Hipgnosis Songs Fund Limited has announced an amendment to its Operative Net Asset Value (Operative NAV) due to the identification of an error in the calculation process. The error, resulting from the double counting of accrued revenue, has led to a 7.6% reduction in the pro forma Operative NAV per Ordinary Share. This amendment follows the Board's strategic review, which raised concerns about the impact of Shot Tower's preliminary valuation and the double counting of accrued revenue in the Operative NAV calculation. The Investment Adviser has acknowledged the error, contrary to previous advice.

Since its flotation in July 2018, the company has reported both an Operative NAV and an IFRS NAV for each accounting period. The Operative NAV is defined as the NAV adjusted for the fair value of the Catalogues of Songs. The error in question relates to the adjustment made to the IFRS NAV to produce the Operative NAV, prepared by the Investment Adviser, and does not relate to the valuation methodology used by the Company's valuer. The impact of the double counting is a 7.6% reduction of the Pro Forma Operative NAV as at 30 September 2023, using the midpoint NAV in Shot Tower's preliminary valuation report as announced on 4 March 2024.

The Board has also sought confirmation from Shot Tower, who agrees that the adjustments previously made to produce the Operative NAV by the Investment Adviser are incorrect. The amendment does not impact any of the Company's banking covenants. However, as the Operative NAV is a key valuation metric in defining the market capitalization of the Company, it is likely that the Company has been overcharged investment advisory fees by the Investment Adviser. The Board has reserved all the Company's rights against the Investment Adviser.

For further information, interested parties can contact Hipgnosis Songs Fund.