Last checked at 24 Aug 2017 07:00
INGENIOUS ENTERTAINMENT VCT 1 PLC
24 August 2017
Half- yearly results for the six months to June 2017
INTERIM MANAGEMENT REPORT
We are delighted to present the half-yearly financial report of Ingenious Entertainment VCT 1 plc (the Company) covering the six months ended 30 June 2017 (the Reporting Period). The half-yearly financial report has not been audited.
Overview of Activities
The D share class reached its five year anniversary on 30 July 2015. The D shares were cancelled and extinguished on 18 January 2017 with all residual funds repaid to the relevant shareholders.
Each of the E and F share classes reached their five year anniversaries on 30 July 2016. The E and F shares were cancelled and extinguished on 18 January 2017, with all residual funds repaid to the relevant shareholders.
The Company has completed its investment strategy and is fully invested under VCT regulations for its G and H share classes. No further investments have been made during the Reporting Period and the Manager is now focused upon maximising the returns from the investments made from the G and H share classes.
Results
The G shares and H shares are accounted for as separate pools of funds necessitating separate reporting. The G shares made a loss of £39,000 (31 December 2016: loss of £776,000; 30 June 2016: loss of £60,000). The H shares made a loss of £46,000 (31 December 2016: loss of £202,000; 30 June 2016: loss of £26,000).
The unaudited net asset value per G share is 24.0 pence (31 December 2016: 40.1 pence; 30 June 2016: 60.5 pence) after the deduction of an interim dividend of 15.0 pence per share in the Reporting Period and the deduction of a total of 20.0 pence per share of dividends in previous periods. The net asset value including distributions to date is 59.0 pence per share (31 December 2016; 60.1 pence per share; 30 June 2016: 80.5 pence per share).
The unaudited net asset value per H share is 62.0 pence (31 December 2016: 68.8 pence; 30 June 2016: 75.4 pence) after the deduction of an interim 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 periods. The net asset value including distributions to date is 82.0 pence per share (31 December 2016; 83.8 pence per share; 30 June 2016: 90.4 pence per share).
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 paying tax-free dividends to shareholders from both the actual income received and capital profits on the sale of investments in the companies that the Company and Ingenious Entertainment VCT 2 plc (together the Ingenious Entertainment VCTs) invest in (Investee Companies).
Investments
The current investment portfolio includes:
Festivals
Brighton Boundary Limited
In May 2016 the Ingenious Entertainment VCTs made an investment of £500,000 into Brighton Boundary Limited to promote a music festival in Brighton.
The Ingenious Entertainment VCTs joined forces with LWE, Alister Pook from SWG Events (SWG) and Matt Priest to produce, promote and manage a new music festival called Boundary Brighton to be held in Stamner Park in Brighton.
The first event was held in September 2016 and formed part of Freshers’ Week for the University of Sussex as well as being aimed at the local audience in and around Brighton and London. Although the festival was well-received by the press and public, it did not sell the required number of tickets to break-even and it incurred a loss.
Brighton Boundary returns to Stamner Park on 30 September 2017 when all the students will have returned to both Sussex and Brighton Universities to give the maximum reach for ticket sales. Tickets went on sale in the first week of April 2017 and almost 5,000 have been sold already which is an increase of 100% compared to this time last year. The break-even point is 7,500 tickets.
Just For London Limited
In October 2014, the Ingenious Entertainment VCTs invested £750,000 into a company to co-promote the Just For Laughs comedy festival.
The first event was held in July 2016 in Russell Square and Logan Hall which is part of University College London and although it was a well-received show by the press and public, it did not sell the required number of tickets to break-even. The show made a significant loss which has been taken into account in the valuation of the investment.
There are currently no clear plans in place to stage another event. However options are being discussed.
The Zoo Project Festival Limited
In March 2014, the Ingenious Entertainment VCTs invested £600,000 into a company to co-promote The Zoo Project Festival.
Over the course of 2012 and 2013 the festival promoters established a strong festival brand with a core following and although it was very well received by the press and public, the attendance levels were disappointing and the event incurred a loss in the region of £40,000.
The Company will not be staging the event again and the funds invested are in the process of being returned to the Ingenious Entertainment VCTs.
SWG Power Limited
In November 2015 the Ingenious Entertainment VCTs made an investment of £500,000 into SWG which has been established to provide power to festivals, live events, conferences and exhibitions.
SWG has been established to act as a service provider supplying on-site power to the festival, exhibition, conference and live event market. SWG exploits the growing market for festivals and live events and looks to sign multi-year deals with events to provide a reliable source of income.
Revenues are generated by supplying on-site power to the festival and live events market. 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 company had a very successful year and has built a significant client list that the Manager hopes can be built on in future years.
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.
For the December 2015 event, the Ingenious Entertainment VCTs and partners Marcus Weedon and Darren Guerin joined forces with AEG Live to utilise AEG’s experience in this market (AEG have promoted the Winter Wonderland events in Hyde Park four times and a winter season in Dublin).
Unfortunately, due to the wettest December on record and the impact of an average event in 2014, the event made a loss which has been taken into account in the valuation of the investment. The event was not held in 2016.
Funds are in the process of being returned to the Ingenious Entertainment VCTs.
Content Exploitation
FM3 2013 Limited
In March 2014, an investment of £1,400,000 was made by the Ingenious Entertainment VCTs into FM3 2013 Limited to film festival and live event content. The business strategy was to deliver five core revenue streams through the exploitation of music festival content, namely commissioned productions, distribution, advertising, brand activation and online video channel creation.
Unfortunately, due to several setbacks, relating to the ability to exploit the proposed revenue streams, the Manager has concluded that very little value can be extracted from the investment and recommended the write down of virtually all of the FM3 investment at this stage. There remains the potential to exploit the proposed revenue streams in the future but, given the difficulties faced to date, any possible time frames or quantum of such earnings is uncertain.
Live Venues
Event Spaces Limited
In December 2014, an investment of £1,250,000 was made by the Ingenious Entertainment VCTs into Event Spaces Limited to promote a wide range of events to be hosted from a semi-permanent events structure situated in London.
A large semi-permanent structure was purchased that was situated on the Pontoon Dock site in East London. 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” is a Lego exhibition based behind the National Theatre on the Southbank in London with life size imitations of DC Comic Superheroes which will initially run from February 2017 to September 2017.
Tickets went on sale in December 2016 and are currently ahead of expectations. The break-even point is 183,000 tickets.
A write - off has been made for the aborted costs incurred by the Ingenious Entertainment VCTs in relation to the initial project.
Counterculture Bars Limited
In September 2015 an investment of £500,000 was made by the Ingenious Entertainment VCTs into Counterculture Bars Limited (Counterculture) to operate the multi-purpose bar/kitchen and live venue, ‘Haunt’ in Stoke Newington with Alexander Brooks.
‘Haunt’ opened in November 2015 and is a multi-faceted and vibrant space which serves as a functioning bar and kitchen, and a multi-purpose event space for promoted, co-promoted and externally hired activities.
Counterculture had a tough first few months having opened too late for Christmas bookings then suffering the traditionally quiet months of January and February. Following this period (apart from August), the operation steadied and popularity grew in the local community.
Counterculture’s most recent accounts show a loss in the region of £125,000. The directors of Counterculture Bars Limited are currently in discussions to assess the future of the venue. In addition, the lease has been offered to the market to compare the value with results of ongoing trading although no serious bids have been made to date.
Genius Star Limited
In December 2015 an investment by the Ingenious Entertainment VCTs of £750,000 was made into Genius Star Limited to operate a pub which serves as a multi functioning bar and kitchen with a function room for promoted, co-promoted and externally hired activities.
‘The Leyton Star’ opened in June 2016 and is a multi-faceted and vibrant space which capitalises on the premises’ location and experience of the partner, Rob Star. The pub offers a different slice of entertainment every day such as 2 for 1 meals on Mondays, Quiz Night on Tuesdays, Karaoke on Wednesdays, Tastings on Thursdays, DJ on Fridays, Sport on TV on Saturday and Sunday day times with DJs in the evenings.
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.
First year financial statements to the year ended April 2017 show a small trading profit which the Manager feels is a great start for a first year trading company.
Outlook
The Brexit referendum result has caused a significant level of uncertainty in the UK economy. Anecdotally, the expectation is that there will be a measure of downturn economically which may adversely impact the performance of the portfolio.
The Manager’s focus remains very firmly upon ensuring that the investments made by the Company are carefully managed and structured in order to balance potential upside against capital risk. The Manager also believes that the Company’s strategy, which aims to balance equity risk with a significant level of downside protection through minimum revenue arrangements in respect of each investment, remains entirely relevant in an uncertain economic environment.
Ingenious Ventures
23 August 2017
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
for the six months ended 30 June 2017
| Six months ended 30 June 2017 (unaudited) | Six months ended 30 June 2016 (unaudited) | Year ended 31 December 2016 (audited) | |||||||||||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total | |||||||||||||||||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||||||||
| Gain on disposal of investments | - | - | - | - | 202 | 202 | - | 208 | 208 | ||||||||||||||||
| (Decrease)/increase in fair value of investments held | - | (145) | (145) | - | (81) | (81) | - | (1,096) | (1,096) | ||||||||||||||||
| Investment income | 20 | 125 | 145 | 29 | - | 29 | 35 | 177 | 212 | ||||||||||||||||
| Investment management fees | (9) | (8) | (17) | (30) | (29) | (59) | (34) | (34) | (68) | ||||||||||||||||
| Other expenses | (68) | - | (68) | (80) | - | (80) | (184) | - | (184) | ||||||||||||||||
| (Loss)/profit on ordinary activities before taxation | (57) | (28) | (85) | (81) | 92 | 11 | (183) | (745) | (928) | ||||||||||||||||
| Tax on ordinary activities | - | - | - | - | - | - | - | - | - | ||||||||||||||||
| (Loss)/profit attributable to equity shareholders | (57) | (28) | (85) | (81) | 92 | 11 | (183) | (745) | (928) | ||||||||||||||||
| Other Comprehensive Income | - | - | - | - | - | - | - | - | - | ||||||||||||||||
| Total Comprehensive Income for the financial period | (57) | (28) | (85) | (81) | 92 | 11 | (183) | (745) | (928) | ||||||||||||||||
| Basic and diluted return per share (pence) | |||||||||||||||||||||||||
| D share | 5 | - | - | - | - | 0.7 | 0.7 | - | (0.1) | 0.8 | 0.7 | ||||||||||||||
| E share | 5 | - | - | - | (0.7) | 1.7 | 0.9 | (1.6) | 1.6 | 0.0 | |||||||||||||||
| F share | 5 | - | - | - | (0.8) | 2.1 | 1.3 | (1.7) | 2.0 | 0.3 | |||||||||||||||
| G share | 5 | (0.7) | (0.5) | (1.1) | (0.7) | (1.1) | (1.7) | (1.5) | (20.5) | (22.1) | |||||||||||||||
| H share | 5 | (1.3) | (0.5) | (1.7) | (0.9) | (0.1) | (1.0) | (2.0) | (5.7) | (7.7) | |||||||||||||||
The Company had no recognised gains and losses other than those disclosed above.
The total column is the Statement of Comprehensive Income of all share classes for the period. The supplementary capital and revenue columns are prepared following guidance published by the Association of Investment Companies (AIC).
The accompanying notes form an integral part of these financial statements.
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE G AND H SHARE FUNDS
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
for the six months ended 30 June 2017
| G shares | H shares | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain on disposal of investments | - | - | - | - | - | - | |||||||||
| (Decrease)/increase in fair value of investments held | - | (82) | (82) | - | (63) | (63) | |||||||||
| Investment income | 12 | 70 | 82 | 8 | 55 | 63 | |||||||||
| Investment management fees | (5) | (4) | (9) | (4) | (4) | (8) | |||||||||
| Other expenses | (30) | - | (30) | (38) | - | (38) | |||||||||
| Profit/(loss) before taxation | (23) | (16) | (39) | (34) | (12) | (46) | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity shareholders | (23) | (16) | (39) | (34) | (12) | (46) | |||||||||
| Basic and diluted return per share (pence) | (0.7) | (0.5) | (1.1) | (1.3) | (0.5) | (1.7) | |||||||||
The Company had no recognised gains and losses other than those disclosed above.
The total column is the Statement of Comprehensive Income per share class for the period. The supplementary capital and revenue columns are prepared following guidance published by the AIC.
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE D, E, F, G AND H SHARE FUNDS
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
for the six months ended 30 June 2016
|
| D shares | E shares | |||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain on disposal of investments | - | 50 | 50 | - | 57 | 57 | |||||||||
| (Decrease)/increase in fair value of investments held | - | - | - | - | (4) | (4) | |||||||||
| Investment income | - | - | - | 4 | - | 4 | |||||||||
| Investment management fees | - | - | - | (7) | (6) | (13) | |||||||||
| Other expenses | - | - | - | (18) | - | (18) | |||||||||
| Profit/(loss) before taxation | - | 50 | 50 | (21) | 47 | 26 | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity shareholders | - | 50 | 50 | (21) | 47 | 26 | |||||||||
| Basic and diluted return per share (pence) | - | 0.7 | 0.7 | (0.7) | 1.7 | 0.9 | |||||||||
|
| F shares | G shares | |||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain on disposal of investments | - | 40 | 40 | - | 1 | 1 | |||||||||
| (Decrease)/increase in fair value of investments held | - | (3) | (3) | - | (28) | (28) | |||||||||
| Investment income | 3 | - | 3 | 13 | - | 13 | |||||||||
| Investment management fees | (4) | (4) | (8) | (10) | (10) | (20) | |||||||||
| Other expenses | (11) | - | (11) | (26) | - | (26) | |||||||||
| Profit/(loss) before taxation | (12) | 33 | 21 | (23) | (37) | (60) | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity shareholders | (12) | 33 | 21 | (23) | (37) | (60) | |||||||||
| Basic and diluted return per share (pence) | (0.8) | 2.1 | 1.3 | (0.7) | (1.1) | (1.7) | |||||||||
| H shares | |||||||
| Revenue | Capital | Total | |||||
| £'000 | £'000 | £'000 | |||||
| Gain on disposal of investments | - | 54 | 54 | ||||
| (Decrease)/increase in fair value of investments held | - | (46) | (46) | ||||
| Investment income | 9 | - | 9 | ||||
| Investment management fees | (9) | (9) | (18) | ||||
| Other expenses | (25) | - | (25) | ||||
| Profit/(loss) before taxation | (25) | (1) | (26) | ||||
| Tax on profit/(loss) | |||||||
| Total comprehensive income attributable to equity shareholders | (25) | (1) | (26) | ||||
| Basic and diluted return per share (pence) | (0.9) | (0.1) | (1.0) | ||||
The Company had no recognised gains and losses other than those disclosed above.
The total column is the Statement of Comprehensive Income per share class for the period. The supplementary capital and revenue columns are prepared following guidance published by the AIC.
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE D, E, F, G AND H SHARE FUNDS
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
for the year ended 31 December 2016
| D shares | E shares | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain on disposal of investments | - | 51 | 51 | - | 59 | 59 | |||||||||
| (Decrease)/increase in fair value of investments held | - | - | - | - | (4) | (4) | |||||||||
| Investment income | - | - | - | 4 | - | 4 | |||||||||
| Investment management fees | - | - | - | (10) | (9) | (19) | |||||||||
| Other expenses | - | - | - | (39) | - | (39) | |||||||||
| Profit/(loss) before taxation | (8) | 51 | 43 | (45) | 46 | 1 | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity shareholders | (8) | 51 | 43 | (45) | 46 | 1 | |||||||||
| Basic and diluted return per share (pence) | (0.1) | 0.8 | 0.7 | (1.6) | 1.6 | - | |||||||||
| F shares | G shares | ||||||||||||||
| Revenue | Capital | Total | Revenue | Capital | Total | ||||||||||
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||||||
| Gain on disposal of investments | - | 41 | 41 | - | 1 | 1 | |||||||||
| (Decrease)/increase in fair value of investments held | - | (3) | (3) | - | (802) | (802) | |||||||||
| Investment income | 3 | - | 3 | 14 | 88 | 102 | |||||||||
| Investment management fees | (5) | (6) | (11) | (9) | (9) | (18) | |||||||||
| Other expenses | (25) | - | (25) | (59) | - | (59) | |||||||||
| Profit/(loss) before taxation | (27) | 32 | 5 | (54) | (722) | (776) | |||||||||
| Tax on profit/(loss) | - | - | - | - | - | - | |||||||||
| Total comprehensive income attributable to equity shareholders | (27) | 32 | 5 | (54) | (722) | (776) | |||||||||
| Basic and diluted return per share (pence) | (1.7) | 2.0 | 0.3 | (1.5) | (20.5) | (22.1) | |||||||||
| H shares | |||||||
| Revenue | Capital | Total | |||||
| £'000 | £'000 | £'000 | |||||
| Gain on disposal of investments | - | 56 | 56 | ||||
| (Decrease)/increase in fair value of investments held | - | (287) | (287) | ||||
| Investment income | 14 | 90 | 104 | ||||
| Investment management fees | (10) | (10) | (20) | ||||
| Other expenses | (55) | - | (55) | ||||
| (Loss)/profit on ordinary activities before taxation | (51) | (151) | (202) | ||||
| Tax on ordinary activities | - | - | - | ||||
| (Loss)/profit attributable to equity shareholders | (51) | (151) | (202) | ||||
| Basic and diluted return per share (pence) | (2.0) | (5.7) | (7.7) | ||||
The Company had no recognised gains and losses other than those disclosed above.
The total column is the Statement of Comprehensive Income per share class for the period. The supplementary capital and revenue columns are prepared following guidance published by the AIC.
BALANCE SHEET (UNAUDITED)
as at 30 June 2017
| 30 June 2017 (unaudited) | 30 June 2016 (unaudited) | 31 December 2016 (audited) | |||||||||||||
| Note | £'000 | £'000 | £'000 | ||||||||||||
| Fixed assets | |||||||||||||||
| Qualifying Investments held at fair value | 6 | 2,206 | 3,548 | 2,606 | |||||||||||
| Non-qualifying Investments held at fair value | 6 | 214 | 212 | 214 | |||||||||||
| Current assets | |||||||||||||||
| Debtors | 34 | 977 | 59 | ||||||||||||
| Non-qualifying Investments at fair value | 6 | - | 369 | - | |||||||||||
| Cash at bank and in hand | 133 | 1,377 | 538 | ||||||||||||
| 167 | 2,723 | 597 | |||||||||||||
| Creditors: amounts falling due within one year | (93) | (155) | (63) | ||||||||||||
| Net current assets | 74 | 2,568 | 534 | ||||||||||||
| Total assets less current liabilities | 2,494 | 6,328 | 3,354 | ||||||||||||
| Capital and reserves | |||||||||||||||
| Called-up share capital | 62 | 174 | 174 | ||||||||||||
| Share premium account | - | - | - | ||||||||||||
| Other reserve account | 4,068 | 8,104 | 6,069 | ||||||||||||
| Capital reserve | (1,054) | (919) | (1,756) | ||||||||||||
| Revenue reserve | (582) | (1,031) | (1,133) | ||||||||||||
| Total shareholders’ funds | 2,494 | 6,328 | 3,354 | ||||||||||||
| Net asset value per D share (pence) | - | 2.7 | 1.0 | ||||||||||||
| Net asset value per E share (pence) | - | 44.6 | 1.0 | ||||||||||||
| Net asset value per F share (pence) | - | 47.2 | 1.0 | ||||||||||||
| Net asset value per G share (pence) | 7 | 24.0 | 60.5 | 40.1 | |||||||||||
| Net asset value per H share (pence) | 7 | 62.0 | 75.4 | 68.8 | |||||||||||
The accompanying notes form an integral part of these financial statements.
The condensed set of financial statements were approved by the Board of Directors on 23 August 2017 and signed on its behalf by David Munns.
David Munns
Chairman
Company Registration Number: 6395011 (England & Wales)
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE G AND H SHARE FUNDS
BALANCE SHEET (UNAUDITED)
| As at 30 June 2017 (unaudited) | |||||
| G shares £'000 | H shares £'000 | ||||
| Fixed assets | |||||
| Qualifying Investments held at fair value | 852 | 1,355 | |||
| Non-qualifying Investments held at fair value | 3 | 211 | |||
| Current assets | |||||
| Debtors | - | 34 | |||
| Cash at bank and in hand | 48 | 85 | |||
| Creditors: amounts falling due within one year | (58) | (34) | |||
| Net current (liabilities)/assets | (11) | 85 | |||
| Total assets less current liabilities | 844 | 1,650 | |||
| Capital and reserves | |||||
| Called-up share capital | 35 | 27 | |||
| Share premium account | - | - | |||
| Other reserve account | 2,096 | 1,972 | |||
| Capital reserve | (959) | (95) | |||
| Revenue reserve | (328) | (254) | |||
| Total shareholders’ funds | 844 | 1,650 | |||
| Net asset value excluding distributions to date (pence per share) | 24.0 | 62.0 | |||
| Net asset value including distributions to date (pence per share) | 59.0 | 82.0 | |||
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE D, E, F, G AND H SHARE FUNDS
BALANCE SHEET (UNAUDITED)
| As at 30 June 2016 (unaudited) | |||||||||||
| D shares £'000 | E shares £'000 | F shares £'000 | G shares £'000 | H shares £'000 | |||||||
| Fixed assets | |||||||||||
| Qualifying Investments held at fair value | 110 | - | - | 1,938 | 1,500 | ||||||
| Non-qualifying Investments held at fair value held at fair value | - | - | - | - | 212 | ||||||
| Current assets | |||||||||||
| Debtors | 50 | 528 | 345 | - | 54 | ||||||
| Non-qualifying Investments | - | - | - | 176 | 193 | ||||||
| Cash at bank and in hand | 133 | 766 | 399 | 23 | 56 | ||||||
| 183 | 1,294 | 744 | 199 | 303 | |||||||
| Creditors: amounts falling due within one year | (110) | (26) | (3) | (8) | (8) | ||||||
| Net current assets | 73 | 1,268 | 741 | 191 | 295 | ||||||
| Total assets less current liabilities | 183 | 1,268 | 741 | 2,129 | 2,007 | ||||||
| Capital and reserves | |||||||||||
| Called-up share capital | 68 | 28 | 16 | 35 | 27 | ||||||
| Share premium account | - | - | - | - | - | ||||||
| Other reserve account | 961 | 1,557 | 857 | 2,624 | 2,105 | ||||||
| Capital reserve | (589) | (134) | (7) | (257) | 68 | ||||||
| Revenue reserve | (257) | (183) | (125) | (273) | (193) | ||||||
| Total shareholders’ funds | 183 | 1,268 | 741 | 2,129 | 2,007 | ||||||
| Net asset value excluding distributions to date (pence per share) | 2.7 | 44.6 | 47.2 | 60.5 | 75.4 | ||||||
| Net asset value including distributions to date (pence per share) | 82.7 | 84.6 | 87.2 | 80.5 | 90.4 | ||||||
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE D, E, F, G AND H SHARE FUNDS
BALANCE SHEET (UNAUDITED)
| As at 31 December 2016 (unaudited) | |||||||||||
| D shares £'000 | E shares £'000 | F shares £'000 | G shares £'000 | H shares £'000 | |||||||
| Fixed assets | |||||||||||
| Qualifying Investments held at fair value | - | - | - | 1,252 | 1,354 | ||||||
| Current assets | |||||||||||
| Debtors | - | - | - | 20 | 39 | ||||||
| Non-qualifying Investments held at fair value | - | - | - | 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 | ||||||
| Total assets less current liabilities | 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) | ||||||
| Total shareholders’ funds | 69 | 29 | 16 | 1,411 | 1,829 | ||||||
| Net asset value excluding distributions to date (pence per share) | 1.0 | 1.0 | 1.0 | 40.1 | 68.7 | ||||||
| Net asset value including distributions to date (pence per share) | 82.6 | 83.7 | 86.2 | 60.1 | 83.7 | ||||||
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
for the six months ended 30 June 2017
| Share Capital | Other reserve | Capital reserve | Revenue reserve | Total reserves | |||||||
|
| £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
| At 1 January 2017 | 174 | 6,069 | (1,756) | (1,133) | 3,354 | ||||||
| Capital cancelled | (112) | (1,340) | 730 | 608 | (114) | ||||||
| Dividends paid | - | (661) | - | - | (661) | ||||||
| Gain on disposal of investments | - | - | - | - | - | ||||||
| Increase in fair value of investments held | - | - | (145) | - | (145) | ||||||
| Investment income | - | - | 125 | 20 | 145 | ||||||
| Investment management fees | - | - | (8) | (9) | (17) | ||||||
| Other expenses | - | - | - | (68) | (68) | ||||||
| At 30 June 2017 | 62 | 4,068 | (1,054) | (582) | 2,494 |
for the six months ended 30 June 2016
| 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 | ||||||
| Dividends paid | - | (1,192) | - | - | (1,192) | ||||||
| Gain on disposal of investments | - | - | 202 | - | 202 | ||||||
| Increase in fair value of investments held | - | - | (81) | - | (81) | ||||||
| Investment income | - | - | - | 29 | 29 | ||||||
| Investment management fees | - | - | (29) | (30) | (59) | ||||||
| Other expenses | - | - | - | (80) | (80) | ||||||
| At 30 June 2016 | 174 | 8,104 | (919) | (1,031) | 6,328 |
for the twelve months ended 31 December 2016
| 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 | ||||||
| Dividends paid | - | (3,226) | - | - | (3,226) | ||||||
| Gain on disposal of investments | - | - | 208 | - | 208 | ||||||
| Increase in fair value of investments held | - | - | (1,096) | - | (1,096) | ||||||
| Investment income | - | - | 177 | 35 | 212 | ||||||
| Investment management fees | - | - | (34) | (34) | (67) | ||||||
| Other expenses | - | - | - | (184) | (184) | ||||||
| At 31 December 2016 | 174 | 6,069 | (1,756) | (1,133) | 3,354 |
STATEMENT OF CASH FLOWS (UNAUDITED)
for the six months ended 30 June 2017
| Period ended 30 June 2017 (unaudited) | Period ended 30 June 2016 (unaudited) | Year ended 31 December 2016 (audited) | |||||
| £'000 | £'000 | £'000 | |||||
| Cash flows from operating activities | |||||||
| Profit/(loss) before taxation | (85) | 11 | (928) | ||||
|
| |||||||
| Adjustments for: | |||||||
| Investment income | (145) | (29) | (212) | ||||
| Gain on disposal of investments | - | (202) | (208) | ||||
| Decrease in fair value of investments held | 145 | 81 | 1,096 | ||||
| Decrease /(increase) in debtors and prepayments | 25 | (949) | (29) | ||||
| Decrease /(increase) in other creditors and accruals | 29 | 46 | (46) | ||||
| Net cash used in operating activities | (33) | (1,042) | (327) | ||||
| Cash flows from investing activities | |||||||
| Purchase of Investments held at fair value | - | (250) | (250) | ||||
| Proceeds on disposal of Qualifying Investments | 400 | 1,973 | 2,088 | ||||
| Proceeds from sale of bonds and similar investments | - | 670 | 1,035 | ||||
| Net cash from investing activities | 400 | 2,393 | 2,872 | ||||
|
| |||||||
| Cash flows from financing activities | |||||||
| Payment of dividends | (661) | (1,192) | (3,226) | ||||
| Capital cancelled | (112) | - | - | ||||
| Net cash used in financing activities | (773) | (1,192) | (3,226) | ||||
| Net increase/(decrease) in cash and cash equivalents | (405) | 159 | (681) | ||||
| Opening cash and cash equivalents | 538 | 1,219 | 1,219 | ||||
| Closing cash and cash equivalents | 133 | 1,378 | 538 |
Closing cash and cash equivalents comprise of cash in hand and cash at the bank.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
for the six months ended 30 June 2017
1. Accounting Policies
a) Company Information
Ingenious Entertainment VCT 1 plc is a venture capital trust company resident in the United Kingdom and incorporated in England and Wales on 10 October 2007. The address of the registered office is 15 Golden Square, London, W1F 9JG. Company number: 6395011.
b) Statement of Compliance
Basis of Accounting
The financial statements for the Reporting Period have been prepared in compliance with UK Generally Accepted Accounting Practice, including Financial Reporting Standard 102 – ‘The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ (‘FRS 102’), with the Companies Act 2006 and with the Statement of Recommended Practice entitled “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (‘SORP 2014’) (with the exception of paragraph 82 of SORP 2014 regarding detailed disclosure of financial and operational performance of the Company’s unquoted investments due to their confidential nature).
Under FRS102, currently fair value hierarchy is categorised as ‘a’, ‘b’ and ‘c’ rather than ‘1’, ‘2’, ‘3’. However, the Financial Reporting Council published amendments on 8 March 2016 which have been adopted, and early application has been permitted to align disclosures with International Financial Reporting Standard 13 (IFRS 13).
The financial statements have been prepared on a going concern basis under the historical cost convention, modified to include certain items at fair value. The principal accounting policies have remained unchanged from those set out in the Company’s 2016 Annual Report and Accounts.
Key sources of economic uncertainty:
Many of the Company’s financial instruments are measured at fair value in the balance sheet and it is usually possible to determine their fair values within a reasonable range of estimates.
For the majority of the Company’s financial instruments, such as unlisted securities, fair value is derived from using valuation techniques, as recommended by International Private Equity and Venture Capital Valuation Guidelines (IPEVC). Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgements (e.g. interest rates, volatility, estimated cash flows) and therefore cannot be determined with precision.
c) Valuation of Investments
The Company’s business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth. In accordance with FRS 102 investments by the Company are held at fair value through profit and loss.
International Private Equity and Venture Capital Valuation Guidelines
Unquoted investments, including equity and loan investments, are stated at fair value through profit and 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 methodologies most applicable to the Company’s investments are:
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.
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.
Gains and losses arising from changes in the fair value of Qualifying and Non-qualifying Investments are recognised as part of the capital return within the Statement of Comprehensive Income and allocated to the realised or unrealised capital reserve as appropriate. Transaction costs attributable to the acquisition or disposal of investments are charged to capital within the Statement of Comprehensive Income.
d) Investment Income
Interest income is recognised in the Statement of Comprehensive Income under the effective interest method.
Under the effective interest method the interest income in the period equals the carrying amount of the loan at the beginning of a period multiplied by the effective interest rate for that period.
The effective interest rate is the rate required to discount the expected future income streams over the life of the loan to its initial carrying amount. The effective interest rate is determined on the basis of the carrying amount of the loan at initial recognition.
In accordance with FRS 102, when calculating the effective interest rate, the Company estimates cash flows considering all contractual terms of the loans (e.g. prepayments) and known credit losses that have been incurred, but it does not consider possible future credit losses not yet incurred. The main impact for the Company in that regard is the estimation of any loan note premiums.
When calculating the effective interest rate, the Company amortises any related fees, finance charges received, transaction costs and other premiums or discounts over the expected life of the loan. However, the Company uses a shorter period if that is the period to which the fees, finance charges paid or received, transaction costs, premiums or discounts relate.
The revenue return on loan notes has been based on the coupon payable by the instrument adjusted to spread any discount or premium on purchase or redemption over its remaining life. In accordance with SORP 2014, in 2016 where a redemption premium is payable, the return has been adjusted so that the amount recognised in revenue is in line with reasonable commercial expectations. Any adjustment is recognised in capital within net gains and losses on investments.
In prior years, the revenue return on the redemption premium was not adjusted and redemption premiums were recognised as revenue income. The Company considers the revised allocation, which has not been applied retrospectively in accordance with SORP 2014, to be more appropriate to the Company.
The amount of redemption premium in revenue is in line with reasonable commercial expectations of interest chargeable on similar commercial loans. Gains and losses arising from changes in the fair value of the investments are included as a capital item in the statement of comprehensive income for the relevant period.
e) Dividend Income
Dividend income is recognised in the Statement of Comprehensive Income once it is declared by the Investee Companies.
f) Expenses
All expenses are accounted for on an accruals basis. Expenses are charged to the revenue account within the Statement of Comprehensive Income except that:
expenses which are incidental to the acquisition or disposal of an investment are charged to capital in the Statement of Comprehensive Income as incurred; expenses are split and presented partly as capital items where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated; and the management fee has been allocated 50% to revenue and 50% to capital, which represents the split of the Company’s long term returns.General expenses are paid for by 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.
g) Taxation
Current tax is recognised for the amount of income tax payable in respect of the taxable profit for the current or past reporting periods using the tax rates and laws that 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 the 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 have been enacted or substantively enacted by the reporting date that are expected to apply to the reversal of the timing difference.
h) G Shares and H Shares
The Company had two share classes as at 30 June 2017: G shares and H shares. Both share classes have a separate pool of income and expenses as well as assets and liabilities attributable to it. Both share classes rank pari passu with each other in terms of voting and other rights.
2. Critical accounting judgements and key sources of estimation uncertainty
In the application of the Company’s accounting policies, which are described in note 1, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
3. Loss on ordinary activities before taxation
Loss on ordinary activities before taxation is stated after charging:
| Period ended 30 June 2017 (unaudited) £ | Period ended 30 June 2016 (unaudited) £ | Year ended 31 December 2016 (audited) £ | |||||
| Audit fees | 13,400 | 11,000 | 22,000 | ||||
| 13,400 | 11,000 | 22,000 |
4. Directors' remuneration and employees
| Period ended | Period ended | Year ended | |||||
| 30 June 2017 (unaudited) £ | 30 June 2016 (unaudited) £ | 31 December 2016 (audited) £ | |||||
| Aggregate Directors' remuneration | 18,750 | 18,750 | 37,500 | ||||
| 18,750 | 18,750 | 37,500 |
The Company had no employees during the financial period ended 30 June 2017 (year ended 31 December 2016: Nil, 30 June 2016: Nil).
5. Basic and Diluted Return per share
The basic return per G share has been calculated on a weighted average of 3,518,044 G shares in issue for the six months ended 30 June 2017 (31 December 2016: 3,518,044; 30 June 2016: 3,518,044).
The basic return per H share has been calculated on a weighted average of 2,660,842 H shares in issue for the six months ended 30 June 2017 (31 December 2016: 2,660,842; 30 June 2016: 2,660,842).
There are no dilutive potential G shares or 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.
6. 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 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
|
| 30 June 2017 (unaudited)
£'000 | 30 June 2016 (unaudited)
£'000 | 31 December 2016 (audited)
£'000 | ||||||
| Listed money market OEICs (note 10) | Level 1 | - | - | - | |||||
| Investment in investee companies (note 10) | Level 3 | 214 | 214 | 214 | |||||
| Unquoted investments (note 8) | Level 3 | 2,206 | 2,606 | 2,606 | |||||
| 2,420 | 2,820 | 2,420 |
The above table provides an analysis of these investments based on the fair value hierarchy described below which reflects the reliability and significance of the information used to measure their fair value:
Level 1 - investments with quoted prices in active markets; Level 2 - investments whose fair value is based directly on observable market prices or is indirectly drawn from observable market prices; and Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or are not based on observable market data. Level 3 unquoted investments have been valued at fair value. Fair value is estimated by assessing the financial performance of the Company’s investee and adjusting upwards or writing down the cost of the Company’s investment using IVCA valuation techniques as described in note 1(c) – valuation of investments.7. Net Asset Value per share
The unaudited net asset value per G share has been calculated based on 3,518,044 G shares being the number of G shares in issue as at 30 June 2017 (31 December 2016: 3,518,044; 30 June 2016: 3,518,044).
The unaudited net asset value per H share has been calculated based on 2,660,842 H shares being the number of H shares in issue as at 30 June 2017 (31 December 2016: 2,660,842; 30 June 2016: 2,660,842).
8. Related Party Transactions
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 also charges an administration fee of £40,000 (31 December 2016: £51,000) per annum (adjusted for inflation and additional share classes, if any) and irrecoverable VAT. The Manager bears any expenses of the Company over and above 3.5% of the net asset value at 31 December in the relevant financial year.
During the period the Company has carried out a number of transactions with the above-mentioned related parties in the normal course of business and on an arm’s length basis:
| Expenditure Paid | Amounts Due | ||||||||||||||
| Entity | Note | 30 June 2017 (unaudited) £'000 | 30 June 2016 (unaudited) £'000 | 31 December 2016 (audited) £'000 | 30 June 2017 (unaudited) £'000 | 30 June 2016 (unaudited) £'000 | 31 December 2016 (audited) £'000 | ||||||||
| Ingenious Capital Management Limited | |||||||||||||||
| - Investment management fee | b | 17 | 59 | 68 | - | - | - | ||||||||
| - Administration fee | b | 9 | 29 | 51 | - | - | - | ||||||||
| - Irrecoverable VAT | b | - | - | - | - | - | - | ||||||||
Transactions between Related Parties
Ingenious Capital Management Limited, a company which is a wholly-owned subsidiary of Ingenious Capital Management Holdings Limited, which is controlled by Patrick McKenna, has entered into consultancy agreements with each of the Company’s Investee Companies to provide management services.
During the period, Ingenious Capital Management Limited charged consulting fees for the provision of such services totalling £NIL excluding VAT (31 December 2016: £30,000; 30 June 2016: £35,000), of which £NIL remained outstanding as at 30 June 2017 (31 December 2016: £NIL; 30 June 2016: £NIL).
The Company’s statutory financial statements for the year ended 31 December 2016 have been delivered to the Registrar of Companies. The auditor’s report on those financial statements was unqualified and did not contain statements under section 498(2) or section 498(3) of the Companies Act 2006.
This condensed interim information for the period does not constitute statutory financial statements within the meaning of section 434 of the Companies Act 2006.
Copies of the half-yearly financial report are being sent, or made available electronically, to all shareholders. Further copies can be downloaded from the Company’s website: www.ingeniousvcts.co.uk
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