Source - BUS

Half-year Report

Ingenious Entertainment VCT 2 plc

INGENIOUS ENTERTAINMENT VCT 2 PLC

9 September 2016

Half- yearly results for the six months to June 2016

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 2016 (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 final investment held in the D share class is Liverpool Sound City. An agreement for the sale of Liverpool Sound City has been signed, and the sale is due to complete shortly. The intention is to distribute the funds from this sale together with the remaining funds in the D share class shortly.

Each of the E and F share classes reached its five year anniversary on 30 July 2016. The final investment held in each of those share classes was Love Supreme. The sale of Love Supreme completed on 30 June 2016 and the Company is due to receive the funds from this sale shortly. Once received, the Company intends to distribute these funds together with the remaining funds in the E and F share classes.

The Company has completed its investment strategy and is fully invested under VCT regulations for its G and H share classes. The Manager is now focused upon maximising the returns from the investments made from those share classes.

No further investments have been made during the Reporting Period.

Results

The D shares, E shares, F shares, G shares and H shares are all accounted for as separate pools of funds necessitating separate reporting. The D shares made a profit of £50,000 (31 December 2015: loss of £153,000; 30 June 2015: loss of £14,000). The E shares made a profit of £26,000 (31 December 2015: loss of £100,000; 30 June 2015: profit of £7,000). The F shares made a profit of £21,000 (31 December 2015: loss of £60,000; 30 June 2015: £Nil). The G shares made a loss of £60,000 (31 December 2015: loss of £264,000; 30 June 2015: loss of £44,000). The H shares made a loss of £26,000 (31 December 2015: loss of £41,000; 30 June 2015: loss of £6,000).

The unaudited net asset value per D share is 2.7 pence (31 December 2015: 2.0 pence; 30 June 2015: 44.1 pence) after the deduction of a total of 80.0 pence per share of dividends in previous periods. The net asset value including distributions to date is 82.7 pence per share (31 December 2015: 82.0 pence per share; 30 June 2015: 84.1 pence per share).

The unaudited net asset value per E share is 44.6 pence (31 December 2015: 63.7 pence; 30 June 2015: 67.4 pence) after the deduction of an interim dividend of 20.0 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 84.6 pence per share (31 December 2015: 83.7 pence per share; 30 June 2015: 87.4 pence per share).

The unaudited net asset value per F share is 47.2 pence (31 December 2015: 65.9 pence; 30 June 2015: 69.7 pence) after the deduction of an interim dividend of 20.0 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 87.2 pence per share (31 December 2015: 85.9 pence per share; 30 June 2015: 89.6 pence per share).

The unaudited net asset value per G share is 60.5 pence (31 December 2015: 67.2 pence; 30 June 2015: 73.4 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 80.5 pence per share (31 December 2015; 82.2 pence per share; 30 June 2015: 88.4 pence per share).

The unaudited net asset value per H share is 75.4 pence (31 December 2015: 81.4 pence; 30 June 2015: 82.7 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 10.0 pence per share of dividends in previous periods. The net asset value including distributions to date is 90.4 pence per share (31 December 2015; 91.4 pence per share; 30 June 2015: 92.7 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 VCT’s) invest in (Investee Companies).

Investments

The current investment portfolio includes:

Brighton Boundary Festival

Ingenious Entertainment VCT 2 investment amount: £250,000 (H share)

(£500,000 across the Ingenious Entertainment VCTs)

The Ingenious Entertainment VCTs joined forces with LWE, SWG and Matt Priest to produce and promote a new music festival called Boundary in Brighton.

The first event is due to be held in September 2016 in Stamner Park in Brighton and will form part of Fresher’s Week for the University of Sussex and Brighton as well as being aimed at the local audience in and around Brighton and London.

Tickets are on sale and well ahead of forecast.

Genius Star Limited

Ingenious Entertainment VCT 2 investment amount: £375,000 (H share)

(£750,000 across the Ingenious Entertainment VCTs)

The Ingenious Entertainment VCTs teamed up with Electric Star Ltd, a company run by Rob Star that runs 4 successful multi-purpose bar/kitchen style venues in East London and Kings Cross, to invest in a new company, Genius Star Limited.

The concept is a multi-faceted and vibrant space which will capitalise on the premises’ location and the experience of Rob Star.

The venue serves as a functioning bar and kitchen, and a multi-purpose event space for promoted, co-promoted and externally hired activities.

The opening night on the 21st July was a great success and the venue hit its weekly target after just 3 days trading and week on week the venue continues to exceed its targets.

Outlook

The recent 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 hopes that discretionary spend increases, and that live event attendances at least hold firm. What is becoming evident is that the so-called ‘headliner driven’ events are showing signs of customer fatigue and the events that deliver more of a broad ranging customer experience are benefitting from this. The Manager believes that it has created a portfolio that delivers this enhanced customer experience.

The Manager’s focus remains very firmly upon ensuring that the investments made by the Company are carefully sourced 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

8 September 2016

CONDENSED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

for the six months ended 30 June 2016

    Six months ended

30 June 2016

(unaudited)

    Six months ended

30 June 2015

(unaudited)

    Year ended

31 December 2015

(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 - 60 60 - 103 103
(Decrease)/increase in fair value of investments held - (81) (81) - (2) (2) - (484) (484)
Investment income 29 - 29 79 - 79 128 - 128
Arrangement fees - - - - - - - - -
Investment management fees (30) (29) (59) (52) (52) (104) (92) (92) (184)
Other expenses (80) - (80) (90) - (90) (181) - (181)
                     
 
(Loss)/profit on ordinary activities before taxation (81) 92 11 (63) 6 (57) (145) (473) (618)
Tax on ordinary activities - - - - - - - - -
                     
 
(Loss)/profit attributable to equity shareholders (81) 92 11 (63) 6 (57) (145) (473) (618)
Other Comprehensive Income   - - -   - - - - - -
Total Comprehensive Income for the financial period (81) 92 11 (63) 6 (57) (145) (473) (618)
                     
 
Basic and diluted return per share (pence)
                     
 
D share 5 - 0.7 0.7 - (0.2) (0.2) - (2.2) (2.3)
E share 5 (0.7) 1.7 0.9 (0.3) 0.5 0.2 (0.8) (2.7) (3.5)
F share 5 (0.8) 2.1 1.3 (0.4) 0.4 - (1.0) (2.9) (3.8)
G share 5 (0.7) (1.1) (1.7) (0.6) (0.7) (1.3) (1.3) (6.2) (7.5)
H share 5 (0.9) (0.1) (1.0) (1.1) 0.8 (0.3) (2.2) 0.6 (1.5)

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 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
Arrangement fees - - - - - -
Investment management fees - - - (7) (6) (13)
Other expenses - - - (18) - (18)
             
Profit/(loss) on ordinary activities before taxation - 50 50 (21) 47 26
Tax on ordinary activities - - - - - -
Profit/(loss) 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
Increase/(decrease) in fair value of investments held - (3) (3) - (28) (28)
Investment income 3 - 3 13 - 13
Arrangement fees - - - - - -
Investment management fees (4) (4) (8) (10) (10) (20)
Other expenses (11) - (11) (26) - (26)
             
(Loss)/profit on ordinary activities before taxation (12) 33 21 (23) (37) (60)
Tax on ordinary activities - - -

 

- - -
(Loss)/profit 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
Profit on disposal of investments - 54 54
(Decrease)/Increase in fair value of investments held - (46) (46)
Investment income 9 - 9
Arrangement fees - - -
Investment management fees (9) (9) (18)
Other expenses (25) - (25)
       
(Loss)/profit on ordinary activities before taxation (25) (1) (26)
Tax on ordinary activities      
(Loss)/profit 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 six months ended 30 June 2015

             
D shares E shares
Revenue Capital Total Revenue Capital Total
  £'000 £'000 £'000 £'000 £'000 £'000
Gain on disposal of investments - 8 8 - 3 3
(Decrease)/Increase in fair value of investments held - (6) (6) - 19 19
Investment income 44 - 44 15 - 15
Arrangement fees - - - - - -
Investment management fees (16) (16) (32) (9) (9) (18)
Other expenses (28) - (28) (12) - (12)
             
Profit/(loss) on ordinary activities before taxation - (14) (14) (6) 13 7
Tax on ordinary activities - - - - - -
Profit/(loss) attributable to equity shareholders - (14) (14) (7) 14 7
Basic and diluted return per share (pence) - (0.2) (0.2) (0.2) 0.5 0.2
   
F shares G shares
Revenue Capital Total Revenue Capital Total
  £'000 £'000 £'000 £'000 £'000 £'000
Gain on disposal of investments - 11 11 - 2 2
(Decrease)/Increase in fair value of investments held - 1 1 - (13) (13)
Investment income 8 - 8 12 - 12
Arrangement fees - - - - - -
Investment management fees (5) (5) (10) (12) (12) (24)
Other expenses (10) - (10) (21) - (21)
             
(Loss)/profit on ordinary activities before taxation (7) 7 - (21) (23) (44)
Tax on ordinary activities - - - - - -
(Loss)/profit attributable to equity shareholders (7) 7 - (21) (23) (44)
Basic and diluted return per share (pence) (0.4) 0.4 - (0.6) (0.7) (1.3)
     
H shares
Revenue Capital Total
  £'000 £'000 £'000
Gain on disposal of investments - 36 36
(Decrease)/Increase in fair value of investments held - (3) (3)
Investment income - - -
Arrangement fees - - -
Investment management fees (10) (10) (20)
Other expenses (19) - (19)
       
(Loss)/profit on ordinary activities before taxation (29) 23 (6)
Tax on ordinary activities - - -
(Loss)/profit attributable to equity shareholders (28) 22 (6)
Basic and diluted return per share (pence) (1.1) 0.8 (0.3)

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 2015

             
D shares E shares
Revenue Capital Total Revenue Capital Total
  £'000 £'000 £'000 £'000 £'000 £'000
Gain on disposal of investments - 35 35 - 13 13
(Decrease)/increase in fair value of investments held - (163) (163) - (74) (74)
Investment income 55 - 55 29 - 29
Arrangement fees - - - - - -
Investment management fees (22) (22) (44) (16) (17) (33)
Other expenses (36) - (36) (35) - (35)
             
Profit/(loss) on ordinary activities before taxation (3) (150) (153) (22) (78) (100)
Tax on ordinary activities - - - - - -
Profit/(loss) attributable to equity shareholders (3) (150) (153) (22) (78) (100)
Basic and diluted return per share (pence) (0.0) (2.2) (2.2) (0.8) (2.7) (3.5)
   
F shares G shares
Revenue Capital Total Revenue Capital Total
  £'000 £'000 £'000 £'000 £'000 £'000
Gain on disposal of investments - 13 13 - 2 2
(Decrease)/Increase in fair value of investments held - (48) (48) - (198) (198)
Investment income 16 - 16 25 - 25
Arrangement fees - - - - - -
Investment management fees (10) (10) (20) (23) (23) (46)
Other expenses (21) - (21) (47) - (47)
             
Loss on ordinary activities before taxation (15) (45) (60) (45) (219) (264)
Tax on ordinary activities - - - - - -
Loss attributable to equity shareholders (15) (45) (60) (45) (219) (264)
Basic and diluted return per share (pence) (0.9) (2.9) (3.8) (1.3) (6.2) (7.5)
  H shares
Revenue   Capital   Total
  £'000 £'000 £'000
Gain on disposal of investments - 39 39
(Decrease)/Increase in fair value of investments held - (2) (2)
Investment income 2 - 2
Arrangement fees - - -
Investment management fees (19) (20) (39)
Other expenses (41) - (41)
       
(Loss)/profit on ordinary activities before taxation (58) 17 (41)
Tax on ordinary activities - - -
(Loss)/profit attributable to equity shareholders (58) 17 (41)
Basic and diluted return per share (pence) (2.2) 0.6 (1.5)

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 2016

    30 June

2016

(unaudited)

  30 June

2015

(unaudited)

  31 December

2015

(audited)

  Note £'000 £'000 £'000
 
Fixed assets
Qualifying Investments held at fair value 6 3,548 7,240

5,332

Non Qualifying Investments held at fair value 6 212 - -
         
 
Current assets
Debtors 977 50 28
Non-qualifying Investments 6 369 3,147 1,038
Cash at bank and in hand 1,377 398 1,219
         
 
2,723 3,595 2,285
Creditors: amounts falling due within one year (155) (69) (109)
         
 
Net current assets 2,568 3,526 2,176
         
 
Total assets less current liabilities 6,328 10,766 7,508
         
 
Capital and reserves
Called-up share capital 174 174 174
Share premium account - - -
Other reserve account 8,104 13,048 9,295
Capital reserve (919) (1,298) (1,011)
Revenue reserve (1,031) (1,158) (950)
         
 
Total shareholders’ funds 6,328 10,766 7,508
 
         
 
 
Net asset value per D share (pence) 7 2.7     44.1     2.0
Net asset value per E share (pence) 7 44.6 67.4 63.7
Net asset value per F share (pence) 7 47.2 69.7 65.9
Net asset value per G share (pence) 7 60.5 73.4 67.2
Net asset value per H share (pence) 7 75.4 82.7 81.4

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 8 September 2016 and signed on its behalf by Paul Gregg.

Paul Gregg

Director

Company Registration Number: 6395025 (England & Wales)

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 - - - - 212
           
 
Current assets
Debtors 50 528 345 - 54
Non-qualifying Investments held at fair value - - - 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 30 June 2015 (unaudited)
  D

shares

£'000

  E

shares

£'000

  F

shares

£'000

  G

shares

£'000

  H

shares

£'000

 
Fixed assets
Qualifying Investments held at fair value 2,570 1,637 908 2,125 -
           
 
Current assets
Debtors 50 - - - -
Non-qualifying Investments - 286 190 465 2,206
Cash at bank and in hand 383 4 2 5 4
           
 
433 290 192 470 2,210
Creditors: amounts falling due within one year (34) (9) (4) (12) (10)
           
 
Net current assets 399 281 188 458 2,200
           
 
Total assets less current liabilities 2,969 1,918 1,096 2,583 2,200
           
 
Capital and reserves
Called-up share capital 68 28 16 35 27
Share premium account - - - - -
Other reserve account 3,657 2,124 1,173 2,800 2,238
Capital reserve (503) (90) 12 (25) 74
Revenue reserve (253) (144) (105) (227) (139)
           
 
Total shareholders’ funds 2,969 1,918 1,096 2,583 2,200
           
Net asset value excluding distributions to date (pence per share) 44.1 67.4 69.7 73.4 82.7
           
Net asset value including distributions to date (pence per share) 84.1 87.4 89.6 88.4 92.7

NON-STATUTORY ANALYSIS (UNAUDITED) BETWEEN THE D, E, F, G AND H SHARE FUNDS

BALANCE SHEET (UNAUDITED)

  As at 31 December 2015 (audited)
  D

shares

£'000

  E

shares

£'000

  F

shares

£'000

  G

shares

£'000

  H

shares

£'000

 
Fixed assets
Qualifying Investments held at fair value 110 1,099 670 1,953 1,500
           
 
Current assets
Debtors - 28 - - -
Non-qualifying Investments held at fair value - 243 183 420 192
Cash at bank and in hand 59 486 192 1 481
           
 
59 757 375 421 673
Creditors: amounts falling due within one year (36) (47) (9) (9) (8)
           
 
Net current assets 23 710 366 412 665
           
 
Total assets less current liabilities 133 1,809 1,036 2,365 2,165
           
 
Capital and reserves
Called-up share capital 68 28 16 35 27
Share premium account - - - - -
Other reserve account 961 2,125 1,171 2,800 2,238
Capital reserve (640) (181) (39) (220) 69
Revenue reserve (256) (163) (112) (250) (169)
           
 
Total shareholders’ funds 133 1,809 1,036 2,365 2,165
           
Net asset value excluding distributions to date (pence per share) 2.0 63.7 65.9 67.2 81.4
           
Net asset value including distributions to date (pence per share) 82.0 83.7 85.9 82.2 91.4

STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

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 six months ended 30 June 2015

  Share Capital   Other reserve   Capital reserve   Revenue reserve   Total reserves

 

£'000 £'000 £'000 £'000 £'000
At 1 January 2015 174 14,923 (1,304) (1,095) 12,698
Dividends paid - (1,875) - - (1,875)
Gain on disposal of investments - - 60 - 60
Increase in fair value of investments held - - (2) - (2)
Investment income - - - 79 79
Investment management fees - - (52) (52) (104)
Other expenses - - - (90) (90)
At 30 June 2015 174 13,048 (1,298) (1,158) 10,766

for the twelve months ended 31 December 2015

  Share Capital   Other reserve   Capital reserve   Revenue reserve   Total reserves

 

£'000 £'000 £'000 £'000 £'000
At 1 January 2015 174 14,923 (1,304) (1,095) 12,698
Elimination of reserves for Ordinary and C shares - (1,056) 766 290 -
Dividends paid - (4,572) - - (4,572)
Gain on disposal of investments - - 103 - 103
Increase in fair value of investments held - - (484) - (484)
Investment income - - - 128 128
Investment management fees - - (92) (92) (184)
Other expenses - - - (181) (181)
At 30 December 2015 174 9,295 (1,011) (950) 7,508

STATEMENT OF CASH FLOWS (UNAUDITED)

for the six months ended 30 June 2016

  Period ended

30 June 2016

(unaudited)

  Period ended

30 June 2015

(unaudited)

  Year ended

31 December 2015

(audited)

  £'000 £'000 £'000
 
Cash flows from operating activities
Profit/(loss) on ordinary activities before tax 11 (57) (618)
Investment Income (29) (79) (128)
Gain on disposal of investments (202) (80) (103)
Decrease in fair value of investments held 81 2 484
Increase in debtors and prepayments (949) (28) (6)
Increase in other creditors and accruals 46 15 55
       
Net cash flows from operating activities (1,042) (227) (316)
       
 
Cash flows from investing activities
Purchase of Investments held at fair value (250) (1,500)
Proceeds on disposal of Qualifying Investments 1,973 1,137 4,144
Proceeds from sale of bonds and similar investments 670 60 3,409
       
 
Net cash inflows from investing activities 2,393 1,197 6,053

 

 
Cash flows from financing activities
Payment of dividends (1,192) (1,875) (4,572)
       
 
Net cash outflow flow from financing activities (1,192) (1,875) (4,572)
       
       
Net increase/(decrease) in cash and cash equivalents 159 (905) 1,165
Opening cash and cash equivalents 1,219 4,447 54
Closing cash and cash equivalents 1,378 3,542 1,219

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 2016

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.

b) Statement of Compliance

Basis of Accounting

The financial statements for the Reporting Period have been prepared in compliance with applicable UK Accounting Standards, being FRS 102 - The Financial Reporting Standard, the Companies Act 2006 and with the Statement of Recommended Practice (the SORP) entitled “Financial Statements of Investment Trust Companies and Venture Capital Trusts” (with the exception of paragraph 82 of the SORP regarding detailed disclosure of financial and operational performance of the Company’s unquoted investments due to their confidential nature) which was issued in November 2014. The half year accounts are prepared in accordance with Financial Reporting Standards 104 – Interim Financial Reporting.

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 2015 Annual Report and Accounts.

c) Financial Instruments

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.

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.

d) Investment Income (continued)

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.

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 were paid for by the D share class until 5 August 2015 and from 6 August 2015 by the E share class and have been recharged on a quarterly basis to the other share classes based on the proportional net asset value per share class as at the last day of the previous quarter.

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) D Shares, E Shares, F Shares, G Shares and H Shares

The Company had five Share classes up to 30 June 2016: D shares, E shares, F shares, G shares and H shares. Each Share class has a separate pool of income and expenses as well as assets and liabilities attributable to it. All Share classes rank pari passu with each other in terms of voting and other rights.

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:

  30 June 2016

£

  30 June 2015

£

  31 December 2015

£

 
Audit fees 11,000 8,850 21,000
11,000 8,850 21,000
 

4. Directors' remuneration and employees

 
30 June 2016

£

30 June 2015

£

31 December 2015

£

 
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 2016 (31 December 2015: Nil, 30 June 2015: Nil).

5. Basic and Diluted Return per share

The basic return per D share has been calculated on a weighted average of 6,735,624 D shares in issue for the six months ended 30 June 2016 (31 December 2015: 6,735,624; 30 June 2015: 6,735,624).

The basic return per E share has been calculated on a weighted average of 2,846,122 E shares in issue for the six months ended 30 June 2016 (31 December 2015: 2,846,122; 30 June 2015: 2,846,122).

The basic return per F share has been calculated on a weighted average of 1,572,095 F shares in issue for the six months ended 30 June 2016 (31 December 2015: 1,572,095; 30 June 2015: 1,572,095).

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 2016 (31 December 2015: 3,518,044; 30 June 2015: 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 2016 (31 December 2015: 2,660,842; 30 June 2015: 2,660,842).

There are no dilutive potential D shares, E shares, F shares, 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. Investments

  30 June 2016

£’000

  30 June 2015

£’000

  31 December 2015

£’000

Fixed Assets
Level c (ii)
Qualifying Investments: 3,548 7,240 5,332
Non Qualifying Investments: 212
Current Assets
Non-qualifying Investments: 369 3,147 1,038
4,129 10,387 6,370

a) Qualifying Investments

Quoted market prices in active markets – “Level a”

Level a: quoted prices in active markets for an identical asset. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held is the current bid price.

Valued using models with significant observable market parameters – “Level b”

Level b: where quoted prices are not available, the price of a recent transaction for an identical asset, providing there has been no significant change in economic circumstances or a significant lapse in time since the transaction took place.

Valued using models with observable parameters – “Level c (i)”

Level c(i): fair values where the value estimate relies on observable market data. The fair value is determined by using valuation techniques. These valuation techniques maximise the use of observable data where it is available and rely as little as possible on entity specific estimates. If all the inputs required to fair value an instrument are observable, the instruments is included in level c (i).

Valued using models with significant unobservable parameters – “Level c (ii)”

Level c(ii): fair values are not traded in an active market and the fair value is determined by using valuation techniques such as less recent third party transactions or earnings multiples. If one or more of the significant inputs is not based on observable market data, the instrument is included in level c (ii). The Company's unquoted investments all fall into this category.

There have been no transfers between these classifications in the year. The change in fair value for the current and previous year is recognised through the statement of comprehensive income.

b) Non-qualifying Investments

In order to safeguard the capital available for investment in VCT Qualifying Investments and balance this with the need to provide good returns to investors, available funds from the net proceeds are invested in appropriate securities (money market securities and cash funds) until required for Qualifying Investment purposes.

7. Net Asset Value per share

The unaudited net asset value per D share has been calculated based on 6,735,624 D shares being the number of D shares in issue as at 30 June 2016 (31 December 2015: 6,735,624; 30 June 2015: 6,735,624).

The unaudited net asset value per E share has been calculated based on 2,846,122 E shares being the number of E shares in issue as at 30 June 2016 (31 December 2015: 2,846,122; 30 June 2015: 2,846,122).

The unaudited net asset value per F share has been calculated based on 1,572,095 F shares being the number of F shares in issue as at 30 June 2016 (31 December 2015: 1,572,095; 30 June 2015: 1,572,095).

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 2016 (31 December 2015: 3,518,044; 30 June 2015: 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 2016 (31 December 2015: 2,660,842; 30 June 2015: 2,660,842).

8. Related Party Transactions

a) The Company has appointed Ingenious Ventures as Manager. Ingenious Ventures is a trading division of Ingenious Capital Management Limited. Patrick McKenna is a director of Ingenious Capital Management Limited which is a subsidiary of Ingenious Capital Management Holdings Limited, which is controlled by Patrick McKenna.

The Manager, in accordance with the management agreement, receives a management fee of 0.4375% of the net asset value payable quarterly in advance (1.75% annualised). The Manager also receives an administration fee of £56,000 per annum from the Company.

b) Since April 2016 the funds invested in OEICs are managed by Tilney Asset Management Ltd. Before this Ingenious Asset Management Limited, a company of which Patrick McKenna was a director managed the funds invested in OEICs. Ingenious Asset Management Limited was a subsidiary of Ingenious Asset Management Group Limited, which was also controlled by Patrick McKenna. There is no fee payable by the Company in relation to this transaction.

c) Patrick McKenna is a director and a shareholder of Ingenious Entertainment VCT 1 plc. The Company and Ingenious Entertainment VCT 1 plc both invested in Brighton Boundary Festival Limited, to stage the first Brighton Boundary Festival which is due to take place in September 2016. In May 2016, the Company invested £250,000 in Brighton Boundary Festival Limited - £175,000 for a 15% equity stake with a £75,000 loan note instrument. Ingenious Entertainment VCT 1 also invested £250,000 in Brighton Boundary Festival Limited - £175,000 for a 15% equity stake and £75,000 loan note instrument.

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
2016

£'000

 

30 June
2015

£'000

 

31 December
2015

£'000

30 June
2016

£'000

 

30 June
2015

£'000

 

31 December
2015

£'000

Ingenious Capital Management Limited
- Investment management fee b 59 104 184 - - -
- Administration fee b 29 38 71 - - -
- 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 £35,000 excluding VAT (31 December 2015: £137,000; 30 June 2015: £103,000), of which £NIL remained outstanding as at 30 June 2016 (31 December 2015: £45,000; 30 June 2015: £NIL).

The Company’s statutory financial statements for the year ended 31 December 2015 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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