TIDMPUM9
RNS Number : 8750C
Puma VCT 9 PLC
30 June 2016
HIGHLIGHTS
-- Fund substantially invested in a diverse range of high quality businesses and projects.
-- Requirement that qualifying investments are 70% of the fund on an HMRC basis now met.
-- Profit of GBP1.4 million before tax for the period, a
post-tax gain of 3.86p per share reduced to GBP848,000 before tax
for the period, a post-tax gain of 1.94p per share after providing
GBP532,000 against the Opes investment.
-- 12p per share dividends paid during the period, equivalent to
an 8.6% per annum tax-free running yield on investment.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Company's third Annual Report which,
reflecting the change of accounting year end, represents a 14 month
period ended 29 February 2016.
The Investment Manager, Puma Investments, now has over GBP130
million of VCT money under management in this and other Puma VCTs
and a well-established, experienced VCT team to manage the
Company's deal flow.
Results
The Company reported a profit before tax and provision against
the Opes investment of GBP1.4 million for the period (2014:
GBP517,000) and a post-tax gain of 3.86p per ordinary share
(calculated on the weighted average number of shares). This profit
before tax is reduced to GBP848,000 after the GBP532,000 provision
against the Opes investment resulting in a post-tax gain of 1.94p
per ordinary share. The Net Asset Value per ordinary share ("NAV")
at the year-end (after adding back dividends paid) was 97.49p
(2014: 95.51p).
Dividend
I am pleased to report that, in line with our stated objective
as set out in our prospectus, your board declared the Company's
first two dividends during the period, a total of 12p per Ordinary
Share. This is equivalent to an 8.6% per annum tax-free running
yield on your investment.
Investments
At the end of the period, the Company had a total of GBP21.5
million invested in a mixture of qualifying and non-qualifying
investments whilst maintaining our VCT qualifying status. These
investments are primarily in asset-backed businesses and projects
generating a weighted average annual return of 7% on the basis of
current deployments and investment performance.
The Company's portfolio of investments is generally performing
well. As reported on 4 March 2016, a major incident occurred at the
materials recycling facility operated by Opes Industries Limited,
into which the Company has invested a total of GBP3.6 million
alongside other funds managed by, and companies advised by, the
Investment Manager. Your board has agreed that a provision of
GBP532,000 should be made to the carrying value of this investment.
Further detail of this is set out in the Investment Manager's
report below.
VCT qualifying status
I am pleased to report that the Company achieved its 70%
qualifying status during the period. PricewaterhouseCoopers LLP
("PwC") provides the board and the Investment Manager with advice
on the ongoing compliance with HMRC rules and regulations
concerning VCTs. PwC also assists the Investment Manager in
establishing the status of investments as qualifying holdings.
Outlook
The Company made good progress during the period, and
thereafter. We are pleased to report that the Company's net assets
are now substantially deployed in a diverse range of high quality
businesses and projects. The ongoing lack of availability of bank
credit has enabled the Company to assemble a portfolio of
investments on attractive terms. Whilst there will probably be some
further changes in the composition of the portfolio, the Board
expects to concentrate in the future on the monitoring of our
existing investments and considering the options for exits in due
course.
The Board has considered the implications of the recent
referendum vote for the Company's portfolio and prospects. At this
stage the impact is uncertain. However, as far as we can judge,
there is no obvious impact on the portfolio. It may be that money
market interest rates will remain low for longer than they
otherwise would have done, but low rates had anyway been assumed in
our financial planning.
Egmont Kock
Chairman
30 June 2016
INVESTMENT MANAGER'S REPORT
Introduction
The Company's funds are now substantially deployed in both
qualifying and non-qualifying investments, having met its minimum
qualifying investment percentage of 70 per cent during the period.
We believe our portfolio is well positioned to deliver attractive
returns to shareholders within the fund's expected remaining time
horizon.
Qualifying investments
The Company deployed a total of GBP6.2 million across three
VCT-qualifying investments during the period, ensuring that the
requirement that qualifying investments represent 70% of the fund
on an HMRC basis was met.
As previously reported, the Company had invested GBP1.6 million
(as part of a GBP2.4 million investment alongside other Puma VCTs)
into Alyth Trading Limited, a nationwide provider of contracting
services to provide working capital for its ongoing business. In
February 2016, the Company invested a further GBP1.6 million (as
part of a GBP2.6 million further investment round alongside other
Puma VCTs) into Alyth Trading. During the period, Alyth Trading had
been engaged on a project to provide contracting services in
connection with the construction of a new 65 bed high-end nursing
home in Saggart Village, County Dublin. We are pleased to report
that the project has completed successfully, generating attractive
returns for Alyth Trading which will benefit the Company when its
investment is repaid in due course. During the period, Alyth
Trading entered into two new contracts. In June 2015, it entered
into a contract to provide contracting services in connection with
the construction of a 112 bed purpose built care home in Hamilton,
Scotland, which we are informed is going well. In February 2016, it
entered into a further contract to provide contracting services in
connection with the construction of a 68 bed purpose built care
home in Egham, Windsor
At the start of the period, the Company had a GBP400,000
investment in Saville Services Limited, a company providing
contracting services over a series of projects, which had
successfully completed a number of construction projects, most
recently of 20 supported living apartments in Grimsby, North East
Lincolnshire. In February 2016, the Company invested a further GBP3
million (as part of a GBP5 million further investment round
alongside other Puma VCTs) into Saville Services and we understand
that Saville Services' directors are actively pursuing
opportunities to deploy these funds in similar projects in the near
future.
As reported on 4 March 2016, a major incident occurred at the
Materials Recycling Facility ("MRF") operated by Opes Industries
Limited ("Opes"), into which the Company has invested a total of
GBP3.6 million, GBP1.6 million during the period, as part of an
GBP8.8m investment by entities managed or advised by Puma. Opes
owns a 73 hectare site in north Oxfordshire with an operating
landfill site for non-hazardous materials and an aggregates/gravel
quarrying business. The site has planning permission for a MRF to
process waste from commercial and industrial sources and from
construction and demolition. The MRF was designed to separate
metals for recycling, generate solid recovered fuel and send only a
small proportion of the material accepted at the gate for landfill.
As a result the MRF would mitigate the cost of landfill tax
incurred from a consignment. The Company's investment was to
provide funding for the construction and equipping of the MRF and
working capital during the build-up of the trade. The funding was
provided in the form of equity and loan stock and our interests are
covered by a first fixed and floating charge over all Opes' assets
including a charge over the land and buildings. A large industrial
building (approx. 100m x 30m) was constructed to house the MRF
which began operating during the second half of 2015. In the early
hours of Sunday 28 February 2016, a fire was discovered within the
waste reception hall of the MRF. The fire has seriously damaged at
least one third of the building and seems to have destroyed at
least half of the plant and equipment. However, until recently, the
fire was still smouldering and it is therefore currently impossible
to make an informed assessment of the full extent of the damage. No
one was hurt in the fire. It was clear that the immediate
consequence of the fire was that the plant is currently unable to
operate and will require substantial rebuilding and reequipping
before it can reopen. On 9 March 2016, the Company appointed an
administrator over Opes in order to best protect the Company's
investment. The administrator has implemented various measures to
preserve the value of Opes' assets and mitigate costs. We
understand that the MRF and the Opes business is insured in respect
of plant, building and business interruption; however, due to the
prolonged smouldering of the fire, the insurers have only recently
been able to assess the damage and are currently preparing their
report. In light of the continued uncertainty regarding the
situation, the Company has made a provision of GBP532,000 against
the carrying value of its investment in Opes. The provision is
believed to be a prudent position reflecting in part the potential
for various legal and professional fees likely to be incurred in
maximising the recovery of the investment.
The Company's GBP1.875 million qualifying investment (as part of
a GBP5 million investment alongside other Puma VCTs) in Urban
Mining Limited, a member of the Chinook Urban Mining group of
companies, continues to perform well. Chinook Urban Mining is a
well-funded energy-from-waste business which is developing a
flagship plant in East London to generate electricity through the
gasification of municipal solid waste and will benefit from
Renewable Obligations Certificates. The investment is secured with
a first charge over the Chinook Urban Mining business and the eight
acre site of the East London plant and is yielding an attractive
return to the Company.
As previously reported, Kinloss Trading Limited and Jephcote
Trading Limited (in which the Company had invested GBP3.5 million
and GBP880,000 respectively) have been, as members of SKPB Services
LLP, engaged in a contract with Ansgate (Barnes) Limited to provide
project management and contracting services in connection with the
construction of nine new houses and 12 new flats at a construction
known as The Albany, in Barnes, south west London. We are pleased
to report that the project completed successfully earlier this
year, generating attractive returns for Kinloss Trading and
Jephcote Trading and which will benefit the Company when its
investment is repaid in due course. We understand that the
management of SKPB Services are in advance discussions in
connection with a new large contract.
Non-qualifying investments
As previously reported, we have adopted a strategy for the
non-qualifying portfolio of investing in secured loans (and other
similar instruments) offering a good yield with hopefully limited
downside risk. During the period, the Company realised
approximately GBP6 million net within the non-qualifying portfolio
to free up cash to make the qualifying investments referred to
above.
The Company's loan (through an affiliate, Lothian Lending
Limited) to RPE FL1 Limited, a member of the Renewable Power
Exchange group, continues to perform well. The original GBP1.3
million loan (as part of a GBP2.6 million investment alongside
another Puma VCT), provided funding towards the construction of a
1.5MW wind farm in East Lothian, Scotland, with the electricity
once generated, used to supply those on low incomes in the local
community. The loan is secured on the site in East Lothian and is
earning an attractive rate of interest. We are pleased to report
that the construction is now complete, the turbines are generating
electricity and EBITDA is in line with forecasts. During the
period, Lothian Lending repaid GBP175,000 and the loan balance now
stands at GBP1.125 million.
As previously reported, various entities managed and advised by
your Investment Manager provided several tranches of a GBP7.1
million bridging facility to companies within the Connolly and
Callaghan group. The Company participated in this through an
initial GBP1.95 million non-qualifying loan (advanced through an
affiliate, Buckhorn Lending Limited) and, subsequently, through a
GBP600,000 non-qualifying loan (advanced through another affiliate,
Latimer Lending Limited). The Connolly and Callaghan group is a
provider of emergency overnight accommodation in Bristol with over
20 years' experience in the sector. The overall facility was
secured on a portfolio of over 20 properties and was extended on a
sub-50% loan-to-value basis. I am pleased to report that, during
the period, the loan together with accrued interest was repaid
generating an attractive return to the Company.
The Company's GBP750,000 investment in Gold Line Property
Limited, a care and dementia treatment business which has been
developing new premises in Mytchett, Surrey, has performed well.
The build project completed on time and on budget, the premises has
recently passed its Care Quality Commission final inspection and
the first patients have been accepted. During the period, the loan
was increased to GBP1.4 million and extended for a further 18
months and, following an internal corporate restructuring, is now
advanced (through an affiliate of the Company, Latimer Lending
Limited) to Kingsmead Care Home Limited, a subsidiary of Gold Line
Property Limited. The loan remains secured with a first charge on
the business and the property.
The Company's various loans to entities within the Citrus Group,
as part of a series of revolving credit facilities from other
vehicles managed and advised by your Investment Manager to provide
working capital to the Citrus PX business, continue to deliver
attractive returns to the Company. Citrus PX operates a property
part exchange service facilitating the rapid purchase of properties
for developers and homeowners. The facilities provide a series of
loans to Citrus PX, with the benefit of a first charge over a
geographically diversified portfolio of residential properties on
conservative terms. At the period end, the Company's investment
(through its affiliate Valencia Lending Limited) totalled GBP1
million.
As previously reported, the Company had extended a GBP1.54
million loan which (through another affiliate, Buckhorn Lending
Limited), together with other Puma VCTs, provided a GBP4 million
revolving credit facility to Ennovor Trading 1 Limited for the
purchase of used cooking oil for conversion into bio-diesel. The
facility was structured to mitigate risks by being capable of being
drawn only once back-to-back purchase and sale contracts had been
entered into with approved counterparties. In November 2014,
following a major default by one of those counterparties, Ennovor
Trading 1 Limited was placed into administration. We had previously
reported that the Company had recovered its principal in full plus
some interest from the proceeds of the administration and we are
pleased to report that, during the period, the Company recovered a
further GBP293,371 thus fully recovering all accrued interest that
was due.
As indicated in the Company's interim report, during the period
the Company realised its GBP500,000 investment in Nextenergy Solar
Fund, an investment company focusing on operational solar
photovoltaic assets located in the United Kingdom, at a premium to
the issue price.
During the period, to further manage liquidity, the Company
invested GBP2.34 million via Latimer Lending Limited in a floating
rate bond issued by Commonwealth Bank of Australia (GBP1.29
million) and in a 6.5% bond issued by J Sainsbury plc (GBP1.05
million). The Commonwealth Bank of Australia position was realised
shortly before the end of the period.
Investment Strategy
We are pleased to have invested a substantial proportion of the
funds raised by the Company in asset-backed qualifying and
non-qualifying investments. We remain focused on generating strong
returns for the Company in both the qualifying and non-qualifying
portfolios whilst balancing these returns with maintaining an
appropriate risk exposure and ensuring compliance with the HMRC VCT
rules. We are now primarily focusing on the monitoring of our
existing investments and considering the options for exits.
Puma Investment Management Limited
30 June 2016
Investment Portfolio Summary
As at 29 February 2016
Valuation
as a %
of Net
Valuation Cost Gain/(loss) Assets
GBP'000 GBP'000 GBP'000
Qualifying Investments
Jephcote Trading
Limited 880 880 - 4%
Kinloss Trading Limited 3,500 3,500 - 15%
Saville Services
Limited 3,400 3,400 - 14%
Urban Mining Limited 1,875 1,875 - 8%
Opes Industries Limited 3,068 3,600 (532) 13%
Alyth Trading Limited 3,200 3,200 - 13%
Total Qualifying
Investments 15,923 16,455 (532) 67%
---------- -------- ------------ ----------
Non-Qualifying Investments
Latimer Lending Limited 2,460 2,460 - 10%
Valencia Lending
Limited 1,000 1,000 - 4%
Lothian Lending Limited 1,125 1,125 - 5%
Total Non-Qualifying
investments 4,585 4,585 - 19%
---------- -------- ------------ ----------
Latimer Lending Limited
(Sainsburys Bond)* 1,023 1,048 (25) 4%
Liquidity Management
investments 1,023 1,048 (25) 4%
---------- -------- ------------ ----------
Total Investments 21,531 22,088 (557) 90%
Balance of Portfolio 2,618 2,618 - 10%
Net Assets 24,149 24,706 (557) 100%
---------- -------- ------------ ----------
Of the investments held at 29 February 2016, all are
incorporated in England and Wales.
* Quoted investment listed on the London Stock Exchange
Income Statement
For the period ended 29 February 2016
Period from 1 January
2015 to 29 February Year ended 31 December
2016 2014
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Loss)/Gain on 8
investments (b) - (559) (559) - 23 23
Income 2 2,301 - 2,301 1,293 - 1,293
2,301 (559) 1,742 1,293 23 1,316
-------- -------- -------- -------- -------- --------
Investment management
fees 3 (153) (459) (612) (135) (405) (540)
Other expenses 4 (282) - (282) (259) - (259)
(435) (459) (894) (394) (405) (799)
-------- -------- -------- -------- -------- --------
Profit on ordinary
activities before
taxation 1,866 (1,018) 848 899 (382) 517
Tax (charge)/credit
on profit on ordinary
activities 5 (373) 83 (290) (8) - (8)
Profit and total
comprehensive
income for the
period 1,493 (935) 558 891 (382) 509
======== ======== ======== ======== ======== ========
Basic and diluted
Return/(loss)
per Ordinary Share
(pence) 6 5.29p (3.31p) 1.98p 3.15p (1.35p) 1.80p
======== ======== ======== ======== ======== ========
All items in the above statement derive from continuing
operations.
There are no gains or losses other than those disclosed in the
Income Statement.
The total column of this statement is the Statement of Total
Comprehensive Income of the Company prepared in accordance with FRS
102 'The Financial Reporting Standard applicable in the UK and
Republic of Ireland'. The supplementary revenue and capital columns
are prepared in accordance with the Statement of Recommended
Practice, 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts' issued in November 2014 by the Association
of Investment Companies.
Balance Sheet
As at 29 February 2016
As at As at
29 February 31 December
Note 2016 2014
GBP'000 GBP'000
Fixed Assets
Investments 8 21,531 21,918
------------- -------------
Current Assets
Debtors 9 2,472 1,019
Cash 635 4,405
------------- -------------
3,107 5,424
Creditors - amounts
falling due within one
year 10 (488) (360)
Net Current Assets 2,619 5,064
------------- -------------
Total Assets less Current
Liabilities 24,150 26,982
Creditors - amounts
falling due after more
than one year 11 (1) (1)
Net Assets 24,149 26,981
============= =============
Capital and Reserves
Called up share capital 12 282 282
Capital redemption reserve 1 1
Capital reserve - realised (1,088) (730)
Capital reserve - unrealised (557) 20
Revenue reserve 25,511 27,408
Total Equity 24,149 26,981
============= =============
Net Asset Value per
Ordinary Share 13 85.49p 95.51p
============= =============
The financial statements on pages 27 to 43 were approved and
authorised for issue by the Board of Directors on 30 June 2016 and
were signed on their behalf by:
Egmont Kock
Chairman
30 June 2016
Statement of Cash Flows
For the period ended 29 February 2016
Period
from 1
January
2015 to Year ended
29 February 31 December
2016 2014
GBP'000 GBP'000
Reconciliation of profit
after tax to net cash used
in operating activities
Profit on ordinary activities
after taxation 558 509
Taxation 290 8
Loss/(gain) on investments 577 (23)
Increase in debtors (1,453) (934)
(Decrease)/increase in
creditors (162) 132
Net cash used in operating
activities (190) (308)
------------- -------------
Cash flow from investing
activities
Purchase of investments (5,200) (11,575)
Proceeds from disposal
of investments and loan
note repayments 5,010 2,012
Net cash used in investing
activities (190) (9,563)
------------- -------------
Cash flow from financing
activities
Shares repurchased in year - (94)
Dividends paid to shareholders (3,390) -
Net cash used in financing
activities (3,390) (94)
------------- -------------
Net decrease in cash and
cash equivalents (3,770) (9,965)
Cash and cash equivalents
at the beginning of the
period 4,405 14,370
Cash and cash equivalents
at the end of the period 635 4,405
============= =============
Statement of Changes in Equity
For the period ended 29 February 2016
Called Capital Capital Capital
up share redemption reserve reserve Revenue
capital reserve - realised - unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at
31 December 2013 283 - (324) (4) 26,611 26,566
Profit for the
year - - (406) 24 891 509
Shares cancelled
in the year (1) 1 - - (94) (94)
---------- ------------ ------------ -------------- --------- --------
Balance as at
31 December 2014 282 1 (730) 20 27,408 26,981
Profit for the
period - - (376) (559) 1,493 558
Realised on disposal - - 18 (18) - -
Dividends paid - - - - (3,390) (3,390)
Balance as at
29 February 2016 282 1 (1,088) (557) 25,511 24,149
========== ============ ============ ============== ========= ========
Distributable reserves comprise: Capital reserve-realised,
Capital reserve-unrealised (excluding gains on unquoted
investments) and the Revenue reserve. At the period-end
distributable reserves were GBP23,866,000 (2014:
GBP26,698,000).
The Capital reserve-realised includes gains/losses that have
been realised in the period due to the sale of investments, net of
related costs. The Capital reserve-unrealised represents the
investment holding gains/losses and shows the gains/losses on
investments still held by the Company not yet realised by an asset
sale.
The revenue reserve represents the cumulative revenue earned
less cumulative distributions.
1. Accounting Policies
Accounting convention
Puma VCT 9 plc ("the Company") was incorporated on 3 October
2012 and is domiciled in England and Wales. The registered office
is Bond Street House, 14 Clifford Street, London W1S 4JU. The
Company is a public limited company whose shares are listed on LSE
with a premium listing. The company's principal activities and
nature of operations are disclosed in the Report of the
Directors.
The financial statements have been prepared under the historical
cost convention, modified to include the revaluation of investments
held at fair value, and in accordance with FRS 102 'The Financial
Reporting Standard applicable in the UK and Republic of Ireland'
("FRS 102") and the Statement of Recommended Practice, 'Financial
Statements of Investment Trust Companies and Venture Capital
Trusts' issued in November 2014 by the Association of Investment
Companies ("the SORP").
Monetary amounts in these financial statements are rounded to
the nearest whole GBP1,000, except where otherwise indicated.
First time adoption of FRS 102
These financial statements are the first financial statements of
the Company prepared in accordance with FRS 102. The financial
statements of the Company for the year ended 31 December 2014 were
prepared in accordance with previous UK GAAP.
Some of the FRS 102 recognition, measurement, presentation and
disclosure requirements and accounting policy choices differ from
previous UK GAAP. There are no significant changes to the
accounting policies as a result of the adoption of FRS 102 and no
changes in previously reported profit or equity.
Investments
All investments are measured at fair value. They are all held as
part of the Company's investment portfolio and are managed in
accordance with the investment policy set out on page 14.
Listed investments are stated at bid price at the reporting
date.
Unquoted investments are stated at fair value by the Directors
with reference to the International Private Equity and Venture
Capital Valuation Guidelines ("IPEV") as follows:
-- Investments which have been made within the last twelve
months or where the investee company is in the early stage of
development will usually be valued at the price of recent
investment except where the company's performance against plan is
significantly different from expectations on which the investment
was made in which case a different valuation methodology will be
adopted.
-- Investments in debt instruments will usually be valued by
applying a discounted cash flow methodology based on expected
future returns of the investment.
-- Alternative methods of valuation such as net asset value may
be applied in specific circumstances if considered more
appropriate.
Realised surpluses or deficits on the disposal of investments
are taken to realised capital reserves, and unrealised surpluses
and deficits on the revaluation of investment are taken to
unrealised capital reserves.
1. Accounting Policies (continued)
Income
Dividends receivable on listed equity shares are brought into
account on the ex-dividend date. Dividends receivable on unquoted
equity shares are brought into account when the Company's right to
receive payment is established and there is no reasonable doubt
that payment will be received. Interest receivable is recognised
wholly as a revenue item on an accruals basis.
Performance fees
Upon its inception, the Company agreed performance fees payable
to the Investment Manager, Puma Investment Management Limited, and
members of the investment management team at 20 per cent of the
aggregate excess of the amounts realised over GBP1 per Ordinary
Share returned to Ordinary Shareholders. This incentive will only
be exercisable once the holders of Ordinary Shares have received
distributions of GBP1 per share. The performance fee is accounted
for as an equity-settled share-based payment.
Section 26 of FRS 102 "Share-Based Payment" requires the
recognition of an expense in respect of share-based payments in
exchange for goods or services. Entities are required to measure
the goods or services received at their fair value, unless that
fair value cannot be estimated reliably in which case that fair
value should be estimated by reference to the fair value of the
equity instruments granted.
At each balance sheet date, the Company estimates that fair
value by reference to any excess of the net asset value, adjusted
for dividends paid, over GBP1 per share in issue at the balance
sheet date. Any change in fair value is recognised in the Income
Statement with a corresponding adjustment to equity.
Expenses
All expenses (inclusive of VAT) are accounted for on an accruals
basis. Expenses are charged wholly to revenue, with the exception
of:
-- expenses incidental to the acquisition or disposal of an investment charged to capital; and
-- the investment management fee, 75 per cent of which has been
charged to capital to reflect an element which is, in the
directors' opinion, attributable to the maintenance or enhancement
of the value of the Company's investments in accordance with the
Board's expected long-term split of return; and
-- the performance fee which is allocated proportionally to
revenue and capital based on the respective contributions to the
Net Asset Value.
Taxation
Corporation tax is applied to profits chargeable to corporation
tax, if any, at the applicable rate for the period. The tax effect
of different items of income/gain and expenditure/loss is allocated
between capital and revenue return on the marginal basis as
recommended by the SORP.
Deferred tax is recognised in respect of all timing differences
that have originated but not reversed at the balance sheet date,
where transactions or events that result in an obligation to pay
more, or right to pay less, tax in the future have occurred at the
balance sheet date. This is subject to deferred tax assets only
being recognised if it is considered more likely than not that
there will be suitable taxable profits from which the future
reversal of the underlying timing differences can be deducted.
Timing differences are differences arising between the Company's
taxable profits and its results as stated in the financial
statements which are capable of reversal in one or more subsequent
periods. Deferred tax is measured on a non-discounted basis at the
tax rates that are expected to apply in the periods in which timing
differences are expected to reverse, based on tax rates and laws
enacted or substantively enacted at the balance sheet date.
1. Accounting Policies (continued)
Reserves
Realised losses and gains on investments, transaction costs, the
capital element of the investment management fee and taxation are
taken through the Income Statement and recognised in the Capital
Reserve - Realised on the Balance sheet. Unrealised losses and
gains on investments and the capital element of the performance fee
are also taken through the Income Statement and are recognised in
the Capital Reserve - Unrealised.
Debtors
Debtors include accrued income which is recognised at amortised
cost, equivalent to the fair value of the expected balance
receivable.
Dividends
Final dividends payable are recognised as distributions in the
financial statements when the Company's liability to make payment
has been established. The liability is established when the
dividends proposed by the Board are approved by the Shareholders.
Interim dividends are recognised when paid.
Key accounting estimates and assumptions
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates and assumptions will, by
definition, seldom equal the related actual results. The estimates
and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets within the next
financial year relate to the fair value of unquoted investments.
Further details of the unquoted investments are disclosed in the
Investment Manager's Report on pages 3 to 6 and notes 8 and 14 of
the financial statements.
2. Income
Period from
1 January 2015
to 29 February Year ended 31
2016 December 2014
GBP'000 GBP'000
Income from investments
Loan stock interest 2,260 1,199
Bond yields 28 13
2,288 1,212
Other income
Bank deposit income 13 81
2,301 1,293
================ ===============
3. Investment Management Fees
Period from
1 January 2015
to 29 February Year ended 31
2016 December 2014
GBP'000 GBP'000
Puma Investments
fees 612 540
================ ===============
Puma Investment Management Limited ("Puma Investments") has been
appointed as the Investment Manager of the Company for an initial
period of five years, which can be terminated by not less than
twelve months' notice, given at any time by either party, on or
after the fifth anniversary. The Board is satisfied with the
performance of the Investment Manager. Under the terms of this
agreement Puma Investments will be paid an annual fee of 2 per cent
of the Net Asset Value payable quarterly in arrears calculated on
the relevant quarter end NAV of the Company. These fees are capped,
the Investment Manager having agreed to reduce its fee (if
necessary to nothing) to contain total annual costs (excluding
performance fee and trail commission) to within 3.5 per cent of
funds raised. Total costs this period were 2.7 per cent of the
funds raised (2014: 2.7%).
4. Other expenses
Period from
1 January 2015
to 29 February Year ended 31
2016 December 2014
GBP'000 GBP'000
Administration
- Shore Capital
Fund Administration
Services Limited 107 95
Directors Remuneration 65 56
Social security
costs 5 1
Auditor's remuneration
for statutory audit 23 22
Other expenses 82 85
282 259
================ ===============
Shore Capital Fund Administration Services Limited provides
administrative services to the Company for an aggregate annual fee
of 0.35 per cent of the Net Asset Value of the Fund, payable
quarterly in arrears.
Remuneration for each Director for the period is disclosed in
the Directors' Remuneration Report on page 19. The Company had no
employees (other than Directors) during the period. The average
number of non-executive Directors during the period was 3 (2014:
3). The non-executive Directors are considered to be the Key
Management Personnel of the Company with total remuneration for the
period of GBP70,000 (2014: GBP57,000), including social security
costs.
The Auditor's remuneration of GBP18,750 (2014: GBP18,250) has
been grossed up in the table above to be inclusive of VAT.
5. Tax on Ordinary Activities
Period from
1 January 2015 Year ended
to 29 February 31 December
2016 2014
GBP'000 GBP'000
UK corporation tax
charged to revenue 373 8
UK corporation tax
credited to capital (83) -
UK corporation tax
charge for the period 290 8
================ =============
Factors affecting tax charge
for the period
Profit on ordinary
activities before
taxation 848 517
================ =============
Tax charge calculated
on profit on ordinary
activities before
taxation at the
applicable rate
of 20% 170 103
Capital losses not
deductible / (gains
not taxable) 112 (5)
Tax losses utilised - (89)
Other differences 8 (1)
290 8
================ =============
Capital returns are not taxable as VCTs are exempt from tax on
realised capital gains subject that they comply and continue to
comply with the VCT regulations.
Due to the Company's status as a Venture Capital Trust and the
intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the Company has not provided
deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
6. Basic and diluted return/(loss) per Ordinary Share
Period from 1 January 2015
to 29 February 2016
Revenue Capital Total
Profit/(loss) for
the period (GBP'000) 1,493 (935) 558
Weighted average
number of shares 28,248,823 28,248,823 28,248,823
Return/(loss) per
share 5.29p (3.31)p 1.98p
Year ended 31 December
2014
Revenue Capital Total
Profit/(loss) for
the year (GBP'000) 891 (382) 509
Weighted average
number of shares 28,265,480 28,265,480 28,265,480
Return/(loss) per
share 3.15p (1.35)p 1.80p
7. Dividends
The Directors do not propose a final dividend in relation to the
period ended 29 February 2016 (2014: GBPnil). Two interim dividends
of 6p per ordinary share were paid from revenue reserves in the
period ended 29 February 2016 totalling GBP3,390,000 (2014:
GBPnil).
8. Investments
(a) Movements in Qualifying Non qualifying
investments investments investments Total
GBP'000 GBP'000 GBP'000
Book cost at 1
January 2015 10,255 11,643 21,898
Net unrealised
gains at 1 January
2015 - 20 20
Valuation at 1
January 2015 10,255 11,663 21,918
Purchases at cost 6,200 2,337 8,537
Disposals:
- Proceeds - (8,365) (8,365)
- Realised net
losses on disposals - (2) (2)
Net unrealised
losses (532) (25) (557)
Valuation at 29
February 2016 15,923 5,608 21,531
============= =============== ========
Book cost at 29
February 2016 16,455 5,633 22,088
Net unrealised
losses at 29 February
2016 (532) (25) (557)
Valuation at 29
February 2016 15,923 5,608 21,531
============= =============== ========
(b) Gains and losses on investments
The gains and losses on investments for the period shown in the
Income Statement is analysed as follows:
Period
from 1
January
2015 to Year ended
29 February 31 December
2016 2014
GBP'000 GBP'000
Realised (losses)/gains
on disposals in the period (2) 3
Unrealised (losses)/gains in
period (557) 20
(559) 23
============= =============
(c) Quoted and unquoted investments
Market Market value
value as as at 31
at 29 February December
2016 2014
GBP'000 GBP'000
Quoted investments 1,023 520
Unquoted investments 20,508 21,398
21,531 21,918
=============== ===============
Further details of these investments are disclosed in the
Investment Portfolio Summary on pages 7 to 12 of the Annual
Report.
9. Debtors
As at 29 February As at 31 December
2016 2014
GBP'000 GBP'000
Other debtors 1 -
Accrued income 2,471 1,019
------------------ ------------------
2,472 1,019
================== ==================
10. Creditors - amounts falling due within one year
As at 29 February As at 31 December
2016 2014
GBP'000 GBP'000
Accrued management
fees and administration
costs 190 352
Corporation tax 298 8
488 360
================== ==================
11. Creditors - amounts falling due after more than one year
As at 29 February As at 31 December
2016 2014
GBP'000 GBP'000
Loan notes 1 1
================== ==================
On 30 October 2012, the Company issued Loan Notes in the amount
of GBP1,000 to a nominee on behalf of the Investment Manager and
members of the investment management team. The Loan Notes accrue
interest of 5 per cent per annum.
The Loan Notes entitle the Investment Manager and members of the
investment management team to receive a performance related
incentive of 20 per cent of the aggregate amounts realised by the
Company in excess of GBP1 per Ordinary Share. The Shareholders will
be entitled to the balance. This incentive, to be effected through
the issue of shares in the Company, will only be exercised once the
holders of Ordinary Shares have received dividends of GBP1 per
share (whether capital or income). The performance incentive
structure provides a strong incentive for the Investment Manager to
ensure that the Company performs well, enabling the Board to
approve distributions as high and as soon as possible.
In the event that distributions to the holders of Ordinary
Shares totalling GBP1 per share have been made the Loan Notes will
convert into sufficient Ordinary Shares to represent 20 per cent of
the enlarged number of Ordinary Shares. The amount of the
performance fee will be calculated as 20 per cent of the excess of
the net asset value (adjusted for dividends paid) over GBP1 per
issued share.
12. Called Up Share Capital
As at 29 February As at 31 December
2016 2014
GBP'000 GBP'000
28,248,823 ordinary
shares of 1p each 282 282
================== ==================
13. Net Asset Value per Ordinary Share
As at As at
29 February 31 December
2016 2014
Net assets 24,149,000 26,981,000
Shares in issue 28,248,823 28,248,823
Net asset value
per share
Basic 85.49p 95.51p
Diluted 85.49p 95.51p
Net asset value per share as at 29 February 2016 is calculated
after the payment of total dividends of 12p during the period, as
disclosed in note 7.
14. Financial Instruments
The Company's financial instruments comprise its investments,
cash balances, debtors and certain creditors. The fair value of all
of the Company's financial assets and liabilities is represented by
the carrying value in the Balance Sheet. Excluding cash balances,
the Company held the following categories of financial instruments
at 29 February 2016:
As at 29 February As at 31 December
2016 2014
GBP'000 GBP'000
Financial assets measured
at fair value through
profit or loss
Investments managed
through Puma Investment
Management Limited 21,531 21,918
Financial assets that
are debt instruments
measured at amortised
cost
Interest, dividends
and other receivables 2,472 1,019
Financial liabilities
measured at amortised
cost (191) (353)
23,812 22,584
================== ==================
Management of risk
The main risks the Company faces from its financial instruments
are market price risk, being the risk that the value of investment
holdings will fluctuate as a result of changes in market prices
caused by factors other than interest rate or currency movements,
liquidity risk, credit risk and interest rate risk. The Board
regularly reviews and agrees policies for managing each of these
risks. The Board's policies for managing these risks are summarised
below and have been applied throughout the period.
14. Financial Instruments (continued)
Credit risk
Credit risk is the risk that the counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The Investment Manager
monitors counterparty risk on an ongoing basis. The carrying amount
of financial assets best represents the maximum credit risk
exposure at the balance sheet date. The Company's financial assets
and maximum exposure to credit risk is as follows:
As at 29 As at 31
February December
2016 2014
GBP'000 GBP'000
Investments in loans,
loan notes and bonds 10,544 13,233
Cash at bank and in hand 635 4,405
Interest, dividends and
other receivables 2,472 1,019
13,651 18,657
========== ==========
The cash held by the Company at the period end is split between
two U.K. banks. Bankruptcy or insolvency of either bank may cause
the Company's rights with respect to the receipt of cash held to be
delayed or limited. The Board monitors the Company's risk by
reviewing regularly the financial position of the banks and should
it deteriorate significantly the Investment Manager will, on
instruction of the Board, move the cash holdings to another
bank.
Credit risk associated with interest, dividends and other
receivables are predominantly covered by the investment management
procedures.
Investments in loans, loan notes and bonds comprises a
fundamental part of the Company's venture capital investments,
therefore credit risk in respect of these assets is managed within
the Company's main investment procedures.
Market price risk
Market price risk arises mainly from uncertainty about future
prices of financial instruments held by the Company. It represents
the potential loss the Company might suffer through holding
investments in the face of price movements. The Investment Manager
actively monitors market prices and reports to the Board, which
meets regularly in order to consider investment strategy.
The Company's strategy on the management of market price risk is
driven by the Company's investment policy as outlined in the
Strategic Report on page 14. The management of market price risk is
part of the investment management process. The portfolio is managed
with an awareness of the effects of adverse price movements through
detailed and continuing analysis, with an objective of maximising
overall returns to shareholders.
Holdings in unquoted investments may pose higher price risk than
quoted investments. Some of that risk can be mitigated by close
involvement with the management of the investee companies along
with review of their trading results.
5% (2014: 2%) of the Company's investments are listed on the
London Stock Exchange and 95% (2014: 98%) are unquoted
investments.
14. Financial Instruments (continued)
Liquidity risk
Details of the Company's unquoted investments are provided in
the Investment Portfolio summary on page 7. By their nature,
unquoted investments may not be readily realisable, the Board
considers exit strategies for these investments throughout the
period for which they are held. As at the period end, the Company
had no borrowings, other than loan notes amounting to GBP1,000
(2014: GBP1,000) (see note 11).
The Company's liquidity risk associated with investments is
managed on an ongoing basis by the Investment Manager in
conjunction with the Directors and in accordance with policies and
procedures in place as described in the Report of the Directors.
The Company's overall liquidity risks are monitored on a quarterly
basis by the Board. The Company maintains sufficient investments in
cash and readily realisable securities to pay accounts payable and
accrued expenses.
Fair value interest rate risk
The benchmark that determines the interest paid or received on
the current account is the Bank of England base rate, which was 0.5
per cent at 29 February 2016. All of the loan and loan note
investments are unquoted and hence not directly subject to market
movements as a result of interest rate movements.
Cash flow interest rate risk
The Company has exposure to interest rate movements primarily
through its cash deposits and loan notes which track either the
Bank of England base rate or LIBOR.
Interest rate risk profile of financial assets
The following analysis sets out the interest rate risk of the
Company's financial assets as at 29 February 2016.
Weighted
Weighted average
average period
Rate interest until
status rate maturity Total
GBP'000
Cash at bank -
RBS Floating 0.15% - 560
Cash at bank -
Lloyds Floating 0.50% - 75
Loans, loan notes
and bonds Floating 15.47% 38 months 3,969
Loans, loan notes
and bonds Fixed 18.11% 43 months 5,416
Non-interest
Balance of assets bearing - 14,618
24,638
========
The following analysis sets out the interest rate risk of the
Company's financial assets as at 31 December 2014.
Weighted
Weighted average
average period
Rate interest until
status rate maturity Total
GBP'000
Cash at bank -
RBS Floating 0.15% - 2,304
Cash at bank -
Lloyds Floating 0.50% - 2,101
Loans, loan notes
and bonds Floating 13.82% 48 months 6,799
Loans, loan notes
and bonds Fixed 14.65% 51 months 6,434
Non-interest
Balance of assets bearing - 9,704
27,342
========
14. Financial Instruments (continued)
Foreign currency risk
The reporting currency of the Company is Sterling. The Company
has not held any non-Sterling investments during the period.
Fair value hierarchy
Financial assets and liabilities measured at fair value are
disclosed using a fair value hierarchy that reflects the
significance of the inputs used in making the fair value
measurements, as follows:-
-- Level a - Fair value is measured based on quoted prices in an active market.
-- Level b - Fair value is measured based on directly observable
current market prices or indirectly being derived from market
prices.
-- Level c (i) - Fair value is measured using a valuation
technique that is based on data from an observable market.
-- Level c (ii) - Fair value is measured using a valuation
technique that is not based on data from an observable market.
Fair values have been measured at the end of the reporting
period as follows:-
As at 29 As at 31
February December
2016 2014
GBP'000 GBP'000
Level a
Investments listed on
LSE 1,023 520
Level c(ii)
Unquoted investments 20,508 21,398
21,531 21,918
========== ==========
The Level c (ii) investments have been valued in line with the
Company's accounting policies and IPEV guidelines. Further details
of these investments are provided in the Significant Investments
section of the Annual Report.
Reconciliation of fair value for level c (ii) financial
instruments held at the period-end:
Unquoted Loans
shares and loan
notes Total
GBP'000 GBP'000 GBP'000
Balance as at 31 December
2013 4,333 7,789 12,122
Purchases at cost 3,832 7,243 11,075
Repayments of loans
and loan notes - (1,799) (1,799)
Balance as at 31 December
2014 8,165 13,233 21,398
Purchases at cost 4,340 1,860 6,200
Repayments of loans
and loan notes - (4,221) (4,221)
Transfers on restructuring (986) 986 -
Transfer to quoted
investment - (2,337) (2,337)
Unrealised loss (532) - (532)
Balance as at 29 February
2016 10,987 9,521 20,508
========= ========== ========
15. Capital management
The Company's objectives when managing capital are to safeguard
the Company's ability to continue as a going concern, so that it
can provide an adequate return to shareholders by allocating its
capital to assets commensurate with the level of risk.
By its nature, the Company has an amount of capital, at least
70% (as measured under the tax legislation) of which must be, and
remain, invested in the relatively high risk asset class of small
UK companies within three years of that capital being
subscribed.
The Company accordingly has limited scope to manage its capital
structure in the light of changes in economic conditions and the
risk characteristics of the underlying assets. Subject to this
overall constraint upon changing the capital structure, the Company
may adjust the amount of dividends paid to shareholders, issue new
shares, or sell assets to maintain a level of liquidity to remain a
going concern.
The Board has the opportunity to consider levels of gearing,
however there are no current plans to do so. It regards the net
assets of the Company as the Company's capital, as the level of
liabilities is small and the management of those liabilities is not
directly related to managing the return to shareholders.
16. Contingencies, Guarantees and Financial Commitments
There were no commitments, contingencies or guarantees of the
Company at the period-end (2014: GBPnil).
17. Controlling Party
In the opinion of the Directors there is no immediate or
ultimate controlling party.
The financial information set out in this announcement does not
constitute the Company's statutory financial statements in
accordance with section 434 Companies Act 2006 for the period ended
29 February 2016, but has been extracted from the statutory
financial statements for the period ended 29 February 2016 which
were approved by the Board of Directors on 30 June 2016 and will be
delivered to the Registrar of Companies. The Independent Auditor's
Report on those financial statements was unqualified and did not
contain any emphasis of matter nor statements under s 498(2) and
(3) of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2014 have
been delivered to the Registrar of Companies and received an
Independent Auditors report which was unqualified and did not
contain any emphasis of matter nor statements under s 498(2) and
(3) of the Companies Act 2006.
A copy of the full annual report and financial statements for
the period ended 29 February 2016 will be printed and posted to
shareholders shortly. Copies will also be available to the public
at the registered office of the Company at Bond Street House, 14
Clifford Street, London, W1S 4JU and will be available for download
from www.pumainvestments.co.uk.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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