Ingenious Ent VCT 1 Half-year Report

 
TIDMIE1G 
 
 

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

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(END) Dow Jones Newswires

August 24, 2018 02:00 ET (06:00 GMT)