TIDMIE1H
INGENIOUS ENTERTAINMENT VCT 1 PLC24 August 2018Half-yearly
results for the six months to June 2018
INTERIM MANAGEMENT REPORTWe are delighted to present the
half-yearly financial report of Ingenious Entertainment VCT 1 plc
(the Company) covering the six months ended 30 June 2018 (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 4 August 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
GBP17,000 (year ended 31 December 2017: loss of GBP197,000; six
months ended 30 June 2017: loss of GBP39,000) during the Reporting
Period. The H shares made a loss of GBP91,000 (31 December 2017:
loss of GBP82,000; 30 June 2017: loss of GBP46,000).
The unaudited net asset value per G share is 19.0 pence (31
December 2017: 19.5 pence; 30 June 2017: 24.0 pence) after the
deduction of a total of 35.0 pence per share of dividends in
previous periods. The net asset value per G share including
distributions to date is 54.0 pence (31 December 2017: 54.5 pence;
30 June 2017: 59.0 pence).
The unaudited net asset value per H share is 57.3 pence (31
December 2017: 60.7 pence; 30 June 2017: 62.0 pence) after the
deduction of a total of 20.0 pence per share of dividends in
previous periods. The net asset value per H share including
distributions to date is 77.3 pence (31 December 2017: 80.7 pence;
30 June 2017: 82.0 pence).
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 (the Company and Ingenious Entertainment
VCT 2 plc together the Ingenious Entertainment VCTs) have invested
in (Investee Companies).
Investments
The current investment portfolio includes:
Festivals
Brighton Boundary Limited
In May 2016 the Ingenious Entertainment VCTs made an investment
of GBP500,000 into Brighton Boundary Limited to produce an annual
music festival in Brighton.
Brighton Boundary Limited 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 under way for 2018 with a view to increasing capacity
and ticket prices with a view to making a profit. Ticket sales have
already reached 8,000 which is 1,500 more than this time last
year.
The Manager believes that any losses made in years one and two
will be recouped in future years and therefore it is deemed
appropriate for the Company to hold this investment at cost.
Just For London Limited
In October 2014 an investment of GBP750,000 was made by the
Ingenious Entertainment VCTs into Just For London Limited to create
a new comedy festival in central London.
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.
In line with standard procedures, the Company has made a
provision of GBP200,000 against this investment.
Whilst the company continues to look for opportunities to
further its trade, there are no current plans to stage another
event. Therefore the Manager is considering whether it is in the
best interests of the investors to realise its investment.
SWG Power Limited
In November 2015 the Ingenious Entertainment VCTs made an
investment of GBP500,000 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.
Live Venues
Event Spaces Limited
In December 2014, an investment of GBP1,250,000 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 if the company suffered losses then one
of the shareholders, Paul Gregg, would agree to pay to the company
an amount equal to certain losses of the company. Event Spaces
Limited is currently in the process of enforcing these contractual
arrangements against Paul Gregg.
The Company has factored professional fees to be paid by the
company in enforcing the contractual arrangements into its
assessment of the amount that may be realised from its
investment.
Counterculture Bars Limited
In September 2015 an investment of GBP500,000 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 opening too late for
Christmas bookings then suffering from adverse weather conditions
experienced in the months of January and February. Following this
period, 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 significant
trading losses so the lease has been offered to the market to
compare the value of it with the results of ongoing trading.
However, no serious bids have been made to date, and the company
has continued to trade.
Market prices for the lease have indicated that the investment
is impaired. As a result, in line with standard procedures, the
Company has made a provision of GBP232,000 against its
investment.
Genius Star Limited
In December 2015 an investment by the Ingenious Entertainment
VCTs of GBP750,000 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
wooden 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 GBP250,000 to create a similar
style venue called the 'The Heathcote & Star' in Leytonstone
which operates the same entertainment as 'The Leyton Star'.
The valuation reports from the external surveyors confirm that
the market value of the property assets of Genius Star is in line
with the Manager's expectations.
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 Ventures23 August 2018
CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)for the
six months ended 30 June 2018
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain/(loss) on - - - - - - - (1) (1)
disposal
ofinvestments
(Decrease)/increase - (140) (140) - (145) (145) - (369) (369)
infair
value
of
investmentsheld
Investment 10 77 87 20 125 145 25 169 194
income
Investment - - - (9) (8) (17) - - -
managementfees
Other (55) - (55) (68) - (68) (105) - (105)
expenses
(Loss)/profit (45) (63) (108) (57) (28) (85) (80) (201) (281)
on ordinary
activities
before
taxation
Tax - - - - - - - - -
on ordinary
activities
(Loss)/profit (45) (63) (108) (57) (28) (85) (80) (201) (281)
attributableto
equity
shareholders
Other - - - - - - - - -
ComprehensiveIncome
Total (45) (63) (108) (57) (28) (85) (80) (201) (281)
ComprehensiveIncome
for
the
financialperiod
Basic and
diluted
returnper
share (pence)
G 5 (0.5) - (0.5) (0.7) (0.5) (1.1) (0.8) (4.8) (5.6)
share
H 5 (1.0) (2.4) (3.4) (1.3) (0.5) (1.7) (1.9) (1.2) (3.1)
share
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
FUNDSSTATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)for the six
months ended 30 June 2018
G shares H shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain/(loss) on - - - - - -
disposal
of investments
(Decrease)/increase - - - - (140) (140)
in fair
value
of investments
held
Investment income 1 - 1 9 77 86
Investment - - - - - -
management
fees
Other expenses (18) - (18) (37) - (37)
Profit/(loss) (17) - (17) (28) (63) (91)
before
taxation
Tax - - - - - -
on profit/(loss)
Total comprehensive (17) - (17) (28) (63) (91)
income
attributable
to
equity shareholders
Basic and diluted (0.5) - (0.5) (1.0) (2.4) (3.4)
return
per share (pence)
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 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain/(loss) on - - - - - -
disposal
ofinvestments
(Decrease)/increase - (82) (82) - (63) (63)
in fairvalue
of investments held
Investment income 12 70 82 8 55 63
Investment management (5) (4) (9) (4) (4) (8)
fees
Other expenses (30) - (30) (38) - (38)
Profit/(loss) before (23) (16) (39) (34) (12) (46)
taxation
Tax on profit/(loss) - - - - - -
Total comprehensive (23) (16) (39) (34) (12) (46)
incomeattributable
to equityshareholders
Basic and diluted (0.7) (0.5) (1.1) (1.3) (0.5) (1.7)
return
pershare (pence)
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 FUNDSSTATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)for the
year ended 31 December 2017
D shares E shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain/(loss) on - - - - - -
disposal
ofinvestments
(Decrease)/increase - - - - - -
in fairvalue
of investments held
Investment income - - - - - -
Investment management - - - - - -
fees
Other expenses (2) - (2) - - -
Profit/(loss) before (2) - (2) - - -
taxation
Tax on profit/(loss) - - - - - -
Total comprehensive (2) - (2) - - -
incomeattributable
to equityshareholders
Basic and diluted - - - - - -
return
pershare (pence)
F shares G shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain/(loss) on - - - - (1) (1)
disposal
ofinvestments
(Decrease)/increase - - - - (226) (226)
in fairvalue
of investments held
Investment income - - - 9 58 67
Investment management - - - - - -
fees
Other expenses - - - (37) - (37)
Profit/(loss) before - - - (28) (169) (197)
taxation
Tax on profit/(loss) - - - - - -
Total comprehensive - - - (28) (169) (197)
incomeattributable
to equityshareholders
Basic and diluted - - - (0.8) (4.8) (5.6)
return
pershare (pence)
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE D, E, F, G AND H
SHARE FUNDSSTATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
(CONTINUED)for the year ended 31 December 2017
H shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Gain/(loss) on disposal ofinvestments - - -
(Decrease)/increase in fairvalue - (143) (143)
of investments held
Investment income 16 111 127
Investment management fees - - -
Other expenses (66) - (66)
(Loss)/profit on ordinaryactivities (50) (32) (82)
before taxation
Tax on ordinary activities - - -
(Loss)/profit attributable (50) (32) (82)
toequity shareholders
Basic and diluted return pershare (pence) (1.9) (1.2) (3.1)
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 2018
30 June2018(unaudited) 30 June2017(unaudited) 31 December2017(audited)
Note GBP'000 GBP'000 GBP'000
Fixed assets
Qualifying 6 1,690 2,206 2,027
Investments
held at fairvalue
Non-qualifying 6 3 214 3
Investments
held at fairvalue
Current assets
Debtors 83 34 45
Cash at bank 451 133 281
and in hand
534 167 326
Creditors: amounts (35) (93) (56)
falling
due withinone year
Net current assets 499 74 270
Total assets 2,192 2,494 2,300
less current
liabilities
Capital and reserves
Called-up share 62 62 62
capital
Share premium account - - -
Other reserve account 4,068 4,068 4,068
Capital reserve (1,290) (1,054) (1,227)
Revenue reserve (648) (582) (603)
Total shareholders' 2,192 2,494 2,300
funds
Net asset value per 7 19.0 24.0 19.5
G share (pence)
Net asset value per 7 57.3 62.0 60.7
H share (pence)
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 2018 and signed on its behalf by
David Munns.
David MunnsChairmanCompany Registration Number: 06395011
(England & Wales)
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE G AND H SHARE
FUNDSBALANCE SHEET (UNAUDITED)
As at 30 June 2018 (unaudited)
GsharesGBP'000 HsharesGBP'000
Fixed assets
Qualifying Investments 469 1,221
held at fair value
Non-qualifying Investments 3 -
held at fairvalue
Current assets
Debtors 67 40
Cash at bank and in hand 153 298
220 338
Creditors: amounts falling (24) (35)
due within one year
Net current assets 196 303
Total assets less current 668 1,524
liabilities
Capital and reserves
Called-up share capital 35 27
Share premium account - -
Other reserve account 2,096 1,972
Capital reserve (1,112) (178)
Revenue reserve (351) (297)
Total shareholders' funds 668 1,524
Net asset value excluding 19.0 57.3
distributions
todate (pence per share)
Net asset value including 54.0 77.0
distributions
todate (pence per share)
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE G AND H SHARE
FUNDSBALANCE SHEET (UNAUDITED)
As at 30 June 2017 (unaudited)
GsharesGBP'000 HsharesGBP'000
Fixed assets
Qualifying Investments 852 1,355
held at fair value
Non-qualifying Investments 3 211
held at fairvalue
Current assets
Debtors - 34
Cash at bank and in hand 48 85
48 119
Creditors: amounts falling (58) (34)
due within oneyear
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 24.0 62.0
todate (pence per share)
Net asset value including distributions 59.0 82.0
todate (pence per share)
NON-STATUTORY ANALYSIS (AUDITED) BETWEEN THE G AND H SHARE
FUNDSBALANCE SHEET (AUDITED)
As at 31 December 2017 (audited)
GsharesGBP'000 HsharesGBP'000
Fixed assets
Qualifying Investments 564 1,463
held at fair value
Non-qualifying Investments 3 -
held at fairvalue
Current assets
Debtors 20 34
Cash at bank and in hand 127 154
147 188
Creditors: amounts falling (28) (37)
due within oneyear
Net current (liabilities)/assets 122 151
Total assets less current 686 1,614
liabilities
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)
Total shareholders' funds 686 1,614
Net asset value excluding 19.5 60.7
distributions
todate (pence per share)
Net asset value including 54.5 80.7
distributions
todate (pence per share)
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)for the six months
ended 30 June 2018
ShareCapital Otherreserve Capitalreserve Revenuereserve Totalreserves
GBP'000 GBP'000
GBP'000
GBP'000 GBP'000
At 1 January 62 4,068 (1,227) (603) 2,300
2018
Total - - (63) (45) (108)
Comprehensive
Income
Transactions
with owners
Capital - - - - -
reduction
for
D, E and
F shares
Dividends - - - - -
paid
At 30 June 62 4,068 (1,290) (648) 2,192
2018
for the six months ended 30 June 2017
ShareCapital Otherreserve Capitalreserve Revenuereserve Totalreserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 174 6,069 (1,756) (1,133) 3,354
2017
Total - - (28) (57) (85)
Comprehensive
Income
Transactions
with owners
Capital (112) (1,340) 730 608 (114)
reduction
for
D, E and
F shares
Dividends - (661) - - (661)
paid
At 30 June 62 4,068 (1,054) (582) 2,494
2017
for the twelve months ended 31 December 2017
ShareCapital Otherreserve Capitalreserve Revenuereserve Totalreserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 174 6,069 (1,756) (1,133) 3,354
2017
Total - - (201) (80) (281)
Comprehensive
Income
Transactions
with owners
Capital (112) (1,340) 730 610 (112)
reduction
for
D, E and
F shares
Dividends - (661) - - (661)
paid
At 62 4,068 (1,227) (603) 2,300
31 December
2017
STATEMENT OF CASH FLOWS (UNAUDITED)for the six months ended 30
June 2018
Period ended30 June Period ended30 June Year ended31 December
2018(unaudited) 2017(unaudited) 2017(audited)
GBP'000 GBP'000 GBP'000
Cash flows from
operating
activities
Profit/(loss) before (108) (85) (281)
taxation
Adjustments for:
Investment income (87) (145) (194)
Loss/(gain) on - - 1
disposal
of investments
Decrease/(increase) 140 145 369
in fair
value ofinvestments
held
Decrease /(increase) (38) 25 -
in
debtors
andprepayments
Increase/(decrease) (21) 29 6
in other
creditors
andaccruals
Net cash used (114) (33) (99)
in operating
activities
Cash flows from
investing
activities
Purchase - - (125)
of Investments
held at fair value
Proceeds on disposal 284 400 529
of
QualifyingInvestments
Proceeds - - 211
on
disposal
of
Non-qualifyingInvestments
Net cash from 284 400 615
investing
activities
Cash flows from
financing
activities
Payment of dividends - (661) (661)
Capital cancelled - (112) (112)
Net cash used - (773) (773)
in financing
activities
Net 170 (405) (257)
increase/(decrease)
in
cash
and cashequivalents
Opening cash and 281 538 538
cash equivalents
Closing cash and 451 133 281
cash equivalents
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 2018
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: 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" ('SORP 2014').
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 2017 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.
Investments are recognised as financial assets on legal
completion of the investment contract and are derecognised 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 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 prices
Of 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.
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.
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 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.
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
administration fees charged by the Manager. It is then recognised
as a deduction against the overheads.
g) Taxation
Current tax is recognised for the amount of income tax payable
in respect of the taxable profit for the current or past reporting
periods using the tax rates and laws that that have been enacted or
substantively enacted by the reporting date.
Deferred tax is recognised in respect of all timing differences
at the reporting date, except as otherwise indicated. Timing
differences are differences between taxable profits and total
comprehensive income as stated in the financial statements that
arise from the inclusion of income and expenses in tax assessments
in periods different from those in which they are recognised in 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
that have been enacted or substantively enacted by the reporting
date that are expected to apply to the reversal of the timing
difference.
h) Financial Instruments
The Company's financial assets are its investments and
receivables. Receivables and payables are carried at amortised
cost. There are no financial liabilities other than payables.
i) G Shares and H Shares
The Company had two share classes as at 30 June 2018: 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.
j) Cash and Cash equivalents
Cash, for the purpose of the cash flow statement comprises cash
at bank.
k) 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.
l) 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. 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 Period Year
ended30 ended30 ended31
Jun2018(unaudited)GBP June2017(unaudited)GBP December2017(audited)GBP
Audit fees 12,000 13,400 25,000
12,000 13,400 25,000
4. Directors' remuneration and employees
Period Ended Period ended Year ended
Period Period Year
ended30 ended30 ended31
June2018(unaudited)GBP June2017(unaudited)GBP December2017(audited)GBP
Aggregate Directors' 18,750 18,750 37,500
remuneration
18,750 18,750 37,500
The Company had no employees during the financial period ended
30 June 2018 (year ended 31 December 2017: nil; six months ended 30
June 2017: 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 2018 (31 December 2017: 3,518,044; 30 June 2017:
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 2018 (31 December 2017: 2,660,842; 30 June 2017:
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 30 31
June June December
2018(unaudited)GBP'000 2017(unaudited)GBP'000 2017(audited)GBP'000
Investment in Level 3 3 214 3
Investee
Companies
Unquoted Level 3 1,690 2,206 2,027
investments
1,693 2,420 2,030
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 2018 (31 December 2017: 3,518,044; 30 June 2017:
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 2018 (31 December 2017: 2,660,842; 30 June 2017:
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 did not
charge an administration fee for the period (31 December 2017:
GBPnil). Further to this 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 June2018(unaudited)GBP'000 30 June2017(unaudited)GBP'000 31 December2017(audited)GBP'000 30 June2018(unaudited)GBP'000 30 June2017(unaudited)GBP'000 31 December2017(audited)GBP'000
Ingenious Capital Management
Limited
- Investment management - 17 - - - -
fee
- Administration - 9 - - - -
fee
- - - - - - (9)
Rebate
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 did not
charge any consulting fees for the provision of such services (31
December 2017: GBPnil; 30 June 2017: GBPnil).
The Company's statutory financial statements for the year ended
31 December 2017 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
View source version on businesswire.com:
https://www.businesswire.com/news/home/20180823005752/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
August 24, 2018 02:00 ET (06:00 GMT)
Ingenious 1 H (LSE:IE1H)
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