TIDMIEVH
INGENIOUS ENTERTAINMENT VCT 2 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 2 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
GBP39,000 (31 December 2016: loss of GBP776,000; 30 June 2016: loss
of GBP60,000). The H shares made a loss of GBP46,000 (31 December
2016: loss of GBP202,000; 30 June 2016: loss of GBP26,000).
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 1 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 GBP500,000 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
GBP750,000 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
GBP600,000 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 GBP40,000.
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 GBP500,000 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 GBP1,000,000 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 GBP1,400,000 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 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 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 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 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 GBP125,000. 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 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 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 Six months ended Year ended
30 June 2017 30 June 2016 31 December 2016
(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 - - - - 202 202 - 208 208
on disposal
of investments
(Decrease)/increase - (145) (145) - (81) (81) - (1,096) (1,096)
in fair
value
of investments
held
Investment 20 125 145 29 - 29 35 177 212
income
Investment (9) (8) (17) (30) (29) (59) (34) (34) (68)
management
fees
Other (68) - (68) (80) - (80) (184) - (184)
expenses
(Loss)/profit (57) (28) (85) (81) 92 11 (183) (745) (928)
on ordinary
activities
before
taxation
Tax - - - - - - - - -
on ordinary
activities
(Loss)/profit (57) (28) (85) (81) 92 11 (183) (745) (928)
attributable
to
equity
shareholders
Other - - - - - - - - -
Comprehensive
Income
Total (57) (28) (85) (81) 92 11 (183) (745) (928)
Comprehensive
Income
for
the financial
period
Basic and
diluted
return
per share
(pence)
D 5 - - - - 0.7 0.7 - (0.1) 0.8 0.7
share
E 5 - - - (0.7) 1.7 0.9 (1.6) 1.6 0.0
share
F 5 - - - (0.8) 2.1 1.3 (1.7) 2.0 0.3
share
G 5 (0.7) (0.5) (1.1) (0.7) (1.1) (1.7) (1.5) (20.5) (22.1)
share
H 5 (1.3) (0.5) (1.7) (0.9) (0.1) (1.0) (2.0) (5.7) (7.7)
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
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 on disposal - - - - - -
of investments
(Decrease)/increase - (82) (82) - (63) (63)
in fair
value 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)
income
attributable
to
equity shareholders
Basic and diluted (0.7) (0.5) (1.1) (1.3) (0.5) (1.7)
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 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain on disposal - 50 50 - 57 57
of investments
(Decrease)/increase - - - - (4) (4)
in fair
value of investments
held
Investment income - - - 4 - 4
Investment management - - - (7) (6) (13)
fees
Other expenses - - - (18) - (18)
Profit/(loss) before - 50 50 (21) 47 26
taxation
Tax on profit/(loss) - - - - - -
Total comprehensive - 50 50 (21) 47 26
income
attributable
to
equity shareholders
Basic and diluted - 0.7 0.7 (0.7) 1.7 0.9
return
per share (pence)
F shares G shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain on disposal - 40 40 - 1 1
of investments
(Decrease)/increase - (3) (3) - (28) (28)
in fair
value of investments
held
Investment income 3 - 3 13 - 13
Investment management (4) (4) (8) (10) (10) (20)
fees
Other expenses (11) - (11) (26) - (26)
Profit/(loss) before (12) 33 21 (23) (37) (60)
taxation
Tax on profit/(loss) - - - - - -
Total comprehensive (12) 33 21 (23) (37) (60)
income
attributable
to
equity shareholders
Basic and diluted (0.8) 2.1 1.3 (0.7) (1.1) (1.7)
return
per share (pence)
H shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Gain on disposal - 54 54
of investments
(Decrease)/increase - (46) (46)
in fair
value of investments
held
Investment income 9 - 9
Investment management (9) (9) (18)
fees
Other expenses (25) - (25)
Profit/(loss) before (25) (1) (26)
taxation
Tax on profit/(loss)
Total comprehensive (25) (1) (26)
income
attributable
to
equity shareholders
Basic and diluted (0.9) (0.1) (1.0)
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 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain on disposal - 51 51 - 59 59
of investments
(Decrease)/increase - - - - (4) (4)
in fair
value
of investments
held
Investment - - - 4 - 4
income
Investment - - - (10) (9) (19)
management
fees
Other expenses - - - (39) - (39)
Profit/(loss) (8) 51 43 (45) 46 1
before
taxation
Tax - - - - - -
on profit/(loss)
Total (8) 51 43 (45) 46 1
comprehensive
income
attributable
to
equity
shareholders
Basic and (0.1) 0.8 0.7 (1.6) 1.6 -
diluted
return
per share
(pence)
F shares G shares
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain on disposal - 41 41 - 1 1
of investments
(Decrease)/increase - (3) (3) - (802) (802)
in fair
value
of investments
held
Investment 3 - 3 14 88 102
income
Investment (5) (6) (11) (9) (9) (18)
management
fees
Other expenses (25) - (25) (59) - (59)
Profit/(loss) (27) 32 5 (54) (722) (776)
before
taxation
Tax - - - - - -
on profit/(loss)
Total (27) 32 5 (54) (722) (776)
comprehensive
income
attributable
to
equity
shareholders
Basic and (1.7) 2.0 0.3 (1.5) (20.5) (22.1)
diluted
return
per share
(pence)
H shares
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Gain on disposal - 56 56
of investments
(Decrease)/increase - (287) (287)
in fair
value
of investments
held
Investment 14 90 104
income
Investment (10) (10) (20)
management
fees
Other expenses (55) - (55)
(Loss)/profit (51) (151) (202)
on ordinary
activities
before taxation
Tax on ordinary - - -
activities
(Loss)/profit (51) (151) (202)
attributable
to
equity
shareholders
Basic and (2.0) (5.7) (7.7)
diluted
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.
BALANCE SHEET (UNAUDITED)
as at 30 June 2017
30 June 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
Note GBP'000 GBP'000 GBP'000
Fixed assets
Qualifying 6 2,206 3,548 2,606
Investments
held at fair value
Non-qualifying 6 214 212 214
Investments
held at fair value
Current assets
Debtors 34 977 59
Non-qualifying 6 - 369 -
Investments
at fair value
Cash at bank 133 1,377 538
and in hand
167 2,723 597
Creditors: amounts (93) (155) (63)
falling
due within one year
Net current assets 74 2,568 534
Total assets 2,494 6,328 3,354
less current
liabilities
Capital and reserves
Called-up share 62 174 174
capital
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' 2,494 6,328 3,354
funds
Net asset value per - 2.7 1.0
D share (pence)
Net asset value per - 44.6 1.0
E share (pence)
Net asset value per - 47.2 1.0
F share (pence)
Net asset value per 7 24.0 60.5 40.1
G share (pence)
Net asset value per 7 62.0 75.4 68.8
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 2017 and signed on its behalf by
Paul Gregg.
Paul Gregg
Chairman
Company Registration Number: 6395025 (England & Wales)
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE G AND H SHARE
FUNDS
BALANCE SHEET (UNAUDITED)
As at 30 June 2017 (unaudited)
G H
shares shares
GBP'000 GBP'000
Fixed assets
Qualifying Investments 852 1,355
held at fair value
Non-qualifying Investments 3 211
held at fair value
Current assets
Debtors - 34
Cash at bank and in hand 48 85
Creditors: amounts falling (58) (34)
due within one year
Net current (liabilities)/assets (11) 85
Total assets less current 844 1,650
liabilities
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 24.0 62.0
distributions
to date (pence per share)
Net asset value including 59.0 82.0
distributions
to date (pence per share)
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE D, E, F, G AND H
SHARE FUNDS
BALANCE SHEET (UNAUDITED)
As at 30 June 2016 (unaudited)
D E F G H
shares shares shares shares shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Qualifying Investments 110 - - 1,938 1,500
held at fair value
Non-qualifying Investments - - - - 212
held at
fair value held at fair value
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 (110) (26) (3) (8) (8)
due within one year
Net current assets 73 1,268 741 191 295
Total assets less current 183 1,268 741 2,129 2,007
liabilities
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 2.7 44.6 47.2 60.5 75.4
distributions
to date (pence per share)
Net asset value including 82.7 84.6 87.2 80.5 90.4
distributions
to date (pence per share)
NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE D, E, F, G AND H
SHARE FUNDS
BALANCE SHEET (UNAUDITED)
As at 31 December 2016 (unaudited)
D E F G H
shares shares shares shares shares
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Fixed assets
Qualifying Investments - - - 1,252 1,354
held at fair value
Current assets
Debtors - - - 20 39
Non-qualifying Investments - - - 3 211
held at fair value
Cash at bank and in hand 73 33 20 151 261
73 33 20 174 511
Creditors: amounts falling (4) (4) (4) (15) (36)
due within one year
Net current assets 69 29 16 159 475
Total assets less current 69 29 16 1,411 1,829
liabilities
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 1.0 1.0 1.0 40.1 68.7
distributions
to date (pence per share)
Net asset value including 82.6 83.7 86.2 60.1 83.7
distributions
to date (pence per share)
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
for the six months ended 30 June 2017
Share Capital Other reserve Capital Revenue Total
reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 174 6,069 (1,756) (1,133) 3,354
1 January
2017
Capital (112) (1,340) 730 608 (114)
cancelled
Dividends - (661) - - (661)
paid
Gain - - - - -
on disposal
of
investments
Increase in - - (145) - (145)
fair value
of
investments
held
Investment - - 125 20 145
income
Investment - - (8) (9) (17)
management
fees
Other - - - (68) (68)
expenses
At 30 June 62 4,068 (1,054) (582) 2,494
2017
for the six months ended 30 June 2016
Share Capital Other reserve Capital Revenue Total
reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 174 9,295 (1,011) (950) 7,508
1 January
2016
Dividends - (1,192) - - (1,192)
paid
Gain - - 202 - 202
on disposal
of
investments
Increase in - - (81) - (81)
fair value
of
investments
held
Investment - - - 29 29
income
Investment - - (29) (30) (59)
management
fees
Other - - - (80) (80)
expenses
At 30 June 174 8,104 (919) (1,031) 6,328
2016
for the twelve months ended 31 December 2016
Share Capital Other reserve Capital Revenue Total
reserve reserve reserves
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 174 9,295 (1,011) (950) 7,508
1 January
2016
Dividends - (3,226) - - (3,226)
paid
Gain - - 208 - 208
on disposal
of
investments
Increase in - - (1,096) - (1,096)
fair value
of
investments
held
Investment - - 177 35 212
income
Investment - - (34) (34) (67)
management
fees
Other - - - (184) (184)
expenses
At 174 6,069 (1,756) (1,133) 3,354
31 December
2016
STATEMENT OF CASH FLOWS (UNAUDITED)
for the six months ended 30 June 2017
Period ended Period ended Year ended
30 June 2017 30 June 2016 31 December 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash flows from operating
activities
Profit/(loss) before (85) 11 (928)
taxation
Adjustments for:
Investment income (145) (29) (212)
Gain on disposal - (202) (208)
of investments
Decrease in fair value 145 81 1,096
of investments held
Decrease /(increase) 25 (949) (29)
in debtors
and prepayments
Decrease /(increase) 29 46 (46)
in other
creditors and accruals
Net cash used in operating (33) (1,042) (327)
activities
Cash flows from investing
activities
Purchase of Investments - (250) (250)
held at fair value
Proceeds on disposal of 400 1,973 2,088
Qualifying Investments
Proceeds from sale - 670 1,035
of bonds
and similar investments
Net cash from investing 400 2,393 2,872
activities
Cash flows from financing
activities
Payment of dividends (661) (1,192) (3,226)
Capital cancelled (112) - -
Net cash used in financing (773) (1,192) (3,226)
activities
Net increase/(decrease) in (405) 159 (681)
cash and cash equivalents
Opening cash and 538 1,219 1,219
cash equivalents
Closing cash and 133 1,378 538
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 2017
1. Accounting Policies
a) Company Information
Ingenious Entertainment VCT 2 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: 6395025.
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 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.
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 Period ended Year ended
30 June 2017 30 June 2016 31 December 2016
(unaudited) (unaudited) (audited)
GBP GBP GBP
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 30 June 31 December
2017 2016 2016
(unaudited) (unaudited) (audited)
GBP GBP 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 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 30 June 2016 31 December 2016
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Listed money Level 1 - - -
market
OEICs (note 10)
Investment in Level 3 214 214 214
investee
companies (note
10)
Unquoted Level 3 2,206 2,606 2,606
investments
(note 8)
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 GBP40,000 (31 December 2016: GBP51,000)
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
30 June 30 June 31 December 30 June 30 June 31 December
2017 2016 2016 2017 2016 2016
(unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited)
Entity Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Ingenious Capital Management
Limited
- Investment management b 17 59 68 - - -
fee
- 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 GBPNIL
excluding VAT (31 December 2016: GBP30,000; 30 June 2016:
GBP35,000), of which GBPNIL remained outstanding as at 30 June 2017
(31 December 2016: GBPNIL; 30 June 2016: GBPNIL).
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
View source version on businesswire.com:
http://www.businesswire.com/news/home/20170823005877/en/
This information is provided by Business Wire
(END) Dow Jones Newswires
August 24, 2017 02:00 ET (06:00 GMT)
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