around the world
including Dublin, Cape Town, Sydney and Dubai. The investment
generated a small profit to the Company.
Golf Live
Ingenious Live VCT 2 Investment amount: GBP275,000
(GBP550,000 across the Ingenious Live VCTs)
(GBP550,000 across the Ingenious Entertainment VCTs)
Golf Live is a three day interactive golf event which was staged
at The London Golf Club between 18 and 20 May 2011. IMG, manager to
a large number of leading golfers, has also invested into the
event. The long term aim is to roll the event out to further
prestigious golf courses around the world and it has already
attracted sponsorship partners of the quality of O2, Jaguar,
Turkish Airlines and the European Golf Tour. The event represents a
highly creative way of bringing the sports and exhibition markets
closely together.
In 2011, Golf Live was hosted by the 2010 Ryder Cup captain,
Colin Montgomerie, alongside many other stars from within the world
of golf. The event was extremely well received by both the
corporate partners as well as the paying public. Its audience
satisfaction rating was the highest that Brand Events, our highly
experienced co-promotion partners, had ever received for one of
their events.
The partners were delighted with the financial performance of
the event in its second year whereby it broke even. They feel very
confident that Golf Live is poised to move into profitability
during the 2012 event which is to be held on 18 to 20 May 2012 and
will once again feature Colin Montgomerie, as well as Gary Player
and an array of golfing talent still to be announced. The
anticipated international roll-out of the brand is also likely to
commence next year.
Live Venues
Scarborough Open Air Theatre
Ingenious Live VCT 2 Investment amount: GBP1,000,000
(GBP2,000,000 across the Ingenious Live VCTs)
(GBP2,000,000 across the Ingenious Entertainment VCTs)
In December 2009, the Ingenious Live VCTs entered into an
arrangement to exclusively co-promote a variety of live events at
Scarborough Open Air Theatre, the largest open air theatre in
Europe. The theatre, which is situated on the Yorkshire coast,
seats over 6,000 people and is a major venue in the North East of
England for theatrical performances, concerts, opera and dance.
The venue was built by Scarborough Council, who has granted a 25
year license to operate the venue when it was opened by HRH the
Queen in May 2010. The co-promoters of the venue are the Apollo
Theatre Group, a very experienced live event promoter and the
Manager feels that the venue has a great deal of potential.
The 2011 season was opened with a performance by the legendary
Sir Elton John, who sold out the venue in a record breaking three
hours. Other major shows to be staged this season include Rewind
(returning after last year's sold out performance), Last Night of
the Proms (featuring Dame Kiri Te Kanawa who also sold out the
venue during 2010's Gala Opening), as well as popular chart stars
N-Dubz.
The venue has proved challenging in terms of profitability, but
the partners believe that they will be able to generate long term
profits from their 25 year operators license.
Television Format
Let's Dance
Ingenious Live VCT 2 Investment amount: GBP500,000
(GBP1,000,000 across the Ingenious Live VCTs)
(GBP1,000,000 across the Ingenious Entertainment VCTs)
In January 2009, GBP2,000,000 was invested across both the
Ingenious Live and Entertainment VCTs to back the television dance
format Let's Dance. This was the second co-investment between the
Ingenious Live and Entertainment VCTs.
For the past three years BBC One has commissioned Whizz Kid
Entertainment to produce this hugely popular celebrity-led series
for both Comic Relief and Sports Relief. In 2011 the programme was
aired to over 8.3 million viewers and enjoyed the prime time
Saturday night slot on BBC One. Following the ratings success of
the UK series, the Let's Dance format has been sold and aired in a
number of different countries including Germany, the Netherlands,
Sweden, Russia, Slovakia and Indonesia.
The series has also been re-commissioned for a fourth UK series
to be aired in 2012 and, as a result of this success, the
international sales agents for both the US (William Morris) and the
Rest of the World (Fremantle) are continuing to push forward with
the international sale of the format. Our financial forecasts show
that the format revenues already generated will at least cover the
investment made and the Manager is hopeful that there will be some
upside in the investment in future years.
Contact
If you have any questions on this review or would like to speak
with a member of the management team, please do not hesitate to
contact us on 0207 319 4000.
Ingenious Ventures
29 March 2012
BUSINESS REVIEW
The purpose of this review is to provide Shareholders with a
summary setting out the business objectives of the Company, the
Board's strategy to achieve those objectives, the risks faced, the
regulatory environment and the key performance indicators (KPIs)
used to measure performance.
1. Strategy for Achieving Objectives
Ingenious Live VCT 2 plc is a tax efficient company listed on
The London Stock Exchange.
The investment objective is to achieve a combination of a high
degree of downside protection in an otherwise potentially high risk
proposition and long-term capital growth, maximising distributions
in order to take advantage of tax-free dividends.
The Board has delegated day-to-day investment management and
administration of the Company to the Manager under the terms of a
management agreement.
The Manager's review provides a review of the investment
portfolio and the market outlook.
2. Investment Policy
The Company's investment policy is to invest in Investee
Companies that will produce and promote new and established events
whose revenues will be underpinned by warranties or other similar
contractual arrangements. The Ingenious Live VCTs will invest in
Investee Companies which are expected to participate in the
revenues and growth of events. The events produced and promoted by
the Investee Companies are likely to be held primarily in the UK
and may include concerts, festivals, exhibitions, theatrical shows,
conferences, trade fairs and sporting events.
The Company will only invest in an Investee Company:
-- where the event has been approved by the Manager through its selection process; and
-- where the Investee Company has obtained performance
warranties or similar contractual arrangements that will provide
for the Investee Company to receive minimum revenues equivalent to
at least 70% of the Company's investment, although the Manager is
currently endeavouring to secure higher levels of minimum revenues
in the current economic environment.
The initial capital required by an Investee Company will be
provided by the Company. The majority of this initial capital will
be provided through loan finance which should provide additional
capital protection. The Company can invest, under current venture
capital trust legislation, up to GBP1 million per tax year in any
one Investee Company.
The Company has the flexibility to retain up to 30% of its
assets in cash and cash equivalent instruments which the Directors
believe should provide a significant degree of downside protection
whilst preserving the upside potential of the events within the
portfolio.
At 31 December 2011 the Company had made ten investments in
Qualifying Companies, with contractual arrangements that provide
for the Investee Company to receive minimum revenues equivalent to
at least 70% of the Company's investment, all of which had received
the prior approval of the Manager's Investment Committee.
3. Principal Risks, Risk Management and Regulatory Environment
The Board believes that the principal risks faced by the Company
are:
-- Investment and strategic - the performance of an investment
in an event is tied to a certain degree to the fortunes of the
industry generally. In particular, there is a risk that the Company
will not identify opportunities where the commercial success of the
event is sufficient to earn revenues over and above the minimum
contractual income negotiated.
-- Loss of approved status as a Venture Capital Trust - the
Company must comply with section 274 of the ITA which allows it to
be exempt from capital gains tax on investment gains realised by
Shareholders. Any breach of these rules may lead to the Company
losing its approval as a VCT, and qualifying Shareholders who have
not held their Shares for the designated holding period would have
to repay the income tax relief they obtained and future dividends
paid by the Company would become subject to tax. The Company would
also lose its exemption from corporation tax on capital gains.
-- Regulatory - the Company is required to comply with the Act,
the rules of the UK Listing Authority and United Kingdom Accounting
Standards. Breach of any of these regulatory rules might lead to
suspension of the Company's Stock Exchange listing, financial
penalties or a qualified audit report.
-- Financial - inadequate internal controls might lead to
misappropriation of assets. Inappropriate accounting policies might
lead to misreporting or breaches of regulations.
-- External inherent risks - the Company's investments will be
in unquoted companies which by their nature involve a higher degree
of risk than investment in the main market due to the fact there is
no liquid market and may, therefore, be difficult to realise.
Furthermore, there may be further constraints imposed on
realisations because of the requirement to satisfy certain
conditions necessary for the Company to maintain its VCT status
(such as the obligation to have at least 70% by value of its
investments in qualifying holdings by the beginning of the
accounting period commencing three years after provisional VCT
approval).
The Board seeks to mitigate the internal risks by setting clear
policies, including establishing a funding structure which provides
for minimum revenues equivalent to at least 70% of the investment,
regular reviews of performance, monitoring progress and compliance.
Details of the Company's internal controls are contained in the
Corporate Governance Report.
4. Key Performance Indicators (KPIs)
The primary KPI on which the Board assesses the performance of
the Manager in meeting the Company's objective is the change in net
asset value per Share.
A review of the Company's performance during the year, the
position of the Company at the year end and the outlook for the
coming year are contained within the Chairman's Statement and the
Manager's Review.
income statement
for the year ended 31 December 2011
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- ----- -------- -------- -------- -------- -------- --------
Gain on disposal
of investments - 80 80 - 63 63
Increase/(decrease)
in fair value
of investments
held - 42 42 - (111) (111)
Investment
income 2 346 - 346 410 - 410
Investment
management
fees 3 (79) (79) (158) (86) (86) (172)
Other expenses 4 (106) - (106) (101) - (101)
--------------------- ----- -------- -------- -------- -------- -------- --------
Profit/(loss)
on ordinary
activities
before taxation 161 43 204 223 (134) 89
Tax on ordinary 5 - - - - - -
activities
--------------------- ----- -------- -------- -------- -------- -------- --------
Profit/(loss)
on ordinary
activities
after taxation 161 43 204 223 (134) 89
--------------------- ----- -------- -------- -------- -------- -------- --------
Basic and
diluted return
per share
(pence) 6 1.7 0.5 2.2 2.4 (1.4) 1.0
--------------------- ----- -------- -------- -------- -------- -------- --------
The Company has no recognised gains and losses other than those
disclosed above.
The total column is the Income Statement of the Company for the
year. The supplementary capital and revenue columns are prepared
following guidance published by the Association of Investment
Companies (AIC).
All operations are considered to be continuing.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 December 2011
31 December 2011 31 December 2010
GBP'000 GBP'000
----------------------------- ----------------- -----------------
Opening shareholders' funds 8,415 8,973
Dividends (647) (647)
Profit for the year 204 89
----------------------------- ----------------- -----------------
Closing shareholders' funds 7,972 8,415
----------------------------- ----------------- -----------------
The accompanying notes form an integral part of these financial
statements.
BALANCE SHEET
as at 31 December 2011
31 December 31 December
2011 2010
Note GBP'000 GBP'000
----------------------------------------- ------ ------------ ------------
Fixed assets
Qualifying Investments 7 6,843 6,521
----------------------------------------- ------ ------------ ------------
Current assets
Debtors 9 278 138
Non-qualifying Investments 10 873 1,717
Cash at bank and in hand 6 63
----------------------------------------- ------ ------------ ------------
1,157 1,918
Creditors: amounts falling
due within one year 11 (28) (24)
----------------------------------------- ------ ------------ ------------
Net current assets 1,129 1,894
----------------------------------------- ------ ------------ ------------
Net assets 7,972 8,415
----------------------------------------- ------ ------------ ------------
Capital and reserves
Called-up share capital 12 92 92
Share premium account 13 4,383 4,383
Other reserve 13 3,088 3,735
Capital reserve 13 525 482
Revenue reserve 13 (116) (277)
----------------------------------------- ------ ------------ ------------
Shareholders' funds 7,972 8,415
----------------------------------------- ------ ------------ ------------
Net asset value excluding distributions
to date (pence per share) 14 86.3 91.0
----------------------------------------- ------ ------------ ------------
Net asset value including distributions
to date (pence per share) 100.3 98.0
----------------------------------------- ------ ------------ ------------
The accompanying notes form an integral part of these financial
statements.
The financial statements were approved by the Board of Directors
on 29 March 2012.
Signed on behalf of the Board of Directors:
Gavin Hamilton-Deeley
Chairman
CASH FLOW STATEMENT
for the year ended 31 December 2011
31 December 2011 31 December 2010
Note GBP'000 GBP'000
-------------------------------------------- ----- ----------------- -----------------
Net cash outflow from operating activities (181) (211)
-------------------------------------------- ----- ----------------- -----------------
Financial investment
Purchase of Qualifying Investments 7 - (74)
Disposal of Qualifying Investments 7 - 74
-------------------------------------------- ----- ----------------- -----------------
Net cash flow from financial investment - -
-------------------------------------------- ----- ----------------- -----------------
Management of liquid resources
Disposal of Non-qualifying Investments 10 771 828
-------------------------------------------- ----- ----------------- -----------------
Net cash inflow from liquid resources 771 828
--------------------------------------------------- ----------------- -----------------
Dividends
Payment of dividends 13 (647) (647)
-------------------------------------------- ----- ----------------- -----------------
Net cash outflow from dividends (647) (647)
-------------------------------------------- ----- ----------------- -----------------
Decrease in cash (57) (30)
-------------------------------------------- ----- ----------------- -----------------
Reconciliation of profit before taxation
to net cash flow from operating activities Note 2011 GBP'000 2010 GBP'000
--------------------------------------------- ----- ------------- -------------
Profit on ordinary activities
before taxation 204 89
(Increase)/decrease in fair value of
investments held 13 (42) 111
Investment income (207) (337)
Increase in receivables (140) (70)
Increase/(decrease) in payables 4 (4)
--------------------------------------------- ----- ------------- -------------
Net cash outflow from operating
activities (181) (211)
--------------------------------------------- ----- ------------- -------------
Reconciliation of net cash flow to movement
in net funds 2011 GBP'000 2010 GBP'000
--------------------------------------------- ------------- -------------
Opening cash balances 63 93
Net cash outflow (57) (30)
--------------------------------------------- ------------- -------------
Closing cash balances 6 63
--------------------------------------------- ------------- -------------
Total net funds comprises cash of GBP6k (31 December 2010:
GBP63k) and Non-qualifying Investments of GBP873k (31 December
2010: GBP1,717k).
The accompanying notes form an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2011
1. Accounting Policies
a) Basis of Accounting
The financial statements for the Reporting Period have been
prepared in compliance with UK Generally Accepted Accounting
Practice, and with the Statement of Recommended Practice (the SORP)
entitled "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" which was issued in January 2009.
The comparative figures are for the year 1 January 2010 to 31
December 2010.
The financial statements have been prepared on a going concern
basis under the historical cost convention, except for the
measurement at fair value for investments. The principal accounting
policies have remained unchanged from those set out in the
Company's 2010 Annual Report and Accounts.
b) Valuation of Investments
The Company's business is investing in financial assets with a
view to profiting from their total return in the form of income and
capital growth. As set out in the Prospectus all investments are
designated at fair value.
International Private Equity and Venture Capital Valuation
Guidelines
Unquoted investments, including equity and loan investments, are
designated at fair value and valued in accordance with the
International Private Equity and Venture Capital Guidelines and
Financial Reporting Standard 26 "Financial Instruments: Recognition
and Measurement" (FRS 26). Investments are initially recognised at
cost. The investments are subsequently re-measured at fair value,
as estimated by the Directors with prudence and good faith.
Investment holding gains or losses arising from the revaluation of
investments are taken directly to the Income Statement. Fair value
is determined as follows:
-- Fair value is the amount for which an asset could be
exchanged between knowledgeable, willing parties in an arm's length
transaction.
-- In estimating the fair value for an investment, the Manager
will apply a methodology that is appropriate in light of the
nature, facts and circumstances of the investment and its
materiality in the context of the total investment portfolio and
will use reasonable assumptions and estimations.
-- An appropriate methodology incorporates available information
about all factors that are likely to materially affect the fair
value of the investment. The valuation methodologies are applied
consistently from period to period, except where a change would
result in a better estimate of fair value. Any changes in valuation
methodologies will be clearly disclosed in the financial
statements.
The most widely used methodologies are listed below. In
assessing which methodology is appropriate, the Directors are
predisposed towards those methodologies that draw upon
market--based measures of risk and return.
-- Price of recent investment
-- Discounted cash flows/earnings multiple
-- Net assets
-- Available market prices
Of these the two methodologies most applicable to the Company's
investments are:
1 - Price of recent investment
Where the investment being valued was made recently, its cost
will generally provide a good indication of value. It is generally
considered that this would only apply for a limited period; in
practice a period up to the start of the first live event or
entertainment content which forms the investment is often applied
as the long stop date for such a valuation.
2 - Discounted cash flows/earnings of the underlying
business
Investments can be valued by calculating the net present value
of expected future cashflows of the Investee Companies. In relation
to the Company's investments, anticipating future cashflows in
excess of the guaranteed amounts would clearly require highly
subjective judgements to be made in the early stage of each
investment and therefore would not be an appropriate methodology to
apply in the early stage of the investment.
In the period prior to the second live event or entertainment
content it is considered appropriate to use the price paid for the
recent investment as the latest available information. Thereafter,
the portfolio of investments is fair valued on the discounted cash
flow/earnings basis using the latest available information on the
performance of the live event or entertainment content. Gains or
losses arising from changes in the fair value of the 'financial
assets at fair value through profit or loss' category are presented
in the Income Statement in the period in which they arise.
As a result of the above basis of valuation, there is
significant judgement associated with the valuation of
investments.
Non-qualifying Investments - Open Ended Investment Companies
(OEICs)
The Company's Non-qualifying Investments in interest bearing
money market OEICs are valued at fair value which is mid price.
They have been designated as fair value through profit and loss for
the purposes of FRS 26.
Gains and losses arising from changes in fair value of
Qualifying and Non-qualifying Investments are recognised as part of
the capital return within the Income Statement and allocated to the
realised or unrealised capital reserve as appropriate. Transaction
costs attributable to the acquisition or disposal of investments
are charged to capital within the Income Statement.
c) Investment Income
Interest income is recognised in the Income Statement under the
effective interest rate method. The effective interest rate is the
rate required to discount the expected future income streams over
the life of the loan to its initial carrying amount. The main
impact for the Company in that regard is the accounting treatment
of the loan note premiums. Where those loan note premiums are
charged in lieu of higher interest then they should be credited to
income over the life of the advance to the extent those premiums
are anticipated to be collected.
d) Dividend Income
Dividend income is recognised in the Income Statement once it is
declared by the Investee Companies.
e) Expenses
All expenses are accounted for on an accruals basis. Expenses
are charged to the revenue account within the Income Statement
except that:
-- expenses which are incidental to the acquisition or disposal
of an investment are charged to capital in the Income Statement as
incurred;
-- expenses are split and presented partly as capital items
where a connection with the maintenance or enhancement of the value
of the investments held can be demonstrated; and
-- the management fee has been allocated 50% to revenue and 50%
to capital, which represents the split of the Company's long term
returns.
f) Deferred Taxation
Deferred taxation is recognised in respect of all timing
differences that have originated but not reversed at the balance
sheet date where transactions or events that result in an
obligation to pay more, or a right to pay less, tax in the future
have occurred at the balance sheet date. This is subject to
deferred tax assets only being recognised if it is considered more
likely than not that there will be suitable profits from which the
future reversal of the underlying timing differences can be
deducted. Timing differences are differences arising between the
Company's taxable profits and its results as stated in the
financial statements which are capable of reversal in one or more
subsequent periods.
2. Investment Income
2011 2010
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Dividend income from Qualifying Investments 25 25
Loan note interest from Qualifying Investments 321 385
------------------------------------------------ --------- ---------
346 410
------------------------------------------------ --------- ---------
3. Investment Management Fees
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------- --------- --------- --------- --------- --------- ---------
Investment
management
fees 79 79 158 86 86 172
------------- --------- --------- --------- --------- --------- ---------
79 79 158 86 86 172
------------- --------- --------- --------- --------- --------- ---------
For the purposes of the revenue and capital columns in the
Income Statement, the management fee has been allocated 50% to
revenue and 50% to capital, which represents the expected split of
the Company's long term returns.
4. Other Expenses
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------------------- --------- --------- --------- --------- --------- ---------
Directors' remuneration (excluding employer's
national insurance) 38 - 38 30 - 30
Auditor's remuneration
- Audit fees 13 - 13 13 - 13
Legal and professional fees 6 - 6 6 - 6
Other administration expenses 48 - 48 50 - 50
Irrecoverable VAT 1 - 1 2 - 2
---------------------------------------------------- --------- --------- --------- --------- --------- ---------
106 - 106 101 - 101
---------------------------------------------------- --------- --------- --------- --------- --------- ---------
The Company is not registered for VAT. Fees payable to the
Company's auditor for the audit of the Company's financial
statements are GBP13k (31 December 2010: GBP13k) excluding VAT.
Further details on the Directors' fee disclosures are given in the
Directors' Remuneration Report.
5. Tax Charge on Ordinary Activities
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- --------- --------- --------- ---------
Profit/(loss)
on ordinary activities
before tax 161 43 204 223 (134) 89
Profit/(loss)
on ordinary activities
by tax rate 26.5%
(31 December
2010: 28%) 43 11 54 62 (38) 24
------------------------- --------- --------- --------- --------- --------- ---------
Adjustments:
------------------------- --------- --------- --------- --------- --------- ---------
Non taxable losses
on investments - - - - 13 13
Disallowed expenses - 21 21 - 25 25
Non-taxable capital
gains - (32) (32) - - -
UK dividends
not taxable (7) - (7) (7) - (7)
Utilisation of
brought forward
excess management
expenses (36) - (36) (55) - (55)
------------------------- --------- --------- --------- --------- --------- ---------
- - - - - -
------------------------- --------- --------- --------- --------- --------- ---------
As the Company is a VCT its capital gains are not taxable.
At 31 December 2011 the Company had surplus management expenses
of GBP244k (31 December 2010: GBP382k). A deferred tax asset has
not been recognised in respect of these surplus management expenses
as the future taxable income of the Company can not be predicted
with reasonable certainty. Due to the Company's status as a VCT,
and the intention to continue meeting the conditions required to
obtain approval in the foreseeable future, the Company does not
recognise deferred tax on any capital gains or losses which arise
on the revaluation of investments.
6. Basic and Diluted Return per Share
2011 2011 2011 2010 2010 2010
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ---------- ---------- ---------- ---------- ---------- ----------
Profit/(loss)
on ordinary
activities after
taxation 161 43 204 223 (134) 89
Weighted average
shares in issue
(number) 9,242,845 9,242,845 9,242,845 9,242,845 9,242,845 9,242,845
-------------------- ---------- ---------- ---------- ---------- ---------- ----------
Profit/(loss)
attributable
per share (pence) 1.7 0.5 2.2 2.4 (1.4) 1.0
-------------------- ---------- ---------- ---------- ---------- ---------- ----------
There are no dilutive potential Ordinary shares, including
convertible instruments, options or contingent share agreements in
issue for the Company. The basic return per Share is therefore the
same as the diluted return per Share.
7. Fixed Asset Investments
2011 2010
Unquoted Investments GBP'000 GBP'000
Equity shares 2,153 2,037
Unsecured loan notes 4,690 4,484
------------------------- --------- ---------
6,843 6,521
------------------------- --------- ---------
2011 2010
Qualifying Investments GBP'000 GBP'000
------------------------- --------- ---------
Opening valuation 6,521 6,242
Fair value adjustment 322 279
Purchases at cost - 74
Repayment of loan note - (74)
------------------------- --------- ---------
Closing valuation 6,843 6,521
------------------------- --------- ---------
Included in the valuation above is an equal and opposite fair
value gain and fair value loss amounting to GBP206k (31 December
2010: GBP337k). This represents the accounting treatment of the
guaranteed loan note premium. The GBP206k is included in the Income
Statement under Investment Income (refer to note 2).
8. Significant Interests
The Company has interests of greater than 10% of the nominal
value of the allotted shares in the following Investee Companies
incorporated in the United Kingdom as at 31 December 2011:
Trading Companies % class and share type % voting rights
--------------------------- ------------------------ ----------------
Aurem Limited 24.95% A Ordinary 24.95%
IR Productions Limited 24.95% A Ordinary 24.95%
CFDT Limited 24.95% A Ordinary 24.95%
Taste Xmas Live Limited 24.95% A Ordinary 24.95%
Brand Events Live Limited 24.95% A Ordinary 24.95%
Annie Films Limited 24.95% A Ordinary 24.95%
Jetstream Events Limited 24.95% A Ordinary 24.95%
Dance Floor Limited 12.48% A Ordinary 12.48%
Golfmania Limited 12.48% A Ordinary 12.48%
Into The Groove Limited 13.97% A Ordinary 13.97%
--------------------------- ------------------------ ----------------
It is considered that, as permitted by FRS 9, "Associates and
Joint Ventures", the above investments are held as part of an
investment portfolio, and that, accordingly, their value to the
Company lies in their marketable value as part of that portfolio.
In view of this, it is not considered that any of the above
represents investments in associated undertakings.
9. Debtors
2011 2010
GBP'000 GBP'000
-------------------------------- --------- ---------
Prepayments and accrued income 278 138
-------------------------------- --------- ---------
10. Current Asset Investments
2011 2010
GBP'000 GBP'000
------------------------------------------ --------- ---------
Funds held in listed money market OEICs 873 1,717
------------------------------------------ --------- ---------
2011 2010
Non-Qualifying Investments GBP'000 GBP'000
------------------------------------------ --------- ---------
Opening valuation 1,717 2,598
Disposal proceeds (771) (828)
Unrealised change in value of investment (73) (53)
------------------------------------------ --------- ---------
Closing valuation 873 1,717
------------------------------------------ --------- ---------
In order to safeguard the capital available for investment in
Qualifying Investments and balance this with the need to provide
good returns to investors, available funds from the net proceeds
are invested in appropriate securities (money market OEICs) until
required for Qualifying Investment purposes.
11. Creditors: Amounts Falling Due Within One Year
2011 2010
GBP'000 GBP'000
------------------------------ --------- ---------
Trade creditors 4 -
Accruals and deferred income 24 24
------------------------------ --------- ---------
28 24
------------------------------ --------- ---------
12. Called-Up Share Capital
2011 2010
Allotted, called-up and fully paid GBP'000 GBP'000
------------------------------------- --------- ---------
9,242,845 Ordinary Shares 1p each 92 92
------------------------------------- --------- ---------
The entire issued Ordinary share capital of the Company has been
admitted to the official list maintained by the Financial Services
Authority and to trading on the London Stock Exchange.
13. Reserves
Share Other Capital Revenue Total
premium reserve reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- --------- --------- --------- --------- ----------
At 1 January 2011 4,383 3,735 482 (277) 8,323
Dividend payments - (647) - - (647)
Gain on disposal of investments - - 80 - 80
Increase in fair value
of investments held - - 42 - 42
Investment income - - - 346 346
Investment management
fees - - (79) (79) (158)
Other expenses - - - (106) (106)
--------------------------------- --------- --------- --------- --------- ----------
At 31 December 2011 4,383 3,088 525 (116) 7,880
--------------------------------- --------- --------- --------- --------- ----------
The capital reserve includes realised investment holding gains
of GBP89k and unrealised investment holding gains of GBP436k. The
other reserve, capital reserve and revenue reserve accounts are the
only distributable reserves of the Company.
On 11 February 2011, the Company paid dividends amounting to
GBP647k on Ordinary shares (13 April 2010: GBP647k).
14. Net Asset Value Per Share Excluding Distributions to Date
2011 2010
--------------------------------------------------- ---------- ----------
Net assets attributable to Shareholders (GBP'000) 7,972 8,415
Shares in issue (number) 9,242,845 9,242,845
--------------------------------------------------- ---------- ----------
Net asset value per Share (pence) 86.3 91.0
--------------------------------------------------- ---------- ----------
15. Financial Instruments and Risk Management
The Company's financial instruments comprise equity and floating
rate debt investments in unquoted companies, cash balances and
listed money market OEICs. The Company holds financial assets in
accordance with its investment policy.
Fixed asset investments (see note 7) are valued at fair value.
For quoted securities included in current asset Non--qualifying
Investments, this is mid price. In respect of unquoted investments,
these are fair valued in accordance with the International Private
Equity and Venture Capital Valuation Guidelines. The fair value of
all other financial assets and liabilities is represented by their
carrying value on the Balance Sheet.
Fair Value Hierarchy
2011 2010
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Listed money market OEICs (note 10) Level 1 873 1,717
Unquoted investments (note 7) Level 3 6,843 6,521
------------------------------------- --------- --------- ---------
7,716 8,238
----------------------------------------------- --------- ---------
The level 3 investments include net fair value gains of GBP322k
in the current year (31 December 2010: GBP279k), as disclosed in
note 7.
In accordance with FRS 29, "Financial Instruments: Disclosures",
the above table provides an analysis of these investments based on
the fair value hierarchy described below which reflects the
reliability and significance of the information used to measure
their fair value:
-- Level 1 - investments with quoted prices in active markets;
-- Level 2 - investments whose fair value is based directly on
observable market prices or is indirectly drawn from observable
market prices; and
-- Level 3 - investments whose fair value is determined using a
valuation technique based on assumptions that are not supported by
observable current market prices or are not based on observable
market data.
The valuation techniques used by the Company are explained in
note 1 on accounting policies.
Risk Management
The Company's investing activities expose it to various types of
risk that are associated with the financial instruments and markets
in which it invests. The most important types of financial risk to
which the Company is exposed are:
-- Market risk;
-- Interest rate risk;
-- Credit risk; and
-- Liquidity risk.
The nature and extent of the financial instruments outstanding
at the balance sheet date and the risk management policies employed
by the Company are discussed below:
a) Market Risk
Market risk embodies the potential for both losses and gains and
includes interest rate risk and price risk.
The Company's strategy on the management of investment risk is
driven by the Company's investment objective. Investments in
unquoted companies, by their nature, involve a higher degree of
risk than investments in larger "blue chip" companies.
The risk of loss in value is managed through careful selection
in accordance with a formalised investment decision process, with
each investment proposal evaluated by the Investment Committee as
part of the due diligence stage. The Company's investment policy
can be found in the Business Review. The risk is also managed
through continuous monitoring of the performance of investments and
changes in their risk profile.
b) Interest Rate Risk
Some of the Company's financial assets are interest bearing, all
of which are at floating rates. As a result, the Company has
exposure to interest rate risk due to fluctuations in the
prevailing levels of market interest rate.
When the Company retains cash balances, the majority of cash is
held within interest bearing money market OEICs. This is the
Non-qualifying Investments amount on the Balance Sheet being
GBP873k (31 December 2010: GBP1,717k). The benchmark rate which
determines the interest payments received on interest bearing cash
balances and debt investments in unquoted companies is the bank
base rate which was 0.5% as at 31 December 2011 (31 December 2010:
0.5%).
The following table illustrates the sensitivity of the impact on
ordinary activities for the year before taxation and total equity
to a change in interest rates of 50 basis points, with effect from
the beginning of the year. These changes are considered to be
reasonably possible based on observation of current market
conditions. The calculations are based on the Company's
Non-qualifying Investments held at each balance sheet date. All
other variables are held constant.
31 December 2011 31 December 2010
GBP'000 GBP'000
+/- 50 basis points +/- 50 basis points
------------------------------------------------------ -------------------- --------------------
Impact on profit on ordinary activities for the year
before taxation and total equity 4 9
------------------------------------------------------ -------------------- --------------------
c) Credit Risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company.
Whilst the Company is exposed to credit risk due to its
GBP4,690k (31 December 2010: GBP4,484k) unsecured loan note
instruments, this risk is mitigated by the Company requiring that
minimum royalty arrangements are in place prior to the investment
as set out in the Company's investment policy. In addition, and in
accordance with the Company's monitoring procedure, the Manager
closely monitors progress (including financial expenditure) against
the Investee Companies' agreed business plans.
The GBP4,690k (31 December 2010: GBP4,484k) unsecured loan notes
are the contractually agreed 70% of initial investments.
d) Liquidity Risk
The Company's financial instruments include equity and debt
investments in unquoted companies, which are not traded in an
organised public market and which generally may be illiquid. As a
result, the Company may not be able to liquidate quickly some of
its investment in these instruments at an amount close to fair
value.
The Company maintains sufficient reserves of cash and readily
realisable marketable securities to meet its liquidity requirements
at all times. No numerical disclosures have been provided in
respect of liquidity risk as this is not considered to be
material.
16. Contingent Assets
There is currently interest income accruing on the unsecured
loan note instruments at a rate of 4.5%, being 4% over the bank
base rate which was 0.5% as at 31 December 2011 (31 December 2010:
0.5%), totalling GBP216k (31 December 2010: GBP137k). The repayment
of this interest is not deemed recoverable based on current profits
being derived by the Investee Companies, which currently can not be
determined with any certainty, therefore the Directors have not
recognised it in the financial statements.
17. Related Party Transactions
a) Ingenious Ventures Limited was the Company's investment
manager until 28 February 2008, when the investment management
agreement was novated to Ingenious Asset Management Limited, and
Ingenious Ventures became a trading division of Ingenious Asset
Management Limited. Patrick McKenna is a director of Ingenious
Asset Management Limited which is a subsidiary within the Ingenious
Group, which is controlled by Patrick McKenna.
The Manager, as per the management agreement, receives a
management fee of 0.5% of the net asset value payable quarterly in
advance. This amounted to GBP158k as at 31 December 2011 (31
December 2010: GBP172k). The Manager also charges an administration
fee of GBP20k (31 December 2010: GBP19k) per annum and
irrecoverable VAT.
b) The funds invested in OEICs are managed by Ingenious Asset
Management Limited of which Patrick McKenna is a director.
Ingenious Asset Management Limited is a subsidiary of the Ingenious
Group, which is controlled by Patrick McKenna. There is no fee
associated with this transaction.
During the period the Company has entered into transactions with
the above-mentioned related parties in the normal course of
business and on an arm's length basis as listed in the table
below:
2011 2011 2010 2010
Expenditure Amounts Expenditure Amounts
paid due paid due
Entity Note GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ------ ------------- --------- -------------- ---------
Ingenious Asset Management Limited
Investment management
fee a 158 - 172 -
Administration
fee a 20 - 19 -
Irrecoverable
VAT a 3 - 1 2
----------------------- ------ ------------- --------- -------------- ---------
Transactions Between Related Parties
Ingenious Media Consulting Limited, a company which is a
wholly-owned subsidiary in the Ingenious Group, which is controlled
by Patrick McKenna, has entered into consultancy agreements with
each of the Company's Investee Companies to provide management
services. For the provision of such services, consulting fees
totalling GBP306k excluding VAT (31 December 2010: GBP166k), have
been invoiced in the year of which GBP48k remains outstanding as at
31 December 2011 (31 December 2010: GBPNil).
18. Events After the Balance Sheet Date
The Company declared an interim dividend of 21.0 pence per
Ordinary share on 2 February 2012 (2011: 7.0 pence). The dividend
was paid on 24 February 2012 by way of a capital distribution
reducing the Company's other reserves.
19. Capital Management
The capital management objectives of the Company are:
-- To safeguard its ability to continue as a going concern so
that it can continue to provide returns to Shareholders.
-- To ensure sufficient liquid resources are available to meet
the funding requirements of its investments and to fund new
investments where identified.
The Company has no external debt; consequently all capital is
represented by the value of share capital, distributable and other
reserves. Total Shareholder equity at 31 December 2011 was
GBP7,972k (31 December 2010: GBP8,415k).
In order to maintain or adjust its capital structure the Company
may adjust the amount of dividends paid to the Shareholders, return
capital to Shareholders, issue new Shares or sell assets.
There have been no changes to the capital management objectives
or the capital structure of the business from the previous
period.
The Company is subject to the following externally imposed
capital requirements:
-- As a public company Ingenious Live VCT 2 plc must have a
minimum of GBP50k of share capital.
The level of dividends may be influenced by the need to comply
with the VCT legislation which states that no more than 15% of
income from shares and securities may be retained.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR GMGZFZLRGZZM
Ingenious 2 (LSE:ILV2)
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Ingenious 2 (LSE:ILV2)
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