Ingenious Live VCT 2 plc Statement re Annual -4-
08 Abril 2011 - 5:00AM
UK Regulatory
-- In estimating fair value for an investment, the Investment
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
-- 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 the period prior to the second live eventwhich 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 companies in which the Company
has invested (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 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 earnings multiple 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
The Company's non-qualifying investments in interest bearing
money market open ended investment companies (OEICs) are valued at
fair value, this is bid 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 relating to loan note premiums is recognised in
the Income Statement as accrued on a time-apportionment basis so as
to reflect the effective interest rate. Where those loan note
premiums are charged in lieu of higher interest then they are
credited to income over the life of the advance to the extent those
premiums are anticipated to be collected.
d) Dividend Income
Dividend income is recognised in the Income Statement once
declared by any investee company.
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; 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.
-- 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.
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
2010 2009
GBP'000 GBP'000
--------------------------------------------- --------- ---------
Bank deposit interest - 5
Dividend income from Qualifying Investments 25 11
Loan note interest from Qualifying
Investments 385 52
--------------------------------------------- --------- ---------
410 68
--------------------------------------------- --------- ---------
3. Investment Management Fee
2010 2010 2010 2009 2009 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment
management
fee 86 86 172 89 89 178
------------ --------- --------- --------- --------- --------- ---------
86 86 172 89 89 178
------------ --------- --------- --------- --------- --------- ---------
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
2010 2010 2010 2009 2009 2009
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) 30 - 30 31 - 31
Auditors' remuneration
- Audit fees 13 - 13 13 - 13
Legal & professional
fees 6 - 6 5 8 13
Other administration
expenses 50 - 50 43 4 47
Irrecoverable VAT 2 - 2 13 1 14
----------------------- -------- -------- -------- -------- -------- --------
101 - 101 105 13 118
----------------------- -------- -------- -------- -------- -------- --------
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 excluding VAT. Further details on the
Directors' fee disclosures are given in the Directors' Remuneration
Report.
5. Tax Charge on Ordinary Activities
2010 2010 2010 2009 2009 2009
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 223 (134) 89 (126) 230 104
Profit/(loss)
on ordinary
activities by
tax rate 28%
(2009: 28%) 62 (38) 24 (35) 64 29
---------------- -------- -------- -------- -------- --------- ---------
Adjustments:
---------------- -------- -------- -------- -------- --------- ---------
Non taxable
losses/(gains)
on
investments - 13 13 - (93) (93)
Disallowed
expenses - 25 25 - 29 29
UK dividends
not taxable (7) - (7) (3) - (3)
Utilisation of
brought
forward excess
management
expenses (55) - (55) 38 - 38
---------------- -------- -------- -------- -------- --------- ---------
- - - - - -
---------------- -------- -------- -------- -------- --------- ---------
As the Company is a VCT its capital gains are not taxable.
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