TIDMPUMX
RNS Number : 0656T
Puma VCT 10 PLC
29 June 2018
HIGHLIGHTS
-- Funds substantially invested in a diverse range of high quality businesses and projects
-- 18p per share of dividends paid since inception (including 6p
interim dividend paid in February 2018), equivalent to an 8.6% per
annum tax-free running yield on net investment
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Company's fourth Annual Report for
the year ended 28 February 2018.
Investments
At the end of the year, the Company had just over GBP20 million
invested in a mixture of qualifying and non-qualifying investments
whilst maintaining our VCT status. Details of these investments,
which are primarily in asset-backed businesses and projects, can be
found in the Investment Manager's report on pages 3 to 7.
Dividend
As envisaged in the Company's prospectus, the Company has again
paid a dividend of 6p per ordinary share, equivalent to an 8.6%
tax-free annual running yield on shareholders' net investment.
Results
The Company reported a profit after tax of GBP119,000 (2017:
GBP209,000), a gain of 0.43p (2017: 0.76p) per ordinary share
(calculated on the weighted average number of shares). The reduced
profit was the result of a particularly high-yielding qualifying
investment redeeming during the year, the proceeds of which had not
been deployed at the year end. In addition the prior accounting
period was an extended 14 month period whilst this is a calendar
year. The Net Asset Value per ordinary share ("NAV") at 28 February
2018 after adding back dividends paid was 97.54p (2017:
97.10p).
VCT qualifying status
PricewaterhouseCoopers LLP ("PwC") provides the board and the
Investment Manager with advice on the ongoing compliance with HMRC
rules and regulations concerning VCTs and has reported no issues in
this regard for the Company to date. PwC will continue to assist
the Investment Manager in monitoring rule compliance and
establishing the status of potential investments as qualifying
holdings in the future.
Patient Capital Review and Finance Act 2018
We are pleased that, in its response to the Financing Growth in
Innovative Firms Consultation published with the Autumn Budget on
22 November 2017 ("the Patient Capital Review"), the Government has
recognised the continuing importance of VCTs in providing much
needed investment in SMEs. We note that recently enacted Finance
Act 2018 increases VCTs' minimum qualifying investment percentage
threshold from 70% to 80% with effect from 6 April 2019. As
previously reported, the Company has already met its minimum
qualifying investment percentage and we therefore believe that it
is on track to meet this revised target in due course.
Outlook
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. There may be some further changes in the
composition of the portfolio but the Board expects to predominantly
concentrate in the future on the monitoring of our existing
investments and over the next year or so realising the portfolio to
enable the liquidation of the fund after the fifth anniversary as
was envisaged in the prospectus.
David Vaughan
Chairman
28 June 2018
INVESTMENT MANAGER'S REPORT
Introduction
The Company's funds are now substantially deployed in both
qualifying and non-qualifying investments and we believe the
Company's portfolio is well positioned to deliver attractive
returns to shareholders within the fund's expected remaining time
horizon.
Investments
Qualifying Investments
Gasification Plant, East London
In July 2014, before the passing of the Finance Act 2014, the
Company completed a 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. 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. We are pleased to report that the balance of the Company's
investment was repaid during the year, yielding an attractive
return to the Company.
Welcome Health - Chain of Pharmacies
The Company had previously invested GBP2.5 million (as part of a
GBP5 million investment alongside other Puma VCTs) in Welcome
Health Limited. We are pleased to report that Welcome Health
commenced its trade during the year, acquiring a series of mature
pharmacies across the North East of England. The entrepreneur
behind Welcome Health has experience in this geography and is
focused on providing pharmaceutical services to a currently
underserviced and relatively deprived market. As at the date of
this report, Welcome Health owns and operates five pharmacies and
expects to acquire further units in the coming year.
Mini Rainbows - Children's Nursery
As previously reported, the Company invested GBP2.5 million in
Mini Rainbows Limited (as part of a GBP5 million investment
alongside other Puma VCTs), which was established to operate a
trading business in the childcare sector and/or to acquire
businesses which operate within that sector. During the year, Mini
Rainbows commenced its trade by acquiring a mature children's day
nursery in Murrayfield, an affluent part of Edinburgh. The nursery
was founded in 1995 and has capacity for up to 90 children. The
Mini Rainbows' experienced management team are in various stages of
discussions to acquire further nurseries in the coming months.
Warm Hearth - Pubs with Microbreweries
In late 2015, the Company invested GBP2.5 million (as part of a
GBP5 million investment alongside other Puma VCTs) in Warm Hearth
Limited, a pub business seeking to capitalise on the strong growth
trends within the craft beer sub-market. As previously reported,
Warm Hearth entered into a franchise agreement with Brewhouse &
Kitchen Limited ("B&K"), a strong and fast-growing national
branded operator, offering craft micro-brewing activities within
each of its pub units as a point of focus. Warm Hearth acquired
three substantial freehold pub assets in Chester, Wilmslow and
Bedford, all of which opened during 2016 and are trading as fully
branded B&K units. Warm Hearth sold the Bedford pub just before
the end of the year and management are now focused on improving
performance at the Chester and Wilmslow pubs, as well as looking at
planning options on both sites to further enhance value.
Materials Recycling Facility, Oxfordshire
As previously reported, a major fire occurred in February 2016
at the Materials Recycling Facility ("MRF") operated by Opes
Industries Limited ("Opes"), into which the Company invested a
total of GBP3.45m (as part of an GBP8.8m investment by Puma
entities). As a result of the incident, and as reported in the
Company's previous annual report, the board made a provision of
GBP510,000 against the carrying value of the Company's investment
in Opes.
Opes owned a 73 hectare site in north Oxfordshire with a MRF,
including a landfill site for non-hazardous materials and an
aggregates/gravel quarrying business. 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 Opes'
assets.
Following the incident, the Company appointed an administrator
over Opes in order to protect the Company's investment. During the
year, the administrator made substantial progress in recovering the
Company's investment. The site was sold and a settlement was
reached with Opes' insurers. As a result, a large part of the
original capital invested has been recovered. The directors have
now reversed GBP188,000 of the original GBP510,000 impairment to
reflect the current position. The administrator continues to pursue
several other avenues to recover the balance of the Company's
investment.
Growing Fingers - Children's Nursery
As reported in the Company's previous annual report, the Company
had made a GBP980,000 qualifying investment (as part of a GBP2.8
million investment alongside other Puma VCTs) in Growing Fingers
Limited, and a further GBP420,000 was invested during the year. The
investment is funding the construction and launch of a new
purpose-built 108 place nursery school in Wendover,
Buckinghamshire, an affluent commuter town with direct links to
London. Growing Fingers is a new venture headed by a management
team with many years' operational experience in nurseries and
healthcare facilities. The Company benefits from first charge
security over the Wendover site and the Growing Fingers
business.
Saville Services - Care Home Project, Chester
The Company's investment of GBP2.1 million, as previously
reported (alongside other Puma VCTs) into Saville Services Limited
continues to perform well. Saville Services has been working on a
series of projects, including most recently the construction of a
77-bed, purpose-built care home in Chester. We are pleased to
report that the care home project completed successfully during the
year generating attractive returns for Saville Services which will
benefit the Company when its investment is repaid in due
course.
Sunlight Education Nucleus - Special Educational Needs
Schools
In November 2017, the Company made a GBP1 million qualifying
investment (as part of a GBP4.7 million investment alongside other
Puma VCTs) in Sunlight Education Nucleus Limited, a company seeking
to develop, own and operate a series of special education needs
schools across the United Kingdom. The management team have
successfully launched and operated two special education needs
schools and are now actively seeking a new site.
Non-Qualifying Investments
Citrus Group
As previously reported, a series of loans had been advanced to
various entities within the Citrus Group, which at the start of the
year stood at GBP1 million (through an affiliate, Victoria Lending
Limited). These loans, together with loans from other vehicles
managed and advised by your Investment Manager, formed part of a
series of revolving credit facilities to provide working capital to
the Citrus PX business. Citrus PX operates a property part exchange
service facilitating the rapid purchase of properties for
developers and homeowners. Shortly following the year end, the
loans were repaid in full giving a good rate of return.
Mixed Residential-Commercial Development, Bloomsbury
During the year, a GBP1.2 million loan (as part of a total
facility of GBP17.97 million, increased from GBP17.5 million) was
advanced (through an affiliate, Lothian Lending Limited) to
Cudworth Limited to fund the construction of a mixed residential
and commercial development in Bloomsbury, London, close to the
British Museum and 600m from King's Cross station. The development
includes 11 apartments, 2 houses and 11,800 square feet of B1
commercial space. The loan is secured with a first charge over the
site. The development is well progressed and expects to reach
practical completion towards the middle of next year.
Construction of Airport Hotel, Edinburgh
During the year, a GBP822,000 loan, through an affiliate,
Latimer Lending Limited (as part of an overall facility of GBP16.1
million) was agreed with Ability Hotels (Edinburgh) Limited to fund
the development of a new 240-room Hampton by Hilton hotel at
Edinburgh Airport. The hotel is scheduled to open in early 2019 at
which time it will be the newest and nearest hotel to the airport
terminal building. The Ability Group is an experienced developer
and operator of hotels and the loan is secured with a first charge
over the site.
Housing Development Project, Aberdeen
As previously reported, a GBP474,000 loan (as part of a GBP2.9
million facility from other vehicles managed and advised by your
Investment Manager) had been extended (through an affiliate,
Valencia Lending Limited) to Churchill Homes (Culter House)
Limited. Churchill Homes is a longstanding Aberdeenshire developer
and the facility provided funding towards the construction of a
private detached housing development in one of Aberdeen's finest
residential suburbs. The loan is secured with a first charge over
the site and is earning an attractive rate of interest. Whilst the
Aberdeen housing market has slowed during the year, primarily as a
result in the reduction in the price of oil, the loan is being
serviced and the Company's security remains at an appropriate
level.
Care Home for the Elderly, Hamilton
As previously reported, a loan of GBP1.2 million (as part of a
GBP6.9 million facility from other vehicles managed and advised by
the Investment Manager) was made (through an affiliate, Lothian
Lending Limited) to Richmond Global Properties Limited to fund the
development of a 112 bed purpose built care home in Hamilton,
Scotland. We are pleased to report that, during the year, the loan
was repaid in full, the project having reached practical completion
with the home being fitted out ready to accept its first
residents.
Care Home for the Elderly, Dover
In September 2015, GBP800,000 was advanced (through an
affiliate, Lavender Lending Limited) to Athena (Alpha) Limited, as
part of a GBP4.4 million facility from other vehicles managed and
advised by the Investment Manager, to fund the development of a new
purpose-built, 80-bed residential care home in Dover, Kent. The
site occupies a prominent location adjacent to the recently opened
new community hospital, approximately a 5 minute drive from Dover
town centre. We are pleased to report that, during the year, the
borrower sold the care home shortly following practical completion
and the loan was repaid in full giving a good rate of return.
Care Home for the Elderly, Egham
As previously reported, a loan of GBP575,000 had been advanced
(through an affiliate, Meadow Lending Ltd) to Windsar Care (UK) LLP
to fund the development and initial trading of a 68-bed
purpose-built care home in Egham, Windsor. This loan, together with
loans from other vehicles managed and advised by the Investment
Manager totalling GBP5.3 million, are secured with a first charge
over the site. As previously reported, construction has been behind
schedule and over budget as a result of the non-performance of the
original building contractor. We are pleased to report that,
following a substantial injection of further equity by the
developer and careful management by the construction manager, Alyth
Trading, a new contractor has been appointed and the scheme is now
on track to reach practical completion by the end of the year. It
is anticipated that the value of the scheme on completion of
construction will exceed the total value of the loans made.
Wind Farm, East Lothian
As previously reported, a GBP1.3 million loan (through another
affiliate, Lothian Lending Limited) had been advanced as part of a
GBP2.6 million facility to RPE FL1 Limited, a member of the
Renewable Power Exchange group. The facility 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. We are pleased to report
that, during the year, the loan was repaid in full with all
interest, generating an attractive return.
Care Home for the Elderly, Formby
During the year, a GBP800,000 loan (as part of an overall
facility of GBP7.6 million) was agreed (through an affiliate,
Lavender Lending Limited) with New Care (Sefton) Limited to fund
the development and initial trading of a 75-bed purpose-built care
home in Formby, Merseyside. The New Care Group is an experienced
developer and operator of care homes. The loan is secured with a
first charge over the site.
Apartment Development Project, Worthing
During the year, a loan of GBP500,000 was advanced (through an
affiliate, Valencia Lending Limited) to Columbia House Development
Limited. This loan, together with loans from other vehicles managed
and advised by the Investment Manager totalling GBP5 million,
facilitate the acquisition of an office block in Worthing, for
which the borrower is seeking planning permission for a conversion
into 144 flats. The loan is secured with a first charge over the
property at an appropriate loan to current value (the site already
has planning permission for a 102 flat scheme) and is generating an
attractive return.
Supported Living, Wigan
Following the year end, loans of GBP2.1 million were advanced
(through affiliates, Valencia Lending Limited and Lothian Lending
Limited) to Enabling Homes Investments Ltd, an experienced
developer of supported living homes. The loans are to fund the
development of a 22-apartment supported scheme in Wigan and are
secured with a first charge over the site. Construction is expected
to commence imminently and practical completion is targeted for Q2
2019. Enabling Homes Investments Ltd has agreed terms to sell the
scheme immediately following practical completion which should
generate sufficient proceeds to repay the loans.
As previously reported, to further manage liquidity, the Company
held various bonds which have been sold to free up cash for the
Company to make the qualifying investments referred to above.
Further details are disclosed in note 8 to the financial
statements.
Investment Strategy
We are pleased now to have invested the Company's funds in both
qualifying and non-qualifying secured 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 preparing the
portfolio for realisation in due course.
Puma Investment Management Limited
28 June 2018
Investment Portfolio Summary
As at 28 February 2018
Valuation
as a % of
Valuation Cost Gain/(loss) Net Assets
GBP'000 GBP'000 GBP'000
Qualifying Investment
Opes Industries Limited 2,628 2,950 (322) 12%
Warm Hearth Limited 2,500 2,500 - 11%
Mini Rainbows Limited 2,500 2,500 - 11%
Welcome Health Limited 2,500 2,500 - 11%
Saville Services Limited 2,139 2,139 - 10%
Growing Fingers Limited 1,400 1,400 - 6%
Sunlight Education Nucleus
Limited 1,000 1,000 - 5%
Total Qualifying Investments 14,667 14,989 (322) 66%
---------- -------- ------------ ------------
Non-Qualifying Investments
Valencia Lending Limited 984 984 - 4%
Lothian Lending Limited 1,266 1,266 - 6%
Latimer Lending Limited 822 822 - 4%
Lavender Lending Limited 800 800 - 4%
Victoria Lending Limited 1,000 1,000 - 5%
Meadow Lending Limited 575 575 - 3%
Total Non-Qualifying
investments 5,447 5,447 - 26%
---------- -------- ------------ ------------
Liquidity Management
Commonwealth Bank of
Australia bond* 199 199 - 1%
Total Liquidity Management
investments 199 199 - 1%
---------- -------- ------------ ------------
Total Investments 20,313 20,635 (322) 93%
Balance of Portfolio 1,666 1,666 - 7%
Net Assets 21,979 22,301 (322) 100%
---------- -------- ------------ ------------
Of the investments held at 28 February 2018, all are
incorporated in England and Wales.
* Quoted investment listed on the LSE.
Income Statement
For the year ended 28 February 2018
Period from 1 January
Year ended 28 February 2016 to 28 February
2018 2017
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
8
Gain on investments (b) - 190 190 - 32 32
Income 2 644 - 644 1,109 - 1,109
644 190 834 1,109 32 1,141
-------- -------- -------- -------- --------
Investment management
fees 3 (117) (351) (468) (146) (438) (584)
Other expenses 4 (263) - (263) (278) - (278)
(380) (351) (731) (424) (438) (862)
-------- -------- -------- -------- --------
Profit/(loss) before
taxation 264 (161) 103 685 (406) 279
Taxation 5 (50) 66 16 (158) 88 (70)
Profit/(loss) and
total comprehensive
income for the year 214 (95) 119 527 (318) 209
======== ======== ======== ======== ======== ========
Basic and diluted
Return/(loss) per
ordinary share (pence) 6 0.77p (0.34p) 0.43p 1.91p (1.15p) 0.76p
======== ======== ======== ======== ======== ========
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 and updated in January 2017.
Balance Sheet
As at 28 February 2018
As at As at
28 February 28 February
Note 2018 2017
GBP'000 GBP'000
Fixed Assets
Investments 8 20,313 22,390
------------- -------------
Current Assets
Debtors 9 1,725 1,087
Cash at bank and in hand 90 243
------------- -------------
1,815 1,330
Creditors - amounts falling
due within one year 10 (149) (203)
Net Current Assets 1,666 1,127
------------- -------------
Net Assets 21,979 23,517
============= =============
Capital and Reserves
Called up share capital 12 17 17
Share premium account 15,624 15,624
Capital reserve - realised (1,166) (933)
Capital reserve - unrealised (321) (459)
Revenue reserve 7,824 9,268
Total Equity 21,978 23,517
============= =============
Net Asset Value per Ordinary
Share 13 79.54p 85.10p
============= =============
The financial statements on pages 34 to 48 were approved and
authorised for issue by the Board of Directors on 28 June 2018 and
were signed on their behalf by:
David Vaughan
Chairman
28 June 2018
Statement of Cash Flows
For the year ended 28 February 2018
Period from
1 January
Year ended 2016 to 28
28 February February
2018 2017
GBP'000 GBP'000
Profit after tax 119 209
Taxation (16) 70
Gain on investments (190) (51)
Increase in debtors (576) (54)
Decrease in creditors (4) (985)
Tax paid (95) (116)
Net cash used in operating activities (762) (927)
------------- ------------
Cash flow from investing activities
Purchase of investments (2,067) (4,694)
Proceeds from disposal of investments 4,334 8,762
Net cash generated from investing
activities 2,267 4,068
------------- ------------
Cash flow from financing activities
Dividends paid (1,658) (3,316)
Net cash used for financing activities (1,658) (3,316)
------------- ------------
Net decrease in cash and cash equivalents (153) (175)
Cash and cash equivalents at the beginning
of the year 243 418
Cash and cash equivalents at the end
of the year 90 243
============= ============
Statement of Changes in Equity
For the year ended 28 February 2018
Called Share Capital Capital
up share premium reserve reserve Revenue
capital account - realised - unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 1 January
2016 17 15,624 (575) (499) 12,057 26,624
Realised gain in the
period - - 11 (11) - -
Total comprehensive
income for the period - - (369) 51 527 209
Dividends paid - - - - (3,316) (3,316)
Balance as at 28 February
2017 17 15,624 (933) (459) 9,268 23,517
Realised gain from
prior period - - 50 (50) - -
Total comprehensive
income for the year - - (283) 188 214 119
Dividends paid - - - (1,658) (1,658)
Balance as at 28 February
2018 17 15,624 (1,166) (321) 7,824 21,978
========== ========= ============ ============== ========= ========
Distributable reserves comprise: Capital reserve-realised,
Capital reserve-unrealised (excluding gains on unquoted
investments) and the Revenue reserve. At the year-end distributable
revenue reserves were GBP7,824,000 (2017: GBP9,268,000).
The Capital reserve-realised includes gains/losses that have
been realised in the year 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.
Share premium represents premium on shares issued less issue
costs.
The revenue reserve represents the cumulative revenue earned
less cumulative distributions.
1. Accounting Policies
Accounting convention
Puma VCT 10 plc ("the Company") was incorporated, registered and
is domiciled in England. The Company's registered number is
08714913. The registered office is Bond Street House, 14 Clifford
Street, London W1S 4JU. The Company is a public limited company
(limited by shares) whose shares are listed on LSE with a premium
listing. The company's principal activities and a description of
the nature of the Company's operations are disclosed in the
Strategic Report.
The financial statements have been prepared under the historical
cost convention, modified to include investments at fair value, and
in accordance with the requirements of the Companies Act 2006,
including the provisions of the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008, 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 and updated in January 2017 ("the SORP").
Monetary amounts in these financial statements are rounded to
the nearest whole GBP1,000, except where otherwise indicated.
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 17.
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.
-- Other investments (comprising equity and loan notes) and
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.
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% of the aggregate
excess of the amounts realised over GBP1 per Ordinary Share
returned to Ordinary Shareholders. This incentive will only be
effective once the other holders of Ordinary Shares have received
distributions of GBP1 per share.
The performance incentive has been satisfied through the issue
of 6,908,306 Ordinary Shares (as set out in note 11 of the
financial statements) to the Investment Manager and members of the
investment management team being 20% of the total issued Ordinary
Share capital of 34,541,530. Under the terms of the incentive
arrangement, all rights to dividends will be waived until the GBP1
per Ordinary Share performance target has been met. 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% 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 year. 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.
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.
Creditors
Creditors are initially measured at the transaction price and
subsequently measured at amortised cost, being the transaction
price less any amounts settled.
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 period 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 7 and notes 8 and 14 of
the financial statements.
2. Income
Period from 1 January
Year ended 28 February 2016 to 28 February
2018 2017
GBP'000 GBP'000
Income from investments
Loan stock interest 639 1,000
Bond yields 5 109
644 1,109
======================= ======================
3. Investment Management Fees
Period from 1 January
Year ended 28 February 2016 to 28 February
2018 2017
GBP'000 GBP'000
Puma Investments fees 468 584
468 584
======================= ======================
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% 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% of funds raised. Total costs
this year were 2.7% of the funds raised (2017: 2.7%). Graham Shore
(a director) holds a Directorship of the parent of the Investment
Manager.
4. Other expenses
Period from 1 January
Year ended 28 February 2016 to 28 February
2018 2017
GBP'000 GBP'000
PI Administration Services
Limited 82 102
Directors' Remuneration 48 56
Social security costs 2 3
Auditor's remuneration
for statutory audit 24 23
Legal and professional
fees 50 40
Other expenses 57 54
263 278
======================= ======================
PI Administration Services Limited provides administrative
services to the Company for an aggregate annual fee of 0.35% of the
Net Asset Value of the Fund, payable quarterly in arrears.
Remuneration for each Director for the year is disclosed in the
Directors' Remuneration Report on page 23. The Company had no
employees (other than Directors) during the year (2017: none). The
average number of non-executive Directors during the year was 3
(2017: 3). The non-executive Directors are considered to be the Key
Management Personnel of the Company with total remuneration for the
year of GBP50,000 (2017: GBP59,000), including social security
costs.
The Auditor's remuneration of GBP20,000 (2017: GBP19,500) has
been grossed up in the table above to be inclusive of VAT.
5. Taxation
Period from 1 January
Year ended 28 February 2016 to 28 February
2018 2017
GBP'000 GBP'000
UK corporation tax charged
to revenue reserve 50 158
UK corporation tax credited
to capital reserve (66) (88)
UK corporation tax (credit)/charge
for the year (16) 70
======================= ======================
Factors affecting tax (credit)/charge for
the year
Profit before taxation 103 279
======================= ======================
Tax charge calculated
on profit before taxation
at 19% (2017: 20%) 20 56
Capital items not taxable (36) (6)
Prior period under-accrual - 20
(16) 70
======================= ======================
Capital returns are not taxable as the Company is exempt from
tax on realised capital gains whilst it continues to comply with
the VCT regulations, so no corporation tax is recognised on capital
gains or losses. Due to the intention to continue to comply with
the VCT regulations, the Company has not provided for deferred tax
on any realised or unrealised capital gains and losses.
6. Basic and diluted return/(loss) per Ordinary Share
Year ended 28 February 2018
Revenue Capital Total
Total comprehensive income
for the year (GBP'000) 214 (95) 119
------------ ------------ ------------
Number of shares in issue 34,541,530 34,541,530 34,541,530
Less: management incentive
shares (6,908,306) (6,908,306) (6,908,306)
Number of shares in issue
for purposes of basic and
diluted return/(loss) per
share calculations 27,633,224 27,633,224 27,633,224
Basic and diluted return/(loss)
per share 0.77p (0.34p) 0.43p
------------ ------------ ------------
Period from 1 January 2016 to 28
February 2017
Revenue Capital Total
Total comprehensive income
the period (GBP'000) 527 (318) 209
------------ ------------ ------------
Number of shares in issue 34,541,530 34,541,530 34,541,530
Less: management incentive
shares (6,908,306) (6,908,306) (6,908,306)
Number of shares in issue
for purposes of basic and
diluted return/(loss) per
share calculations 27,633,224 27,633,224 27,633,224
------------ ------------ ------------
Based and diluted return/(loss)
per share 1.91p (1.15p) 0.76p
------------ ------------ ------------
7. Dividends
The Directors do not propose a final dividend in relation to the
year ended 28 February 2018 (2017: GBPnil). An interim dividend of
6p per ordinary share was paid from revenue reserves in the year
ended 28 February 2018 totalling GBP1,658,000 (2017:
GBP3,316,000).
8. Investments
Qualifying Non qualifying
(a) Movements in investments investments investments Total
GBP'000 GBP'000 GBP'000
Book cost at 28 February
2017 15,944 6,906 22,850
Unrealised gains/(losses)
at 28 February 2017 (510) 52 (458)
Valuation at 28 February
2017 15,434 6,958 22,392
Purchases at cost 1,420 4,168 5,588
Disposals of investments
and repayments of loan
and loan notes:
- Proceeds (2,375) (5,482) (7,857)
- Realised net profit on
disposals - 2 2
- Net unrealised gains 188 - 188
Valuation at 28 February
2018 14,667 5,646 20,313
============= =============== ========
Book cost at 28 February
2018 14,989 5,646 20,635
Net unrealised gains/(losses)
at 28 February 2018 (322) - (322)
Valuation at 28 February
2018 14,667 5,646 20,313
============= =============== ========
During the year, the Company sold its quoted bonds in Sainsburys
for GBP875,000. These bonds were originally acquired for GBP821,000
and were stated at GBP872,000 as at 28 February 2017. Also during
the year, the Company purchased quoted bonds in the Commonwealth
Bank of Australia for GBP647,000 and subsequently disposed of these
for GBP646,000.
(b) Gains and losses on investments
The gains and losses on investments for the year shown in the
Income Statement is analysed as follows:
Period from
1 January
Year ended 2016 to 28
28 February February
2018 2017
GBP'000 GBP'000
Realised gain/(loss) on
disposal 2 (19)
Unrealised (losses)/gains
in the year 188 51
190 32
============= ============
(c) Quoted and unquoted investments
Market value Market value
as at 28 as at 28
February February
2018 2017
GBP'000 GBP'000
Quoted investments 199 872
Unquoted investments 20,114 21,518
20,313 22,390
============= =============
Further details of these investments are disclosed in the
Investment Portfolio Summary on pages 8 to 15 of the Annual
Report.
9. Debtors
As at 28 February As at 28 February
2018 2017
GBP'000 GBP'000
Accrued income 1,589 1,063
Other debtors 75 24
Corporation tax 61 -
1,725 1,087
================== ==================
10. Creditors - amounts falling due within one year
As at 28 February As at 28 February
2018 2017
GBP'000 GBP'000
Accruals 149 153
Corporation tax - 50
149 203
================== ==================
11. Management Performance Incentive Arrangement
On 7 October 2013, the Company entered into an Agreement with
the Investment Manager and members of the investment management
team (together "the Management Team") such that the Management Team
will be entitled in aggregate to share in 20% of the aggregate
excess on any amounts realised by the Company in excess of GBP1 per
Ordinary Share, the Performance Target.
This incentive is effective through the issue of ordinary shares
in the Company, such that the Management Team hold 6,908,306
ordinary shares being 20% of the issued share capital of
34,541,530.
The Management Team will waive all rights to dividends until a
return of GBP1 per share (whether capital or income) has been paid
to the other shareholders.
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.
12. Called Up Share Capital
As at 28 February As at 28 February
2018 2017
GBP'000 GBP'000
34,541,530 (2017: 34,541,530)
ordinary shares of 0.05p
each 17 17
================== ==================
13. Net Asset Value per Ordinary Share
2018 2017
Net assets GBP21,978,500 GBP23,517,000
-------------- --------------
Number of shares in issue 34,541,530 34,541,530
Less: management incentive shares
(see note 11) (6,908,306) (6,908,306)
-------------- --------------
Number of shares in issue for
purposes of Net
Asset Value per share calculation 27,633,224 27,633,224
-------------- --------------
Net asset value per share
Basic 79.54p 85.10p
Diluted 79.54p 85.10p
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 28 February 2018:
2018 2017
GBP'000 GBP'000
Financial assets at fair value
through profit or loss 20,313 22,390
Financial assets that are debt
instruments measured at amortised
cost 1,664 1,087
Financial liabilities measured
at amortised cost (149) (153)
21,828 23,324
======== ========
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 year.
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:
2018 2017
GBP'000 GBP'000
Investments in loans, loan
notes and bonds 10,143 11,445
Cash at bank and in hand 90 243
Interest, dividends and other
receivables 1,664 1,087
11,897 12,775
======== ========
The cash held by the Company at the year end is held in one U.K.
bank. Bankruptcy or insolvency of the 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 bank 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 17. 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. 1% (2017: 4%) of the
Company's investments are quoted investments and 99% (2017: 96%)
are unquoted investments.
Liquidity risk
Details of the Company's unquoted investments are provided in
the Investment Portfolio summary on page 8. 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 year end, the Company had
no borrowings.
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 Strategic Report and 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% at 28 February 2018 (2017:0.25%). 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 28 February 2018.
Weighted Weighted
average average
interest period
Rate status rate until maturity Total
GBP'000
Cash at bank - RBS Floating 0.01% - 90
Loans, loan notes
and bonds Floating 1.73% 38 months 3,250
Loans, loan notes
and bonds Fixed 9.6% 30 months 6,008
Balance of assets Non-interest bearing - 12,780
22,128
========
The following analysis sets out the interest rate risk of the
Company's financial assets as at 28 February 2017:
Weighted
Weighted average
average period
interest until
Rate status rate maturity Total
GBP'000
Cash at bank -
RBS Floating 0.01% - 243
Loans, loan notes
and bonds Floating 5.65% 15 months 4,632
Loans, loan notes
and bonds Fixed 11.24% 39 months 5,125
Balance of assets Non-interest bearing - 13,720
23,720
========
Foreign currency risk
The reporting currency of the Company is Sterling. The Company
has not held any non-Sterling investments during the year.
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 1 - Fair value is measured using the unadjusted quoted
price in an active market for identical assets.
-- Level 2- Fair value is measured using inputs other quoted
prices that are observable using market data.
-- Level 3 - Fair value is measured using unobservable inputs.
Fair values have been measured at the end of the reporting
period as follows:-
2018 2017
GBP'000 GBP'000
Level 1
Investments listed on LSE 199 872
Level 3
Unquoted investments 20,114 21,518
20,313 22,390
======== ========
The Level 3 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 interests
section of the Annual Report on pages 8 to 15.
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.
From April 2019 this is rising to 80%.
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 year-end (2017: none).
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 year ended
28 February 2018, but has been extracted from the statutory
financial statements for the year ended 28 February 2018 which were
approved by the Board of Directors on 28 June 2018 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 period ended 28 February 2017
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.
Copies of the full annual report and financial statements for
the year ended 28 February 2018 will 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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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