Last checked at 1 May 2018 07:00
INGENIOUS ENTERTAINMENT VCT 1 PLC (“the Company”)STATEMENT OF ANNUAL RESULTS
For the year ended 31 December 2017
Chairman’s Statement
I am delighted to present the Company’s tenth Annual Report and Accounts covering the year to 31 December 2017 (the Reporting Period).
Overview of Activities
The D, E and F shares were cancelled and extinguished on 18 January 2017 with all residual funds repaid to the relevant shareholders.
The G Share class reached its five year anniversary on 6 September 2017. The H Share class reaches its five year anniversary in September 2018.
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 of the remaining Share classes over the next 18 months.
The Company continued to actively source and review investment opportunities for the H Share class during the Reporting Period. The Company made one follow on investment during the Reporting Period, Genius Star Limited. Details of all investments can be found in the Manager’s Review.
During the Reporting Period, one live event was undertaken by one of the Company’s Investee Companies. Brighton Boundary festival took place on 30 September 2017 in Stamner Park, Brighton.
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.
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 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 outlook of the Company over the next 18 months.
The D Shares made a loss of £2,000 (31 December 2016: profit of £43,000). The E Shares made a profit of £nil (31 December 2016: profit of £1,000). The F Shares made a profit of £nil (31 December 2016: profit of £5,000). The G Shares made a loss of £197,000 (31 December 2016: loss of £776,000). The H Shares made a loss of £82,000 (31 December 2016: loss of £202,000).
The D Shares were cancelled and extinguished on 18 January 2017. The D Shares returned a total of 82.6 pence per D Share.
The E Shares were cancelled and extinguished on 18 January 2017. The E Shares returned a total of 83.7 pence per E Share.
The F Shares were cancelled and extinguished on 18 January 2017. The F Shares returned a total of 86.2 pence per F Share.
The net asset value per G Share at 31 December 2017 was 19.5 pence after the deduction of the dividend of 15 pence per Share in the Reporting Period and the deduction of a total of 20 pence per Share dividends in the previous years (31 December 2016: 40.1 pence). Total value returned to investors being total distributions through dividends and the net asset value as at year end was therefore 54.5 pence per G Share (31 December 2016: 60.1 pence).
The net asset value per H Share at 31 December 2017 was 60.7 pence after the deduction of the dividend of 5 pence per Share in the Reporting Period and the deduction of a 15 pence per Share dividend in the previous years (31 December 2016: 68.8 pence). Total value returned to investors being total distributions through dividends and the net asset value as at year end was therefore 80.7 pence per H Share (31 December 2016: 83.7 pence).
Legislative and Regulatory Developments
Changes introduced in the Finance Act 2018 will apply to new qualifying investments made on or after 15 March 2018. As the Company is fully invested, and not looking to make additional investments, it is not anticipated that the rules will have a significant impact on the Company going forward.
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. The viability of the Company to September 2019 has been disclosed in note 13 of the Corporate Governance Report.
Manager’s Review
The Company and Ingenious Entertainment VCT 2 plc (VCT 2) (collectively known as ‘the Ingenious Entertainment VCTs’) have made equal investments into each qualifying investment.
A summary of the Company’s investments, their individual cost, valuation method, valuations and the split between the various share classes as of 31 December 2017 is shown below:
| ValuationMethodology | RemainingCost £’000 | TotalValuation£'000
| GSharesValuation£'000
| HSharesValuation£'000
| ||||||||
| Festivals | ||||||||||||
| Brighton Boundary Limited | ||||||||||||
| (Cost £250,000: £500,000 across the Ingenious Entertainment VCTs) | Price of recentinvestment |
250 | 250 | - | 250 | |||||||
| SWG Power Limited | ||||||||||||
| (Cost £250,000: £500,000 across the Ingenious Entertainment VCTs) | Price of recentinvestment |
250 | 250 | - | 250 | |||||||
| Just For London Limited | ||||||||||||
| (Cost £375,000: £750,000 across the Ingenious Entertainment VCTs) | Net Assets | 375 | 275 | - | 275 | |||||||
| Seasonal Events | ||||||||||||
| Winterville Events Limited | ||||||||||||
| (Cost £250,000: £500,000 across the Ingenious Entertainment VCTs) | Net Assets | 250 | 77 | 77 | - | |||||||
| Content Exploitation | ||||||||||||
| FM3 2013 Limited | ||||||||||||
| (Cost £700,000: £1,400,000 across the Ingenious Entertainment VCTs) | Net Assets | 700 | 18 | 18 | - | |||||||
| Live Venues | ||||||||||||
| Genius Star Limited | ||||||||||||
| (Cost £500,000: £1,000,000 across the Ingenious Entertainment VCTs) | Price of recentinvestment |
500 | 500 | - | 500 | |||||||
| Event Spaces Limited | ||||||||||||
| (Cost £625,000: £1,250,000 across the Ingenious Entertainment VCTs) | Net Assets | 625 | 469 | 469 | - | |||||||
| Counterculture Bars Limited | ||||||||||||
| (Cost £250,000: £500,000 across the Ingenious Entertainment VCTs) | Net Assets | 250 | 188 | - | 188 | |||||||
| Total investments | 3,200 | 2,027 | 564 | 1,463 | ||||||||
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.
Brighton Boundary Ltd produced, promoted and managed a new music festival called Boundary Brighton, held in Stamner Park in Brighton.
Although the festival was well received in its first year in 2016 it did not sell enough tickets to break-even. The event returned to Stamner Park on 30 September 2017 and almost doubled ticket sales to 11,500 which meant the event was much closer to breaking even. The Manager believes this is a great improvement year-on-year.
Plans are already under way for 2018 with a view to increasing capacity and ticket prices to improve the profit to offset the losses made in 2016 and 2017.
SWG Power Limited
In November 2015 the Ingenious Entertainment VCTs made an investment of £500,000 into SWG Power Limited which was established to provide onsite power to festivals, live events, conferences and exhibitions.
The company exploits the growing market for festivals and live events and looks to sign multi-year deals to provide a reliable source of income.
Power supply contracts encompass fees for the supply of power service fees for staff operating the power equipment and maintaining the equipment on site along with a mark-up on fuel costs charged to traders on the event site. The investment has performed according to expectations.
Just For London Limited
In October 2014, the Ingenious Entertainment VCTs invested £750,000 into Just for London Ltd to 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 well-received 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.
Whilst company continues to look for opportunities to further its trade, there are no clear plans to stage another event. Therefore the Manager is considering whether it is in the best interests of the investors to return the cash to the Company.
Seasonal Event
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 called 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.
While the founder shareholders of Winterville Events Limited continue to make loss payments to the company, the company will continue to look for further opportunities.
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 concluded that very little value can be extracted from the investment and recommended the write down of virtually all of the FM3 investment in 2016. FM3 will return any remaining cash available to it to the VCTs in 2018 in order to fully disinvest from FM3 2013 Ltd.
Live Venues
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 founder, Rob Star.
The pub also benefits from a garden area where nine heated wooded cabanas were fitted to hold over 100 people as well as a further 75 people outside these areas.
The Ingenious Entertainment VCTs made a further investment in the company in November 2017 of £250,000 to create a similar style venue called the ‘The Heathcote & Star’ in Leytonstone which operates the same entertainment as ‘The Leyton Star’.
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 was 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 was a Lego Exhibition based behind the National Theatre on the Southbank in London with life size imitations of DC Comic Superheroes. The exhibition ran from February to September 2017.
Ticket sales were going well, however the terrorist attacks in London dramatically affected ticket sales and the event suffered heavy losses.
It was contractually agreed between all of the shareholders of Event Spaces Limited that in the event of losses being suffered by the company that one of the shareholders would pay to the company an amount equal to certain losses suffered. Event Spaces Limited is currently in the process of enforcing these contractual arrangements against the relevant shareholder. Once this matter has been settled the VCTs will look to realise the value of their investment.
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 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.
Since opening, the financial accounts are showing trading losses in excess of £300,000 so the lease has been offered to the market to compare the value of it with the results of ongoing trading (although no serious bids have been made to date).
In line with standard procedures, a provision of £125,000 has been made against this investment.
STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2017
| Year ended 31 December 2017 | Year ended 31 December 2016 | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |||||||||
| (Loss)/gain on disposal of investments | 10 | - | (1) | (1) | - | 208 | 208 | ||||||||
| (Decrease) in fair value of investments held | - | (369) | (369) | - | (1,096) | (1,096) | |||||||||
| Investment income | 2 | 25 | 169 | 194 | 35 | 177 | 212 | ||||||||
| Investment management fees | 3 | - | - | - | (34) | (34) | (68) | ||||||||
| Other expenses | 4 | (105) | - | (105) | (184) | - | (184) | ||||||||
| Loss before taxation | (80) | (201) | (281) | (183) | (745) | (928) | |||||||||
| Tax on loss | 5 | - | - | - | - | - | - | ||||||||
| Total comprehensive income attributable to equity Shareholders | (80) | (201) | (281) | (183) | (745) | (928) | |||||||||
| Basic and diluted return per share (pence) | |||||||||||||||
| D Share | 6 | - | - | - | (0.1) | 0.8 | 0.7 | ||||||||
| E Share | 6 | - | - | - | (1.6) | 1.6 | 0.0 | ||||||||
| F Share | 6 | - | - | - | (1.7) | 2.0 | 0.3 | ||||||||
| G Share | 6 | (0.8) | (4.8) | (5.6) | (1.5) | (20.5) | (22.1) | ||||||||
| H Share | 6 | (1.9) | (1.2) | (3.1) | (2.0) | (5.7) | (7.7) | ||||||||
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 2017
| D Shares | E Shares | ||||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||||
| Gain/(loss) on disposal ofinvestments | - | - | - | - | - | - | |||||||||
| (Decrease)/increase in fairvalue of investments held | - | - | - | - | - | - | |||||||||
| Investment income | - | - | - | - | - | - | |||||||||
| Investment management fees | - | - | - | - | - | - | |||||||||
| Other expenses | (2) | - | (2) | - | - | - | |||||||||
| Loss before taxation | (2) | - | (2) | - | - | - | |||||||||
| Tax on loss | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity Shareholders | (2) | - | (2) | - | - | - | |||||||||
| Basic and diluted return per share (pence) | - | - | - | - | - | - | |||||||||
| F Shares | G Shares | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||||||||||
| Loss on disposal of investments | - | - | - | - | (1) | (1) | |||||||||
| Decrease in fair value of investments held | - | - | - | - | (226) | (226) | |||||||||
| Investment income | - | - | - | 9 | 58 | 67 | |||||||||
| Investment management fees | - | - | - | - | - | - | |||||||||
| Other expenses | - | - | - | (37) | - | (37) | |||||||||
| Loss before taxation | - | - | - | (28) | (169) | (197) | |||||||||
| Tax on loss | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity Shareholders | - | - | - | (28) | (169) | (197) | |||||||||
| Basic and diluted return per share (pence) | - | - | - | (0.8) | (4.8) | (5.6) | |||||||||
| H Shares | |||||||||||||||
| Revenue | Capital | Total | |||||||||||||
| £'000 | £'000 | £'000 | |||||||||||||
| Gain on disposal of investments | - | - | - | ||||||||||||
| Decrease in fair value of investments held | - | (143) | (143) | ||||||||||||
| Investment income | 16 | 111 | 127 | ||||||||||||
| Investment management fees | - | - | - | ||||||||||||
| Other expenses | (66) | - | (66) |
|
| ||||||||||
|
| |||||||||||||||
| Loss before taxation | (50) | (32) | (82) | ||||||||||||
| Tax on loss | - | - | - | ||||||||||||
| Total comprehensive income attributable to equity Shareholders | (50) | (32) | (82) | ||||||||||||
| Basic and diluted return per share (pence) | (1.9) | (1.2) | (3.1) | ||||||||||||
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 2016
| D Shares | E Shares | ||||||||||||||
| Revenue £'000 | Capital £'000 | Total £'000 | Revenue £'000 | Capital £'000 | Total £'000 | ||||||||||
| Gain on disposal of investments | - | 51 | 51 | - | 59 | 59 | |||||||||
| Decrease in fair value ofinvestments 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 incomeattributable to equityShareholders | (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 ofinvestments 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 incomeattributable to equityShareholders | (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) | ||||||||||||
| Loss before taxation | (51) | (151) | (202) | ||||||||||||
| Tax on loss | - | - | - | ||||||||||||
| Total comprehensive incomeattributable to equityShareholders | (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.
BALANCE SHEET
as at 31 December 2017
| Note | 31 December 2017£'000
| 31 December 2016£'000
| ||||||||||
| Fixed assets | ||||||||||||
| Qualifying Investments held at fair value | 7 | 2,027 | 2,606 | |||||||||
| Current assets | ||||||||||||
| Debtors | 9 | 45 | 45 | |||||||||
| Non-qualifying Investments held at fair value | 10 | 3 | 214 | |||||||||
| Cash at bank and in hand | 281 | 538 | ||||||||||
| 329 | 811 | |||||||||||
| Creditors: amounts falling due within one year | 11 | (56) | (49) | |||||||||
| Net current assets | 273 | 748 | ||||||||||
| Net assets | 2,300 | 3,354 | ||||||||||
| Capital and reserves | ||||||||||||
| Called-up share capital | 12 | 62 | 174 | |||||||||
| Share premium account | - | - | ||||||||||
| Other reserve account | 4,068 | 6,069 | ||||||||||
| Capital reserve | (1,227) | (1,756) | ||||||||||
| Revenue reserve | (603) | (1,133) | ||||||||||
| Shareholders’ funds | 2,300 | 3,354 | ||||||||||
| Net asset value per D Share | 13 | - | 1.0 | |||||||||
| Net asset value per E Share | 13 | - | 1.0 | |||||||||
| Net asset value per F Share | 13 | - | 1.0 | |||||||||
| Net asset value per G Share | 13 | 19.5 | 40.1 | |||||||||
| Net asset value per H Share | 13 | 60.7 | 68.8 | |||||||||
The financial statements were approved by the Board of Directors on 30 April 2018.
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 2017
| D Shares £'000 | E Shares £'000 | F Shares £'000 | G Shares £'000 | H Shares £'000 | |||||||||
| Fixed assets | |||||||||||||
| Qualifying Investments | - | - | - | 564 | 1,463 | ||||||||
| Current assets | |||||||||||||
| Debtors | - | - | - | 20 | 34 | ||||||||
| Non-qualifying Investments | - | - | - | 3 | - | ||||||||
| Cash at bank and in hand | - | - | - | 127 | 154 | ||||||||
| - | - | - | 150 | 188 | |||||||||
| Creditors: amounts fallingdue within one year | - | - | - | (28) | (37) | ||||||||
| Net current assets | - | - | - | 122 | 151 | ||||||||
| Net assets | - | - | - | 686 | 1,614 | ||||||||
| Capital and reserves | |||||||||||||
| Called-up share capital | - | - | - | 35 | 27 | ||||||||
| Share premium account | - | - | - | - | - | ||||||||
| Other reserve account | - | - | - | 2,096 | 1,972 | ||||||||
| Capital reserve | - | - | - | (1,112) | (115) | ||||||||
| Revenue reserve | - | - | - | (333) | (270) | ||||||||
| Shareholders’ funds | - | - | - | 686 | 1,614 | ||||||||
| Net asset value excludingdistributions to date (penceper share) | - | - | - | 19.5 | 60.7 | ||||||||
| Net asset value includingdistributions to date (penceper share) | - | - | - | 54.5 | 80.7 |
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 excludingdistributions to date (penceper share) | 1.0 | 1.0 | 1.0 | 40.1 | 68.7 | ||||||||
| Net asset value includingdistributions to date (penceper share) | 82.6 | 83.7 | 86.2 | 60.1 | 83.7 |
CASH FLOW STATEMENT
for the year ended 31 December 2017
| 31 December2017
| 31 December2016
| ||||||||
| Note | £'000 | £'000 | |||||||
| Cash Flows from Operating Activities
Loss for the year |
(281) |
(928) | |||||||
| Adjustments for: | |||||||||
| Accrued investment income | (194) | (212) | |||||||
| Loss/(gain) on disposal of investments | 10 | 1 | (208) | ||||||
| Decrease in fair value of investments held | 7 | 369 | 1,096 | ||||||
| Decrease/(increase) in debtors and prepayments | - | (29) | |||||||
| Increase/(Decrease) in other creditors and accruals | 6 | (46) | |||||||
| Net cash used in operating activities | (99) | (327) | |||||||
| Cash flows from Investing Activities | |||||||||
| Purchase of Investments held at fair value | 7 | (125) | (250) | ||||||
| Proceeds on disposal of Qualifying Investments | 10 | 529 | 2,088 | ||||||
| Proceeds on disposal of Non – Qualifying Investments | 211 | - | |||||||
| Proceeds from sale of bonds and similar investments | - | 1,035 | |||||||
| Net cash from investing activities | 615 | 2,872 | |||||||
|
| |||||||||
| Cash flows from financing activities | |||||||||
| Dividends paid | 18 | (661) | (3,226) | ||||||
| Cancellation of share Capital | 12 | (112) | - | ||||||
| Net cash used in financing activities | (773) | (3,226) | |||||||
| Net (decrease) in cash and cash equivalents | (257) | (681) | |||||||
| Opening cash and cash equivalents | 538 | 1,219 | |||||||
| Closing cash and cash equivalents | 281 | 538 | |||||||
Cash and cash equivalents comprise cash in hand and cash at bank.
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
for the year ended 31 December 2017
| Share Capital | Other reserve | Capital reserve | Revenue reserve | Total reserves | |||||||
|
| £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
| At 1 January 2016 | 174 | 9,295 | (1,011) | (950) | 7,508 | ||||||
| Total Comprehensive Income | - | - | (745) | (183) | (928) | ||||||
| Transactions with owners | |||||||||||
| Dividends paid | - | (3,226) | - | - | (3,226) | ||||||
| At 31 December 2016 | 174 | 6,069 | (1,756) | (1,133) | 3,354 | ||||||
| Total Comprehensive Income | - | - | (201) | (80) | (281) | ||||||
| Transactions with owners | |||||||||||
| Capital reduction for D, E and F Shares | (112) | (1,340) | 730 | 610 | (112) | ||||||
| Dividends paid | - | (661) | - | - | (661) | ||||||
| At 31 December 2017 | 62 | 4,068 | (1,227) | (603) | 2,300 |
As at 31 December 2016 the D Shares, E Shares and F Shares were subject to a capital reduction, which required the approval of the High Court of Justice of England and Wales, and were cancelled on 18 January 2017. Details of the Company’s share capital and substantial shareholdings can be found in in Note 12 to the financial statements.
As at 31 December 2017 the G Shares had £651,000 available as distributable reserves (31 December 2016: £1,376,000). As at 31 December 2017 the H Shares had £1,587,000 available as distributable reserves (31 December 2016: £1,802,000). Total distributable reserves as at 31 December 2017 were £2,238,000 (31 December 2016: £3,180,000).
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 capital reserve includes realised investment holding losses of £22,000 (31 December 2016: losses of £85,000) and unrealised investment holding losses of £1,173,000 (31 December 2016: losses of £1,019,000).
The capital reserve represents the investment holding gains/losses and shows the gains/losses on investments still held by the Company not yet realised by an asset sale.
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 2017 the following dividend payments were made:
| 31 December 2017 | 31 December 2016 | |||||
| £'000 | £'000 | |||||
| D Share | - | 108 | ||||
| E Share | - | 1,785 | ||||
| F Share | - | 1,025 | ||||
| G Share | 528 | 176 | ||||
| H Share | 133 | 133 | ||||
| Total Dividends Paid | 661 | 3,226 | ||||
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2017
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: 06395011.
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” issued in November 2014 and updated in January 2017 with consequential amendments” (‘SORP’).
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 2016 to 31 December 2016.
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 2016 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.
Investments are recognised as financial assets on legal completion of the investment contract and are de-recognised on legal completion of the sale of investment.
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 or until a material change in operations; 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.
All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in the fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a ‘unit of account’ basis, alongside consideration of:
(i) Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company this value will be used.
(ii) In the absence of i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-
a. A multiple basis. The shares may be valued by applying a suitable price-earnings ratio, revenue or gross profit multiple to that company’s historic, current or forecast post-tax earnings before interest and amortisation, or revenue, (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability).
Or:-
b. Where a company’s underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate.
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.
c) 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 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.
d) Dividend Income
Dividend income is recognised in the Statement of Comprehensive Income 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 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 expected split of the Company’s long term returns.General expenses were paid for by the H Share class and have been recharged on a quarterly basis to the G Share class based on the proportional net asset value per Share class as at the last day of the previous quarter.
In any financial year, if the total fees and expenses of the Company in that financial year, excluding the performance related incentive fee and irrecoverable VAT on such total fees and expenses, exceed 3.5% of the average Net Asset Value in the relevant financial year, then the Manager shall bear the expenses in excess of such amount. This first offsets against the management and admin fee charged by the Manager. It is then recognised as a deduction against the overheads.
f) 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.
g) Financial Instruments
The Company’s financial assets are its investments. The policies in relation to those assets are set out in note 14. Receivables and payables are carried at amortised cost. There are no financial liabilities other than payables.
h) Cash and Cash equivalents
Cash, for the purpose of the cash flow statement comprises cash at bank.
i) G Shares and H Shares
The Company had two Share classes up to 31 December 2017: 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.
j) Dividend Policy
Dividends by the Company are accounted for in the period in which the dividend is paid or when the dividends proposed by the Board are approved by the Shareholders.
k) Remuneration of key management personnel
The remuneration of the Directors, who are key management personnel of the Company, is disclosed in the Directors’ Remuneration Report.
2. Investment Income
| 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Dividend income from Qualifying Investments | - | - | - | - | - | - | |||||||||
| Loan note premium from Qualifying Investments (note 7) | 25 | 169 | 194 | 35 | 177 | 212 | |||||||||
| 25 | 169 | 194 | 35 | 177 | 212 |
3. Investment Management Fees
| 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Investment management fees | - | - | - | 34 | 34 | 68 |
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. No management fees have been incurred in 2017 due to the clause in the investment management agreement whereby the Manager bears all expenses of the Company over and above 3.5% of the average quarterly net asset value in the relevant financial year. No further fees were earned by the Manager. As at year end the Manager owed the Company £35,000 (2016: £36,000).
4. Other Expenses
| 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||
| 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 | 1 | - | 1 | |||||||||
| Auditor’s remuneration | |||||||||||||||
| - Audit fees | 25 | - | 25 | 22 | - | 22 | |||||||||
| Legal and professional fees | 14 | - | 14 | 41 | - | 41 | |||||||||
| Other administration expense | 36 | - | 36 | 81 | - | 81 | |||||||||
| ICML rebate for expenses over 3.5% | (9) | - | (9) | - | - | - | |||||||||
| 105 | - | 105 | 184 | - | 184 |
The Company is not registered for VAT. Full disclosure of key management personnel’s remuneration is included in the Directors’ Remuneration report. Audit fees include VAT which is not recoverable, audit fees net of VAT were £21,000 (2016: £18,000).
5. Tax Charge
| 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | ||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Loss before tax | (80) | (201) | (281) | (183) | (746) | (928) | |||||||||
| Loss on by tax rate 19.25%(31 December 2016: 20.00%) | (15) | (39) | (54) | (37) | (149) | (186) | |||||||||
| Adjustments: | |||||||||||||||
| Non-taxable losses on investments | - | 71 | 71 | - | 178 | 178 | |||||||||
| Disallowed expenses | - | - | - | 5 | 7 | 12 | |||||||||
| Unutilised/(utilised) losses for the current year | - | - | - | 32 | (36) | (4) | |||||||||
| Management expensesunutilised/(utilised) | 15 | (32) | (17) | - | - | - | |||||||||
| - | - | - | - | - | - |
As the Company is a VCT its capital gains are not taxable. At 31 December 2017 the Company had surplus management expenses of £1,122,000 (31 December 2016: £1,211,000). 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 | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss)/gain before taxation | (2) | - | (2) | (8) | 51 | 43 | |||||||||
| Weighted average Shares inissue (number) | - | - | - | 6,735,624 | 6,735,624 | 6,735,624 | |||||||||
| (Loss)/profit attributable perShare (pence) | - | - | - | (0.1) | 0.8 | 0.7 | |||||||||
| E Shares | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Loss/(gain)before taxation | - | - | - | (45) | 46 | 1 | |||||||||
| Weighted average Shares inissue (number) | - | - | - | 2,846,122 | 2,846,122 | 2,846,122 | |||||||||
| (Loss)/profit attributable perShare (pence) | - | - | - | (1.6) | 1.6 | 0.0 | |||||||||
| F Shares | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss)/gain before taxation | - | - | - | (27) | 32 | 5 | |||||||||
| Weighted average Shares inissue (number) | - | - | - | 1,572,095 | 1,572,095 | 1,572,095 | |||||||||
| (Loss)/profit attributable perShare (pence) | - | - | - | (1.7) | 2.0 | 0.3 | |||||||||
| G Shares | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss) before taxation | (28) | (169) | (197) | (54) | (722) | (777) | |||||||||
| Weighted average Shares inissue (number) | 3,518,044 | 3,518,044 | 3,518,044 | 3,518,044 | 3,518,044 | 3,518,044 | |||||||||
| (Loss) attributable per Share(pence) | (0.8) |
| (4.8) | (5.6) | (1.5) | (20.5) | (22.1) | ||||||||
| H Shares | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | |||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| (Loss) before taxation | (50) | (32) | (82) | (51) | (151) | (203) | |||||||||
| Weighted average Shares inissue (number) | 2,660,842 | 2,660,842 | 2,660,842 | 2,660,842 | 2,660,842 | 2,660,842 | |||||||||
| (Loss)/profit attributable perShare (pence) | (1.9) | (1.2) | (3.1) | (2.0) | (5.7) | (7.7) |
There are no dilutive potential 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
| 2017 £'000 | 2016 £'000 | ||||||||
| Unquoted investments | 2,027 | 2,606 | |||||||
| Equity shares | 851 | 1,390 | |||||||
| Unsecured loan notes | 1,176 | 1,216 | |||||||
| 2,027 | 2,606 | ||||||||
| Qualifying Investments | |||||||||
| 2017 £'000 | 2016 £'000 | ||||||||
| Opening valuation | 2,606 | 5,332 | |||||||
| Purchases at cost | 125 | 250 | |||||||
| Return of investment | (529) | (1,880) | |||||||
| Transfer to Non Qualifying | - | (211) | |||||||
| Fair value adjustment | (175) | (885) | |||||||
| Closing valuation | 2,027 | 2,606 | |||||||
Included in the valuation above is an equal and opposite fair value gain and fair value loss amounting to £194,000 (31 December 2016: £211,000). This represents the accounting treatment of the guaranteed loan note premium. The £194,000 (31 December 2016: £211,000) 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 2017:
| Trading Companies | Registered Address | Profit/ (loss) before tax | Net Assets | Result for the year ended | % class and share type | % voting rights | |||||||||||
| £’000 | £’000 | ||||||||||||||||
| BrightonBoundary Limited | 15 GoldenSquare, London,W1F 9JG | (232) | 118 | 31 March 2017 | 50.00% A Ordinary | 15.00% | |||||||||||
| SWG Power Limited | Vine House,Northwick Road,Pilning,Bristol, Avon,BS35 4HA | 39 | 379 | 28 February 2017 | 50.00% A Ordinary | 22.50% | |||||||||||
| Just For LondonLimited | 15 GoldenSquare, London,W1F 9JG | (683) | 141 | 30 September 2016 | 50.00% A Ordinary | 16.68% | |||||||||||
| WintervilleEvents Limited | 15 GoldenSquare, London,W1F 9JG | (166) | 357 | 31 August 2016 | 50.00% A Ordinary | 15.00% | |||||||||||
| FM3 2013 Limited | 15 GoldenSquare, London,W1F 9JG | (141) | 176 | 31 December 2016 | 50.00% A Ordinary | 20.00% | |||||||||||
| Genius StarLimited | 359 BethnalGreen Road,London, E2 6LG | (72) | 450 | 31 October 2017 | 50.00% A Ordinary | 25.00% | |||||||||||
| Event SpacesLimited | 15 GoldenSquare, London, W1F 9JG | (13) | 843 | 31 October 2016 | 50.00% A Ordinary | 22.50% | |||||||||||
| CountercultureBars Limited | 182 StokeNewington Road,London, N16 7UY | (151) | 251 | 31 July 2017 | 50.00% A Ordinary | 14.27% |
As required 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
All amounts are receivable within one year:
| 2017 | 2016 | ||||||||
| £'000 | £'000 | ||||||||
| Amounts due from ICML | 36 | 35 | |||||||
| Prepayments and accrued income | 9 | 10 | |||||||
| Total | 45 | 45 | |||||||
The above represents the total value to the Company. The internal recharges between G and H Share classes have been eliminated.
10. Current Asset Investments
| 2017 | 2016 | |||
| £'000 | £'000 | |||
| Investment Non-Qualifying unquoted investments | 3 | 214 | ||
| Non-Qualifying Investments | |||||||||
| 2017 £'000 | 2016 £'000 | ||||||||
| Opening valuation | 214 | 1,038 | |||||||
| Disposal proceeds - listed money market OEICs | - | (1,035) | |||||||
| Disposal of Non-Qualifying Investments | (211) | - | |||||||
| Reclassification to Non-Qualifying Investments | - | 211 | |||||||
| Closing valuation | 3 | 214 | |||||||
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 Loss on Disposal of Qualifying Unquoted Investments
| Unquoted Investments | Loss £000 | Proceeds £000 | 2017CarryingValue £000 | 2016CarryingValue £000 | |||||
| Winterville Events Limited | - | 250 | 77 | 327 | |||||
| The Zoo Project Festival Limited | (1) | 279 | 0 | 279 | |||||
| Realised loss on unquoted investments | (1) | 529 | 77 | 606 | |||||
| Unrealised loss on disposal of unquoted investments | - | ||||||||
| Realised gains on quoted investments | - | ||||||||
| Total realised loss on investments | (1) |
11. Creditors: Amounts Falling Due Within One Year
| 2017 | 2016 | ||||||||
| £'000 | £'000 | ||||||||
| Amounts due to ICML | - | - | |||||||
| Trade creditors | 18 | 13 | |||||||
| Accruals | 37 | 36 | |||||||
| 56 | 49 |
The above represents the total value to the Company. The internal recharges between G and H share have been eliminated.
12. Called-up Share Capital
| 2017 | 2016 | ||||||||
| Allotted, called-up and fully paid | £'000 | £'000 | |||||||
| 6,735,624 D Shares 1 pence each | - | 68 | |||||||
| 2,846,122 E Shares 1 pence each | - | 28 | |||||||
| 1,572,095 F Shares 1 pence each | - | 16 | |||||||
| 3,518,044 G Shares 1 pence each | 35 | 35 | |||||||
| 2,660,842 H Shares 1 pence each | 27 | 27 | |||||||
| 62 | 174 |
| Allotted, called-up and fully paid as at 31 December 2015 | £'000 | ||
| 17,332,727 Shares 1 pence each | 174 | ||
| Allotted, called-up and fully paid as at 31 December 2016 | 174 |
| Allotted, called-up and fully paid as at 31 December 2016 | £'000 | ||
| 17,332,727 Shares 1 pence each | 174 | ||
| Cancellation of share Capital | |||
| 6,735,624 D Shares 1 pence each | (68) | ||
| 2,846,122 E Shares 1 pence each | (28) | ||
| 1,572,095 F Shares 1 pence each | (16) | ||
| Allotted, called-up and fully paid as at 31 December 2017 | 62 |
In the year ended 31 December 2017, 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 8 December 2016 by which the Company’s Shareholders approved the reduction of the Company’s share capital by the cancellation and extinguishment of all its D, E and F Shares of 1p each. Payments for the reduction of capital were made by the Registrars.
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.
G Shares and H Shares ranked pari passu with each other in terms of voting and other rights. The entire issued 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.
For information on dividends paid out during the year please see note 18.
13. Net Asset Value per Share Excluding Distributions to Date
| 2017 | 2016 | ||||||||||
| Net assets attributable to D Shareholders (£'000) | - | 69 | |||||||||
| D Shares in issue (number) | - | 6,735,624 | |||||||||
| Net asset value per D Share (pence) | - | 1.0 | |||||||||
|
| 2017 | 2016 | |||||||||
| Net assets attributable to E Shareholders (£'000) | - | 29 | |||||||||
| E Shares in issue (number) | - | 2,846,122 | |||||||||
| Net asset value per E Share (pence) | - | 1.0 | |||||||||
|
| 2017 | 2016 | |||||||||
| Net assets attributable to F Shareholders (£'000) | - | 16 | |||||||||
| F Shares in issue (number) | - | 1,572,095 | |||||||||
| Net asset value per F Share (pence) | - | 1.0 | |||||||||
|
| 2017 | 2016 | |||||||||
| Net assets attributable to G Shareholders (£'000) | 686 | 1,411 | |||||||||
| G Shares in issue (number) | 3,518,044 | 3,518,044 | |||||||||
| Net asset value per G Share (pence) | 19.5 | 40.1 | |||||||||
|
| 2017 | 2016 | |||||||||
| Net assets attributable to H Shareholders (£'000) | 1,614 | 1,829 | |||||||||
| H Shares in issue (number) | 2,660,842 | 2,660,842 | |||||||||
| Net asset value per H Share (pence) | 60.7 | 68.7 | |||||||||
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.
All of the Company’s financial assets and liabilities as at 31 December 2017 are stated at fair value as determined by the Directors, with the exception of receivables and payables and cash, which are carried at amortised cost, in accordance with FRS102.
Fair Value Hierarchy
| Between 3 and 5 years | 2017 £'000 | 2016 £'000 | |||||
| Investment in non-qualifying unquoted investments (note 10) | Level 3 | 3 | 214 | ||||
| Qualifying unquoted investments (note 7) | Level 3 | 2,027 | 2,606 | ||||
| 2,030 | 2,820 |
Level 3 investments include a £4,000 revaluation loss on Just for London Limited, a £13,000 revaluation loss on Counterculture Bars Limited, a £17,000 revaluation loss on FM3 2013 Limited and a £141,000 revaluation loss on Event Spaces 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 IPEVC 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 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. At the end of 2016 all cash had been removed from the money market OEICs. 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 0.50% as at 31 December 2017 (31 December 2016: 0.25%).
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 2017 | 31 December 2016 | ||||||
| £'000 +/- 50 basis points | £'000 +/- 50 basis points | |||||||
| Impact on loss for the year | 0 | 0 | ||||||
| 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.
The Company is exposed to credit risk due to its £1,176,000 (31 December 2016: £1,216,000) through its holding of unsecured loan note instruments. However 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 £1,176,000 (31 December 2016: £1,216,000) 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 all expenses of the Company over and above 3.5% of the net asset value at 31 December in the relevant financial year. Due to the scale of the expenses in comparison to the NAV in 2017 the Manager did not charge management fees (31 December 2016: £68,000). The Manager did not charge an administration fee for the year (31 December 2016: £51,000). Further to this the Manager reimbursed the Company a further £9,000 to cover all expenses over and above 3.5% of the net asset value at 31 December 2017 (31 December 2016: £nil).
As at 31 December 17 the Manager owed the Company £36,000 (31 December 2016: £35,000).
b) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 2 plc. In December 2015, The Company and Ingenious Entertainment VCT 2 plc agreed to create and invest in a new company, Genius Star Limited, to operate a multi-purpose bar/kitchen and live venue. The Company invested £375,000 in Genius Star Limited and in November 2017, invested a further £125,000 for 25% of the equity. Ingenious Entertainment VCT 2 plc initially invested £375,000 In December 2015 and then invested a further £125,000 for 25% of the equity in Genius Star Limited. The investment was made in 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.
| 2017 | 2017 | 2016 | 2016 | ||||||||
| Entity | Note | Expenditurepaid£'000
| Amounts due£'000
| Expenditurepaid£'000
| Amountsdue£'000
| ||||||
| Ingenious Capital Management Limited | |||||||||||
| - Investment management fee | 15a | - | - | 68 | - | ||||||
| Administration fee | 15a | - | - | 51 | - | ||||||
| Rebate | 15a | - | (9) | - | - |
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 nil excluding VAT (31 December 2016: £30,000), have been invoiced to the Investee Companies in the period of which £nil remained outstanding as at 31 December 2017 (31 December 2016: £nil)
16. 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 2017 was £2,300,000 (31 December 2016: £3,354,000).
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.
17. Subsequent events
There have not been any significant events after year end.
18. Dividends
Dividends paid out during the year were as follows:
| Year ended | Year ended | ||||||
| 31 December 2017 | 31 December 2016 | ||||||
| £'000 | £'000 | ||||||
| Dividend of 1.6p per D Share paid on 7 December 2016 | - | 108 | |||||
| Dividend of 20 per E Share paid on 18 March 2016 | - | 569 | |||||
| Dividend of 42p per E share paid on 7 October 2016 | - | 1,195 | |||||
| Dividend of 0.7p per E share paid on 7 December 2016 | - | 20 | |||||
| Dividend of 20 per F Share paid on 18 March 2016 | - | 314 | |||||
| Dividend of 42p per F Share paid on 7 October 2016 | - | 660 | |||||
| Dividend of 3.2p per F Share paid on 7 December 2016 | - | 50 | |||||
| Dividend of 5p per G Share paid on 18 March 2016 | - | 176 | |||||
| Dividend of 5p per H Share paid on 18 March 2016 | - | 133 | |||||
| Dividend of 15p per G Share paid on 21 July 2017 | 528 | - | |||||
| Dividend of 5p per H Share paid on 21 July 2017 | 133 | - | |||||
| 661 | 3,226 |
The financial information set out in these statements does not constitute the Company’s statutory accounts for the year ended 31 December 2017, prepared in accordance with section 435 of the Companies Act 2006, but is derived from those accounts. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The auditors have reported on these accounts and their report was unqualified and did not contain a statement under section 498(2) of the Companies Act 2006.
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