Last checked at 27 Apr 2017 07:00
INGENIOUS ENTERTAINMENT VCT 1 PLC (“the Company”)
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2016
Chairman’s Statement
I am delighted to present the Company’s ninth Annual Report and Accounts covering the year to 31 December 2016 (the Reporting Period).
Overview of Activities
The D Share class reached its five year anniversary on 30 July 2015. The D shares were cancelled and extinguished on January 18 2017 with all residual funds repaid to the relevant shareholders.
The E and F Share classes reached their five year anniversary on 30 July 2016. The E and F shares were cancelled and extinguished on January 18 2017; with all residual funds repaid to the relevant shareholders.
The Company has now completed its investment strategy and is fully invested under the VCT regulations for its G and H Share classes. The Manager will focus upon maximising the returns from the investments.
The Company continued to actively source and review investment opportunities during this Reporting Period for the H Share class. The Company made one investment during the Reporting Period. Details of all investments can be found in the Manager’s Review.
During the Reporting Period two live events were undertaken by two of the Company’s Investee Companies. Brighton Boundary festival took place on 17 September as part of Fresher’s Week in Stamner Park. Just for London put on Just for Laughs comedy festival for the week commencing the 14 July in central London.
Fund Raising
The Company raised no further funds during the Reporting Period.
Results
The 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 D Shares made a profit of £43,000 (31 December 2015: loss of £153,000). The E Shares made a profit of £1,000 (31 December 2015: loss of £100,000). The F Shares made a profit of £5,000 (31 December 2015: loss of £60,000). The G Shares made a loss of £776,000 (31 December 2015: loss of £264,000). The H Shares made a loss of £202,000 (31 December 2015: loss of £41,000).
The net asset value per D Share at 31 December 2016 was 1 pence although this is after the deduction of the dividend of 1.6 pence per Share in the Reporting Period and the deduction of a total of 80 pence per Share of dividends in previous years (31 December 2015: 2.0 pence). The net asset value as at 31 December 2016 including distributions was therefore 82.6 pence per D Share (31 December 2015: 82.0 pence).
The net asset value per E Share at 31 December 2016 was 1 pence after the deduction of the dividend of 62.7 pence per Share in the Reporting Period and the deduction of a total of 20 pence per Share of dividends in previous years (31 December 2015: 63.7 pence). The net asset value as at 31 December 2016 including distributions was therefore 83.7 pence per E Share (31 December 2015: 83.7 pence).
The net asset value per F Share at 31 December 2016 was 1 pence after the deduction of the dividend of 65.2 pence per Share in the Reporting Period and the deduction of a total of 20 pence per Share of dividends in previous years (31 December 2015: 65.9 pence). The net asset value as at 31 December 2016 including distributions was therefore 86.2 pence per F Share (31 December 2015: 85.9 pence).
The net asset value per G Share at 31 December 2016 was 40.1 pence after the deduction of the dividend of 5 pence per Share in the Reporting Period and the deduction of a total of 15 pence per Share dividends in the previous years (31 December 2015: 67.2 pence). The net asset value as at 31 December 2016 including distributions was therefore 60.1 pence per G Share (31 December 2015: 82.2 pence).
The net asset value per H Share at 31 December 2016 was 68.8 pence after the deduction of the dividend of 5 pence per Share in the Reporting Period and the deduction of a 10 pence per Share dividend in the previous years (31 December 2015: 81.4 pence). The net asset value as at 31 December 2016 including distributions was therefore 83.8 pence per H Share (31 December 2015: 91.4 pence).
Legislative and Regulatory Developments
The changes to the VCT rules that were introduced in 2015 have not had a significant impact on the operation of the Company.
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 portfolio includes investments other than festivals; such as investments in venues that are set up to hold live events and therefore take advantage of different areas of the live events industry.
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.
Manager’s Review
The Company and Ingenious Entertainment VCT 2 plc have made equal investments into each qualifying investment.
The Company and Ingenious Entertainment VCT 2 plc are collectively known as ‘the Ingenious Entertainment VCT’s’.
A summary of the Company’s investments, their individual valuations and the split between the various share classes as of 31 December 2016 is shown below:
| Total £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | ||||||||
| Festivals | |||||||||||||
| Just For London Comedy Festival | |||||||||||||
| (Cost £375,000: £750,000 across the Ingenious Entertainment VCTs) | 279 | - | - | - | - | 279 | |||||||
| The Zoo Project Festival | |||||||||||||
| (Cost £300,000: £600,000 across the Ingenious Entertainment VCTs) | 279 | - | - | - | 279 | - | |||||||
| SWG Power Limited | |||||||||||||
| (Cost £250,000: £500,000 across the Ingenious Entertainment VCTs) | 250 | - | - | - | - | 250 | |||||||
| Brighton Boundary Limited | |||||||||||||
| (Cost £250,000: £500,000 across the Ingenious Entertainment VCTs) | 250 | - | - | - | - | 250 | |||||||
| Seasonal Events | |||||||||||||
| Winterville Events Limited | |||||||||||||
| (Cost £500,000: £1,000,000 across the Ingenious Entertainment VCTs) | 328 | - | - | - | 328 | - | |||||||
| Content Exploitation | |||||||||||||
| FM3 2013 Limited | |||||||||||||
| (Cost £700,000: £1,400,000 across the Ingenious Entertainment VCTs) | 35 | - | - | - | 35 | - | |||||||
| Live Venues | |||||||||||||
| Event Spaces Limited | |||||||||||||
| (Cost £625,000: £1,250,000 across the Ingenious Entertainment VCTs) | 610 | - | - | - | 610 | - | |||||||
| Genius Star Limited | |||||||||||||
| (Cost £375,000: £750,000 across the Ingenious Entertainment VCTs) | 375 | - | - | - | - | 375 | |||||||
| Counterculture Bars Limited | |||||||||||||
| (Cost £250,000: £500,000 across the Ingenious Entertainment VCTs) | 200 | - | - | - | - | 200 | |||||||
| Total investments | 2,606 | - | - | - | 1,252 | 1,354 |
Festivals
Brighton Boundary Limited
In May 2016 the Ingenious Entertainment VCTs made an investment of £500,000 into Brighton Boundary Limited to promote a music festival in Brighton.
The Ingenious Entertainment VCTs joined forces with LWE, SWG Power Limited (SWG) and Matt Priest to produce, promote and manage a new music festival called Boundary Brighton to be held in Stamner Park in Brighton.
The first event was held in September 2016 and formed part of Freshers’ Week for the University of Sussex as well as being aimed at the local audience in and around Brighton and London. Although the festival was well-received by the press and public, it did not sell the required amount of tickets to break-even and it incurred a loss.
Just For London Limited
In October 2014, the Ingenious Entertainment VCTs invested £1,750,000 into a company to co-promote the Just For Laughs comedy festival.
The first event was held in July 2016 in Russell Square and Logan Hall which is part of University College London and although it was a well-received show by the press and public, it did not sell the required amount of tickets to break-even. The show made a significant loss which has been taken into account in the valuation of the investment.
There is no clear plan in place to stage another event. However options are being discussed.
The Zoo Project Festival Limited
In March 2014, the Ingenious Entertainment VCTs invested £600,000 into a company to co-promote The Zoo Project Festival.
Over the course of 2012 and 2013 the festival promoters established a strong festival brand with a core following and although it was very well received by the press and public, the attendance levels were disappointing and the event incurred a loss in the region of £40,000.
The Manager is currently reviewing future options for the brand.
SWG Power Limited
In November 2015 the Ingenious Entertainment VCT’s made an investment of £500,000 into SWG which has been established to provide power to festivals, live events, conferences and exhibitions.
SWG has been established to act as a service provider supplying on-site power to the festival, exhibition, conference and live event market. SWG will aim to exploit the growing market for festivals and live events and will look to sign multi-year deals with events to provide a reliable source of income.
SWG will use a portion of the investment to purchase new power generation equipment to enable it to tender for a greater number of power contracts.
During the ‘build’ of events, the purchased assets will be brought to the respective event sites to provide power for the event (e.g. for stage lighting, sound systems and back office) and to power individual traders and exhibitors working at the event, for which SWG will receive supplementary income to the tendered amount with the event promoter.
Revenues will be generated from power supply contracts which will encompass fees for the supply of power, service fees for staff operating the equipment and maintaining the equipment on site, and a mark-up on fuel costs charged to traders on the event site.
Winterville Events Limited
In September 2014, an investment of £1,000,000 was made by the Ingenious Entertainment VCTs 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.
For the 2015 event, the Ingenious Entertainment VCTs and partners Marcus Weedon and Darren Guerin joined forces with AEG Live to utilise AEG’s experience in this market (AEG have promoted four Winter Wonderlands in Hyde Park and a winter season in Dublin).
Unfortunately, due to the wettest December on record and the impact of an average event in 2014, the event made a loss which has been taken into account in the valuation of the investment. The event was not held in 2016.
Content Exploitation
FM3 2013 Limited
In March 2014, an investment of £1,400,000 was made by the Ingenious Entertainment VCTs into FM3 2013 Limited to film festival and live event content. The business strategy was 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.
Unfortunately, due to several setbacks, relating to the ability to exploit the proposed revenue streams, the Manager has concluded that very little value can be extracted from the investment and recommended the write down of virtually all of the FM3 investment at this stage. There remains the potential to exploit the proposed revenue streams in the future but, given the difficulties faced to date, any possible time frames or quantum of such earnings is uncertain.
Live Venues
Event Spaces Limited
In December 2014, an investment of £1,250,000 was made by the Ingenious Entertainment VCTs into Event Spaces Limited to promote a wide range of events to be hosted from a semi-permanent events structure situated in London.
A large semi-permanent structure was purchased that was situated on the Pontoon Dock site. However this project was abandoned due to unresolvable issues with the landowner over the length of time the site could be leased for. The structure has been sold for a loss and the directors of Event Spaces Limited decided to reinvest the capital into a new project called ‘Art of the Brick’.
Art of the Brick is a Lego Exhibition based behind the National Theatre on the Southbank in London with life size imitations of DC Comic Superheroes which will initially run from February to September 2017.
Tickets went on sale in December and are currently ahead of expectations. The break-even point is 183,000 tickets.
A provision has been made for the aborted costs incurred by the Ingenious Entertainment VCTs in relation to the initial project.
Counterculture Bars Limited
In September 2015 an investment of £500,000 was made by the Ingenious Entertainment VCT’s into Counterculture Bars Limited (Counterculture) to operate the multi-purpose bar/kitchen and live venue, ‘Haunt’ in Stoke Newington with Alexander Brooks.
‘Haunt’ opened in November 2015 and is a multi-faceted and vibrant space which serves as a functioning bar and kitchen, and a multi-purpose event space for promoted, co-promoted and externally hired activities.
Counterculture had a tough first few months opening too late for Christmas bookings then suffering the hard months of January and February. Following this period (apart from August), the operation steadied and popularity grew in the local community. A decision was made to cut costs by outsourcing the food function.
Counterculture’s most recent accounts show a loss in the region of £125,000. The directors of Counterculture Bars Limited are currently in discussions to assess the future of the venue. In addition, the lease has been offered to the market to compare the value with results of ongoing trading although no serious bids have been made to date.
Genius Star Limited
In December 2015 an investment by the Ingenious Entertainment VCTs of £750,000 was made into Genius Star Limited to operate a pub which serves as a multi functioning bar and kitchen with a function room for promoted, co-promoted and externally hired activities.
‘The Leyton Star’ opened in June 2016 and is a multi-faceted and vibrant space which capitalises on the premises’ location and experience of the partner, Rob Star.
The pub also benefits from a garden area where 9 heated wooded cabanas were fitted to hold over 100 people as well as a further 75 people outside these areas.
.
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
| Year ended 31 December 2016 | Year ended 31 December 2015 | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||
| Gain on disposal of investments | 10 | - | 208 | 208 | - | 103 | 103 | ||||||||
| Increase/(decrease) in fair value of investments held | - | (1,096) | (1,096) | - | (484) | (484) | |||||||||
| Investment income | 2 | 35 | 177 | 212 | 128 | - | 128 | ||||||||
| Investment management fees | 3 | (34) | (34) | (68) | (92) | (92) | (184) | ||||||||
| Other expenses | 4 | (184) | - | (184) | (181) | - | (181) | ||||||||
| Loss before taxation | (183) | (745) | (928) | (145) | (473) | (618) | |||||||||
| Tax on profit/(loss) | 5 | - | - | - | - | - | - | ||||||||
| Total comprehensive income attributable to equity Shareholders | (183) | (745) | (928) | (145) | (473) | (618) | |||||||||
| Basic and diluted return per share (pence) | |||||||||||||||
| D Share | 6 | (0.1) | 0.8 | 0.7 | (0.0) | (2.2) | (2.3) | ||||||||
| E Share | 6 | (1.6) | 1.6 | 0.0 | (0.8) | (2.7) | (3.5) | ||||||||
| F Share | 6 | (1.7) | 2.0 | 0.3 | (1.0) | (2.9) | (3.8) | ||||||||
| G Share | 6 | (1.5) | (20.5) | (22.1) | (1.3) | (6.2) | (7.5) | ||||||||
| H Share | 6 | (2.0) | (5.7) | (7.7) | (2.2) | 0.6 | (1.5) | ||||||||
The total column represents the profit or loss account of the Company for the year.
All revenue and capital items in the above statement derive from continuing operations.
NON-STATUTORY ANALYSIS BETWEEN THE D, E, F, G AND H SHARE FUNDS (UNAUDITED)
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2016
| D Shares | E Shares | ||||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||||
| Gain/(loss) on disposal of investments | - | 51 | 51 | - | 59 | 59 | |||||||||
| (Decrease)/increase in fair value of investments held | - | - | - | - | (4) | (4) | |||||||||
| Investment income | - | - | - | 4 | - | 4 | |||||||||
| Investment management fees | - | - | - | (10) | (9) | (19) | |||||||||
| Other expenses | (8) | - | (8) | (39) | - | (39) | |||||||||
| Profit/(loss) before taxation | (8) | 51 | 43 | (45) | 46 | 1 | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity Shareholders | (8) | 51 | 43 | (45) | 46 | 1 | |||||||||
| Basic and diluted return per share (pence) | (0.1) | 0.8 | 0.7 | (1.6) | 1.6 | - | |||||||||
| F Shares | G Shares | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain on disposal of investments | - | 41 | 41 | - | 1 | 1 | |||||||||
| Decrease in fair value of investments held | - | (3) | (3) | - | (802) | (802) | |||||||||
| Investment income | 3 | - | 3 | 14 | 88 | 102 | |||||||||
| Investment management fees | (5) | (6) | (11) | (9) | (9) | (18) | |||||||||
| Other expenses | (25) | - | (25) | (59) | - | (59) | |||||||||
| Profit/(loss) before taxation | (27) | 32 | 5 | (54) | (722) | (776) | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity Shareholders | (27) | 32 | 5 | (54) | (722) | (776) | |||||||||
| Basic and diluted return per share (pence) | (1.7) | 2.0 | 0.3 | (1.5) | (20.5) | (22.1) | |||||||||
| H Shares | |||||||
| Revenue | Capital | Total | |||||
| £'000 | £'000 | £'000 | |||||
| Gain on disposal of investments | - | 56 | 56 | ||||
| Decrease in fair value of investments held | - | (287) | (287) | ||||
| Investment income | 14 | 90 | 104 | ||||
| Investment management fees | (10) | (10) | (20) | ||||
| Other expenses | (55) | - | (55) | ||||
| Profit/(loss)before taxation | (51) | (151) | (202) | ||||
| Tax on profit/(loss) | - | - | - | ||||
| Total comprehensive income attributable to equity Shareholders | (51) | (151) | (202) | ||||
| Basic and diluted return per share (pence) | (2.0) | (5.7) | (7.7) | ||||
The Total column represents the profit or loss account per Share class for the year.
NON-STATUTORY ANALYSIS BETWEEN THE D, E, F, G AND H SHARE FUNDS (UNAUDITED)
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2015
| D Shares | E Shares | ||||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||||
| Gain/(loss) on disposal of investments | - | 35 | 35 | - | 13 | 13 | |||||||||
| (Decrease)/increase in fair value of investments held | - | (163) | (163) | - | (74) | (74) | |||||||||
| Investment income | 55 | - | 55 | 29 | - | 29 | |||||||||
| Investment management fees | (22) | (22) | (44) | (16) | (17) | (33) | |||||||||
| Other expenses | (36) | - | (36) | (35) | - | (35) | |||||||||
| Loss before taxation | (3) | (150) | (153) | (22) | (78) | (100) | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity Shareholders | (3) | (150) | (153) | (22) | (78) | (100) | |||||||||
| Basic and diluted return per share (pence) | (0.0) | (2.2) | (2.2) | (0.8) | (2.7) | (3.5) | |||||||||
| F Shares | G Shares | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain on disposal of investments | - | 13 | 13 | - | 2 | 2 | |||||||||
| Decrease in fair value of investments held | - | (48) | (48) | - | (198) | (198) | |||||||||
| Investment income | 16 | - | 16 | 25 | - | 25 | |||||||||
| Investment management fees | (10) | (10) | (20) | (23) | (23) | (46) | |||||||||
| Other expenses | (21) | - | (21) | (47) | - | (47) | |||||||||
| Loss before taxation | (15) | (45) | (60) | (45) | (219) | (264) | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity Shareholders | (15) | (45) | (60) | (45) | (219) | (264) | |||||||||
| Basic and diluted return per share (pence) | (0.9) | (2.9) | (3.8) | (1.3) | (6.2) | (7.5) | |||||||||
| H Shares | |||||||
| Revenue | Capital | Total | |||||
| £'000 | £'000 | £'000 | |||||
| Gain on disposal of investments | - | 39 | 39 | ||||
| Decrease in fair value of investments held | - | (2) | (2) | ||||
| Investment income | 2 | - | 2 | ||||
| Investment management fees | (19) | (20) | (39) | ||||
| Other expenses | (41) | - | (41) | ||||
| Loss before taxation | (58) | 17 | (41) | ||||
| Tax on profit/(loss) | - | - | - | ||||
| Total comprehensive income attributable to equity Shareholders | (58) | 17 | (41) | ||||
| Basic and diluted return per share (pence) | (2.2) | 0.6 | (1.5) | ||||
The Total column represents the profit or loss account per Share class for the year.
BALANCE SHEET
as at 31 December 2016
| Note | 31 December 2016 £'000 | 31 December 2015 £'000 | ||||||
| Fixed assets | ||||||||
| Qualifying Investments held at fair value | 7 | 2,606 | 5,332 | |||||
| Current assets | ||||||||
| Debtors | 9 | 59 | 28 | |||||
| Non-qualifying Investments held at fair value | 10 | 214 | 1,038 | |||||
| Cash at bank and in hand | 538 | 1,219 | ||||||
| 811 | 2,285 | |||||||
| Creditors: amounts falling due within one year | 11 | (63) | (109) | |||||
| Net current assets | 748 | 2,176 | ||||||
| Net assets | 3,354 | 7,508 | ||||||
| Capital and reserves | ||||||||
| Called-up share capital | 12 | 174 | 174 | |||||
| Share premium account | 12 | - | - | |||||
| Other reserve account | 6,069 | 9,295 | ||||||
| Capital reserve | (1,756) | (1,011) | ||||||
| Revenue reserve | (1,133) | (950) | ||||||
| Shareholders’ funds | 3,354 | 7,508 | ||||||
| Net asset value per D Share |
| 13 | 1.0 | 2.0 | ||||
| Net asset value per E Share |
| 13 | 1.0 | 63.7 | ||||
| Net asset value per F Share |
| 13 | 1.0 | 65.9 | ||||
| Net asset value per G Share |
| 13 | 40.1 | 67.2 | ||||
| Net asset value per H Share |
| 13 | 68.8 | 81.4 | ||||
The financial statements were approved by the Board of Directors on 26 April 2017.
Signed on behalf of the Board of Directors:
David Munns
Chairman
NON-STATUTORY ANALYSIS BETWEEN THE D, E, F, G AND H SHARE FUNDS (UNAUDITED)
BALANCE SHEET
as at 31 December 2016
| D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Fixed assets | |||||||||||||
| Qualifying Investments | - | - | - | 1,252 | 1,354 | ||||||||
| Current assets | |||||||||||||
| Debtors | - | - | - | 20 | 39 | ||||||||
| Non-qualifying Investments | - | - | - | 3 | 211 | ||||||||
| Cash at bank and in hand | 73 | 33 | 20 | 151 | 261 | ||||||||
| 73 | 33 | 20 | 174 | 511 | |||||||||
| Creditors: amounts falling due within one year | (4) | (4) | (4) | (15) | (36) | ||||||||
| Net current assets | 69 | 29 | 16 | 159 | 475 | ||||||||
| Net assets | 69 | 29 | 16 | 1,411 | 1,829 | ||||||||
| Capital and reserves | |||||||||||||
| Called-up share capital | 68 | 28 | 16 | 35 | 27 | ||||||||
| Share premium account | - | - | - | - | - | ||||||||
| Other reserve account | 853 | 341 | 146 | 2,624 | 2,105 | ||||||||
| Capital reserve | (589) | (135) | (6) | (943) | (83) | ||||||||
| Revenue reserve | (263) | (205) | (140) | (305) | (220) | ||||||||
| Shareholders’ funds | 69 | 29 | 16 | 1,411 | 1,829 | ||||||||
| Net asset value excluding distributions to date (pence per share) | 1.0 | 1.0 | 1.0 | 40.1 | 68.7 | ||||||||
| Net asset value including distributions to date (pence per share) | 82.6 | 83.7 | 86.2 | 60.1 | 83.7 |
NON-STATUTORY ANALYSIS BETWEEN THE D, E, F, G AND H SHARE FUNDS (UNAUDITED)
BALANCE SHEET
as at 31 December 2015
| D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Fixed assets | |||||||||||||
| Qualifying Investments | 110 | 1,099 | 670 | 1,953 | 1,500 | ||||||||
| Current assets | |||||||||||||
| Debtors | - | 28 | - | - | - | ||||||||
| Non-qualifying Investments | - | 243 | 183 | 420 | 192 | ||||||||
| Cash at bank and in hand | 59 | 486 | 192 | 1 | 481 | ||||||||
| 59 | 757 | 375 | 421 | 673 | |||||||||
| Creditors: amounts falling due within one year | (36) | (47) | (9) | (9) | (8) | ||||||||
| Net current assets | 23 | 710 | 366 | 412 | 665 | ||||||||
| Net assets | 133 | 1,809 | 1,036 | 2,365 | 2,165 | ||||||||
| Capital and reserves | |||||||||||||
| Called-up share capital | 68 | 28 | 16 | 35 | 27 | ||||||||
| Share premium account | - | - | - | - | - | ||||||||
| Other reserve account | 961 | 2,125 | 1,171 | 2,800 | 2,238 | ||||||||
| Capital reserve | (640) | (181) | (39) | (220) | 69 | ||||||||
| Revenue reserve | (256) | (163) | (112) | (250) | (169) | ||||||||
| Shareholders’ funds | 133 | 1,809 | 1,036 | 2,365 | 2,165 | ||||||||
| Net asset value excluding distributions to date (pence per share) | 2.0 | 63.7 | 65.9 | 67.2 | 81.4 | ||||||||
| Net asset value including distributions to date (pence per share) | 82.0 | 83.7 | 85.9 | 82.2 | 91.4 |
CASH FLOW STATEMENT
for the year ended 31 December 2016
| 31 December 2016 | 31 December 2015 | ||||||||
| Note | £'000 | £'000 | |||||||
| Cash Flows from Operating Activities
Loss for the year |
(928) |
(618) | |||||||
| Adjustments for: | |||||||||
| Accrued investment income | (212) | (128) | |||||||
| Gain on disposal of investments | 10 | (208) | (103) | ||||||
| Decrease in fair value of investments held | 7 | 1,096 | 484 | ||||||
| Decrease/ (increase) in debtors and prepayments | (29) | (6) | |||||||
| (Decrease)/ increase in other creditors and accruals | (46) | 55 | |||||||
| Net cash used in operating activities | (327) | (316) | |||||||
| Cash flows from Investing Activities | |||||||||
| Purchase of Investments held at fair value | 7 | (250) | (1,500) | ||||||
| Proceeds on disposal of Qualifying Investments | 10 | 2,088 | 4,144 | ||||||
| Proceeds from sale of bonds and similar investments | 1,035 | 3,409 | |||||||
| Net cash from investing activities | 2,872 | 6,053 | |||||||
|
| |||||||||
| Cash flows from financing activities | |||||||||
| Dividends paid | (3,226) | (4,572) | |||||||
| Net cash used in financing activities | (3,226) | (4,572) | |||||||
| Net (decrease)/increase in cash and cash equivalents | (681) | 1,165 | |||||||
| Opening cash and cash equivalents | 1,219 | 54 | |||||||
| Closing cash and cash equivalents | 538 | 1,219 | |||||||
Cash and cash equivalents comprise cash in hand and cash at bank.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
for the year ended 31 December 2016
| Share Capital | Other reserve | Capital reserve | Revenue reserve | Total reserves | |||||||
|
| £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
| At 1 January 2015 | 174 | 14,923 | (1,304) | (1,095) | 12,698 | ||||||
| Elimination of reserves for Ordinary and C Shares | (1,056) | 766 | 290 | - | |||||||
| Dividends paid | - | (4,572) | - | - | (4,572) | ||||||
| Gain on disposal of investments | - | - | 103 | - | 103 | ||||||
| Decrease in fair value of investments held | - | - | (484) | - | (484) | ||||||
| Investment income | - | - | - | 128 | 128 | ||||||
| Investment management fees | - | - | (92) | (92) | (184) | ||||||
| Other expenses | - | - | - | (181) | (181) | ||||||
| At 31 December 2015 | 174 | 9,295 | (1,011) | (950) | 7,508 | ||||||
| Dividends paid | - | (3,226) | - | - | (3,226) | ||||||
| Gain on disposal of investments | - | - | 208 | - | 208 | ||||||
| Decrease in fair value of investments held | - | - | (1,096) | - | (1,096) | ||||||
| Investment income | - | - | 177 | 35 | 212 | ||||||
| Investment management fees | - | - | (34) | (34) | (67) | ||||||
| Other expenses | - | - | - | (184) | (184) | ||||||
| At 31 December 2016 | 174 | 6,069 | (1,756) | (1,133) | 3,354 |
The capital reserve includes realised investment holding losses of £76,000 (31 December 2015: losses of £284,000) and unrealised investment holding losses of £663,000 (31 December 2015: gains of £433,000).
The other reserve was created from the cancellation of the share premium on all Shares issued by the Company, which was done in order to create a distributable reserve.
The revenue reserve includes all current and prior period retained profits and losses which do not relate to realised and unrealised investment losses. The other reserve, capital reserve and revenue reserve accounts are the distributable reserves of the Company.
During the year ended 31 December 2016 the following dividend payments were made:
| 31 December 2016 | 31 December 2015 | ||
| £'000 | £'000 | ||
| D Share | 108 | 4,042 | |
| E Share | 1,785 | 142 | |
| F Share | 1,025 | 79 | |
| G Share | 176 | 176 | |
| H Share | 133 | 133 | |
| Total Dividends Paid | 3,226 | 4,572 |
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2016
1. Accounting Policies
a) Company Information
Ingenious Entertainment VCT 1 plc (public company limited by shares) is a venture capitalist trust company domiciled in the United Kingdom and incorporated in England on 10 October 2007. The address of the registered office is 15 Golden Square, London, W1F 9JG. Company number: 6395011.
b) Statement of Compliance
Basis of Accounting
The financial statements for the Reporting Period have been prepared in compliance with UK Generally Accepted Accounting Practice, including Financial Reporting Standard 102 – ‘The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ (‘FRS 102’), with the Companies Act 2006 and with the Statement of Recommended Practice entitled “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (‘SORP 2014’) (with the exception of paragraph 82 of SORP 2014 regarding detailed disclosure of financial and operational performance of the Company’s unquoted investments due to their confidential nature).
Under FRS102, currently fair value hierarchy is categorised as ‘a’, ‘b’ and ‘c’ rather than ‘1’, ‘2’, ‘3’. However, the Financial Reporting Council published amendments on 8 March 2016 which have been adopted, and early application has been permitted to align disclosures with IFRS 13.
The comparative figures are for the year 1 January 2015 to 31 December 2015.
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 materially unchanged from those set out in the Company’s 2015 Annual Report and Accounts.
FRS 102 sections 11 and 12 have been adopted with regards to the Company’s financial instruments.
The financial statements are presented in Sterling (£).
Key sources of economic uncertainty:
Many of the Company’s financial instruments are measured at fair value in the balance sheet and it is usually possible to determine their fair values within a reasonable range of estimates.
For the majority of the Company’s financial instruments, such as unlisted securities, fair value is derived from using valuation techniques, as recommended by International Private Equity and Venture Capital Valuation Guidelines (IPEVC). Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgements (e.g. interest rates, volatility, estimated cash flows) and therefore cannot be determined with precision.
c) 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. In accordance with FRS 102 investments by the Company are held at fair value through profit or loss.
International Private Equity and Venture Capital Valuation Guidelines
Unquoted investments, including equity and loan investments, are stated at fair value through profit or loss and are valued in accordance with the IPEVC Guidelines and FRS 102. Investments are initially recognised at cost. The value of investments is subsequently re-measured to current fair value, as estimated by the Directors. Gains or losses arising from the revaluation of investments are taken directly to the Statement of Comprehensive Income. 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 of an investment, the Manager will apply a methodology that is appropriate for 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 methodology most applicable to the Company’s investments is:
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.
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.
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 Statement of Comprehensive Income 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 Statement of Comprehensive Income.
d) Investment Income
Interest income is recognised in the Statement of Comprehensive Income under the effective interest method.
Under the effective interest method:
The interest income in a period equals the carrying amount of the loan at the beginning of a period multiplied by the effective interest rate for that period.
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 effective interest rate is determined on the basis of the carrying amount of the loan at initial recognition.
In accordance with FRS 102, when calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the loans (e.g. prepayments) and known credit losses that have been incurred, but it does not consider possible future credit losses not yet incurred. The main impact for the Company in that regard is the estimation of any loan note premiums.
When calculating the effective interest rate, the Company amortises any related fees, finance charges received, transaction costs and other premiums or discounts over the expected life of the loan. However, the Company uses a shorter period if that is the period to which the fees, finance charges paid or received, transaction costs, premiums or discounts relate.
The revenue return on loan notes has been based on the coupon payable by the instrument adjusted to spread any discount or premium on purchase or redemption over its remaining life. In accordance with SORP 2014, in 2016 where a redemption premium is payable, the return has been adjusted so that the amount recognised in revenue is in line with reasonable commercial expectations. Any adjustment is recognised in capital within net gains and losses on investments.
In prior years, the revenue return on the redemption premium was not adjusted and redemption premiums were recognised as revenue income. The Company considers the revised allocation, which has not been applied retrospectively in accordance with SORP 2014, to be more appropriate to the Company.
The amount of redemption premium recognised in revenue is in line with reasonable commercial expectations of interest chargeable on similar commercial loans. Gains and losses arising from changes in the fair value of the investments are included as a capital item in the statement of comprehensive income for the relevant period.
e) Dividend Income
Dividend income is recognised in the Statement of Comprehensive Income once it is declared by the Investee Companies.
f) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged to the revenue account within the Statement of Comprehensive Income except that:
expenses which are incidental to the acquisition or disposal of an investment are charged to capital in the Statement of Comprehensive Income 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 E Share class until 12 October 2016 and from 13 October 2016 by the H 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.
g) Taxation
Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past reporting periods using the tax rates and laws that that have been enacted or substantively enacted by the reporting date.
Deferred tax is recognised in respect of all timing differences at the reporting date, except as otherwise indicated. Timing differences are differences between taxable profits and total comprehensive income as stated in the financial statements that arise from the inclusion of income and expenses in tax assessments in periods different from those in which they are recognised in financial statements. Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.
Deferred tax is calculated using the tax rates and laws that that have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference.
h) D Shares, E Shares, F Shares, G Shares and H Shares
The Company had five Share classes up to 31 December 2016: D Shares, E Shares, F Shares, G Shares and H Shares. 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
| 2016 £'000 | 2015 £'000 | ||||
| Dividend income from Qualifying Investments | - | - | |||
| Loan note interest from Qualifying Investments | - | - | |||
| Loan note premium from Qualifying Investments (note 7) | 212 | 128 | |||
| 212 | 128 |
3. Investment Management Fees
| 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Investment management fees | 34 | 34 | 68 | 92 | 92 | 184 |
For the purposes of the revenue and capital columns in the Statement of Comprehensive Income, the management fee has been allocated 50% to revenue and 50% to capital, which represents the split of the Company’s long term returns.
4. Other Expenses
| 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | ||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Directors’ remuneration | 38 | - | 38 | 38 | - | 38 | |||||||||
| Employers NI on Director remuneration | 1 | 1 | |||||||||||||
| Auditor’s remuneration | |||||||||||||||
| - Audit fees | 22 | - | 22 | 21 | - | 21 | |||||||||
| Legal and professional fees | 41 | - | 41 | 10 | - | 10 | |||||||||
| Other administration expense | 84 | - | 84 | 112 | - | 112 | |||||||||
| 186 | - | 186 | 181 | - | 181 |
The Company is not registered for VAT. Fees payable to the Company’s auditor for the audit of the Company’s financial statements are £17,000 plus expenses of 3% of the audit fee (31 December 2015: £16,000) excluding VAT.
5. Tax Charge
| 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | ||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| -183 | -746 | -928 | |||||||||||
| Loss before tax | -145 | -473 | -618 | ||||||||||
| Loss on by tax rate 20.00% (31 December 2015: 20.247%) | -37 | -149 | -186 | -29 | -96 | -125 | |||||||
| Adjustments: | |||||||||||||
| Non-taxable (gains)/losses on investments | - | 178 | 178 | - | 77 | 77 | |||||||
| Disallowed expenses | 5 | 7 | 12 | 19 | 19 | ||||||||
| Unutilised/(utilised) losses for the current year | 32 | -36 | -4 | 29 | - | 29 | |||||||
| Non-deductible fair value adjustment re: loan notes | - | - | - | - | - | - | |||||||
| Management expenses utilised | - | - | - | - | - | - | |||||||
| - | - | - | - | - | - |
As the Company is a VCT its capital gains are not taxable.
At 31 December 2016 the Company had surplus management expenses of £1,211,000 (31 December 2015: £1,229, 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.
6. Basic and Diluted Return per Share
| D Shares | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain/(loss) before taxation | -8 | 51 | 43 | -3 | -150 | -153 | |||||||||
| 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) | -0.1 | 0.8 | 0.7 | 0 | -2.2 | -2.3 | |||||||||
| E Shares | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain/(loss)before taxation | -45 | 46 | 1 | -22 | -78 | -100 | |||||||||
| 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) | -1.6 | 1.6 | 0 | -0.8 | -2.7 | -3.5 | |||||||||
| F Shares | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain/ (loss) before taxation | -27 | 32 | 5 | -15 | -45 | -60 | |||||||||
| Weighted average Shares in issue (number) | 1,572,095 | 1,572,095 | 1,572,095 | 1,572,095 | 1,572,095 | 1,572,095 | |||||||||
| Profit/(loss) attributable per Share (pence) | -1.7 | 2 | 0.3 | -1 | -2.9 | -3.9 | |||||||||
| G Shares | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss)/gain before taxation | -54 | -722 | -777 | -45 | (219)) | -264 | |||||||||
| 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 | -20.5 | -22.1 | -1.3 | -6.2 | -7.5 | |||||||||
| H Shares | 2016 | 2016 | 2016 | 2015 | 2015 | 2015 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss)/ gain before taxation | -51 | -151 | -203 | -58 | 17 | -41 | |||||||||
| Weighted average Shares in issue (number) | 2,660,842 | 2,660,842 | 2,660,842 | 2,660,842 | 2,660,842 | 2,660,842 | |||||||||
| (Loss)/profit attributable per Share (pence) | -2 | -5.7 | -7.7 | -2.2 | 0.6 | -1.6 |
There are no dilutive potential 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.
7. Fixed Asset Investments
| 2016 | 2015 | |||
| £'000 | £'000 | |||
| Unquoted investments | 2,606 | 5,332 | ||
| Equity shares | 1,390 | 2,307 | ||
| Unsecured loan notes | 1,216 | 3,025 | ||
| 2,606 | 5,332 | |||
| Qualifying Investments | ||||
| 2016 | 2015 | |||
| £'000 | £'000 | |||
| Opening valuation | 5,332 | 8,280 | ||
| Purchases at cost | 250 | 1,500 | ||
| Return of investment | -1,880 | -4,092 | ||
| Transfer to Non Qualifying | -211 | - | ||
| Fair value adjustment | -885 | -356 | ||
| Closing valuation | 2,606 | 5,332 | ||
Included in the valuation above is an equal and opposite fair value gain and fair value loss amounting to £211,000 (31 December 2015: £128,000). This represents the accounting treatment of the guaranteed loan note premium. The £211,000 (31 December 2015: £238,000) is included in the Statement of Comprehensive Income under Investment Income (refer to note 2).
8. 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 2016:
| 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% | |||||
| London Flower Show Limited | 50.00% A Ordinary | 22.50% | |||||
| Just For London Limited | 50.00% A Ordinary | 16.67% | |||||
| Genius Star Limited | 50.00% A Ordinary | 25.00% | |||||
| Counterculture Bars Limited | 50.00% A Ordinary | 14.48% | |||||
| SWG Power Limited | 50.00% A Ordinary | 22.50% | |||||
| Winterville Events Limited | 50.00% A Ordinary | 15.00% | |||||
| The Zoo Project Festival Limited | 50.00% A Ordinary | 18.75% | |||||
| Brighton Boundary Limited | 50.00% A Ordinary | 15.00% |
As permitted by FRS 102, the above investments in associated undertakings are held at fair value with changes in fair value recognised in profit or loss.
9. Debtors
| 2016 | 2015 | |||
| £'000 | £'000 | |||
| Prepayments and accrued income | 59 | 28 | ||
10. Current Asset Investments
| 2016 | 2015 | |||||||||||||
| £'000 | £'000 | |||||||||||||
| Funds held in listed money market OEICs | - | 1,035 | ||||||||||||
| Investment in Investee Companies | 214 | 3 | ||||||||||||
| 214 | 1,038 | |||||||||||||
| Non-Qualifying Investments | ||||||||||||||
| 2016 £'000 | 2015 £'000 | |||||||||||||
| Opening valuation | 1,038 | 4,396 | ||||||||||||
| Purchases at cost – listed money market OEICs | - | - | ||||||||||||
| Disposal proceeds - listed money market OEICs | (1,035) | (3,267) | ||||||||||||
| Unrealised change in value - listed money market OEICs | - | (91) | ||||||||||||
| Reclassification to Non-Qualifying Investments | 211 | - | ||||||||||||
| Closing valuation | 214 | 1,038 | ||||||||||||
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.
Analysis of Realised Gain or Loss on Disposal of Unquoted Investments
| Unquoted Investments | Gain/ (Loss) £000 | Proceeds £000 | 2016 Carrying Value £000 | 2015 Carrying Value £000 | |||||
| Love Supreme Festival Limited | 210 | 960 | 750 | 750 | |||||
| Saturn Star Limited | (1) | 518 | 519 | 519 | |||||
| Just for London Limited | - | 500 | 500 | 500 | |||||
| Liverpool Sound City Limited | - | 110 | 110 | 110 | |||||
| Realised gains on unquoted investments | 209 | 2,088 | 1,879 | 1,879 | |||||
| Unrealised loss on disposal of unquoted investments | (30) | ||||||||
| Realised gains on quoted investments | 30 | ||||||||
| Total realised gains on investments | 209 |
11. Creditors: Amounts Falling Due Within One Year
| 2016 | 2015 | ||||||||
| £'000 | £'000 | ||||||||
| Trade creditors | 27 | 21 | |||||||
| Accruals | 36 | 88 | |||||||
| 63 | 109 |
12. Called-up Share Capital
| 2016 | 2015 | |||||||
| Allotted, called-up and fully paid | £'000 | £'000 | ||||||
| 6,735,624 D Shares 1 pence each | 68 | 68 | ||||||
| 2,846,122 E Shares 1 pence each | 28 | 28 | ||||||
| 1,572,095 F Shares 1 pence each | 16 | 16 | ||||||
| 3,518,044 G Shares 1 pence each | 35 | 35 | ||||||
| 2,660,842 H Shares 1 pence each | 27 | 27 | ||||||
| 174 | 174 |
D Shares, E Shares, F Shares, G Shares and H Shares ranked 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.
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 were set off against the share premium account. As at 31 December 2016, the D Shares were subject to a capital reduction, which required the approval of the court, and the D Shares were cancelled on 18 January 2017.
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 were set off against the share premium account. As at 31 December 2016, the E Shares and F Shares were subject to a capital reduction, which required the approval of the court, and the E Shares and F Shares were cancelled on 18 January 2017.
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 were set off against the share premium account.
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 were set off against the share premium account.
13. Net Asset Value per Share Excluding Distributions to Date
| 2016 | 2015 | ||||||||
| Net assets attributable to D Shareholders (£'000) | 69 | 133 | |||||||
| D Shares in issue (number) | 6,735,624 | 6,735,624 | |||||||
| Net asset value per D Share (pence) | 1.0 | 2.0 | |||||||
|
| 2016 | 2015 | |||||||
| Net assets attributable to E Shareholders (£'000) | 29 | 1,813 | |||||||
| E Shares in issue (number) | 2,846,122 | 2,846,122 | |||||||
| Net asset value per E Share (pence) | 1.0 | 63.7 | |||||||
|
| 2016 | 2015 | |||||||
| Net assets attributable to F Shareholders (£'000) | 16 | 1,036 | |||||||
| F Shares in issue (number) | 1,572,095 | 1,572,095 | |||||||
| Net asset value per F Share (pence) | 1.0 | 65.9 | |||||||
|
| |||||||||
|
| 2016 | 2015 | |||||||
| Net assets attributable to G Shareholders (£'000) | 1,411 | 2,365 | |||||||
| G Shares in issue (number) | 3,518,044 | 3,518,044 | |||||||
| Net asset value per G Share (pence) | 40.1 | 67.2 | |||||||
|
| |||||||||
|
| 2016 | 2015 | |||||||
| Net assets attributable to H Shareholders (£'000) | 1,829 | 2,165 | |||||||
| H Shares in issue (number) | 2,660,842 | 2,660,842 | |||||||
| Net asset value per H Share (pence) | 68.7 | 81.4 | |||||||
14. Financial Instruments and Risk Management
The Company’s financial instruments comprise equity and floating rate debt investments in unquoted companies, cash balances and listed money market OEICs. The Company holds financial assets in accordance with its investment policy.
Fixed asset investments (see note 7) are valued at fair value. For quoted securities included in current asset Non-qualifying Investments, this is 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
| 2016 £'000 | 2015 £'000 | ||||||
| Listed money market OEICs (note 10) | Level 1 | - | 1,035 | ||||
| Investment in investee companies (note 10) | Level 3 | 214 | 3 | ||||
| Unquoted investments (note 8) | Level 3 | 2,606 | 5,332 | ||||
| 2,820 | 6,370 |
Level 3 investments include a £95,500 revaluation loss on Just for London Limited, a £50,000 revaluation loss on Counterculture Bars Limited, a £15,000 revaluation loss on Event Spaces Limited during the year, and a £20,750 revaluation loss on Zoo Project Limited and a £665,000 revaluation loss on FM3 2013 Limited during the year.
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. Level 3 unquoted investments have been valued at fair value. Fair value is estimated by assessing the financial performance of the Company’s investee and adjusting upwards or writing down the cost of the Company’s investment using IVCA valuation techniques as described in note 1(c) - Accounting Policies.Risk Management
The Company’s investing activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The Company measures risk by assessing the impact that each risk parameter will have on the profitability of the Company, or in the case of liquidity risk, by assessing the impact that any given factor will reduce the likelihood of the Company being able to meet its financial liabilities as they fall due. 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 credit risk, 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 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. At the end of the year all cash had been removed from the money market OEICs (31 December 2015: £1,038,000). Sitting within Non qualifying Investments are two unquoted investments. 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 0.25% as at 31 December 2016 (31 December 2015: 0.5%).
The following table illustrates the sensitivity of the impact on profit 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 2016 | 31 December 2015 | ||||||
| £'000 +/- 50 basis points | £'000 +/- 50 basis points | |||||||
| Impact on loss for the year | 0 | 5 | ||||||
| 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 £987,500 (31 December 2015: £2,488,000) 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 £987,500 (31 December 2015: £2,488,000) unsecured loan notes are mostly 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.
15. Related Party Transactions
a) The Company has an investment management agreement with Ingenious Capital Management Limited of which Patrick Mckenna is a director.
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. The Manager bears any expenses of the Company over and above 3.5% of the net asset value at 31 December in the relevant financial year. At 31 December 2016, this reimbursement was £36,000 (31 December 2015 - £nil) and it is included in debtors. In aggregate, the management fee amounted to £68,000 as at 31 December 2016 (31 December 2015: £184,000). The Manager also charges an administration fee of £51,000 (31 December 2015: £71,000) per annum (adjusted for inflation and additional Share classes, if any) and irrecoverable VAT.
b) For the first 8 months of the year, there were funds invested in OEICs. These funds were managed by Ingenious Asset Management Limited of which Patrick McKenna was a director. Ingenious Asset Management Limited was a subsidiary of the Ingenious Group, which was controlled by Patrick McKenna. On 29 April 2016 Ingenious Asset Management Limited was sold to Tilney Bestinvest Group Limited; Tilney Bestinvest Group Limited now trades as Tilney Asset Management Limited. There were no fees associated with this transaction.
c) Patrick McKenna is a director and shareholder of Ingenious Entertainment VCT 2 plc. The Company and Ingenious Entertainment VCT 2 plc have invested in a new company, Brighton Boundary Limited, to set up a new festival in Brighton, Brighton Boundary. In May 2016 the Company invested £250,000 for a total of 15% of the equity in Brighton Boundary Limited. The investment was made from the H 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.
| 2016 | 2016 | 2015 | 2015 | ||||||||
| Entity | Note | Expenditure paid £'000 | Amounts due £'000 | Expenditure paid £'000 | Amounts due £'000 | ||||||
| Ingenious Capital Management Limited | |||||||||||
| - Investment management fee | a | 68 | - | 184 | - | ||||||
| - Administration fee | a | 51 | - | 71 | - |
Transactions with 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 £30,000 excluding VAT (31 December 2015: £137,000), have been invoiced to the Investee Companies in the period of which £nil remained outstanding as at 31 December 2016 (31 December 2015: £45,000).
16. Events After the Balance Sheet Date
a) On 18 January 2017, the High Court sanctioned the cancelling and extinguishing of all of its D Shares. The final repayment of 1 pence per D Share was made to Shareholders on 10 February 2017.
b) On 18 January 2017, the High Court sanctioned the cancelling and extinguishing of all of its E Shares. The final repayment of 1 pence per E Share was made to Shareholders on 10 February 2017.
c) On 18 January 2017, the High Court sanctioned the cancelling and extinguishing of all of its F Shares. The final repayment 1 pence per F Share was made to Shareholders on 10 February 2017.
17. 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 2016 was £2,606,000 (31 December 2015: £7,508,000).
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 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.
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