AAA Video Games EIS Fund

INVESTOR PRESENTATION > 2017/18

 2017/18

IMPORTANT REGULATORY INFORMATION

This presentation relates to the AAA Video Games EIS Fund (the “Fund”) and is issued and approved by Daedalus Partners LLP (“Daedalus”),
which is authorised and regulated by the Financial Services Authority in the United Kingdom with Firm Reference Number 564221.

This presentation is subject to the provisions of the information memorandum (“Information Memorandum”) for the Fund published by
Daedalus, as amended and/or supplemented from time to time. The terms of the Information Memorandum shall prevail in the event of a
conflict between the terms of this presentation and the Information Memorandum. Any decision in connection with an investment in the Fund
should therefore be made only on the basis of information contained in the Information Memorandum issued in connection with the offer and
not on this document. Nothing in this presentation is intended to constitute or form part of any offer for sale or solicitation of any offer to buy
or subscribe for the Fund.

If you are in any doubt about the content of the Information Memorandum, and/or this document and/or any action you should take, you are
strongly recommended to seek advice immediately from an independent financial adviser authorised under the Financial Services and Markets
Act 2000 (FMSA) who specialises in advising on opportunities of this nature. Potential investors should seek their own professional advice on
the taxation consequences of investing in the Fund. Nothing in this document or the Information Memorandum constitutes investment, tax,
legal or other advice by Daedalus. An investment in the Fund will not be suitable for all recipients of this document or the Information
Memorandum and your attention is drawn to the section headed “Risk Factors” in the Information Memorandum.

All statements of opinion or belief contained in this document or Information Memorandum and all views expressed, statements made and all
projections and forecasts regarding future events or the anticipated future performance of the Fund represent Daedalus’ own assessment and
interpretation of information available to them as at the date of the Information Memorandum. No representation is made, or assurance given,
that such views, statements, projections, forecasts or anticipated future performance are correct, attainable or complete or that the objectives
of the Fund will be achieved. The views, statements, projections, forecasts and anticipated future performance are based upon various
assumptions and estimates which involve significant judgment and analysis and which are subject to uncertainties and contingencies; actual
results could differ materially from those set forth in such projections, views, statements, forecasts and anticipated future performance.
Prospective investors must determine for themselves what reliance, if any, they should place on such statements, views or forecasts and no
responsibility is accepted by Daedalus in respect thereof.
 2017/18

SUMMARY
• An EIS Fund investing in companies producing and exploiting Video Games for PC & Console
SECTOR
• Games will be based on existing high profile Film and Television IP

• Global video games market is expected to be worth $90.07bn by 2020 and growing at 4.8% p.a.
GROWTH • PC & Console Games make up > 70% of global video games revenues

Downside Performance mitigated by:

DOWNSIDE
PROTECTION • EIS Tax benefits;
• UK Video Game Production Tax Credit; and
• Publisher minimum revenue commitments

TARGET
• Base investment returns per £1.00 invested of £0.70 - £1.25 with a target of £2.00+
RETURNS

• Management & Advisory Teams with over 20 years’ experience

FUND DETAILS • Success-based Fee Structure
• Fund size: £8m - £15m
 2017/18

THE MARKET The global video game market was

worth $71.27bn in 2015 and is
Global video games market
anticipated to rise by an average
Revenues ($bn)
4.8% a year to $90.07bn by 2020
100
90
80
70
60
50
40
30
20
10 Source: pwc
Entertainment and
0
Media Outlook 2016-
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

PC Console Social/casual

4
 2017/18
INVESTMENT PHILOSOPHY
PC & Console
The Fund will invest in a
portfolio of companies that
produce video games for
console and PC.
Downside Protection
Companies will benefit from
minimum guaranteed income from
a publisher, as well as other
government backed incentives
worth at least 70% of production
budget
Existing IP Sales
Games will be based on
Games will have retail sales
existing Film and TV
estimates of >2x budget
intellectual property, and
have development budgets
of £3m - £5m
Uncapped Upside Growth Capital
Companies will also have an Companies should be able to
uncapped ongoing participation produce multiple games based on a
in the commercial exploitation range of IP over three years
of each game
 2017/18

INVESTMENT TIMELINE

By launching
Game the game
Minimum
published around
guaranteed Further Excess funds
Company Company across another
revenue and revenue are
acquires spends £3m - existing major event
government received from reinvested to
license to £5m platforms e.g. such as a film
incentives publisher as develop
existing IP for developing Xbox Live, release, the
equal to 70% game is additional
up to £250K game PlayStation chances of
of total spend exploited games
Network & hitting target
received
Steam sales is
increased
 2017/18

INVESTMENT MODEL
£3,000

Investor’s Equity EIS Relief

£10,000

Production Company

£10,000

Film/TV IP-based PC or Console Game

£2,000 £5,000 £5,500 - £13,000+

Tax Credit Publisher Minimum Guarantee Profits

 2017/18

FINANCIAL ILLUSTRATIONS
Base Target High
Initial Investment (£100,000) (£100,000) (£100,000)

EIS Income Tax Relief £30,000 £30,000 £30,000

Net Cost of Investment (£70,000) (£70,000) (£70,000)

Investment Return £70,000 £125,000 £200,000

Total Net Profit/Loss - £55,000 £130,000

Return on Net Investment - 78% 186%

Gross Equivalent Return - 143% 338%

The above returns are set out for illustrative purposes only and are not a reliable indicator of future performance. The Fund will be invested in small
companies and an Investor may not receive any Investment Return and may lose the entirety of their investment. No warranty as to future outcome is
implied or should be inferred. Investors’ attention is drawn to the information set out in the Information Memorandum and in particular the “Risk Factors”
section in Part 5.
 2017/18

TYPES OF GAME DEVELOPER

Hit IP User Scale Complete Predictable Low Cost Base Ability to Create
Ownership Infrastructure Revenues Hit IP

Major Studio

EIS Investee
Companies

Independents
 2017/18

TYPES OF VIDEO GAME

• Dominated by a small number of large studios

PC/Console • Focus on High Budget games (£100m+)

Market • Require large global distribution
• Rely on high volume of sales to be profitable
(1m-5m+ units)
• Often part of a major game franchise

• Significant potential value in IP acquired

• Low Budget as not targeting “hardcore” gamers
EIS Fund • Few sales required to meet breakeven as low
budget
• Existing fan base for IP already in place

• Low Cost
• Potential for very high returns, but…
App-based / • Very High Risk
Mobile • Very competitive
• Often requires significant user acquisition spend
 2017/18

GAMES DO NOT HAVE TO BE BIG BUDGET TO MAKE PROFITS

• Team size: 400+ • Team size: 10 people

• Cost $100m+ • Cost $1m
• Sold 15m units+ • 80m+ installs
• Net Revenue $300m+ • Net Revenue $300m

• Team size: 300+ • Team size: 5 people

• Cost $200m+ • Cost $1m
• Sold 52m units+ • 365m+ installs
• Net Revenue $1bn+ • Net Revenue $1bn

• Team size: 1 person

• Team size: 125+
• Cost <$100k
• Cost $100m+
• Sold 54m units+
• Sold 18m units+
• Net Revenue $500m+
• Net Revenue $400m+
 2017/18

DECREASING COST OF PRODUCTION

1994 2016
$1.9m $0.05/m

$500/m $0.05/m

$500/m $200,000 $2,000

 2017/18

LOW COST TO ACCESS GAMES AND WIDER DISTRIBUTION

1994 2016

$500/m
 2017/18

THE GAMES ADVISERS

Martin Alltimes
• Has worked for over 20 years in the video games industry
• Currently CEO of The Imaginati which is developing the video game based on the movie War for the Planet
of the Apes, due for release next year
• Previously a VP at The Walt Disney Company where he oversaw the Creative Development and
Production of based on Toy Story, The Chronicles of Narnia, Alice in Wonderland and Pirates of the Caribbean
• Has also helped create multiple award winning studios and original IP

Barry O’Neill
• CEO of Touch Press Inc., a newly merged entity made up of 3 leading digital publishers
• Previously Chief Executive of StoryToys, which has released titles based on the Brothers Grimm fairy tales
and well known children's characters such as Elmo, Chuggington and The Very Hungry Caterpillar
• Former head of Bandai Namco’s European “networks”
• Spearheaded the launch of high profile content such as PAC-MAN, Dr. Kawashima and Tekken on to new
platforms including Facebook, iOS, Android and PlayStation Network
• Chairman of Games Ireland
 2017/18

THE GAMES ADVISERS: TRACK RECORD

No of Units Sold: 1.76m 5.57m 1.31m

No of Units Sold: 0.94m 1.68m 2.68m

 2017/18

THE INVESTMENT TEAM

Gavin Harrison
• Has managed over 70 investments in video games since 2011
• Qualified Chartered Accountant, having trained at Arthur Andersen
• Previously Director of Structured Finance at leading alternative asset manager
• Experience in the media, mobile technology and renewable energy sectors

Stephen Norton
• Qualified Accountant and MBA from Cass Business School
• Previously COO of a leading alternative asset investment firm
• Experience in the entertainment, telecoms, real estate and renewable energy sectors
• Member of the Chartered Institute of Securities

Nick Astaire
• Joined Daedalus in September 2014
• Has over 15 years’ experience in financial services
• Experience in the media, real estate and smaller company sectors
• Previously founded a business that that funded over £350m of property investments
 2017/18

FEES
EVALUATION FEE An initial Evaluation Fee equal to 2% of the amount invested, paid by the investee company.

ANNUAL An Annual Monitoring Fee equal to 1% of the capital invested (charged for a maximum of 3 years), paid by the
MONITORING investee companies and deferred until investor has recovered its initial investment.
FEE

CUSTODIAN An Annual Custodian Fee equal to a maximum of 0.15% of the capital invested, paid by the investee companies.
CHARGES

A Performance Fee (or equity) equivalent to 20% of any distributions (or amounts realised/payable) to the EIS
PERFORMANCE
shareholders of each Company, subject to Investors first receiving 110p per 100p invested (ignoring any EIS tax
FEE
reliefs) across the portfolio. The Performance Fee increases to an amount up to 45% once Investors have
received 200p per 100p invested across the portfolio. The above Performance Fee will be calculated at the
aggregate level of the Fund not on a Company by Company basis.

OTHER Reasonable third party expenses incurred by, and costs of, the Manager and its affiliates in managing,
administering and providing services to the Fund and its investments may be charged to the Fund or the
Companies.