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Venture Capital Trusts (VCTs) were introduced in 1995 and are designed to encourage individuals to invest indirectly in a range of small higher-risk trading companies using a listed Investment Trust structure.

Ingenious VCTs offer the following benefits:

• Attractive expected returns and consistent annual tax-free dividends
• 30% income tax relief
• Significant downside protection
• 5-year liquidity strategy

In addition, any gain realised by an investor on the sale of shares in a VCT is not subject to Capital Gains Tax and as an Investment Trust, the VCT itself does not pay Corporation Tax on any gains arising on the disposal of underlying VCT investments.

Planned exit VCTs provide investors with a combination of tax advantages. Qualifying investors will receive 30% upfront tax relief on their investment provided that the shares are held for at least five years. In addition, dividends and gains on the disposal of shares are exempt from taxation under current legislation.

Each VCT will issue each shareholder with a tax certificate which should be used to claim the 30% income tax relief. Individuals can claim their relief either by obtaining an adjustment to their PAYE tax code by ringing their local tax office or through self assessment.

Dividends received on shares acquired in VCTs (on investments up to £200,000 per tax year) are not required to be shown on a shareholder’s self assessment tax return.

VCTs have 3 years in which to meet the qualifying provisions. During that time, investors are granted provisional relief subject to the conditions being met. No VCT has yet failed to meet these requirements in the allotted time.

There is no annual limit for subscriptions to VCTs however tax reliefs will only be obtained on £200,000 in any single tax year. This applies to the combined total of any new VCT share subscriptions and market purchases. Husband and wife can make separate claims for £200,000 each for any one tax year.

The VCTs aim to deliver target annual dividends of 5 – 7p which represents a running gross equivalent yield of 14-20% on a net cost on investment of 70 pence.

VCTs should be seen as longer term investments and may be higher risk and more difficult to realise than investing in other securities listed in the Official List of the UK Listing Authority and admitted to trading on the London Stock Exchange. VCTs are designed to provide capital for small companies and each VCT will invest in several companies.

As such, there is a risk that these companies may not perform as hoped and in some circumstances may fail completely. Although every step is taken to protect our shareholders from risk it is advised that individuals consider carefully their appetite for risk and their ability to engage in long term 5 year investments such as VCTs before making an investment.

The following strategies are utilised by the Entertainment VCTs at all times in order to mitigate risk:

• Each VCT invests in a range of companies in order to spread risk for our investors.
• All Ingenious Entertainment VCTs’ investments must demonstrate that they have secured a minimum revenue guarantee of 75% of the total investment before the cash is deployed.
• Each investee company will engage the services of an experienced producer or promoter with a proven track record in bringing media projects to market. Investments are made when the fund manager is confident that those involved are capable of delivering the returns targeted by the Entertainment VCTs.
• All Ingenious investments are managed by a dedicated and experienced team who select each project carefully against strict investment criteria. All investments are monitored and managed on a daily basis by the team to drive commercial success and mitigate risk.
• Each investee company will be required, where appropriate, to obtain relevant insurance policies in order to protect themselves against normal industry risks.

A planned exit VCT plans to provide investors with an exit as soon as practical after 5 years.  This allows investors to take advantage of the generous tax incentives of a VCT whilst retaining a target date for liquidity for investors. 

The Entertainment VCTs have no set target with regards to the number of companies that they aim to invest in, however, historically a portfolio of 8-10 events is created. The VCT must deploy 70% of all funds in qualifying investments within three years in order to qualify. Throughout this time, the fund manager aims to invest in a range of different companies in order to mitigate risk for shareholders and meet target returns. All investee companies are carefully considered in order to ensure that they meet our strict investment criteria.

Despite a challenging economic environment in 2009 UK live music revenues increased by 9.4% to £1.5bn and now exceed recorded music earnings [PRS Music Industry Report 2010].

Ingenious Entertainment VCTs are currently focusing on the live sector in order to take advantage of several complimentary trends in this area. These include the increase of live revenues across the sector in reaction to changing consumer habits and changing trends in the advertising industry as companies seek new ways to engage audiences. Finally technological advances have also created enhanced opportunities for live and entertainment platforms making this sector a very promising investment opportunity.

When making an investment in this sector Ingenious applies its considerable experience to assess the content and growth opportunities of each particular project. Each investee company engages the services of an experienced producer or promoter with a proven track record in bringing media projects to market. Investments are only ever made when the fund manager is confident the project is capable of delivering the returns targeted by the Entertainment VCTs.