The rock band U2 has reported a significant improvement in the financial position of a company at the core of its business empire, parts of which it has moved to the Netherlands for tax reasons.
The reduction in the deficit in the profit and loss account in Not Us Ltd to €2.91 million from €18.81 million came last year as the band embarked on the Vertigo world tour after the release of their 14th album, How to Dismantle an Atomic Bomb.
Band members Bono, the Edge, Adam Clayton and Larry Mullen jnr are directors of Not Us Ltd, in which they each hold a 25 per cent stake. Accounts just filed for this firm provide a partial picture of U2's business dealings and their wealth, which is managed in a private partnership and estimated at more than €600 million.
However, the Dublin-registered Not Us holds the band's interests in 10 subsidiaries in Ireland, Britain and the US, which manage its recording, touring and merchandising interests.
These include U2 Ltd, a company engaged in the production of master tapes which is believed to be one of the businesses that moved to the Netherlands this year. The band members resigned as directors of this company last June and were replaced by Dutch lawyer Roelof Kloeten, Dutch accountant Jan Favie and Dublin accountant Gaby Smyth. The Not Us annual filing for 2005 says the balance due from Not Us to U2 Ltd at the end of 2005 was €3.87 million.
U2 moved their music publishing business to the Netherlands after the Government introduced a cap of €250,000 on the tax-free incomes allowed to artists. They can avail in the Netherlands of a tax rate close to zero on their royalty earnings.
This move was heavily criticised last summer as it appeared to be at odds with Bono's calls for more Government spending on the developing world. Around the same time, Bono acquired an interest in the pro-business Forbes magazine through Elevation Partners, the private equity group in which he is one of six partners. Elevation's 40 per cent stake in Forbes was acquired at a cost of more than $250 million (€199.6 million).
The Not Us filing indicates that the band realised a profit of €1.24 million on the sale of its 1.53 million shares in Burst.com, a Californian software venture that won damages of $60 million from Microsoft last year in a patent infringement case. The firm also acquired a further 20,000 shares in Burst at a cost of $22,496.
Not Us had net assets of €2.07 million at the end of 2005, current liabilities of €441,316 and €3.87 million in long-term liabilities to creditors. With an equity shareholders' deficit of €2.91 million in Not US, the accounts say the firm meets its day to day working capital requirements by way of unsecured, interest-free loans from subsidiaries, related-party creditors and directors. "These parties have confirmed that they will not seek repayment of the loans for the foreseeable future," the accounts say.
A spokeswoman for U2 said the band would not make anyone available to answer queries about the accounts.
