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Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
---|---|---|---|---|---|
Puma Vct 10 Plc | LSE:PUMX | London | Ordinary Share | GB00BFG3QX28 | ORD GBP0.0005 |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 39.00 | 0.00 | 01:00:00 |
Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
---|---|---|---|---|---|
0 | 0 | N/A | 0 |
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.
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