Last checked at 9 Apr 2014 07:00
INGENIOUS ENTERTAINMENT VCT 1 PLC (“the Company”)
STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2013
Chairman’s Statement
I am delighted to present the Company’s sixth Annual Report and Accounts covering the year to 31 December 2013 (the Reporting Period).
Overview of Activities
In December 2013, the Company cancelled all of its Ordinary Shares and completed the full distribution of capital in January 2014 in relation to those shares.
The Company has now completed its investment strategy and is fully invested under the VCT regulations for its C, D, E and F 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 four investments during the Reporting Period. Details of all investments can be found in the Manager’s Review.
Summer 2013 saw the Company invest in a number of portfolio companies established to promote new festivals with mixed results. The Love Supreme Jazz Festival was extremely well received by both the audience and the press. The festival was given five stars by the Guardian, who commented ‘the promoters may find that they have invested into the British jazz world’s Glastonbury’. The festival was loss making in its first year, but that was very much anticipated, and with sales for the 2014 festival already being significantly ahead of target, the belief is that Love Supreme Jazz Festival should, at minimum, break even this year. Liverpool Sound City continues to build its profile and is budgeted to trade profitably for the first time in 2014 and Shakedown has also established its brand name within the Brighton area and beyond.
The investment by the Company into the established Field Day Festival proved to be well placed. The event attracted 30,000 attendees and the promoters believe that this base can be increased in the forthcoming year. Discussions are also underway to roll the Field Day brand out through Europe during the course of 2014.
The Company was, however, involved in two events which were disappointing. As One In The Park, which took place in Victoria Park in May 2013, and which was predominately aimed at the gay community, was well received but poorly attended. The promoters are discussing taking a different route with the brand, but an event will not be taking place in 2014. Similarly disappointing was SD2 which was the twin event to Shakedown. Talent of the calibre of The Wanted and The Saturdays failed to generate sufficient numbers to warrant repeating the event in 2014.
Fund Raising
The H Share Offer was open for subscription until 30 August 2013. During the Reporting Period, just over 2.6 million H Shares were allotted by the Company.
Results
The Ordinary Shares, 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 Directors and the Manager believe that the Company’s strategy of blending high levels of downside protection with its attempt to drive positive returns from the investment portfolio should generate good longer term returns as the investment portfolio matures. The Directors and the Manager have taken a 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 made a loss on ordinary activities of £51,000 (31 December 2012: loss of £139,000). The C Shares made a loss of £86,000 (31 December 2012: loss of £73,000). The D Shares made a loss of £269,000 (31 December 2012: loss of £169,000). The E Shares made a loss of £120,000 (31 December 2012: loss of £56,000). The F Shares made a loss of £34,000 (31 December 2012: loss of £16,000). The G Shares made a loss of £58,000 (31 December 2012: loss of £81,000) The H Shares made a loss of £43,000 (31 December 2012: No H Shares allotted).
The net asset value per Ordinary Share at 31 December 2013 was £Nil pence (31 December 2012: 74.8 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 Company’s share capital by the cancellation and extinguishment of all of its Ordinary Shares of 1 pence each. Up to 31 December 2013, the Company returned 88.3371 pence to investors, with the final distribution of 1 pence per Ordinary Share paid to investors on 21 January 2014.The net asset value per C Share at 31 December 2013 was 60.7 pence (31 December 2012: 68.8 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 2013 including distributions was therefore 80.7 pence per C Share (31 December 2012: 83.8 pence).
The net asset value per D Share at 31 December 2013 was 69.5 pence (31 December 2012: 78.5 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 10.0 pence per Share of dividends in previous years. The net asset value as at 31 December 2013 including distributions was therefore 84.5 pence per D Share (31 December 2012: 88.5 pence).
The net asset value per E Share at 31 December 2013 was 76.9 pence (31 December 2012: 86.1 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 2013 including this distribution was therefore 86.9 pence per E Share (31 December 2012: 91.1 pence).
The net asset value per F Share at 31 December 2013 was 80.0 pence (31 December 2012: 87.2 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 2013 including this distribution was therefore 90.0 pence per F Share (31 December 2012: 92.2 pence).
The net asset value per G Share at 31 December 2013 was 86.6 pence (31 December 2012: 93.3 pence) although this is after the deduction of the dividend of 5.0 pence per Share in the Reporting Period (31 December 2012: No dividends paid). The net asset value as at 31 December 2013 including this distribution was therefore 91.6 pence per G Share (31 December 2012: 93.3 pence).
The net asset value per H Share at 31 December 2013 was 93.5 pence (31 December 2012: no H Shares allotted). No dividends have been paid to date.
Legislative and Regulatory Developments
There has been a continuing flow of proposed legislation and regulation relevant to VCTs. Legislation is to be introduced 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 will not affect the Company as the Board never used these arrangements.
Outlook
The live entertainment sector has experienced similar pressures to those endured by a number of sectors of the economy in terms of discretionary spend, but I am pleased to report that there are signs that 2014 will be another strong year. Festivals like Glastonbury continue to sell out immediately they go on sale and all of the 2014 events in the Company’s current portfolio are currently ahead of forecast in terms of tickets sold.
Both the Board and the Manager consider that the sector in which the Company operates retains the potential for strong growth and that the current investment portfolio has been developed to benefit from this growth.
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
(£2,000,000 across the Ingenious Entertainment VCTs)
Further Funding: December 2013
Entertainment VCT 1 Investment amount £500,000
(£1,000,000 across the Ingenious Entertainment VCTs)
In November 2012, the Entertainment VCTs invested into Waxarch Limited to promote one of London’s foremost festivals for up and coming talent, Field Day Festival. Attendance for the 2013 event remained consistent at around 28,500 attendees and, although the promoters were hoping for a further increase in attendance, the event remains significantly profitable.
The 2014 event, which will take place in Victoria Park, London on Saturday 7 June is currently showing an increase in sales when compared to the previous year and the promoters remain confident that Field Day Festival will take another leap forward in terms of profitability and brand value.
In December 2013 the Company made a further investment in order to promote a second day of Field Day Festival which will take place on Sunday 8 June. The highlight of the day will be a headline performance by The Pixies, a hugely successful band from the USA who has the musical heritage to ‘bed in’ the first Sunday Field Day Festival. The Manager and event partners are also looking to utilise the additional funding to expand the Field Day brand internationally, with a number of discussions with European promoters currently taking place.
Liverpool Sound City Limited
Entertainment VCT 1 Investment amount £600,000
(£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 has now held two UK events further to the VCTs’ investment. The May 2013 event again increased attendance, but the event continues to be loss making. The Manager has spent a large amount of time working with the team in Liverpool and feels that the company has now been stabilised, operating within a far stronger control environment and with a better informed, and more effective, commercial decision-making team. The 2014 event, which takes place from 1 to 3 May, is budgeted to trade profitably and all areas of the business are being closely monitored on a regular basis.
Love Supreme Jazz Festival
Initial Funding: December 2011
Entertainment VCT 1 Investment amount £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
Further Funding: December 2013
Entertainment VCT 1 Investment amount £500,000
(£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 what is the UK’s only camping Jazz festival, the Love Supreme Jazz Festival. The first event took place in July 2013 and was very well received by audience and press alike. On what was the hottest weekend of the year, a strong talent bill performed with headline performances from Bryan Ferry, Jools Holland and Chic accompanied by a vast array of talent representing jazz in all its glories. The event was given five stars by the Guardian, who commented ‘the promoters may find that they have invested into the British jazz world’s Glastonbury’.
The first event was loss making, but this outcome was very much anticipated as new event brands take time to generate full customer awareness. The Manager does firmly believe, however, that the Love Supreme Jazz Festival is an event that has the potential to create positive shareholder value in the longer term.
Hop Farm Comedy
Initial Funding: March 2013
Entertainment VCT 1 Investment amount £500,000
(£1,000,000 across the Ingenious Entertainment VCTs)
Further Funding: June 2013
Entertainment VCT 1 Investment amount £375,000
(£750,000 across the Ingenious Entertainment VCTs)
In 2013 a series of investments totalling £1,750,000 was made into Hop Farm Comedy Limited to create a number of new comedy festivals across the country.
Discussions are currently taking place with a number of national and international comedy partners such as Get Comedy, Just for Laughs and Kilimanjaro, each of whom have many years of direct experience in producing their own comedy events.
The Manager, along with these partners, is researching the best platform to launch these events in terms of location and type of event (i.e. camping or non-camping) and once these discussions are complete we would hope to announce the launch of comedy events later in 2014 or potentially 2015.
Shakedown Festival & SD2 Festival
Initial Funding: February 2011
Entertainment VCT 1 Investment amount £750,000
(£1,500,000 across the Ingenious Entertainment VCTs)
Further Funding: December 2012
Entertainment VCT 1 Investment amount £500,000
(£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 three years, Shakedown is now profitable and is generally regarded as Brighton’s very own festival catering for an audience aged 18 and over.
2014 sees a change of site and an earlier date in the calendar for the event, being Saturday 19 July. The promoters believe that both of these changes give them an opportunity to create both a permanent home and date in the calendar for Shakedown going forward.
Audience levels are currently around 15,000 and the new site has the capacity to grow the event into a 20,000 plus day that should ensure that the event trades profitably. Artists who have headlined at the event since inception include Example, Ed Sheeran, Razorlight, Labrinth, Dizzee Rascal and Rizzle Kicks.
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 now discussing future options for the event which include the possibility of renting out the site to other promoters in return for rental income which would help to reduce any losses incurred.
As One In The Park Festival
Entertainment VCT 1 Investment amount £750,000
(£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 critically well received, the audience of 6,000 was significantly below the numbers anticipated and the event incurred a significant loss.
The As One brand is currently under review, with the event partners looking to stage events in venues rather than a greenfield space to reduce both overheads and overall event risk.
London Electronic Dance (LED) Festival
Entertainment VCT 1 Investment amount: £109,000
(£218,000 across the Ingenious Entertainment VCTs)
In August 2010 the Ingenious Entertainment VCTs invested in a company to co-promote the LED Festival in partnership with AEG Live, Cream and Loudsound.
After incurring losses in its first year, the event fully recovered this deficit in a very successful second year, but the arrival of the Olympics in London made it very difficult to justify staging such events in 2012 and the partners remain in discussion as to how best to continue exploiting the LED brand. In the meantime a significant portion of the original capital invested was returned to the Ordinary Shareholders during the course of 2013.
Exhibitions
Titans of Cricket
Entertainment VCT 1 Investment amount: £1,000,000
(£2,000,000 across the Ingenious Entertainment VCTs)
In June 2011 an investment of £2,000,000 was made by the Ingenious Entertainment VCTs into Titans of Sport Limited (formerly This is Cricket Limited) to promote a new sports event, Titans of Cricket.
Titans of Cricket took the best of Twenty20, the Indian Premier League and World Cup Cricket and combined them in a new format that demonstrates the skills of some of the world’s top cricketing stars both past and present. The first event took place at the O2 in London in October 2011 and attracted 8,000 fans, with appearances from Andrew Flintoff and Adam Gilchrist plus a host of other international cricket stars. The first year event lost money and the Manager and event partners remain in active discussion as to how the brand can be redeveloped to enhance its profitability which include the opportunity to licence the brand to a third party.
INCOME STATEMENT
for the year ended 31 December 2013
| Year ended 31 December 2013 | Year ended 31 December 2012 | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||
| Gain on disposal of investments | - | 52 | 52 | - | 54 | 54 | |||||||||
| Decrease in fair value of investments held | - | (387) | (387) | - | (289) | (289) | |||||||||
| Investment income | 2 | 260 | - | 260 | 318 | - | 318 | ||||||||
| Arrangement fees | 3 | (16) | - | (16) | (39) | - | (39) | ||||||||
| Investment management fees | 4 | (165) | (165) | (330) | (187) | (187) | (374) | ||||||||
| Other expenses | 5 | (240) | - | (240) | (204) | - | (204) | ||||||||
| Loss on ordinary activities before taxation | (161) | (500) | (661) | (112) | (422) | (534) | |||||||||
| Tax on ordinary activities | 6 | - | - | - | - | - | - | ||||||||
| Loss attributable to equity Shareholders | (161) | (500) | (661) | (112) | (422) | (534) | |||||||||
| Basic and diluted return per share (pence) | |||||||||||||||
| Ordinary Share | 7 | 0.2 | (0.7) | (0.5) | 1.2 | (2.5) | (1.3) | ||||||||
| C Share | 7 | (0.4) | (2.6) | (3.0) | (0.6) | (2.0) | (2.6) | ||||||||
| D Share | 7 | 0.2 | (4.2) | (4.0) | (0.8) | (1.7) | (2.5) | ||||||||
| E Share | 7 | (1.2) | (3.0) | (4.2) | (1.6) | (0.4) | (2.0) | ||||||||
| F Share | 7 | (1.3) | (0.8) | (2.1) | (2.1) | 1.1 | (1.0) | ||||||||
| G Share | 7 | (2.0) | 0.4 | (1.6) | (3.6) | - | (3.6) | ||||||||
| H Share | 7 | (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 2013
|
| Year ended 31 December 2013 £'000 | Year ended 31 December 2012 £'000 | ||||
| Opening Shareholders’ funds | 21,960 | 20,340 | ||||
| Capital subscribed | 2,596 | 3,518 | ||||
| Issue costs | (65) | (155) | ||||
| Dividends | (8,359) | (1,209) | ||||
| Loss for the year | (661) | (534) | ||||
| Closing Shareholders’ funds | 15,471 | 21,960 |
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) | |||||||||
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
| 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).
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
INCOME STATEMENT
for the year ended 31 December 2012
| Ordinary Shares | C Shares | ||||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||||
| Gain on disposal of investments | - | 11 | 11 | - | 3 | 3 | |||||||||
| Decrease in fair value of investments held | - | (201) | (201) | - | (42) | (42) | |||||||||
| Investment income | 246 | - | 246 | 29 | - | 29 | |||||||||
| Arrangement fees | - | - | - | - | - | - | |||||||||
| Investment management fees | (69) | (69) | (138) | (18) | (18) | (36) | |||||||||
| Other expenses | (57) | - | (57) | (27) | - | (27) | |||||||||
| Profit/(loss) on ordinary activities before taxation | 120 | (259) | (139) | (16) | (57) | (73) | |||||||||
| Tax on ordinary activities | - | - | - | - | - | - | |||||||||
| Profit/(loss) attributable to equity Shareholders | 120 | (259) | (139) | (16) | (57) | (73) | |||||||||
| Basic and diluted return per share (pence) | 1.2 | (2.5) | (1.3) | (0.6) | (2.0) | (2.6) | |||||||||
| D Shares | E Shares | ||||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||||
| Gain on disposal of investments | - | 31 | 31 | - | 4 | 4 | |||||||||
| (Decrease)/increase in fair value of investments held | - | (96) | (96) | - | 7 | 7 | |||||||||
| Investment income | 40 | - | 40 | 1 | - | 1 | |||||||||
| Arrangement fees | - | - | - | - | - | - | |||||||||
| Investment management fees | (48) | (48) | (96) | (22) | (22) | (44) | |||||||||
| Other expenses | (48) | - | (48) | (24) | - | (24) | |||||||||
| Loss on ordinary activities before taxation | (56) | (113) | (169) | (45) | (11) | (56) | |||||||||
| Tax on ordinary activities | - | - | - | - | - | - | |||||||||
| Loss attributable to equity Shareholders | (56) | (113) | (169) | (45) | (11) | (56) | |||||||||
| Basic and diluted return per share (pence) | (0.8) | (1.7) | (2.5) | (1.6) | (0.4) | (2.0) | |||||||||
NON-STATUTORY ANALYSIS BETWEEN THE ORDINARY, C, D, E, F, G AND H SHARE FUNDS (UNAUDITED)
INCOME STATEMENT
for the year ended 31 December 2012
| F Shares | G Shares | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain on disposal of investments | - | 5 | 5 | - | - | - | |||||||||
| Increase in fair value of investments held | - | 24 | 24 | - | 19 | 19 | |||||||||
| Investment income | 1 | - | 1 | 1 | - | 1 | |||||||||
| Arrangement fees | - | - | - | (39) | - | (39) | |||||||||
| Investment management fees | (12) | (12) | (24) | (18) | (18) | (36) | |||||||||
| Other expenses | (22) | - | (22) ) | (26) | - | (26) | |||||||||
| (Loss)/profit on ordinary activities before taxation | (33) | 17 | (16) | (82) | 1 | (81) | |||||||||
| Tax on ordinary activities | - | - | - | - | - | - | - | ||||||||
| (Loss)/profit attributable to equity Shareholders | (33) | 17 | (16) | (82) | 1 | (81) | |||||||||
| Basic and diluted return per share (pence) | (2.1) | 1.1 | (1.0) | (3.6) | - | (3.6) | |||||||||
| H Shares | |||||||||||||||
| Revenue | Capital | Total | |||||||||||||
| £'000 | £'000 | £'000 | |||||||||||||
| Gain on disposal of investments | - | - | - | ||||||||||||
| Increase/(decrease) in fair value of investments held | - | - | - | ||||||||||||
| Investment income | - | - | - | ||||||||||||
| Arrangement fees | - | - | - | ||||||||||||
| Investment management fees | - | - | - | ||||||||||||
| Other expenses | - | - | - | ||||||||||||
| Profit/(loss) on ordinary activities before taxation | - | - | - | ||||||||||||
| Tax on ordinary activities | - | - | - | ||||||||||||
| Profit/(loss) attributable to equity Shareholders | - | - | - | ||||||||||||
| Basic and diluted return per share (pence) | - | - | - | ||||||||||||
The Company had no H Shares in issue during the year ended 31 December 2012.
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 2013
| Note | 31 December 2013 £'000 | 31 December 2012 £'000 | |||||
| Fixed assets | |||||||
| Qualifying Investments | 8 | 7,228 | 11,949 | ||||
| Current assets | |||||||
| Debtors | 10 | 39 | 139 | ||||
| Non-qualifying Investments | 11 | 8,130 | 8,734 | ||||
| Cash at bank and in hand | 155 | 1,225 | |||||
| 8,324 | 10,098 | ||||||
| Creditors: amounts falling due within one year | 12 | (81) | (87) | ||||
| Net current assets | 8,243 | 10,011 | |||||
| Net assets | 15,471 | 21,960 | |||||
| Capital and reserves | |||||||
| Called-up share capital | 13 | 202 | 277 | ||||
| Share premium account | 14 | - | - | ||||
| Other reserve account | 14 | 17,524 | 23,277 | ||||
| Capital reserve | 14 | (1,275) | (775) | ||||
| Revenue reserve | 14 | (980) | (819) | ||||
| Shareholders’ funds | 15,471 | 21,960 | |||||
| Net asset value per Ordinary Share | 15 | - | 74.8 | ||||
| Net asset value per C Share | 15 | 60.7 | 68.8 | ||||
| Net asset value per D Share | 15 | 69.5 | 78.5 | ||||
| Net asset value per E Share | 15 | 76.9 | 86.1 | ||||
| Net asset value per F Share | 15 | 80.0 | 87.2 | ||||
| Net asset value per G Share | 15 | 86.6 | 93.3 | ||||
| Net asset value per H Share | 15 | 93.5 | - |
The accompanying notes form an integral part of these financial statements.
The financial statements were approved by the Board of Directors on 8 April 2014.
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 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)
BALANCE SHEET
as at 31 December 2012
| 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 | 6,314 | 1,628 | 3,757 | 125 | 125 | - | - | ||||||||
| Current assets | |||||||||||||||
| Debtors | 139 | - | - | - | - | - | - | ||||||||
| Non-qualifying Investments | 897 | 221 | 1,528 | 1,845 | 980 | 3,263 | - | ||||||||
| Cash at bank and in hand | 338 | 89 | 11 | 488 | 272 | 27 | - | ||||||||
| 1,374 | 310 | 1,539 | 2,333 | 1,252 | 3,290 | - | |||||||||
| Creditors: amounts falling due within one year | (51) | (4) | (11) | (7) | (6) | (8) | - | ||||||||
| Net current assets | 1,323 | 306 | 1,528 | 2,326 | 1,246 | 3,282 | - | ||||||||
| Net assets | 7,637 | 1,934 | 5,285 | 2,451 | 1,371 | 3,282 | - | ||||||||
| Capital and reserves | |||||||||||||||
| Called-up share capital | 102 | 28 | 68 | 28 | 16 | 35 | - | ||||||||
| Share premium account | - | - | - | - | - | - | - | ||||||||
| Other reserve account | 8,101 | 2,212 | 5,677 | 2,551 | 1,408 | 3,328 | - | ||||||||
| Capital reserve | (471) | (136) | (170) | (18) | 19 | 1 | - | ||||||||
| Revenue reserve | (95) | (170) | (290) | (110) | (72) | (82) | - | ||||||||
| Shareholders’ funds | 7,637 | 1,934 | 5,285 | 2,451 | 1,371 | 3,282 | - | ||||||||
| Net asset value excluding distributions to date (pence per share) | 74.8 | 68.8 | 78.5 | 86.1 | 87.2 | 93.3 | - | ||||||||
| Net asset value including distributions to date (pence per share) | 89.8 | 83.8 | 88.5 | 91.1 | 92.2 | 93.3 | - |
The Company had no H Shares in issue during the year ended 31 December 2012.
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 |
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 2012
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Opening Shareholders’ funds | 8,286 | 2,148 | 5,791 | 2,649 | 1,466 | - | - | ||||||||
| Capital subscribed | - | - | - | - | - | 3,518 | - | ||||||||
| Issue costs | - | - | - | - | - | (155) | - | ||||||||
| Dividends | (510) | (141) | (337) | (142) | (79) | - | - | ||||||||
| Loss for the year | (139) | (73) | (169) | (56) | (16) | (81) | - | ||||||||
| Closing Shareholders’ funds | 7,637 | 1,934 | 5,285 | 2,451 | 1,371 | 3,282 | - |
CASH FLOW STATEMENT
for the year ended 31 December 2013
| 31 December 2013 | 31 December 2012 | ||||||
| Note | £'000 | £'000 | |||||
| Net cash flow from operating activities | (374) | (545) | |||||
| Financial investment | |||||||
| Purchase of Qualifying Investments | 8 | (2,625) | (2,100) | ||||
| Return of Qualifying Investments | 8 | 7,062 | 400 | ||||
| Net cash flow from financial investment | 4,437 | (1,700) | |||||
| Management of liquid resources | |||||||
| Purchase of Non-qualifying Investments | 11 | (5,874) | (3,389) | ||||
| Disposal of Non-qualifying Investments | 11 | 6,569 | 4,524 | ||||
| Net cash flow from liquid resources | 695 | 1,135 | |||||
|
| |||||||
| Financing | |||||||
| Issue of Shares | 2,596 | 3,518 | |||||
| Issue costs of Shares | 14 | (65) | (155) | ||||
| Net cash flow from financing | 2,531 | 3,363 | |||||
| Dividends | |||||||
| Payment of dividends | 14 | (8,359) | (1,209) | ||||
| Net cash flow from dividends | (8,359) | (1,209) | |||||
| (Decrease)/increase in cash | (1,070) | 1,044 |
Reconciliation of loss before taxation to net cash flow from operating activities
| 2013 £'000 | 2012 £'000 | |||||
| Loss on ordinary activities before taxation | (661) | (534) | ||||
| Decrease in fair value of investments held | 387 | 289 | ||||
| Investment income | (194) | (275) | ||||
| Decrease/(increase) in receivables | 100 | (59) | ||||
| (Decrease)/increase in payables | (6) | 34 | ||||
| Net cash flow from operating activities | (374) | (545) |
Reconciliation of net cash flow to movement in net funds
| 2013 £'000 | 2012 £'000 | ||||||
| (Decrease)/increase in cash in the period | (1,070) | 1,044 | |||||
| Disposal of Non-qualifying investments | 11 | (405) | (1,412) | ||||
| Fair value adjustment on Non-qualifying investments | 11 | 91 | 30 | ||||
| Change in net funds | (1,384) | (338) | |||||
| Net funds at 1 January 2013 | 9,666 | 10,004 | |||||
| Net funds at 31 December 2013 | 8,282 | 9,666 |
Net funds comprise cash of £155,000 (31 December 2012: £1,225,000) and Non-qualifying assets, excluding Investment in Investee Companies of £8,127,000 (31 December 2012: £8,441,000).
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 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
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'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) |
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 2012
| 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 | (187) | (60) | (109) | (61) | (36) | (92) | - | ||||||||
| Financial investment | |||||||||||||||
| Purchase of Qualifying Investments | - | - | (2,100) | - | - | - | - | ||||||||
| Return of Qualifying Investments | 315 | 85 | - | - | - | - | - | ||||||||
| Net cash flow from financial investment | 315 | 85 | (2,100) | - | - | - | - | ||||||||
| Management of liquid resources | |||||||||||||||
| Purchase of Non-qualifying Investments | - | - | - | - | (145) | (3,244) | - | ||||||||
| Disposal of Non-qualifying Investments | 699 | 154 | 2,549 | 640 | 482 | - | - | ||||||||
| Net cash flow from liquid resources | 699 | 154 | 2,549 | 640 | 337 | (3,244) | - | ||||||||
| Financing | |||||||||||||||
| Issue of Shares | - | - | - | - | - | 3,518 | - | ||||||||
| Issue costs of Shares | - | - | - | - | - | (155) | - | ||||||||
| Net cash flow from financing | - | - | - | - | - | 3,363 | - | ||||||||
| Dividends | |||||||||||||||
| Payment of dividends | (510) | (141) | (337) | (142) | (79) | - | - | ||||||||
| Net cash flow from dividends | (510) | (141) | (337) | (142) | (79) | - | - | ||||||||
| Increase in cash | 317 | 38 | 3 | 437 | 222 | 27 | - |
Reconciliation of loss before taxation to net cash flow from operating activities
| Ordinary Shares £'000 | C Shares £'000 | D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Loss on ordinary activities before taxation | (139) | (73) | (169) | (56) | (16) | (81) | - | ||||||||
| Decrease/(increase) in fair value of investments held | 201 | 42 | 96 | (7) | (24) | (19) | - | ||||||||
| Investment income | (206) | (29) | (40) | - | - | - | - | ||||||||
| Increase in receivables | (59) | - | - | - | - | - | - | ||||||||
| Increase in payables | 16 | - | 4 | 2 | 4 | 8 | - | ||||||||
| Net cash flow from operating activities | (187) | (60) | (109) | (61) | (36) | (92) | - |
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2013
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 2012 to 31 December 2012.
The financial statements have been prepared on a going concern basis under the historical cost convention, except for the measurement at fair value for investments. The principal accounting policies have remained unchanged from those set out in the Company’s 2012 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 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 Ordinary Share class until 31 July 2013 and from 1 August 2013 by the C 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) Ordinary Shares, C Shares, D Shares, E Shares, F Shares, G Shares and H Shares
The Company had seven Share classes up to 17 December 2013: Ordinary Shares, C Shares, D Shares, E Shares, F Shares, G Shares and H Shares. On 20 December 2013 the Company’s capital was reduced by the cancellation and extinguishment of all of its Ordinary 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
| 2013 £'000 | 2012 £'000 | ||||
| Bank deposit interest | 7 | 1 | |||
| Dividend income from Qualifying Investments | 9 | - | |||
| Loan note interest from Qualifying Investments | 49 | 42 | |||
| Loan note premium from Qualifying Investments (note 8) | 195 | 275 | |||
| 260 | 318 |
3. Arrangement Fees
| 2013 £'000 | 2012 £'000 | ||||
| Arrangement fees | 16 | 39 |
All costs arising out of the relevant H Share Offer (included in 2013), and G Share Offer (included in 2012), 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
| 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | ||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Investment management fees | 165 | 165 | 330 | 187 | 187 | 374 |
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
| 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | ||||||||||
| 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 2013 | 17 | - | 17 | 14 | - | 14 | |||||||||
| - Audit fees under accrued 2012 | 3 | - | 3 | - | - | - | |||||||||
| - Non-audit fees | - | - | - | 1 | - | 1 | |||||||||
| Legal and professional fees | 29 | - | 29 | 21 | - | 21 | |||||||||
| Other administration expense | 153 | - | 153 | 124 | - | 124 | |||||||||
| Irrecoverable VAT | - | - | - | 6 | - | 6 | |||||||||
| 240 | - | 240 | 204 | - | 204 |
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 (31 December 2012: £17,000) including VAT. Non-audit fees in 2012 related to accounting advice. Further details on the Directors’ fee disclosures are given in the Directors’ Remuneration Report.
6. Tax Charge on Ordinary Activities
| 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | |||||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||||||
| Loss on ordinary activities before tax | (161) | (500) | (661) | (112) | (422) | (534) | ||||||||||||
| Loss on ordinary activities by tax rate 23.247% (31 December 2012: 24.5%) | (37) | (116) | (153) | (27) | (103) | (130) | ||||||||||||
| Adjustments: | ||||||||||||||||||
| Non taxable losses on investments | - | 78 | 78 | - | 57 | 57 | ||||||||||||
| Disallowed expenses | 5 | 38 | 43 | 4 | 46 | 50 | ||||||||||||
| Unutilised losses for the current year | 34 | - | 34 | 23 | - | 23 | ||||||||||||
| UK dividends not taxable | (2) | - | (2) | - | - | - | ||||||||||||
| - | - | - | - | - | - | |||||||||||||
As the Company is a VCT its capital gains are not taxable.
At 31 December 2013 the Company had surplus management expenses of £950,000 (31 December 2012: £806,000). 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 | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Profit/(loss) on ordinary activities after taxation | 16 | (67) | (51) | 120 | (259) | (139) | |||||||||
| Weighted average Shares in issue (number) | 9,897,463 | 9,897,463 | 9,897,463 | 10,205,011 | 10,205,011 | 10,205,011 | |||||||||
| Profit/(loss) attributable per Share (pence) | 0.2 | (0.7) | 0.5 | 1.2 | (2.5) | (1.3) |
| C Shares | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Loss on ordinary activities after taxation | (12) | (74) | (86) | (16) | (57) | (73) | |||||||||
| Weighted average Shares in issue (number) | 2,810,596 | 2,810,596 | 2,810,596 | 2,810,596 | 2,810,596 | 2,810,596 | |||||||||
| Loss attributable per Share (pence) | (0.4) | (2.6) | (3.0) | (0.6) | (2.0) | (2.6) |
| D Shares | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Profit/(loss) on ordinary activities after taxation | 14 | (283) | (269) | (56) | (113) | (169) | |||||||||
| 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) | 0.2 | (4.2) | (4.0) | (0.8) | (1.7) | (2.5) | |||||||||
| E Shares | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Loss on ordinary activities after taxation | (35) | (85) | (120) | (45) | (11) | (56) | |||||||||
| Weighted average Shares in issue (number) | 2,846,122 | 2,846,122 | 2,846,122 | 2,846,122 | 2,846,122 | 2,846,122 | |||||||||
| Loss attributable per Share (pence) | (1.2) | (3.0) | (4.2) | (1.6) | (0.4) | (2.0) |
| F Shares | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss)/profit on ordinary activities after taxation | (21) | (13) | (34) | (33) | 17 | (16) | |||||||||
| 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)/profit attributable per Share (pence) | (1.3) | (0.8) | (2.1) | (2.1) | 1.1 | (1.0) | |||||||||
| G Shares | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss)/profit on ordinary activities after taxation | (71) | 13 | (58) | (82) | 1 | (81) | |||||||||
| Weighted average Shares in issue (number) | 3,518,044 | 3,518,044 | 3,518,044 | 2,302,126 | 2,302,126 | 2,302,126 | |||||||||
| (Loss)/profit attributable per Share (pence) | (2.0) | 0.4 | (1.6) | (3.6) | - | (3.6) | |||||||||
| H Shares | 2013 | 2013 | 2013 | 2012 | 2012 | 2012 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss)/profit on ordinary activities after taxation | (52) | 9 | (43) | - | - | - | |||||||||
| Weighted average Shares in issue (number) | 1,590,411 | 1,590,411 | 1,590,411 | - | - | - | |||||||||
| (Loss)/profit attributable per Share (pence) | (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
| 2013 £'000 | 2012 £'000 | ||||||
| Unquoted investments | 7,228 | 11,949 | |||||
| Equity shares | 1,711 | 2,884 | |||||
| Unsecured loan notes | 5,517 | 9,065 | |||||
| 7,228 | 11,949 | ||||||
| Qualifying Investments | |||||||
| 2013 £'000 | 2012 £'000 | ||||||
| Opening valuation | 11,949 | 10,309 | |||||
| Purchases at cost | 2,625 | 2,100 | |||||
| Return of investment | (7,062) | (400) | |||||
| Fair value adjustment | (284) | (60) | |||||
| Closing valuation | 7,228 | 11,949 | |||||
Included in the valuation above is an equal and opposite fair value gain and fair value loss amounting to £195,000 (31 December 2012: £275,000). This represents the accounting treatment of the guaranteed loan note premium. The £195,000 is included in the Income Statement under Investment Income (refer to note 2).
9. Significant Interests
The Company has interests of 10%, or greater, of the nominal value of the allotted shares in the following Investee Companies incorporated in the United Kingdom as at 31 December 2013:
| Trading Companies | % class and share type | % voting rights | ||||
| CLS Concerts Limited | 50.00% A Ordinary | 16.67% | ||||
| Dance Floor Limited | 50.00% A Ordinary | 24.95% | ||||
| Golfmania Limited | 50.00% A Ordinary | 24.95% | ||||
| Hop Farm Comedy Limited | 50.00% A Ordinary | 20.00% | ||||
| 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 Limited | 50.00% A Ordinary | 15.00% | ||||
| Venn Music Ltd | 50.00% A Ordinary | 24.00% | ||||
| Waxarch Ltd | 50.00% A Ordinary | 15.00% |
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
| 2013 | 2012 | ||||||
| £'000 | £'000 | ||||||
| Trade debtors | - | 36 | |||||
| Prepayments and accrued income | 39 | 103 | |||||
| 39 | 139 | ||||||
11. Current Asset Investments
| 2013 | 2012 | |||||||||||||||||||||
| £'000 | £'000 | |||||||||||||||||||||
| Funds held in listed money market OEICs | 8,127 | 8,441 | ||||||||||||||||||||
| Investment in Investee Companies | 3 | 293 | ||||||||||||||||||||
| 8,130 | 8,734 | |||||||||||||||||||||
| Non-Qualifying Investments | ||||||||||||||||||||||
| 2013 £'000 | 2012 £'000 | |||||||||||||||||||||
| Opening valuation | 8,734 | 9,823 | ||||||||||||||||||||
| Purchases at cost – Investment in Investee Companies | - | 277 | ||||||||||||||||||||
| Disposal proceeds – Investment in Investee Companies | (290) | - | ||||||||||||||||||||
| Fair value gain on investment in Investee Companies | - | 16 | ||||||||||||||||||||
| Purchases at cost – listed money market OEICs | 5,874 | 3,112 | ||||||||||||||||||||
| Disposal proceeds - listed money market OEICs | (6,279) | (4,524) | ||||||||||||||||||||
| Unrealised change in value - listed money market OEICs | 91 | 30 | ||||||||||||||||||||
| Closing valuation | 8,130 | 8,734 | ||||||||||||||||||||
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
| 2013 | 2012 | ||||||
| £'000 | £'000 | ||||||
| Trade creditors | - | 17 | |||||
| Accruals and deferred income | 81 | 70 | |||||
| 81 | 87 |
13. Called-up Share Capital
| 2013 | 2012 | ||||||
| Allotted, called-up and fully paid | £'000 | £'000 | |||||
| 10,205,011 Ordinary Shares 1p each | - | 102 | |||||
| 2,810,596 C Shares 1p each | 28 | 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 | - | |||||
| 202 | 277 |
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 Company’s share capital by the cancellation and extinguishment of all of its Ordinary Shares of 1p each.
In the current year, 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 prior year, 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.
C Shares, 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 C, 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.
|
| Number of H Shares allotted and fully paid | Aggregate value of Share premium allotted £'000 | Aggregate Share premium net of issue costs £'000 | ||||
| 5 April 2013 | 1,735,921 | 1,676 | 1,634 | ||||
| 4 September 2013 | 924,921 | 893 | 870 | ||||
| 2,660,842 | 2,569 | 2,504 |
14. Reserves
| Share premium | Other reserve | Capital reserve | Revenue reserve | Total reserves | ||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||
| At 1 January 2013 | - | 23,277 | (775) | (819) | 21,683 | |||||||
| Issue of equity | 2,569 | - | - | - | 2,569 | |||||||
| Dividends paid | - | (8,359) | - | - | (8,359) | |||||||
| Reduction of Share premium account | (2,504) | 2,504 | - | - | - | |||||||
| Cancellation of Ordinary Shares | - | 102 | - | - | 102 | |||||||
| Gain on disposal of investments | - | - | 52 | - | 52 | |||||||
| Decrease in fair value of investments held | - | - | (387) | - | (387) | |||||||
| Investment income | - | - | - | 260 | 260 | |||||||
| Arrangement fees | (65) | - | - | (16) | (81) | |||||||
| Investment management fees | - | - | (165) | (165) | (330) | |||||||
| Other expenses | - | - | - | (240) | (240) | |||||||
| At 31 December 2013 | - | 17,524 | (1,275) | (980) | 15,269 | |||||||
The capital reserve includes realised investment holding losses of £330,000 and unrealised investment holding losses of £945,000. The other reserve, capital reserve and revenue reserve accounts are the only distributable reserves of the Company.
The Share premium in relation to the H Share class was converted to a distributable reserve following a High Court of Justice of England and Wales order sanctioning the resolutions passed by the Company in general and class meetings held on 28 November 2013.
On 28 February 2013, the Company paid dividends amounting to £2,041,000 on Ordinary Shares (24 February 2012: £510,000), £141,000 on C Shares (24 February 2012: £141,000), £337,000 on D Shares (24 February 2012: £337,000), £142,000 on E Shares (1 May 2012: £142,000) and £79,000 on F Shares (1 May 2012: £79,000). On 9 May 2013, the Company paid dividends amounting to £176,000 on G shares (31 December 2012: £Nil). On 8 August 2013 and 5 December 2013, the Company paid dividends amounting to £5,409,000 and £34,000 respectively, on Ordinary Shares.
15. Net Asset Value Per Share Excluding Distributions to Date
| 2013 | 2012 | |||||||
| Net assets attributable to Ordinary Shareholders (£'000) | 102 | 7,637 | ||||||
| Ordinary Shares in issue (number) | - | 10,205,011 | ||||||
| Net asset value per Ordinary Share (pence) | - | 74.8 | ||||||
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.
| 2013 | 2012 | |||||||
| Net assets attributable to C Shareholders (£'000) | 1,707 | 1,934 | ||||||
| C Shares in issue (number) | 2,810,596 | 2,810,596 | ||||||
| Net asset value per C Share (pence) | 60.7 | 68.8 | ||||||
| 2013 | 2012 | |||||||
| Net assets attributable to D Shareholders (£'000) | 4,679 | 5,285 | ||||||
| D Shares in issue (number) | 6,735,624 | 6,735,624 | ||||||
| Net asset value per D Share (pence) | 69.5 | 78.5 | ||||||
|
| 2013 | 2012 | ||||||
| Net assets attributable to E Shareholders (£'000) | 2,189 | 2,451 | ||||||
| E Shares in issue (number) | 2,846,122 | 2,846,122 | ||||||
| Net asset value per E Share (pence) | 76.9 | 86.1 | ||||||
|
| 2013 | 2012 | ||||||
| Net assets attributable to F Shareholders (£'000) | 1,258 | 1,371 | ||||||
| F Shares in issue (number) | 1,572,095 | 1,572,095 | ||||||
| Net asset value per F Share (pence) | 80.0 | 87.2 | ||||||
|
| ||||||||
|
| 2013 | 2012 | ||||||
| Net assets attributable to G Shareholders (£'000) | 3,048 | 3,282 | ||||||
| G Shares in issue (number) | 3,518,044 | 3,518,044 | ||||||
| Net asset value per G Share (pence) | 86.6 | 93.3 | ||||||
|
| ||||||||
|
| 2013 | 2012 | ||||||
| Net assets attributable to H Shareholders (£'000) | 2,488 | - | ||||||
| H Shares in issue (number) | 2,660,842 | - | ||||||
| Net asset value per H Share (pence) | 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
| 2013 £'000 | 2012 £'000 | ||||||
| Listed money market OEICs (note 11) | Level 1 | 8,127 | 8,441 | ||||
| Investment in investee companies (note 11) | Level 3 | 3 | 293 | ||||
| Unquoted investments (note 8) | Level 3 | 7,228 | 11,949 | ||||
| 15,358 | 20,683 |
Level 3 investments include a £18,000 revaluation gain on Saturn Explosion Limited, a £90,000 revaluation loss on Saturn Star Limited and a £212,000 revaluation loss on Venn Music 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 2013 | 31 December 2012 | ||||||
| £'000 +/- 1 Profit Multiple | £'000 +/- 1 Profit Multiple | |||||||
| Impact on loss on ordinary activities for the year | - | 106 | ||||||
| before taxation and total equity | ||||||||
All Level 3 unquoted investments have been valued at the price of the recent 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 £8,127,000 (31 December 2012: £8,441,000). 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 2013 (31 December 2012: 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 2013 | 31 December 2012 | ||||||
| £'000 +/- 50 basis points | £'000 +/- 50 basis points | |||||||
| Impact on loss on ordinary activities for the year | 42 | 46 | ||||||
| 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 £5,517,000 (31 December 2012: £9,065,000) 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 £5,517,000 (31 December 2012: £9,065,000) 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. Contingent Assets
There is currently interest income accruing on the unsecured loan note instruments at a rate of 4.5% (31 December 2012: 4.5%), being 4% over the bank base rate which was 0.5% as at 31 December 2013 (31 December 2012: 0.5%), totalling £314,000 (31 December 2012: £343,000). The repayment of this interest is not deemed recoverable based on current profits being derived by the Investee Companies, which currently cannot be determined with any certainty, therefore the Directors have not recognised it in the financial statements.
18. Related Party Transactions
a) Under an offer agreement dated 14 December 2012 between the Company, Ingenious Entertainment VCT 2 plc, IMIL and Howard Kennedy Corporate Services LLP, the Company and Ingenious Entertainment VCT 2 plc appointed IMIL, a company of which Patrick McKenna is a director, to be the promoter of the H Share Offer. IMIL is a wholly-owned subsidiary within the Ingenious Media Holdings plc group of companies (the Ingenious Group) which is controlled by Patrick McKenna and is, therefore, considered a related party to the Company under the Listing Rules. A variable arrangement fee equivalent to an amount of between 0.6288% to 5.5% of the subscription monies of an investor (the relevant percentage depending on the category of the investor) was paid by the Company to IMIL in consideration for the services provided as promoter, such fees becoming payable upon the allotment of the Shares under that Offer. This disclosure is being made pursuant to the Listing Rules.
During the Reporting Period, the Company paid IMIL a fee ranging from 0.6288% to 5.5% (depending on the Share issue price) of the gross proceeds of the H Share Offer in consideration for services provided as promoter on the H Share Offer, amounting to £81,000 (31 December 2012: G Share fee amounting to £194,000 in consideration for services provided as promoter of the G Share Offer).
b) On 4 April 2013, Patrick McKenna applied for, in aggregate, 69,840 H Shares in the Company and Ingenious Entertainment VCT 2 plc under the H Share Offer. Further to this, 34,920 H Shares in the Company were allotted to him at an issue price of £1 per Share (together with a further 1,047 H Shares as waiver shares pursuant to the terms of the H Share Offer). For the purposes of the Listing Rules, Patrick is considered to be a related party of the Company (as he is a Director of the Company). The disclosure in relation to this application is made pursuant to the requirements of the Listing Rules.
c) 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 £330,000 as at 31 December 2013 (31 December 2012: £374,000). The Manager also charges an administration fee of £102,000 (31 December 2012: £90,000) per annum (adjusted for inflation and additional Share classes, if any) and irrecoverable VAT.
d) 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.
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 further invest in an existing company, Waxarch Ltd, to promote the Field Day Day Two Festival. In December 2013 the Company invested £500,000 in Waxarch Ltd. Ingenious Entertainment VCT 2 plc invested £500,000 in Waxarch Ltd. The investment was made in the E and F Share classes.
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 invest in an existing company, Hop Farm Comedy Limited, to promote a new comedy concept called Funny Farm. In March 2013 and June 2013 the Company invested £375,000 and £500,000 respectively for a total of 20.00% of the equity in Hop Farm Comedy Limited. Ingenious Entertainment VCT 2 plc invested £375,000 and £500,000 respectively for 20.00% of the equity in Hop Farm Comedy Limited. The investment was made in the C, E and F Share classes.
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 further invest in an existing company, Love Supreme Festival Limited, to promote an existing music festival called Love Supreme Jazz Festival. In December 2013 the Company invested £500,000 in Love Supreme Festival Limited. Ingenious Entertainment VCT 2 plc invested £500,000 in Love Supreme Festival Limited. The investment was made in the E and F Share classes.
h) 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 further invest in an existing company, Saturn Star Limited, to promote a music festival called As One In The Park. In February 2013 the Company invested £750,000 in Saturn Star Limited. Ingenious Entertainment VCT 2 plc invested £750,000 in Saturn Star Limited. The investment was made in the E and F Share classes.
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.
| 2013 | 2013 | 2012 | 2012 | ||||||||
| Entity | Note | Expenditure paid £'000 | Amounts due £'000 | Expenditure paid £'000 | Amounts due £'000 | ||||||
| Ingenious Media Investments Limited | |||||||||||
| - Arrangement fee | a | 81 | - | 194 | - | ||||||
| Ingenious Asset Management Limited | |||||||||||
| - Investment management fee | c | - | - | 55 | - | ||||||
| - Administration fee | c | - | - | 12 | - | ||||||
| - Irrecoverable VAT | - | - | - | - | |||||||
| Ingenious Capital Management Limited | |||||||||||
| - Investment management fee | c | 330 | - | 319 | - | ||||||
| - Administration fee | c | 102 | - | 78 | - | ||||||
| - Irrecoverable VAT | - | 6 | - | 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 £202,000 excluding VAT (31 December 2012: £116,000), have been invoiced to the Investee Companies in the period of which no amount remained outstanding as at 31 December 2013 (31 December 2012: £24,000).
19. Events After the Balance Sheet Date
a) The Company paid a final distribution of 1.0 pence per Ordinary Share on 21 January 2014 (2013: interim dividends of 73.3371 pence).
b) The Company declared an interim dividend of 20.0 pence per C Share on 6 February 2014 (2013: 5.0 pence). The dividend was paid on 7 March 2014 by way of a capital distribution reducing the Company’s other reserves.
c) The Company declared an interim dividend of 5.0 pence per D Share on 6 February 2014 (2013: 5.0 pence). The dividend was paid on 7 March 2014 by way of a capital distribution reducing the Company’s other reserves.
d) The Company declared an interim dividend of 5.0 pence per E Share on 6 February 2014 (2013: 5.0 pence). The dividend was paid on 7 March 2014 by way of a capital distribution reducing the Company’s other reserves.
e) The Company declared an interim dividend of 5.0 pence per F Share on 6 February 2014 (2013: 5.0 pence). The dividend was paid on 7 March 2014 by way of a capital distribution reducing the Company’s other reserves.
f) The Company declared an interim dividend of 5.0 pence per G Share on 6 February 2014 (2013: 5.0 pence). The dividend was paid on 7 March 2014 by way of a capital distribution reducing the Company’s other reserves.
20. 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 2013 was £15,471,000 (31 December 2012: £21,960,000).
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 issue of H Shares (see note 13) and cancellation of Ordinary 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 2014