Posting of Class 1 Disposal Circular
26 Februar 2010 - 3:45PM
UK Regulatory
TIDMLLT
RNS Number : 7736H
Limelight VCT plc
26 February 2010
For Immediate Release
26 February 2010
Limelight VCT plc
(Limelight VCT or the Company)
Class 1 Circular
Notice of General Meeting
Limelight VCT plc is pleased to announce that today it has posted a Circular and
Notice of General Meeting to Shareholders.
On the 25 November 2009, your Board announced that it intends to put to
Shareholders a proposal to sell the majority of the assets held by the Company
to BMS Film Finance LLP for GBP4,302,000 (the "Proposal" and the "Purchaser"
respectively). The Disposal is conditional, inter alia, upon Shareholder
approval at a General Meeting, as the size of the Assets subject to the Disposal
in relation to that of the Company means that the Disposal is classified as a
Class 1 transaction under the Listing Rules.
The purpose of the Circular is to explain the background to and reasons for the
Disposal, why the Board believes that the Disposal is in the best interests of
Limelight VCT plc and its Shareholders and to recommend that Shareholders vote
in favour of the Resolutions at the General Meeting as well as setting out the
future strategy of the Company following the Disposal. This meeting will be
held at 11 am on 24 March 2010 at 4th Floor, 41-44 Great Queen Street, London,
WC2B 5AD. A notice of the General Meeting is in the Circular.
Background
The Company was established as a Venture Capital Trust (VCT) and admitted to
trading on the Main Market of the London Stock Exchange on 4 April 2006, raising
GBP5,620,000, in order to make investments (comprising both equity and debt
instruments) in unquoted British Qualifying Film companies which produce films
and exploit the rights in those films.
Twelve investments have been made to date in accordance with those investment
objectives at a cost of GBP4,080,000 and the Company has achieved qualifying VCT
status after its first 3 years in operation. The investments included in the
Disposal are held on the balance sheet in the accounts of the Group at a value
calculated by reference to expected future income streams principally from the
expected receipt of tax credits. As set out in the interim results as at 30th
September 2009, these investments subject to the Disposal (including all
associated fees and interest) were held at GBP4,492,000.
Due to the successful deployment of most of its cash resources, the Company is
now focused on realising the value of its investments and the investee companies
are now at various stages of release and exploitation of their film rights.
Under the current terms of the individual investment agreements, the returns
from such investments are recouped by the Company as investee companies repay
monies received from successful film tax credit claims and also from the sales
revenues resulting from successful commercial exploitation of each of the films
produced. This process results in cash being received by the Company over months
and even years.
As stated on page 5 of the Condensed Consolidated Interim Financial Statements
of the Company for the period 1 April 2009 to 30 September 2009, current market
conditions have shown it to be likely in most cases that full recoupment will
take longer than anticipated at the time the investment strategy was
established.
Reasons for the Disposal
In light of the above and the challenging environment that remains in the film
finance industry and the current uncertainty surrounding returns on film
investments, the Directors, following consultation with the Shareholders, have
been actively seeking ways to accelerate returns to Shareholders if at all
possible.
The result of this consideration has been the identification of a Purchaser who
through negotiation has offered to acquire 12 investments for the sum of
GBP4,302,000.
The proposed Disposal will accelerate the realisation of cash from the
investments by the Company and in so doing increase the Company's immediate
strategic options for the future with the ultimate aim of maximising overall
returns to Shareholders.
In addition, the Directors estimate that the running costs of the VCT are
approximately GBP200,000 per annum. The Disposal will enable the VCT materially
to reduce the running costs of the Continuing Group and hence increase value to
Shareholders and hence, this means that the Board believes the Disposal to be in
the best interests of Shareholders.
Having considered the disposal options, the Directors agreed to complete the
Disposal to BMS Finance LLP for several reasons. A related company of BMS Film
Finance LLP, BMS Finance Asset Management LLP, has been providing the
administrative and advisory services to Limelight since 1 October 2007 and hence
is familiar with the Company and its investments. Therefore, this avoids a new
purchaser coming in and having to complete considerable due diligence and also
demanding a discount as would be expected to cover this increased level of risk.
In addition, between 26 August and 8 September 2009, the Board took time to seek
alternative purchasers of the film investments but none were identified and
hence it was the view of both the Board and the Investment Manager, that BMS
Film Finance LLP's offer was the only and therefore the best offer available to
maximize value of shareholders.
In agreeing the price the Directors took into account:
(a) the net book value of the Assets subject to the Disposal, per the
interim financial statements for the period ended 30 September 2009, totalling
GBP4,492,000; and
(b) the receipt of cash into the Company which has occurred subsequent to
30 September 2009 in relation to debtors included in the Assets above, being
GBP190,000.
The agreed price of GBP4,302,000 therefore represents close to the fair value of
the relevant investments and the debtor amounts owed in connection with these
investments.
An equity investment in Adulthood Ltd ("Adulthood") and the sales advance
provided to Skellig Productions Ltd ("Skellig") are not included in the Disposal
and are being retained by the Company.
The Purchaser has stated that it has no interest in purchasing the Adulthood
equity investment which leaves the benefit of any future value arising from it
within the Continuing Group.
The Purchaser also has no appetite to purchase the sales advance provided to
Skellig due to its own view of the risk involved in recouping this advance. The
Purchaser is only willing to offer a nominal price for this element of the
investment and hence it is considered more beneficial for the Continuing Group
to retain exposure to any potential future upside over and above a nominal sale
price.
The additional material benefit to the Continuing Group is that the holding of
this equity investment assists the Company in maintaining VCT status which
itself ensures the Directors have the broadest possible options available to
them when deciding the best strategy for the Continuing Group to maximise
returns for Shareholders.
Principal terms of the Disposal
Under the Disposal Agreements, which were signed on 25 February 2010, the
Company has conditionally agreed to sell the 12 investments to the Purchaser.
The total amount payable in cash is GBP4,302,000, of which GBP770,000 will be
paid in cash as at Completion, the residual balance being paid within 5 business
days of Completion and subject to certain adjustments in relation to fees
payable by the Company and any cash received from investments following
publication of this Circular and before completion. The Directors expect that
any adjustments will likely arise due to pre-Completion changes in the value of
financial receivables included in the Disposal.
The Disposal, which is expected to complete on 24 March 2010, is conditional,
inter alia, on the approval of the Shareholders at the General Meeting. A
summary of the principal terms and conditions of the Disposal are set out in
Part III of the Circular.
Use of proceeds and financial effects of the Disposal on the Group
At 30 September 2009, the Group had a net cash balance of GBP676,000. The net
proceeds of the Disposal will be added to the Company's cash balances bringing
the total cash held by the Company to GBP4,917,000 after paying the arrangement
fee of GBP35,000 and the estimated legal and other expenses of GBP26,000.
Following Completion, it is the Board's intention to review the commercial
opportunities within the film industry, and in adherence with the Group's
current investment strategy as outlined in the Prospectus, to assess the best
way to maximise returns for Shareholders. The Company will also continue to
monitor and manage its remaining 2 investments in Adulthood and Skellig. These
have currently been written down to nil as at 30 September 2009 although the
Directors do believe that some value will be returned in due course.
Under the VCT taxation rules, the Company has up to six months following the
Disposal to reinvest sufficient of the proceeds of the Disposal and/or pay
sufficient of the proceeds as dividends in order to maintain VCT status.
An unaudited Pro Forma Statement of Net Assets is below setting out the Balance
Sheet taking into account the effects of the Disposal should it have occurred on
30 September 2009.
The effect of the proposed Disposal on the Company's earnings will be to reduce
these as the Company will only hold cash and may earn interest on this balance
that may be considerably less than the interest that it previously earned on its
investments held. For the six month period ending 30 September 2009, the Assets
generated investment income (excluding bank interest) of GBP211,000 out of a
total of GBP211,000 for the Group over the same period, as extracted from the
Condensed Consolidated Interim Financial Statements of the Company for the
period 1 April 2009 to 30 September 2009.
Current trading and future prospects
Over 70% of the Company's funds are now invested in 12 qualifying British film
companies as described in the Annual Report to 31 March 2009. As a result, the
Company satisfied the necessary requirements at that date to confirm its status
as a fully qualifying Venture Capital Trust with HMRC.
The Company published interim financial statements on 25 November 2009 which
covered the period ending 30 September 2009 and which outlined the current
trading and future prospects for the Company along with details of the
individual investments.
Following completion of the Disposal the Company will have approximately
GBP4,917,000 held in cash and the 2 remaining investments, as mentioned above.
The Continuing Group intends to pursue 2 options:
1. It will continue with the current investment policy whilst carrying out a
review of the current state of the film finance industry in considering whether
there are suitable opportunities for investment. VCT Rules dictate that the
Company has 6 months from receipt of the Disposal proceeds to redeploy the funds
or distribute them to Shareholders and therefore it has up to 6 months to
complete the market review. The Directors are committed however, to completing
this review in such a way as to ensure the decision is made as quickly as
possible.
2. Should this review conclude that the opportunities do not remain attractive
for investors then the Company will attempt to solvently wind up the Company and
distribute the cash and any other assets to Shareholders. The Directors would
expect to have held the General Meeting to approve the solvent winding up of the
Company within 2 months of the completion of the market review although this
timeline will be accelerated in the interest of the Shareholders if at all
possible.
Financial Information on the Assets subject to the disposal
Financial Information
Breakdown of carrying value of each investment to be disposed of under the
Disposal (the "Assets") as at 30 September 2009 along with associated current
assets where these are also being sold:
The equity value of the Assets (GBP1,236,000 above) represents 24.62% of the
total net asset value of the Company as at 30 September 2009.
The information contained in the table above has been extracted, without
material adjustment, directly from the detailed schedules used to produce the
management accounts on a monthly basis. There has been no material change to
these valuations up to the date of this Document.
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | | | | | | | | |
| | Carrying | | | | | | | |
| | Values: | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | As at | Equity | Loan | Sales | Accrued | Fair | Total | |
| | March | | | Advance | Income | Value | Carrying | |
| | 2009 | | | & Fees | | Adjustment | Value at | |
| | | | | | | | 31 March | |
| | | | | | | | 2009 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | | GBP'000's | GBP'000's | GBP'000's | GBP'000's | GBP'000's | GBP'000's | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Adulthood | | 133 | | 12 | | 145 | |
| | | - | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Abrahams | 60 | 118 | 36 | 28 | (59) | 183 | |
| | Point | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | I Know | 75 | 150 | 46 | 32 | | 303 | |
| | You Know | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Red Mist | 95 | 160 | | 59 | (22) | 292 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Moon | 172 | 300 | | 59 | | 531 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Donkeys | 60 | 95 | 38 | 20 | (26) | 187 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Fishtank | 125 | 250 | 80 | 28 | | 483 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Cherrybomb | 93 | 125 | 52 | 19 | (28) | 261 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Nativity | 139 | 260 | | 28 | | 427 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Ghost | 100 | 183 | | 33 | | 316 | |
| | Machine | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Skellig | 242 | 430 | | 36 | | 708 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | FTTT | 75 | 575 | 9 | 15 | | 674 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Total | 1,236 | 2,779 | 261 | 369 | (135) | 4,510 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | As at | Equity | Loan | Sales | Accrued | Fair | Total | |
| | March | | | Advance | Income | Value | Carrying | |
| | 2008 | | | & Fees | | Adjustment | Value at | |
| | | | | | | | 31 March | |
| | | | | | | | 2008 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | | GBP'000's | GBP'000's | GBP'000's | GBP'000's | GBP'000's | GBP'000's | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Adulthood | | 133 | | 4 | | 137 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Abrahams | 60 | 118 | 34 | 9 | | 221 | |
| | Point | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | I Know | 75 | 150 | 43 | 8 | | 276 | |
| | You Know | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Red Mist | 95 | 160 | | 7 | | 262 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Moon | 172 | 300 | | 6 | | 478 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Donkeys | 60 | 95 | 35 | 2 | | 192 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | Total | 462 | 956 | 112 | 36 | | 1,566 | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
| | | | | | | | | |
+----------+------------+------------------------+-------------------+--------------------+--------------------+----------------------+-------------------------+-+
+------------+-------------------------------+----------------------------+-+
| | Income | Income | |
| | in year | in year | |
| | to | to | |
| | March | March | |
| | 2008 | 2009 | |
+------------+-------------------------------+----------------------------+-+
| | GBP'000's | GBP'000's | |
+------------+-------------------------------+----------------------------+-+
| | | | |
+------------+-------------------------------+----------------------------+-+
| Adulthood | 4 | 8 | |
+------------+-------------------------------+----------------------------+-+
| Abrahams | 10 | 21 | |
| Point | | | |
+------------+-------------------------------+----------------------------+-+
| I Know You | 9 | 27 | |
| Know | | | |
+------------+-------------------------------+----------------------------+-+
| Red Mist | 12 | 51 | |
+------------+-------------------------------+----------------------------+-+
| Moon | 14 | 53 | |
+------------+-------------------------------+----------------------------+-+
| Donkeys | 2 | 20 | |
+------------+-------------------------------+----------------------------+-+
| Fishtank | | 29 | |
+------------+-------------------------------+----------------------------+-+
| Cherrybomb | | 28 | |
+------------+-------------------------------+----------------------------+-+
| Nativity | | 38 | |
+------------+-------------------------------+----------------------------+-+
| Ghost | | 38 | |
| Machine | | | |
+------------+-------------------------------+----------------------------+-+
| Skellig | | 36 | |
+------------+-------------------------------+----------------------------+-+
| FTTT | | 17 | |
+------------+-------------------------------+----------------------------+-+
| | | | |
+------------+-------------------------------+----------------------------+-+
| Total | 51 | 366 | |
+------------+-------------------------------+----------------------------+-+
| | | | |
+------------+-------------------------------+----------------------------+-+
Adulthood was the first investment made by the Company in September 2007. There
are no investments that have been held for longer than just over 2 years.
Pro Forma Financial Information
Set out below is an unaudited pro forma statement of consolidated net assets of
the Group following the Disposal, which is based on the net assets of the Group
as at 30 September 2009, and has been prepared on the basis described in the
notes set out below and after making the adjustments described in those notes.
The unaudited pro forma statement of consolidated net assets has been prepared
for illustrative purposes only and, because of its nature, addresses a
hypothetical situation and, therefore, does not represent the Group's actual
financial position or results following the Disposal. Its purpose is to
illustrate the effect on the consolidated net assets of the Company as if the
Disposal had taken place on 30 September 2009.
+--------------+--------+---------+--------+-------------+--------+---------+
| | | | |Adjustments | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| | | 30 | | Disposal | | Pro |
| | | Sept | | of | | Forma |
| | | 2009 | | Assets | | net |
| | | | | | | assets |
+--------------+--------+---------+--------+-------------+--------+---------+
| | |GBP'000 | | GBP'000 | |GBP'000 |
+--------------+--------+---------+--------+-------------+--------+---------+
| Non | | | | | | |
| Current | | | | | | |
| Assets | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Film | | 3,678 | | (3,678) | | - |
| company | | | | | | |
| investments | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| | | 3,678 | | (3,678) | | - |
+--------------+--------+---------+--------+-------------+--------+---------+
| Current | | | | | | |
| assets | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Trade | | 822 | | (624) | | 198 |
| and | | | | | | |
| other | | | | | | |
| receivables | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Cash | | 676 | | 4,241 | | 4,917 |
| and | | | | | | |
| cash | | | | | | |
| equivalents | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| | | 1,498 | | 3,617 | | 5,115 |
+--------------+--------+---------+--------+-------------+--------+---------+
| | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Total | | 5,176 | | (61) | | 5,115 |
| assets | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Current | | | | | | |
| liabilities | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Trade | | (57) | | | | (57) |
| and | | | | | | |
| other | | | | | | |
| payables | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Current | | (98) | | | | (98) |
| tax | | | | | | |
| payable | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Total | | (155) | | | | (155) |
| liabilities | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Net | | 5,021 | | (61) | | 4,960 |
| assets | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Equity | | | | | | |
| attributable | | | | | | |
| to equity | | | | | | |
| holders of | | | | | | |
| the parent | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Share | | 562 | | | | 562 |
| capital | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Share | | 4,619 | | | | 4,619 |
| premium | | | | | | |
| account | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Revenue | | 321 | | | | 321 |
| reserve | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Capital | | (481) | | (61) | | (542) |
| reserve | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
| Total | | 5,021 | | (61) | | 4,960 |
| equity | | | | | | |
+--------------+--------+---------+--------+-------------+--------+---------+
A copy of this Circular is also available from the offices of Limelight VCT plc,
41 - 44 Great Queen Street, London, WC2B 5AD or from the Document Viewing
Facility, UK Listing Authority, The Financial Services Authority, 25 The North
Colonnade, Canary Wharf, London, E14 5HS.
Enquiries
Limelight VCT plc
Michael Henry 020 7478 9144
Beaumont Cornish Limited
Roland Cornish 020 7628 3396
This information is provided by RNS
The company news service from the London Stock Exchange
END
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