Last checked at 16 Apr 2015 07:00
INGENIOUS ENTERTAINMENT VCT 1 PLC (“the Company”)
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2014
Chairman’s Statement
I am delighted to present the Company’s seventh Annual Report and Accounts covering the year to 31 December 2014 (the Reporting Period).
Overview of Activities
In December 2014, the Company cancelled all of its C Shares and completed the full distribution of capital in relation to those shares in January 2015.
The Company has now completed its investment strategy and is fully invested under the VCT regulations for its D, E, F and G Share classes.
The Company continued to actively source and review investment opportunities during this Reporting Period for the G and H Share classes. In total, the Company made five investments during the Reporting Period. Details of all investments can be found in the Manager’s Review.
This year’s activities saw two events, namely Field Day Festival and the Love Supreme Jazz Festival progress significantly. Field Day Festival moved from a one day to a two day event with The Pixies headlining a very successful Field Day Sunday. Nearly 50,000 people attended the weekend and, as a result, Field Day Festival saw a significant increase in its profitability.
The second Love Supreme Jazz Festival also saw a significant increase in its attendance. Headline sets from Jamie Cullum and De La Soul combined with a heavy focus upon tightening the event costs to deliver a profitable event one year earlier than had originally been forecast.
The Company took a slightly different direction within its investment strategy during the year and invested into three companies that are looking to develop brands that stage events across a season or even, in one case, across the whole year. Winterville was a Christmas themed season that took place in Victoria Park, East London throughout December 2014. The event was extremely well received with over 200,000 attendees across the month and, although the event lost money in its first year, the Board believes that the Winterville brand has the potential to be a permanent fixture in East London’s event calendar.
Two further investments into Just For London Limited and Event Spaces Limited seek to create content in the world of comedy in the case of the former (a nine day comedy festival is planned) and to exploit a perceived lack of live event spaces in terms of the latter (Event Spaces Limited will create a unique live event space with a capacity of up to 6,000 attendees at Pontoon Dock, East London).
The Company also made an investment into FM3 2013 Limited, a venture that aims to film live events and to create televisual content that can both be sold through traditional media (i.e. terrestrial and other TV companies) as well as being exploited through online distribution channels.
Fund Raising
The Company raised no further funds during the Reporting Period.
Results
The C Shares, D Shares, E Shares, F Shares, G Shares and H Shares are accounted for as separate pools of funds necessitating separate non-statutory reporting.
The Company continues with its core strategy of blending high levels of downside protection with its attempt to drive positive returns from the investment portfolio. The Directors and the Manager have also maintained their prudent approach in the valuation of investments with the view that it takes at least two to three years to build brand awareness in the live entertainment sector. They remain cautiously optimistic about the future performance and the long term outlook of the Company.
The Ordinary Shares did not trade during the year and therefore had no profit or loss to report (31 December 2013: loss of £51,000). The C Shares made a loss of £47,000 (31 December 2013: loss of £86,000). The D Shares made a loss of £13,000 (31 December 2013: loss of £269,000). The E Shares made a profit of £7,000 (31 December 2013: loss of £120,000). The F Shares made a loss of £6,000 (31 December 2013: loss of £34,000). The G Shares made a loss of £69,000 (31 December 2013: loss of £58,000) The H Shares made a loss of £16,000 (31 December 2013: loss of £43,000).
The net asset value per C Share at 31 December 2014 was £Nil pence (31 December 2013: 60.7 pence). On 17 December 2014 the High Court of Justice of England and Wales made an order sanctioning the resolutions passed by the Company in general and class meetings held on 27 November 2014 by which the Company’s Shareholders approved the reduction of the Company’s share capital by the cancellation and extinguishment of all of its C Shares of 1 pence each. Up to 31 December 2014, the Company returned 78.0729 pence to investors, with the final distribution of 1 pence per C Share paid to investors on 14 January 2015.
The net asset value per D Share at 31 December 2014 was 64.3 pence (31 December 2013: 69.5 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period and the deduction of a total of 15.0 pence per Share of dividends in previous years. The net asset value as at 31 December 2014 including distributions was therefore 84.3 pence per D Share (31 December 2013: 84.5 pence).
The net asset value per E Share at 31 December 2014 was 72.2 pence (31 December 2013: 76.9 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period and the deduction of a total of 10.0 pence per Share of dividends in previous years. The net asset value as at 31 December 2014 including this distribution was therefore 87.2 pence per E Share (31 December 2013: 86.9 pence).
The net asset value per F Share at 31 December 2014 was 74.7 pence (31 December 2013: 80.0 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period and the deduction of a total of 10.0 pence per Share of dividends in previous years. The net asset value as at 31 December 2014 including this distribution was therefore 89.7 pence per F Share (31 December 2013: 90.0 pence).
The net asset value per G Share at 31 December 2014 was 79.7 pence (31 December 2013: 86.6 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period and the deduction of a 5.0 pence per Share dividend in the previous year. The net asset value as at 31 December 2014 including this distribution was therefore 89.7 pence per G Share (31 December 2013: 91.6 pence).
The net asset value per H Share at 31 December 2014 was 87.9 pence (31 December 2013: 93.5 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period (31 December 2013: No dividends paid). The net asset value as at 31 December 2014 including this distribution was therefore 92.9 pence per H Share (31 December 2013: 93.5 pence).
Legislative and Regulatory Developments
Legislation was introduced during the financial year, prohibiting enhanced share buy-backs, where a VCT purchases existing shares from shareholders and within six months the shareholder invests in the same VCT.
This legislation does not affect the Company as the Board never used these arrangements.
Outlook
Live entertainment continues to appeal to customers as an experience that is completely unique to the individual. When this appeal is combined with enjoying the live experience with other likeminded participants, then it is easy to understand why those events that can create their own ‘niche’ will continue to thrive whatever the economy may throw at them.
The ‘season’ has once again begun with Glastonbury selling out in record time. All of the events that the Company has on sale are currently ahead of forecast and the Board does not believe that any of these events will be adversely affected by the General Election or any of the economic uncertainty that currently exists.
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.
Festivals
Field Day Festival
Initial Funding: November 2012
Entertainment VCT 1 Investment amount £1,000,000 (D Shares)
(£2,000,000 across the Ingenious Entertainment VCTs)
Further Funding: December 2013
Entertainment VCT 1 Investment amount £500,000 (E Shares £353,000 and F Shares £147,000)
(£1,000,000 across the Ingenious Entertainment VCTs)
In November 2012 and December 2013, the Entertainment VCTs invested into Waxarch Limited to promote one of London’s foremost festivals for up and coming talent. The 2014 event marked a watershed for Field Day Festival by extending the event to a two day gathering. The Saturday event attracted an audience just below the 30,000 capacity, but the Sunday, with The Pixies headlining, saw an impressive 18,000 customers pass through the gates, way in excess of the breakeven for that day.
As a result of this diversification, the new Field Day weekend delivered record profits for the company. The Manager is also delighted to report that the company was granted a four year Premises Licence for its annual hire of Victoria Park, representing the first time that The London Borough of Tower Hamlets has granted a four year term for this site, thereby reinforcing the strong relationship that exists between Field Day’s management and its local authority partners.
Tickets are on sale for Field Day 2015, which takes place on 6 and 7 June 2015 and the Manager believes that the event will continue to deliver strong levels of profitability for all concerned.
Liverpool Sound City Limited
Entertainment VCT 1 Investment amount £600,000 (D Shares)
(£1,200,000 across the Ingenious Entertainment VCTs)
In March 2012, the Entertainment VCTs made an investment into Liverpool Sound City Limited. This company has, for a number of years, been producing and promoting the Sound City concept which combines the best elements of a music festival, conference and expo across an entire city centre.
Liverpool Sound City 2015 will see a completely fresh focus whereby the main festival will be moved out of multiple venues into a dedicated festival site in the centre of Liverpool. This will ensure that there is little, or no, revenue ‘leakage’ in respect of entry fees and bar income. The new style Liverpool Sound City will also better define the brand as an urban music festival experience.
The company has accumulated losses in excess of £100,000 over the last three years and this has been factored in the valuation of the investment. However, the Manager believes that the new style Sound City (to be headlined by The Flaming Lips, Belle and Sebastian and The Vaccines) which will take place on 22 to 24 May 2015, will finally justify the Company’s investment into the brand.
Love Supreme Jazz Festival
Initial Funding: December 2011
Entertainment VCT 1 Investment amount £1,000,000 (C Shares £375,000, D Shares £375,000, E Shares £125,000, F Shares £125,000)
(£2,000,000 across the Ingenious Entertainment VCTs)
Further Funding: December 2013
Entertainment VCT 1 Investment amount £500,000 (E Shares £320,000, F Shares £180,000)
(£1,000,000 across the Ingenious Entertainment VCTs)
In December 2011, the Entertainment VCTs teamed up with Jazz FM and Neapolitan Music to invest in a company to co-promote the Love Supreme Jazz Festival.
The first event, which took place in July 2013, was loss making, but this outcome was very much anticipated as new event brands take time to generate full customer awareness. The July 2014 event very much reinforced this view by delivering a profit of £78,000.
Early bird tickets for the 2015 Love Supreme Jazz Festival went on sale as early as November 2014 and, with Van Morrison and Chaka Khan headlining the event which takes place from 3 to 5 July 2015, the Manager feels confident that event profits will continue to grow as Love Supreme becomes accepted as the UK’s foremost jazz based Festival brand.
Shakedown Festival and SD2 Festival
Initial Funding: February 2011
Entertainment VCT 1 Investment amount £750,000 (C Shares £225,000, D Shares £525,000)
(£1,500,000 across the Ingenious Entertainment VCTs)
Further Funding: December 2012
Entertainment VCT 1 Investment amount £500,000 (D Shares)
(£1,000,000 across the Ingenious Entertainment VCTs)
In February 2011, an investment of £1,500,000 was made into Venn Music Limited to promote two new music festivals in Summer 2011. Although We The People, which took place in Bristol, fell by the wayside after only one year, the sister festival, Shakedown Festival, which is based in Brighton, continues to establish itself. After four years, Shakedown is now profitable and is generally regarded as Brighton’s very own festival catering for an audience aged 18 and over.
2014 saw a change of site to Waterhall Playing Fields, Brighton, and an earlier date in the calendar for the event, being Saturday 19 July. The event saw an attendance of 11,000 deliver an event profit of £43,000 and, although the Manager would be keen to see a significant increase in profit levels now that the event has been running for four years, Shakedown does at least deliver consistent profits year on year.
Shakedown 2015 will take place at the same venue in August 2015 and early indications are that this year’s event will deliver a performance that will exceed the 2014 profit levels.
In December 2012, a further investment of £1,000,000 was made into the company to introduce a second day to the Shakedown Festival. SD2 Festival was held on the day after Shakedown Festival. With a talent bill comprising the likes of The Wanted, The Saturdays and Conor Maynard, the promoters were of the opinion that the attendance would far surpass the numbers that actually turned up and the event incurred a significant loss. The partners are considering other commercial opportunities to replace these brands.
These losses have been taken into account in preparing the valuation for this investment.
The Zoo Project Festival
Entertainment VCT 1 Investment amount: £300,000 (G Shares)
(£600,000 across the Ingenious Entertainment VCTs)
In March 2014, the Ingenious Entertainment VCTs invested in a company to co-promote The Zoo Project Festival.
The event, which took place from 12 to 14 September 2014, is a spin off from the successful Zoo project club nights in Ibiza which started in 2007. The Festival began in 2012 and had already established a core audience base which both the Manager and the management team of The Zoo Project Festival Limited believed could be increased significantly in 2014. Unfortunately the event did not see a significant increase in attendance and incurred a loss in the region of £50,000.
Discussions are currently underway with regard to how the event can further engage with its audience, increase attendance and deliver profitability going forward.
Just For London Comedy Festival
Entertainment VCT 1 Investment amount: £500,000 (E Shares £320,000, F Shares £180,000)
(£1,000,000 across the Ingenious Entertainment VCTs)
In October 2014, the Ingenious Entertainment VCTs invested in a company to co-promote the Just For London Comedy Festival.
The event brings together three major brands from the world of comedy (PBJ Management, Just For Laughs and Get Comedy) to stage a multi-day comedy festival which will be staged at venues in Central London across two weekends.
The management team are currently reviewing venues to host the event which would need to offer a unique opportunity to deliver what the Manager believes could become the pre-eminent comedy festival held in London. It seems likely that the first event will be held in Summer 2016.
As One In The Park Festival
Entertainment VCT 1 Investment amount £750,000 (E Shares £482,000, F Shares £268,000)
(£1,500,000 across the Ingenious Entertainment VCTs)
In February 2012 an investment of £1,500,000 was made into Saturn Star Limited to create a new gay and alternative lifestyle festival called As One In The Park, which was held in Victoria Park in May 2013.
Although well received by critics, the audience of 6,000 was significantly below the numbers anticipated and the event incurred a significant loss which has been taken into account in the valuation of the investment.
Following the May 2013 event, the As One brand is currently under review, with one further small event having already taken place, generating a small profit. The event partners are looking to stage similar events in existing venues rather than a green field space to reduce both overheads and overall event risk.
Seasonal Events
Winterville Events Limited
Entertainment VCT 1 Investment amount: £500,000 (G Shares)
(£1,000,000 across the Ingenious Entertainment VCTs)
In September 2014, an investment of £1,000,000 was made into Winterville Events Limited to promote an annual Christmas based event - Winterville.
The first event took place in Victoria Park in East London and ran for the duration of December 2014. Winterville hosted indoor and outdoor activities including an ice rink, a live pantomime production, a vintage fun fair, themed food stalls, bars selling craft ales, beer and cider, a roller disco and a spiegeltent staging both comedy and live music for all age groups.
The event was generally well received by press and public alike with over 200,000 people in attendance across the month. The event was loss making (loss around £100,000) in common with most live events in their first year, but the Manager is of the belief that the Winterville brand could certainly generate profits for the company in the near future.
Content Exploitation
FM3 2013 Limited
Entertainment VCT 1 Investment amount: £700,000 (G Shares)
(£1,400,000 across the Ingenious Entertainment VCTs)
In March 2014, an investment of £1,400,000 was made into FM3 2013 Limited to film festival and live event content.
The Ingenious Entertainment VCTs joined forces with Blink TV, a production and distribution company specialising in filming live entertainment content. The company will look to deliver five core revenue streams through the exploitation of music festival content, namely commissioned productions, distribution, advertising, brand activation and online video channel creation.
The business, when operated by Blink TV, was profitable in 2013 and the Manager believes that there is real potential to build the scale of the business both nationally and internationally. The business has a ‘long tail’ of revenues deriving from the exploitation of content and, although it has shown a loss in its first year of trading, current projections show that this will be more than made up for by future earnings derived from the content library already created.
Live Venues
Event Spaces
Entertainment VCT 1 Investment amount: £625,000 (G Shares)
(£1,250,000 across the Ingenious Entertainment VCTs)
In December 2014, an investment of £1,250,000 was made by the Ingenious Entertainment VCTs into Event Spaces Limited.
The company is seeking to acquire two semi-permanent structures which were built as part of the London Pleasure Gardens development at Pontoon Dock, East London. The concept is to develop an events complex around these structures.
Principal terms for renting the site have now been agreed with the Greater London Authority and discussions are now taking place with a number of potential commercial partners as well as third party promoters.
INCOME STATEMENT
for the year ended 31 December 2014
| Year ended 31 December 2014 | Year ended 31 December 2013 | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||
| Gain on disposal of investments | - | 64 | 64 | - | 52 | 52 | |||||||||
| Increase/(decrease) in fair value of investments held | - | 28 | 28 | - | (387) | (387) | |||||||||
| Investment income | 2 | 203 | - | 203 | 260 | - | 260 | ||||||||
| Arrangement fees | 3 | - | - | - | (16) | - | (16) | ||||||||
| Investment management fees | 4 | (121) | (121) | (242) | (165) | (165) | (330) | ||||||||
| Other expenses | 5 | (197) | - | (197) | (240) | - | (240) | ||||||||
| Loss on ordinary activities before taxation | (115) | (29) | (144) | (161) | (500) | (661) | |||||||||
| Tax on ordinary activities | 6 | - | - | - | - | - | - | ||||||||
| Loss attributable to equity Shareholders | (115) | (29) | (144) | (161) | (500) | (661) | |||||||||
| Basic and diluted return per share (pence) | |||||||||||||||
| Ordinary Share | 7 | - | - | - | 0.2 | (0.7) | (0.5) | ||||||||
| C Share | 7 | (1.1) | (0.7) | (1.8) | (0.4) | (2.6) | (3.0) | ||||||||
| D Share | 7 | 0.3 | (0.5) | (0.2) | 0.2 | (4.2) | (4.0) | ||||||||
| E Share | 7 | 0.3 | - | 0.3 | (1.2) | (3.0) | (4.2) | ||||||||
| F Share | 7 | (0.3) | (0.1) | (0.4) | (1.3) | (0.8) | (2.1) | ||||||||
| G Share | 7 | (1.5) | (0.5) | (2.0) | (2.0) | 0.4 | (1.6) | ||||||||
| H Share | 7 | (2.2) | 1.6 | (0.6) | (3.3) | 0.6 | (2.7) | ||||||||
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.
The accompanying notes form an integral part of these financial statements.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
for the year ended 31 December 2014
|
| Year ended 31 December 2014 £'000 | Year ended 31 December 2013 £'000 | |||||
| Opening Shareholders’ funds | 15,471 | 21,960 | |||||
| Capital subscribed | - | 2,596 | |||||
| Issue costs | - | (65) | |||||
| Dividends | (2,629) | (8,359) | |||||
| Loss for the year | (144) | (661) | |||||
| Closing Shareholders’ funds | 12,698 | 15,471 |
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
INCOME STATEMENT
for the year ended 31 December 2014
| Ordinary Shares | C Shares | ||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||
| Loss on disposal of investments | - | - | - | - | (6) | (6) | |||||||
| Decrease in fair value of investments held | - | - | - | - | (5) | (5) | |||||||
| Investment income | - | - | - | 4 | - | 4 | |||||||
| Arrangement fees | - | - | - | - | - | - | |||||||
| Investment management fees | - | - | - | (7) | (7) | (14) | |||||||
| Other expenses | - | - | - | (26) | - | (26) | |||||||
| Loss on ordinary activities before taxation | - | - | - | (29) | (18) | (47) | |||||||
| Tax on ordinary activities | - | - | - | - | - | - | |||||||
| Loss attributable to equity Shareholders | - | - | - | (29) | (18) | (47) | |||||||
| Basic and diluted return per share (pence) | - | - | - | (1.1) | (0.7) | (1.8) | |||||||
| D Shares | E Shares | ||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||
| Gain/(loss) on disposal of investments | - | 8 | 8 | - | (8) | (8) | |||||||
| (Decrease)/increase in fair value of investments held | - | (6) | (6) | - | 26 | 26 | |||||||
| Investment income | 116 | - | 116 | 49 | - | 49 | |||||||
| Arrangement fees | - | - | - | - | - | - | |||||||
| Investment management fees | (38) | (38) | (76) | (18) | (18) | (36) | |||||||
| Other expenses | (55) | - | (55) | (24) | - | (24) | |||||||
| Profit/(loss) on ordinary activities before taxation | 23 | (36) | (13) | 7 | - | 7 | |||||||
| Tax on ordinary activities | - | - | - | - | - | - | |||||||
| Profit/(loss) attributable to equity Shareholders | 23 | (36) | (13) | 7 | - | 7 | |||||||
| Basic and diluted return per share (pence) | 0.3 | (0.5) | (0.2) | 0.3 | - | 0.3 | |||||||
| F Shares | G Shares | ||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Gain on disposal of investments | - | 14 | 14 | - | 61 | 61 | |||||||
| Decrease in fair value of investments held | - | (4) | (4) | - | (51) | (51) | |||||||
| Investment income | 23 | - | 23 | 11 | - | 11 | |||||||
| Arrangement fees | - | - | - | - | - | - | |||||||
| Investment management fees | (11) | (11) | (22) | (26) | (26) | (52) | |||||||
| Other expenses | (17) | - | (17) | (38) | - | (38) | |||||||
| Loss on ordinary activities before taxation | (5) | (1) | (6) | (53) | (16) | (69) | |||||||
| Tax on ordinary activities | - | - | - | - | - | - | |||||||
| Loss attributable to equity Shareholders | (5) | (1) | (6) | (53) | (16) | (69) | |||||||
| Basic and diluted return per share (pence) | (0.3) | (0.1) | (0.4) | (1.5) | (0.5) | (2.0) | |||||||
| H Shares | |||||||||||||
| Revenue | Capital | Total | |||||||||||
| £'000 | £'000 | £'000 | |||||||||||
| Loss on disposal of investments | - | (5) | (5) | ||||||||||
| Increase in fair value of investments held | - | 68 | 68 | ||||||||||
| Investment income | - | - | - | ||||||||||
| Arrangement fees | - | - | - | ||||||||||
| Investment management fees | (21) | (21) | (42) | ||||||||||
| Other expenses | (37) | - | (37) | ||||||||||
| (Loss)/profit on ordinary activities before taxation | (58) | 42 | (16) | ||||||||||
| Tax on ordinary activities | - | - | - | ||||||||||
| (Loss)/profit attributable to equity Shareholders | (58) | 42 | (16) | ||||||||||
| Basic and diluted return per share (pence) | (2.2) | 1.6 | (0.6) | ||||||||||
The Share classes have no recognised gains and losses other than those disclosed above.
The Total column is the Income Statement per Share class for the year. The supplementary Capital and Revenue columns are prepared following guidance published by the Association of Investment Companies (AIC).
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
INCOME STATEMENT
for the year ended 31 December 2013
| Ordinary Shares | C Shares | ||||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||||
| Gain on disposal of investments | - | 29 | 29 | - | 12 | 12 | |||||||||
| Decrease in fair value of investments held | - | (63) | (63) | - | (70) | (70) | |||||||||
| Investment income | 103 | - | 103 | 35 | - | 35 | |||||||||
| Arrangement fees | - | - | - | - | - | - | |||||||||
| Investment management fees | (33) | (33) | (66) | (16) | (16) | (32) | |||||||||
| Other expenses | (54) | - | (54) | (31) | - | (31) | |||||||||
| Profit/(loss) on ordinary activities before taxation | 16 | (67) | (51) | (12) | (74) | (86) | |||||||||
| Tax on ordinary activities | - | - | - | - | - | - | |||||||||
| Profit/(loss) attributable to equity Shareholders | 16 | (67) | (51) | (12) | (74) | (86) | |||||||||
| Basic and diluted return per share (pence) | 0.2 | (0.7) | (0.5) | (0.4) | (2.6) | (3.0) | |||||||||
| D Shares | E Shares | ||||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||||
| Gain on disposal of investments | - | 6 | 6 | - | 12 | 12 | |||||||||
| Decrease in fair value of investments held | - | (246) | (246) | - | (77) | (77) | |||||||||
| Investment income | 104 | - | 104 | 11 | - | 11 | |||||||||
| Arrangement fees | - | - | - | - | - | - | |||||||||
| Investment management fees | (43) | (43) | (86) | (20) | (20) | (40) | |||||||||
| Other expenses | (47) | - | (47) | (26) | - | (26) | |||||||||
| Profit/(loss) on ordinary activities before taxation | 14 | (283) | (269) | (35) | (85) | (120) | |||||||||
| Tax on ordinary activities | - | - | - | - | - | - | |||||||||
| Profit/(loss) attributable to equity Shareholders | 14 | (283) | (269) | (35) | (85) | (120) | |||||||||
| Basic and diluted return per share (pence) | 0.2 | (4.2) | (4.0) | (1.2) | (3.0) | (4.2) | |||||||||
| F Shares | G Shares | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain/(loss) on disposal of investments | - | 14 | 14 | - | (12) | (12) | |||||||||
| (Decrease)/Increase in fair value of investments held | - | (15) | (15) | - | 53 | 53 | |||||||||
| Investment income | 7 | - | 7 | - | - | - | |||||||||
| Arrangement fees | - | - | - | - | - | - | |||||||||
| Investment management fees | (12) | (12) | (24) | (28) | (28) | (56) | |||||||||
| Other expenses | (16) | - | (16) ) | (43) | - | (43) | |||||||||
| (Loss)/profit on ordinary activities before taxation | (21) | (13) | (34) | (71) | 13 | (58) | |||||||||
| Tax on ordinary activities | - | - | - | - | - | - | |||||||||
| (Loss)/profit attributable to equity Shareholders | (21) | (13) | (34) | (71) | 13 | (58) | |||||||||
| Basic and diluted return per share (pence) | (1.3) | (0.8) | (2.1) | (2.0) | 0.4 | (1.6) | |||||||||
| H Shares | |||||||||||||||
| Revenue | Capital | Total | |||||||||||||
| £'000 | £'000 | £'000 | |||||||||||||
| Loss on disposal of investments | - | (9) | (9) | ||||||||||||
| Increase in fair value of investments held | - | 31 | 31 | ||||||||||||
| Investment income | - | - | - | ||||||||||||
| Arrangement fees | (16) | - | (16) | ||||||||||||
| Investment management fees | (13) | (13) | (26) | ||||||||||||
| Other expenses | (23) | - | (23) | ||||||||||||
| (Loss)/profit on ordinary activities before taxation | (52) | 9 | (43) | ||||||||||||
| Tax on ordinary activities | - | - | - | ||||||||||||
| (Loss)/profit attributable to equity Shareholders | (52) | 9 | (43) | ||||||||||||
| Basic and diluted return per share (pence) | (3.3) | 0.6 | (2.7) | ||||||||||||
The Share classes have no recognised gains and losses other than those disclosed above.
The Total column is the Income Statement per Share class for the year. The supplementary Capital and Revenue columns are prepared following guidance published by the Association of Investment Companies (AIC).
BALANCE SHEET
as at 31 December 2014
| Note | 31 December 2014 £'000 | 31 December 2013 £'000 | |||||
| Fixed assets | |||||||
| Qualifying Investments | 8 | 8,280 | 7,228 | ||||
| Current assets | |||||||
| Debtors | 10 | 22 | 39 | ||||
| Non-qualifying Investments | 11 | 4,396 | 8,130 | ||||
| Cash at bank and in hand | 54 | 155 | |||||
| 4,472 | 8,324 | ||||||
| Creditors: amounts falling due within one year | 12 | (54) | (81) | ||||
| Net current assets | 4,418 | 8,243 | |||||
| Net assets | 12,698 | 15,471 | |||||
| Capital and reserves | |||||||
| Called-up share capital | 13 | 174 | 202 | ||||
| Share premium account | 14 | - | - | ||||
| Other reserve account | 14 | 14,923 | 17,524 | ||||
| Capital reserve | 14 | (1,304) | (1,275) | ||||
| Revenue reserve | 14 | (1,095) | (980) | ||||
| Shareholders’ funds | 12,698 | 15,471 | |||||
| Net asset value per Ordinary Share | 15 | - | - | ||||
| Net asset value per C Share | 15 | - | 60.7 | ||||
| Net asset value per D Share | 15 | 64.3 | 69.5 | ||||
| Net asset value per E Share | 15 | 72.2 | 76.9 | ||||
| Net asset value per F Share | 15 | 74.7 | 80.0 | ||||
| Net asset value per G Share | 15 | 79.7 | 86.6 | ||||
| Net asset value per H Share | 15 | 87.9 | 93.5 |
The accompanying notes form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 15 April 2015.
Signed on behalf of the Board of Directors:
David Munns
Chairman
Company Registration Number: 6395011 (England & Wales)
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
BALANCE SHEET
as at 31 December 2014
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Fixed assets | |||||||||||||||
| Qualifying Investments | - | - | 3,660 | 1,602 | 893 | 2,125 | - | ||||||||
| Current assets | |||||||||||||||
| Debtors | - | - | 22 | - | - | - | - | ||||||||
| Non-qualifying Investments | - | - | 637 | 451 | 282 | 683 | 2,343 | ||||||||
| Cash at bank and in hand | - | 6 | 39 | 6 | 1 | 1 | 1 | ||||||||
| - | 6 | 698 | 457 | 283 | 684 | 2,344 | |||||||||
| Creditors: amounts falling due within one year | - | (6) | (29) | (5) | (3) | (6) | (5) | ||||||||
| Net current assets | - | - | 669 | 452 | 280 | 678 | 2,339 | ||||||||
| Net assets | - | - | 4,329 | 2,054 | 1,173 | 2,803 | 2,339 | ||||||||
| Capital and reserves | |||||||||||||||
| Called-up share capital | - | - | 68 | 28 | 16 | 35 | 27 | ||||||||
| Share premium account | - | - | - | - | - | - | - | ||||||||
| Other reserve account | 617 | 439 | 5,003 | 2,267 | 1,250 | 2,976 | 2,371 | ||||||||
| Capital reserve | (538) | (228) | (489) | (103) | 5 | (2) | 51 | ||||||||
| Revenue reserve | (79) | (211) | (253) | (138) | (98) | (206) | (110) | ||||||||
| Shareholders’ funds | - | - | 4,329 | 2,054 | 1,173 | 2,803 | 2,339 | ||||||||
| Net asset value excluding distributions to date (pence per share) | - | - | 64.3 | 72.2 | 74.7 | 79.7 | 87.9 | ||||||||
| Net asset value including distributions to date (pence per share) | - | - | 84.3 | 87.2 | 89.7 | 89.7 | 92.9 |
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
BALANCE SHEET
as at 31 December 2013
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Fixed assets | |||||||||||||||
| Qualifying Investments | - | 1,229 | 3,589 | 1,542 | 868 | - | - | ||||||||
| Current assets | |||||||||||||||
| Debtors | - | 33 | - | - | - | - | 6 | ||||||||
| Non-qualifying Investments | - | 471 | 1,094 | 649 | 391 | 3,050 | 2,475 | ||||||||
| Cash at bank and in hand | 115 | 8 | 4 | 3 | 2 | 4 | 19 | ||||||||
| 115 | 512 | 1,098 | 652 | 393 | 3,054 | 2,500 | |||||||||
| Creditors: amounts falling due within one year | (13) | (34) | (8) | (5) | (3) | (6) | (12) | ||||||||
| Net current assets | 102 | 478 | 1,090 | 647 | 390 | 3,048 | 2,488 | ||||||||
| Net assets | 102 | 1,707 | 4,679 | 2,189 | 1,258 | 3,048 | 2,488 | ||||||||
| Capital and reserves | |||||||||||||||
| Called-up share capital | - | 28 | 68 | 28 | 16 | 35 | 27 | ||||||||
| Share premium account | - | - | - | - | - | - | - | ||||||||
| Other reserve account | 719 | 2,071 | 5,340 | 2,409 | 1,329 | 3,152 | 2,504 | ||||||||
| Capital reserve | (538) | (210) | (453) | (103) | 6 | 14 | 9 | ||||||||
| Revenue reserve | (79) | (182) | (276) | (145) | (93) | (153) | (52) | ||||||||
| Shareholders’ funds | 102 | 1,707 | 4,679 | 2,189 | 1,258 | 3,048 | 2,488 | ||||||||
| Net asset value excluding distributions to date (pence per share) | - | 60.7 | 69.5 | 76.9 | 80.0 | 86.6 | 93.5 | ||||||||
| Net asset value including distributions to date (pence per share) | - | 80.7 | 84.5 | 86.9 | 90.0 | 91.6 | 93.5 |
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
for the year ended 31 December 2014
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Opening Shareholders’ funds | 102 | 1,707 | 4,679 | 2,189 | 1,258 | 3,048 | 2,488 | ||||||||
| Capital subscribed | - | - | - | - | - | - | - | ||||||||
| Issue costs | - | - | - | - | - | - | - | ||||||||
| Dividends | (102) | (1,660) | (337) | (142) | (79) | (176) | (133) | ||||||||
| (Loss)/profit for the year | - | (47) | (13) | 7 | (6) | (69) | (16) | ||||||||
| Closing Shareholders’ funds | - | - | 4,329 | 2,054 | 1,173 | 2,803 | 2,339 |
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
for the year ended 31 December 2013
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Opening Shareholders’ funds | 7,637 | 1,934 | 5,285 | 2,451 | 1,371 | 3,282 | - | ||||||||
| Capital subscribed | - | - | - | - | - | - | 2,596 | ||||||||
| Issue costs | - | - | - | - | - | - | (65) | ||||||||
| Dividends | (7,484) | (141) | (337) | (142) | (79) | (176) | - | ||||||||
| Loss for the year | (51) | (86) | (269) | (120) | (34) | (58) | (43) | ||||||||
| Closing Shareholders’ funds | 102 | 1,707 | 4,679 | 2,189 | 1,258 | 3,048 | 2,488 |
CASH FLOW STATEMENT
for the year ended 31 December 2014
| 31 December 2014 | 31 December2013 | ||||||
| Note | £'000 | £'000 | |||||
| Net cash flow from operating activities | (316) | (374) | |||||
| Financial investment | |||||||
| Purchase of Qualifying Investments | 8 | (2,625) | (2,625) | ||||
| Return of Qualifying Investments | 8 | 1,729 | 7,062 | ||||
| Net cash flow from financial investment | (896) | 4,437 | |||||
| Management of liquid resources | |||||||
| Purchase of Non-qualifying Investments | 11 | (179) | (5,874) | ||||
| Disposal of Non-qualifying Investments | 11 | 3,919 | 6,569 | ||||
| Net cash flow from liquid resources | 3,740 | 695 | |||||
|
| |||||||
| Financing | |||||||
| Issue of Shares | - | 2,596 | |||||
| Issue costs of Shares | - | (65) | |||||
| Net cash flow from financing | - | 2,531 | |||||
| Dividends | |||||||
| Payment of dividends | 14 | (2,629) | (8,359) | ||||
| Net cash flow from dividends | (2,629) | (8,359) | |||||
| Decrease in cash | (101) | (1,070) |
Reconciliation of loss before taxation to net cash flow from operating activities
| 2014 £'000 | 2013 £'000 | ||||||
| Loss on ordinary activities before taxation | (144) | (661) | |||||
| (Increase)/decrease in fair value of investments held | (28) | 387 | |||||
| Investment income | (134) | (194) | |||||
| Decrease in receivables | 17 | 100 | |||||
| Decrease in payables | (27) | (6) | |||||
| Net cash flow from operating activities | (316) | (374) |
Reconciliation of net cash flow to movement in net funds
| 2014 £'000 | 2013 £'000 | ||||||
| Decrease in cash in the period | (101) | (1,070) | |||||
| Disposal of Non-qualifying investments | 11 | (3,740) | (405) | ||||
| Fair value adjustment on Non-qualifying investments | 11 | 6 | 91 | ||||
| Change in net funds | (3,835) | (1,384) | |||||
| Net funds at 1 January 2014 | 8,282 | 9,666 | |||||
| Net funds at 31 December 2014 | 4,447 | 8,282 |
Net funds comprise cash of £54,000 (31 December 2013: £155,000) and Non-qualifying assets, excluding Investment in Investee Companies of £4,393,000 (31 December 2013: £8,127,000).
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
CASH FLOW STATEMENT
for the year ended 31 December 2014
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Net cash flow from operating activities | (13) | (40) | (79) | (52) | (18) | (29) | (85) | ||||||||
| Financial investment | |||||||||||||||
| Purchase of Qualifying Investments | - | - | - | (320) | (180) | (2,125) | - | ||||||||
| Return of Qualifying Investments | - | 1,229 | - | 320 | 180 | - | - | ||||||||
| Net cash flow from financial investment | - | 1,229 | - | - | - | (2,125) | - | ||||||||
| Management of liquid resources | |||||||||||||||
| Purchase of Non-qualifying Investments | - | - | - | - | (109) | (70) | - | ||||||||
| Disposal of Non-qualifying Investments | - | 469 | 451 | 197 | 205 | 2,397 | 200 | ||||||||
| Net cash flow from liquid resources | - | 469 | 451 | 197 | 96 | 2,327 | 200 | ||||||||
| Financing | |||||||||||||||
| Issue of Shares | - | - | - | - | - | - | - | ||||||||
| Issue costs of Shares | - | - | - | - | - | - | - | ||||||||
| Net cash flow from financing | - | - | - | - | - | - | - | ||||||||
| Dividends | |||||||||||||||
| Payment of dividends | (102) | (1,660) | (337) | (142) | (79) | (176) | (133) | ||||||||
| Net cash flow from dividends | (102) | (1,660) | (337) | (142) | (79) | (176) | (133) | ||||||||
| (Decrease)/increase in cash | (115) | (2) | 35 | 3 | (1) | (3) | (18) |
Reconciliation of (loss)/profit before taxation to net cash flow from operating activities
| OrdinaryShares £'000 | CShares£'000 | DShares£'000 | EShares£'000 | FShares£'000 | GShares£'000 | H Shares £'000 | |||||||||
| (Loss)/profit on ordinary activities before taxation | - | (47) | (13) | 7 | (6) | (69) | (16) | ||||||||
| Decrease/(increase) in fair value of investments held | - | 5 | 6 | (26) | 4 | 51 | (68) | ||||||||
| Investment income | - | (3) | (71) | (33) | (16) | (11) | - | ||||||||
| Decrease/(increase) in receivables | - | 33 | (22) | - | - | - | 6 | ||||||||
| (Decrease)/ increase in payables | (13) | (28) | 21 | - | - | - | (7) | ||||||||
| Net cash flow from operating activities | (13) | (40) | (79) | (52) | (18) | (29) | (85) |
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
CASH FLOW STATEMENT
for the year ended 31 December 2013
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Net cash flow from operating activities | 42 | (48) | (102) | (56) | (29) | (113) | (68) | ||||||||
| Financial investment | |||||||||||||||
| Purchase of Qualifying Investments | - | (375) | - | (1,475) | (775) | - | - | ||||||||
| Return of Qualifying Investments | 6,328 | 734 | - | - | - | - | - | ||||||||
| Net cash flow from financial investment | 6,328 | 359 | - | (1,475) | (775) | - | - | ||||||||
| Management of liquid resources | |||||||||||||||
| Purchase of Non-qualifying Investments | - | (340) | - | - | (257) | (2,442) | (2,835) | ||||||||
| Disposal of Non-qualifying Investments | 891 | 89 | 432 | 1,188 | 870 | 2,708 | 391 | ||||||||
| Net cash flow from liquid resources | 891 | (251) | 432 | 1,188 | 613 | 266 | (2,444) | ||||||||
| Financing | |||||||||||||||
| Issue of Shares | - | - | - | - | - | - | 2,596 | ||||||||
| Issue costs of Shares | - | - | - | - | - | - | (65) | ||||||||
| Net cash flow from financing | - | - | - | - | - | - | 2,531 | ||||||||
| Dividends | |||||||||||||||
| Payment of dividends | (7,484) | (141) | (337) | (142) | (79) | (176) | - | ||||||||
| Net cash flow from dividends | (7,484) | (141) | (337) | (142) | (79) | (176) | - | ||||||||
| (Decrease)/increase in cash | (223) | (81) | (7) | (485) | (270) | (23) | 19 |
Reconciliation of loss before taxation to net cash flow from operating activities
| OrdinaryShares£'000 | CShares£'000 | DShares£'000 | EShares£'000 | FShares£'000 | GShares£'000 | HShares£'000 | |||||||||
| Loss on ordinary activities before taxation | (51) | (86) | (269) | (120) | (34) | (58) | (43) | ||||||||
| Decrease/(increase) in fair value of investments held | 63 | 70 | 246 | 77 | 15 | (53) | (31) | ||||||||
| Investment income | (71) | (29) | (76) | (11) | (7) | - | - | ||||||||
| Decrease/(increase) in receivables | 139 | (33) | - | - | - | - | (6) | ||||||||
| (Decrease)/increase in payables | (38) | 30 | (3) | (2) | (3) | (2) | 12 | ||||||||
| Net cash flow from operating activities | 42 | (48) | (102) | (56) | (29) | (113) | (68) |
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2014
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, the Companies Act 2006 and with the Statement of Recommended Practice (the SORP) entitled “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (with the exception of paragraph 80 of the SORP regarding detailed disclosure of financial and operational performance of the Company’s unquoted investments due to their confidential nature) which was issued in January 2009.
The comparative figures are for the year 1 January 2013 to 31 December 2013.
The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement at fair value for Qualifying and Non-qualifying Investments. The principal accounting policies have remained unchanged from those set out in the Company’s 2013 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 through profit and loss and are 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 fair value. The fair value is subsequently re-measured, as estimated by the Directors. 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 pricesOf 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 cash flows of the Investee Companies. In relation to the Company’s investments, anticipating future cash flows 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 - OEICs
The Company’s Non-qualifying Investments in interest bearing money market OEICs are valued at fair value which is bid price. They have been designated as fair value through profit or loss for the purposes of FRS 26.
Gains and losses arising from changes in the 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 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 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 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.General expenses were paid for by the C Share class until 5 August 2014 and from 6 August 2014 by the D Share class and have been recharged on a quarterly basis to the other Share classes based on the proportional net asset value per Share class as at the last day of the previous quarter.
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.
g) C Shares, D Shares, E Shares, F Shares, G Shares and H Shares
The Company had six Share classes up to 18 December 2014: C Shares, D Shares, E Shares, F Shares, G Shares and H Shares. On 18 December 2014 the Company’s capital was reduced by the cancellation and extinguishment of all of its C Shares of 1p each. Each Share class has a separate pool of income and expenses as well as assets and liabilities attributable to it. All Share classes rank pari passu with each other in terms of voting and other rights.
| 2. Investment Income | |||||||
| 2014 £'000 | 2013 £'000 | ||||||
| Bank deposit interest | - | 7 | |||||
| Dividend income from Qualifying Investments | 29 | 9 | |||||
| Loan note interest from Qualifying Investments | 38 | 49 | |||||
| Loan note premium from Qualifying Investments (note 8) | 136 | 195 | |||||
| 203 | 260 | ||||||
| 3. Arrangement Fees | |||||||
| 2014 £'000 | 2013 £'000 | ||||||
| Arrangement fees | - | 16 |
All costs arising out of the relevant H Share Offer (included in 2013), including listing expenses and commissions, were incurred by Ingenious Media Investments Limited (IMIL) and a fee ranging from 0.6288% to 5.5%, depending on the Share issue price, of the gross proceeds of the relevant Offer was paid in consideration of the service provided. The Directors believe that 80% of these fees relate directly to the raising of capital and have classified this proportion as issue costs. In accordance with Company law, the issue costs have been deducted from the Share premium account. The remaining 20% reflected above has been taken to revenue.
4. Investment Management Fees
| 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Investment management fees | 121 | 121 | 242 | 165 | 165 | 330 |
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 split of the Company’s long term returns.
5. Other Expenses
| 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Directors’ remuneration (excluding employer’s national insurance) | 38 | - | 38 | 38 | - | 38 | |||||||
| Auditor’s remuneration | |||||||||||||
| - Audit fees 2014 | 17 | - | 17 | 17 | - | 17 | |||||||
| - Audit fees under accrued 2012 | - | - | - | 3 | - | 3 | |||||||
| Legal and professional fees | 21 | - | 21 | 29 | - | 29 | |||||||
| Other administration expense | 121 | - | 121 | 153 | - | 153 | |||||||
| 197 | - | 197 | 240 | - | 240 |
The Company is not registered for VAT. Fees payable to the Company’s auditor for the audit of the Company’s financial statements are £14,125 (31 December 2013: £13,750) excluding VAT. Further details on the Directors’ fee disclosures are given in the Directors’ Remuneration Report.
6. Tax Charge on Ordinary Activities
| 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Loss on ordinary activities before tax | (115) | (29) | (144) | (161) | (500) | (661) | |||||||
| Loss on ordinary activities by tax rate 21.493% (31 December 2013: 23.247%) | (25) | (6) | (31) | (37) | (116) | (153) | |||||||
| Adjustments: | |||||||||||||
| Non taxable (gains)/losses on investments | - | (20) | (20) | - | 78 | 78 | |||||||
| Disallowed expenses | 2 | 26 | 28 | 5 | 38 | 43 | |||||||
| Unutilised losses for the current year | 29 | - | 29 | 34 | - | 34 | |||||||
| UK dividends not taxable | (6) | - | (6) | (2) | - | (2) | |||||||
| - | - | - | - | - | - |
As the Company is a VCT its capital gains are not taxable.
At 31 December 2014 the Company had surplus management expenses of £1,087,000 (31 December 2013: £950,000). A deferred tax asset has not been recognised in respect of these surplus management expenses as the future taxable income of the Company cannot 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.
7. Basic and Diluted Return per Share
| Ordinary Shares | 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Profit/(loss) on ordinary activities after taxation | - | - | - | 16 | (67) | (51) | |||||||
| Weighted average Shares in issue (number) | - | - | - | 9,897,463 | 9,897,463 | 9,897,463 | |||||||
| Profit/(loss) attributable per Share (pence) | - | - | - | 0.2 | (0.7) | 0.5 | |||||||
| C Shares | 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Loss on ordinary activities after taxation | (29) | (18) | (47) | (12) | (74) | (86) | |||||||
| Weighted average Shares in issue (number) | 2,695,092 | 2,695,092 | 2,695,092 | 2,810,596 | 2,810,596 | 2,810,596 | |||||||
| Loss attributable per Share (pence) | (1.1) | (0.7) | (1.8) | (0.4) | (2.6) | (3.0) | |||||||
| D Shares | 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Profit/(loss) on ordinary activities after taxation | 23 | (36) | (13) | 14 | (283) | (269) | |||||||
| Weighted average Shares in issue (number) | 6,735,624 | 6,735,624 | 6,735,624 | 6,735,624 | 6,735,624 | 6,735,624 | |||||||
| Profit/(loss) attributable per Share (pence) | 0.3 | (0.5) | (0.2) | 0.2 | (4.2) | (4.0) | |||||||
| E Shares | 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Profit/(loss) on ordinary activities after taxation | 7 | - | 7 | (35) | (85) | (120) | |||||||
| Weighted average Shares in issue (number) | 2,846,122 | 2,846,122 | 2,846,122 | 2,846,122 | 2,846,122 | 2,846,122 | |||||||
| Profit/(loss) attributable per Share (pence) | 0.3 | - | 0.3 | (1.2) | (3.0) | (4.2) |
| F Shares | 2014 | 2014 | 2014 | 2013 | 2013 | 2012 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| Loss on ordinary activities after taxation | (5) | (1) | (6) | (21) | (13) | (34) | |||||||
| Weighted average Shares in issue (number) | 1,572,095 | 1,572,095 | 1,572,095 | 1,572,095 | 1,572,095 | 1,572,095 | |||||||
| Loss attributable per Share (pence) | (0.3) | (0.1) | (0.4) | (1.3) | (0.8) | (2.1) | |||||||
| G Shares | 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| (Loss)/profit on ordinary activities after taxation | (53) | (16) | (69) | (71) | 13 | (58) | |||||||
| Weighted average Shares in issue (number) | 3,518,044 | 3,518,044 | 3,518,044 | 3,518,044 | 3,518,044 | 3,518,044 | |||||||
| (Loss)/profit attributable per Share (pence) | (1.5) | (0.5) | (2.0) | (2.0) | 0.4 | (1.6) | |||||||
| H Shares | 2014 | 2014 | 2014 | 2013 | 2013 | 2013 | |||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| (Loss)/profit on ordinary activities after taxation | (58) | 42 | (16) | (52) | 9 | (43) | |||||||
| Weighted average Shares in issue (number) | 2,660,842 | 2,660,842 | 2,660,842 | 1,590,411 | 1,590,411 | 1,590,411 | |||||||
| (Loss)/profit attributable per Share (pence) | (2.2) | 1.6 | (0.6) | (3.3) | 0.6 | (2.7) |
There are no dilutive potential Ordinary, C, D, E, F, G and H Shares, including convertible instruments, options or contingent share agreements in issue for the Company. The basic return per Share is therefore the same as the diluted return per Share.
8. Fixed Asset Investments
| 2014 £'000 | 2013 £'000 | |||||
| Unquoted investments | 8,280 | 7,228 | ||||
| Equity shares | 2,959 | 1,711 | ||||
| Unsecured loan notes | 5,321 | 5,517 | ||||
| 8,280 | 7,228 | |||||
| Qualifying Investments | ||||||
| 2014 £'000 | 2013 £'000 | |||||
| Opening valuation | 7,228 | 11,949 | ||||
| Purchases at cost | 2,625 | 2,625 | ||||
| Return of investment | (1,729) | (7,062) | ||||
| Fair value adjustment | 156 | (284) | ||||
| Closing valuation | 8,280 | 7,228 | ||||
Included in the valuation above is an equal and opposite fair value gain and fair value loss amounting to £136,000 (31 December 2013: £195,000). This represents the accounting treatment of the guaranteed loan note premium. The £136,000 is included in the Income Statement under Investment Income (refer to note 2).
9. Significant Interests
The Company has interests of 3%, or greater, of the nominal value of the allotted shares in the following Investee Companies incorporated in the United Kingdom as at 31 December 2014:
| Trading Companies | % class and share type | % voting rights | ||
| CLS Concerts Limited | 50.00% A Ordinary | 16.67% | ||
| Dance Floor Limited | 50.00% A Ordinary | 12.48% | ||
| Event Spaces Limited | 50.00% A Ordinary | 22.50% | ||
| FM3 2013 Limited | 50.00% A Ordinary | 20.00% | ||
| Hop Farm Comedy Limited | 50.00% A Ordinary | 20.00% | ||
| Just For London Limited | 50.00% A Ordinary | 16.67% | ||
| Liverpool Sound City Limited | 50.00% A Ordinary | 15.00% | ||
| Love Supreme Festival Limited | 50.00% A Ordinary | 12.50% | ||
| Saturn Star Limited | 50.00% A Ordinary | 20.00% | ||
| Titans of Sport Ltd | 50.00% A Ordinary | 15.00% | ||
| Venn Music Ltd | 50.00% A Ordinary | 24.00% | ||
| Waxarch Ltd | 50.00% A Ordinary | 15.00% | ||
| Winterville Events Limited | 50.00% A Ordinary | 15.00% | ||
| The Zoo Project Festival Limited | 50.00% A Ordinary | 18.75% |
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. The investments made by the Company are part of its portfolio of investments and the table above includes all portfolio investments.
| 10. Debtors | |||||
| 2014 | 2013 | ||||
| £'000 | £'000 | ||||
| Prepayments and accrued income | 22 | 39 | |||
| 22 | 39 | ||||
| 11. Current Asset Investments | |||||
| 2014 | 2013 | ||||
| £'000 | £'000 | ||||
| Funds held in listed money market OEICs | 4,393 | 8,127 | |||
| Investment in Investee Companies | 3 | 3 | |||
| 4,396 | 8,130 | ||||
| Non-Qualifying Investments | |||||
| 2014 £'000 | 2013 £'000 | ||||
| Opening valuation | 8,130 | 8,734 | |||
| Disposal proceeds – Investment in Investee Companies | - | (290) | |||
| Purchases at cost – listed money market OEICs | 179 | 5,874 | |||
| Disposal proceeds - listed money market OEICs | (3,919) | (6,279) | |||
| Unrealised change in value - listed money market OEICs | 6 | 91 | |||
| Closing valuation | 4,396 | 8,130 | |||
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.
| 12. Creditors: Amounts Falling Due Within One Year | ||||||
| 2014 | 2013 | |||||
| £'000 | £'000 | |||||
| Trade creditors | 1 | - | ||||
| Accruals | 53 | 81 | ||||
| 54 | 81 | |||||
| 13. Called-up Share Capital | ||||||
| 2014 | 2013 | |||||
| Allotted, called-up and fully paid | £'000 | £'000 | ||||
| 10,205,011 Ordinary Shares 1p each | - | - | ||||
| 2,810,596 C Shares 1p each | - | 28 | ||||
| 6,735,624 D Shares 1p each | 68 | 68 | ||||
| 2,846,122 E Shares 1p each | 28 | 28 | ||||
| 1,572,095 F Shares 1p each | 16 | 16 | ||||
| 3,518,044 G Shares 1p each | 35 | 35 | ||||
| 2,660,842 H Shares 1p each | 27 | 27 | ||||
| 174 | 202 |
On 17 December 2014 the High Court of Justice of England and Wales made an order sanctioning the resolutions passed by the Company in general and class meetings held on 27 November 2014 by which the Company’s Shareholders approved the reduction of the Company’s share capital by the cancellation and extinguishment of all of its C Shares of 1p each.
In the prior year, the High Court of Justice of England and Wales made an order sanctioning the resolutions passed by the Company in general and class meetings held on 28 November 2013 by which the Company’s Shareholders approved the reduction of the Company’s share capital by the cancellation and extinguishment of all of its Ordinary Shares of 1p each.
In the year ended 31 December 2013, 2,660,842 H Shares were issued and allotted in accordance with the terms of the relevant Prospectus. Share issue costs amounted to £81,000 of which £65,000 have been set off against the Share premium account.
In the year ended 31 December 2012, 3,518,044 G Shares were issued and allotted in accordance with the terms of the relevant Prospectus. Share issue costs amounted to £194,000 of which £155,000 have been set off against the Share premium account.
In the year ended 31 December 2011, 2,846,122 E Shares and 1,572,095 F Shares were issued and allotted in accordance with the terms of the relevant Prospectus. Share issue costs amounted to £157,000 and £86,000 respectively of which £125,000 and £69,000 have been set off against the Share premium account.
In the year ended 31 December 2010, 6,785,624 D Shares were issued and allotted in accordance with the terms of the relevant Prospectus. 6,735,624 D Shares were fully paid at that year end. Share issue costs amounting to £295,000 have been set off against the Share premium account.
In the year ended 31 December 2009, 2,810,596 C Shares were issued and allotted in accordance with the terms of the relevant Prospectus. Share issue costs amounting to £121,000 have been set off against the Share premium account.
In the period ended 31 December 2008, 10,205,010 Ordinary Shares were issued and allotted in accordance with the terms of the relevant Prospectus. The one subscriber share created upon incorporation was issued at par. Share issue costs amounting to £448,000 have been set off against the Share premium account.
D Shares, E Shares, F Shares, G Shares and H Shares rank pari passu with each other in terms of voting and other rights. The entire issued D, E, F, G and H Share capital of the Company has been admitted to the official list maintained by the Financial Conduct Authority and to trading on the London Stock Exchange.
14. Reserves
| Share premium | Other reserve | Capital reserve | Revenue reserve | Total reserves | |||||||
|
| £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
| At 1 January 2014 | - | 17,524 | (1,275) | (980) | 15,269 | ||||||
| Issue of equity | - | - | - | - | - | ||||||
| Dividends paid | - | (2,629) | - | - | (2,629) | ||||||
| Cancellation of C Shares | - | 28 | - | - | 28 | ||||||
| Gain on disposal of investments | - | - | 64 | - | 64 | ||||||
| Increase in fair value of investments held | - | - | 28 | - | 28 | ||||||
| Investment income | - | - | - | 203 | 203 | ||||||
| Investment management fees | - | - | (121) | (121) | (242) | ||||||
| Other expenses | - | - | - | (197) | (197) | ||||||
| At 31 December 2014 | - | 14,923 | (1,304) | (1,095) | 12,524 |
The capital reserve includes realised investment holding losses of £387,000 and unrealised investment holding losses of £917,000. The other reserve, capital reserve and revenue reserve accounts are the only distributable reserves of the Company.
On 14 January 2014, the Company paid a capital distribution amounting to £102,000 on Ordinary Shares. On 7 March 2014, the Company paid dividends amounting to £562,000 on C Shares (28 February 2013: £141,000), £337,000 on D Shares (28 February 2013: £337,000), £142,000 on E Shares (28 February 2013: £142,000), £79,000 on F Shares (28 February 2013: £79,000), £176,000 on G Shares (9 May 2013: £176,000). On 9 May 2014, the Company paid dividends amounting to £133,000 on H Shares (2013: £Nil). On 17 September 2014 and 26 November 2014, the Company paid dividends amounting to £1,068,000 and £2,000 respectively on C Shares. On 17 December 2014, the Company declared and paid a capital distribution amounting to £28,000 on C Shares.
15. Net Asset Value Per Share Excluding Distributions to Date
| 2014 | 2013 | ||||||
| Net assets attributable to Ordinary Shareholders (£'000) | - | 102 | |||||
| Ordinary Shares in issue (number) | - | - | |||||
| Net asset value per Ordinary Share (pence) | - | - |
On 18 December 2013 the High Court of Justice of England and Wales made an order sanctioning the resolutions passed by the Company in general and class meetings held on 28 November 2013 by which the Company’s Shareholders approved the reduction of the Ordinary Share capital by the cancellation and extinguishment of all of its Ordinary Shares of 1p each.
| 2014 | 2013 | ||||||
| Net assets attributable to C Shareholders (£'000) | - | 1,707 | |||||
| C Shares in issue (number) | - | 2,810,596 | |||||
| Net asset value per C Share (pence) | - | 60.7 |
On 17 December 2014 the High Court of Justice of England and Wales made an order sanctioning the resolutions passed by the Company in general and class meetings held on 27 November 2014 by which the Company’s Shareholders approved the reduction of the C Share capital by the cancellation and extinguishment of all of its C Shares of 1p each.
| 2014 | 2013 | |||||||
| Net assets attributable to D Shareholders (£'000) | 4,329 | 4,679 | ||||||
| D Shares in issue (number) | 6,735,624 | 6,735,624 | ||||||
| Net asset value per D Share (pence) | 64.3 | 69.5 | ||||||
|
| 2014 | 2013 | ||||||
| Net assets attributable to E Shareholders (£'000) | 2,054 | 2,189 | ||||||
| E Shares in issue (number) | 2,846,122 | 2,846,122 | ||||||
| Net asset value per E Share (pence) | 72.2 | 76.9 | ||||||
|
| 2014 | 2013 | ||||||
| Net assets attributable to F Shareholders (£'000) | 1,173 | 1,258 | ||||||
| F Shares in issue (number) | 1,572,095 | 1,572,095 | ||||||
| Net asset value per F Share (pence) | 74.7 | 80.0 | ||||||
|
| ||||||||
|
| 2014 | 2013 | ||||||
| Net assets attributable to G Shareholders (£'000) | 2,803 | 3,048 | ||||||
| G Shares in issue (number) | 3,518,044 | 3,518,044 | ||||||
| Net asset value per G Share (pence) | 79.7 | 86.6 | ||||||
|
| ||||||||
|
| 2014 | 2013 | ||||||
| Net assets attributable to H Shareholders (£'000) | 2,339 | 2,488 | ||||||
| H Shares in issue (number) | 2,660,842 | 2,660,842 | ||||||
| Net asset value per H Share (pence) | 87.9 | 93.5 | ||||||
16. 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 8) are valued at fair value. For quoted securities included in current asset Non-qualifying Investments, this is bid 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
| 2014 £'000 | 2013 £'000 | ||||||
| Listed money market OEICs (note 11) | Level 1 | 4,393 | 8,127 | ||||
| Investment in investee companies (note 11) | Level 3 | 3 | 3 | ||||
| Unquoted investments (note 8) | Level 3 | 8,280 | 7,228 | ||||
| 12,676 | 15,358 |
Level 3 investments include a £63,000 revaluation loss on Liverpool Sound City Limited, a £255,000 revaluation profit on Waxarch Limited and a £36,000 revaluation loss on Titans of Sport Ltd during the year.
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(b) - Accounting Policies.
The effect on the valuation of the Level 3 investments, if the profit multiple element of the valuation method were to change by a factor of one, would be as follows:
|
| 31 December 2014 | 31 December 2013 | |||||
| £'000 +/- 1 Profit Multiple | £'000 +/- 1 Profit Multiple | ||||||
| Impact on loss on ordinary activities for the year | 103 | - | |||||
| before taxation and total equity | |||||||
Level 3 unquoted investments have been valued at the price of the recent investment, or fair value, depending on the age of the investment.
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 Strategic Report. 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 is subject to 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 of £4,393,000 (31 December 2013: £8,127,000). 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 2014 (31 December 2013: 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 2014 | 31 December 2013 | ||||||
| £'000 +/- 50 basis points | £'000 +/- 50 basis points | |||||||
| Impact on loss on ordinary activities for the year | 31 | 42 | ||||||
| before taxation and total equity | ||||||||
c) Credit Risk
Credit risk is the risk that a 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 £5,321,000 (31 December 2013: £5,517,000) 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 £5,321,000 (31 December 2013: £5,517,000) 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.
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 Board approved a deed of novation which, with effect from 6 April 2012, novated the management agreement so that Ingenious Capital Management Limited, of which Patrick McKenna is a director, replaced Ingenious Asset Management Limited as Manager to the Company. Ingenious Capital Management Limited, trading as Ingenious Ventures, undertakes the same duties as Ingenious Asset Management Limited and, save for the change of name of the Manager, there has been no other change to the terms of the management agreement. The reason for this change was to effect an administrative reorganisation within the Ingenious Group.
The Manager, as per the investment management agreement, receives a management fee of 0.4375% of the net asset value per Share class, payable quarterly in advance. In aggregate, this amounted to £242,000 as at 31 December 2014 (31 December 2013: £330,000). The Manager also charges an administration fee of £88,000 (31 December 2013: £102,000) per annum (adjusted for inflation and additional Share classes, if any) 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.
c) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to create and invest in a new company, Just For London Limited, to promote a new comedy concept called Just For London Comedy Festival. In October 2014 the Company invested £500,000 for a total of 16.67% of the equity in Just For London Limited. Ingenious Entertainment VCT 2 plc invested £500,000 for 16.67% of the equity in Just For London Limited. The investment was made in the E and F Share classes.
d) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to invest in an existing company, The Zoo Project Festival Limited, to promote an existing music festival called The Zoo Project Festival. In March 2014 the Company invested £300,000 for a total of 18.75% of the equity in The Zoo Project Festival Limited. Ingenious Entertainment VCT 2 plc invested £300,000 for a total of 18.75% of the equity in The Zoo Project Festival Limited. The investment was made in the G Share class.
e) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to create and invest in a new company, FM3 2013 Limited, to film festival and live event content. In March 2014 the Company invested £700,000 for a total of 20% of the equity in FM3 2013 Limited. Ingenious Entertainment VCT 2 plc invested £700,000 for 20% of the equity in FM3 2013 Limited. The investment was made in the G Share class.
f) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to create and invest in a new company, Winterville Events Limited, to promote an annual Christmas based event. In September 2014 the Company invested £500,000 for a total of 15% of the equity in Winterville Events Limited. Ingenious Entertainment VCT 2 plc invested £500,000 for 15% of the equity in Winterville Events Limited. The investment was made in the G Share class.
g) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have agreed to create and invest in a new company, Event Spaces Limited, to develop an events complex. In December 2014 the Company invested £625,000 for a total of 22.50% of the equity in Event Spaces Limited. Ingenious Entertainment VCT 2 plc invested £625,000 for 22.50% of the equity in Event Spaces Limited. The investment was made in the G Share class.
During the year 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.
| 2014 | 2014 | 2013 | 2013 | ||||||||
| Entity | Note | Expenditure paid £'000 | Amounts due £'000 | Expenditure paid £'000 | Amounts due £'000 | ||||||
| Ingenious Media Investments Limited | |||||||||||
| - Arrangement fee | - | - | 81 | - | |||||||
| Ingenious Capital Management Limited | |||||||||||
| - Investment management fee | a | 242 | - | 330 | - | ||||||
| - Administration fee | a | 88 | - | 102 | - | ||||||
| - Irrecoverable VAT | - | - | - | 6 |
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 £122,000 excluding VAT (31 December 2013: £202,000), have been invoiced to the Investee Companies in the period of which £38k remained outstanding as at 31 December 2014 (31 December 2013: £Nil).
18. Events After the Balance Sheet Date
a) The Company declared an interim dividend of 20.0 pence per D Share on 28 January 2015 (2014: 5.0 pence). The dividend was paid on 26 February 2015 by way of a capital distribution reducing the Company’s other reserves.
b) The Company declared an interim dividend of 5.0 pence per E Share on 28 January 2015 (2014: 5.0 pence). The dividend was paid on 26 February 2015 by way of a capital distribution reducing the Company’s other reserves.
c) The Company declared an interim dividend of 5.0 pence per F Share on 28 January 2015 (2014: 5.0 pence). The dividend was paid on 26 February 2015 by way of a capital distribution reducing the Company’s other reserves.
d) The Company declared an interim dividend of 5.0 pence per G Share on 28 January 2015 (2014: 5.0 pence). The dividend was paid on 26 February 2015 by way of a capital distribution reducing the Company’s other reserves.
e) The Company declared an interim dividend of 5.0 pence per H Share on 28 January 2015 (2014: 5.0 pence). The dividend was paid on 26 February 2015 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 2014 was £12,703,000 (31 December 2013: £15,471,000).
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 of the business from the previous period.
The capital structure of the Company was changed by the cancellation of C Shares during the year.
The Company is subject to the following externally imposed capital requirements:
As a public company Ingenious Entertainment VCT 1 plc must have a minimum of £50,000 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.
Copyright Business Wire 2015