AMPLIFY MUSIC SEIS 4 SERVICE INVESTMENT PRESENTATION 2015/16 TAX YEAR
REGULATORY NOTICE This presentation is for Professional Intermediaries only. This presenta,on is exempt from sec,on 21 of the Financial Services and Markets Act 2000 and is not required to be and has not been approved for the purposes of the sec,on because it is only being communicated to selected Investment Professionals (as defined under ar,cle 19 of the Financial Services and Markets Act 2000 (Financial Promo,on) Order 2005). If this presenta,on is forwarded to any other person, you must ensure that you have taken responsibility for the presenta,on under the financial promo,ons rules and iden,fied yourself as the issuer. The value of investments and the income from them may fall as well as rise and is not guaranteed. The returns on opportuni,es described in this presenta,on may increase or decrease. Fluctua,on may be par,cularly marked in the case of a higher vola,lity fund and the value of an investment may fall suddenly and substan,ally. Past performance is not a reliable indicator of future results. Levels and basis of taxa,on may change from ,me to ,me. The tax treatment depends on the individual circumstances of each client and may be subject to change in the future. No assurance or guarantee is given that any targeted returns will be achieved. Forecasts of poten,al future results are not a reliable indicator of actual future results. This presenta,on is for informa,on purposes only and does not cons,tute an offer or invita,on to purchase any Interests in the opportuni,es contained herein and has not been prepared in connec,on with any such offer. Applica,ons to invest in the opportuni,es can only be made on the basis of the Informa,on Memoranda. There can be no assurance that the offers’ investment objec,ves will be achieved and investment results may vary substan,ally over ,me. Since the underlying investments in the offers consist, either directly or indirectly, wholly or substan,ally of unlisted companies, under certain market condi,ons, investors seeking to redeem their holdings may experience significant delays. Further, the value of the unlisted companies concerned will generally be a maRer of valuer’s opinion and may fluctuate up or down. There is no assurance that there will be a ready market for any unlisted company from a disposal perspec,ve. Hence, on a disposal, the funds and, therefore, Investors may receive less than the original amount invested. The tax consequences to the offers, the ability of the offers to invest and return capital, including any income and profit earned on those assets and other opera,ons of the offers are based on exis,ng regula,ons and are subject to change through legisla,ve, judicial or administra,ve ac,on in the various jurisdic,ons in which the offers may invest.
INVESTMENT OPPORTUNUTY Amplify Music SEIS 4 provides investors with the opportunity to invest in a diversified portfolio of ten pre-identified SEIS qualifying music companies.
INVESTEE COMPANY STRUCTURE Through the Service, Investors subscribe for 100% of the share capital (except for one Subscriber Share) in each Investee Company. This share structure effectively gives Investors a priority position over the capital and assets of each of the Investee Companies. Un,l the Investors have earned 105p per 100p invested, they will receive 100% of capital. • Only aWer 105p per 100p invested is earned by the Investors will the Directors par,cipate • by way of the Performance Fee of 35%. • For example, with generalist SEIS funds it might be that investors only acquire 50% of the issued share capital in a company, therefore it would be necessary for that company to generate 200p per 100p invested for the investors to recover the cost of their investment.
INVESTMENT STRATEGY It is intended that each Investee Company will sign one Artist (or more) and that each Artist will be signed to both a Recording Company and a Publishing Company. Therefore, the Portfolio will contain five Artists (at least) that are each signed to two out of the ten Investee Companies contained in the Portfolio. Artist Recording Ancillary Agreement Agreement Recording Publishing Company Company Higher Risk Business Lower Risk Business
THE DIRECTORS The Investee Companies will be directed by internationally renowned artist managers (who are board members of the Music Managers Forum) and a music investment specialist, Amp Channel Music. Internationally renowned artists represented by MMF board members, amongst others, are: Arcade Fire Nick Cave • • Arc,c Monkeys Paul McCartney • • Bjork Radiohead • • • Keane • Robbie Williams Laura Marling Ka,e Melua • • Mr Scruff Travis • • Mumford and Sons Yasmin Levy • •
MARKET OPPORTUNUTY Amplify has identified a growing market opportunity to provide alternative forms of finance to artists to develop their careers across all revenue streams, including publishing, live performance, merchandising and sponsorship as well as recording. This market opportunity is based on: • A funding gap leW by record companies in the wake of the decline in record sales, leaving labels with less money to invest in ar,st development Overall music revenues growing in recent years*, despite record sales declines, but record • companies not benefi,ng from that growth in non-recording income Record revenues only represen,ng between 10% and 20% of very successful ar,sts’ total • income, meaning an investment in the wider business is commercially aRrac,ve • Managers now having to fund the early stages of development of ar,st themselves, but not always having sufficient funds for en,re development process The need for funding between £50,000 and £250,000 (£50,000 being more than managers • can risk themselves and £250,000 being a level beyond which major labels may compete) * UK music industry grew 5% in 2014 from £3.8n to £4.1bn (Source: UK Music)
INDUSTRY GROWTH The UK music industry’s GVA contribution to the UK economy has grown by £600,000,000 since the industry began measuring 3 years ago. (Source: UK Music)
ARTIST SELECTION PROCESS The artist selection process of each Investee Company will be led by the MMF Director and will be fundamentally based on: the raw musical talent of the ar,st • • the capability of the ar,st manager the revenue poten,al of the ar,st • While the spread of ar,sts across the Porholio is intended to offer a breadth with regard to the music genres, the Directors’ focus will be first and foremost to iden,fy ‘second stage’ ar,sts with characteris,cs including: • already genera,ng revenues (or with a clear path to revenue genera,on within 18 months) ability to secure Minimum Revenue Guarantees from suitable counterpar,es • high growth poten,al with the possibility of realising a return of mul,ple ,mes the Investment • external valida,on that an ar,st’s recordings or performances are innova,ve and have market poten,al • • led by inspiring, energe,c and ambi,ous ar,st manager(s) capable of delivering forecast returns If a ‘first stage’ ar,st is signed, the ar,st must be able to secure Minimum Revenue Guarantees from suitable counterpar,es that will effec,vely act as our development partners on the ar,st and de-risk our investment
ARTISTS SIGNED TO AMPLIFY Amplify 1 Amplify 2
ARTIST INVESTMENT EXAMPLE The following example of Artist A (a real artist signed to Amplify Music SEIS 2 that cannot be named due to confidentiality) is based on the actual income from Artists A’s previous album and corresponding tour combined with the contractual investment terms agreed between Artist A and the relevant Investee Companies for Artist A’s forthcoming album.
EXIT STRATEGY After the three-year SEIS Minimum Holding Period has expired, the Investee Companies will each, separately, consider whether it is appropriate to present shareholders with the opportunity to realise the value in that Investee Company. Such options to realise value may include: Sale of the Investee Company to a third party • Buy-back of Shares by the Investee Company • Sale of the Investee Company’s assets and liquida,on • While each of the above op,ons will be carefully considered at the relevant ,me, the most likely of these will be liquida,on as this does not depend on finding and/or successfully nego,a,ng with a buyer of the Shares.
ILLUSTRATIVE RETURNS Base Case Assumes that none of the Investee Companies are successful (i.e. all 5 ar,sts fail) and shows either: 7% gain (including SEIS Income Tax Relief only) or • • 21% gain (including SEIS Income Tax Relief and CGT Reinvestment Relief) Target Case Assumes that four of the Investee Companies are unsuccessful, two break even and four are successful to varying degrees (i.e. 2 of the ar,sts fail, 1 breaks even and 2 are successful) and shows either: • 98% gain (including SEIS Income Tax Relief only) or 112% gain (including SEIS Income Tax Relief and CGT Reinvestment Relief) •
ILLUSTRATIVE RETURNS (CNTD)
ILLUSTRATIVE RETURNS (CNTD)
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