TIDMPMH
Puma High Income VCT plc
Final results for the period ended 31 March 2013
HIGHLIGHTS
-- Eleven investments made during the period, totalling GBP9.4 million,
including two non-qualifying secured loans made, offering a higher yield
than most quoted secured bonds or deposits.
-- Qualifying investments now exceed 70% on an HMRC basis.
-- 21p per share of dividends paid since inception, 14p during the period,
equivalent to a 10% per annum tax-free running yield on net investment.
-- Gain in NAV (adding back dividends) of 0.34p per share during the
period.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the Company's third Annual Report which,
reflecting the change of accounting year end to 31 March, represents a
15 month period ended 31 March 2013.
As envisaged in the Company's prospectus, the Company has for the third
calendar year in succession paid a dividend of 7p per ordinary share,
equivalent to a 10% tax-free running yield on shareholder's net
investment. The fully diluted net asset value per share ("NAV") at 31
March 2013 was 72.26p (equivalent to 93.26p after adding back the 21p of
dividends paid to date) resulting in a gain in NAV (after adding back
dividends) of 0.34p per share during the period.
VCT qualifying investments
During the period of fifteen months the Company pursued an active
investment policy. It completed eight VCT-qualifying investments,
deploying a total of just over GBP7 million. Details of these
investments can be found in the Investment Manager's report below.
During the period, the Company met its minimum qualifying investment
percentage of 70 per cent.
Non-qualifying investments
As indicated in the interim report for the first six months of the
period, the Investment Manager made several changes to the
non-qualifying portfolio to re-position it in light of current
conditions in securities markets. During the period ended 31 March
2013, the Investment Manager disposed of all the Company's holdings in
absolute return funds and bond funds, resulting in an overall total
return to the Company (including income and capital) of 5% from the
funds.
During the period, the Company also completed two non-qualifying secured
loans for a total of GBP2.1 million. Details of these can be found in
the Investment Manager's report below.
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. PwC also assists the Investment Manager in
establishing the status of investments as qualifying holdings.
Results and dividends
The Company reported a profit of GBP46,000 for the period. Two interim
dividends, each of 7p per Ordinary Share, were paid during the period
(which represents a 15 month period to 31 March 2013), taking the total
of dividends paid to date to 21p per Ordinary Share, equivalent to a 10%
per annum tax-free running yield on the net investment by shareholders
Outlook
The lack of availability of bank credit has enabled the Company to
assemble a portfolio of investments on attractive terms. In addition to
deploying funds in non-qualifying loans, the Company achieved its 70%
qualifying status in the current financial period. As a result the Board
expect to concentrate in the future on the monitoring of our existing
investments and considering the options for exits.
Ray Pierce
Chairman
29 July 2013
INVESTMENT MANAGER'S REPORT
Introduction
As set out in the Chairman's Statement, the ongoing effects of the
credit crisis mean that small and medium sized businesses (SMEs) are
continuing to find it difficult to access the funding they need from the
traditional banks. As a consequence, we have been able to make a number
of attractive investments, both qualifying and non-qualifying, to
established companies on a secured basis.
VCT qualifying investments
Our investment of GBP860,000 in Mirfield Contracting Limited ("MCL") is
progressing well as indicated in the Company's previous interim report.
MCL is a contracting services company providing project management
services to a GBP3.8 million development of town houses in Mirfield
(near Wakefield) West Yorkshire. The development itself is progressing
well with the first of three phases complete and sold, and the second
phase almost complete. The developer has recently been approved for the
Government-backed Help to Buy Scheme.
In March 2012, the Company invested GBP700,000 (as part of a GBP1.4
million Puma VCT financing) into SIP Communications Plc ("SIPCOM").
SIPCOM provides hosted IP telephony and unified communications products
and services and is a leading hosting provider for users of Microsoft
Lync - a new business version of Skype with many enhanced features
allowing IP telephony, video calls, instant messaging, and online
meetings and integrating with Microsoft Outlook and Office. SIPCOM had a
major customer default on its contract last year and to be prudent we
have made a fair value provision against an element of our investment.
As indicated in the Company's previous interim report, the Company
invested GBP880,000 into each of two contracting companies, Frederica
Trading Limited ("Frederica") and Glenmoor Trading Limited ("Glenmoor"),
committing GBP1.76 million in total. As members of a limited liability
partnership with other contracting companies, Frederica and Glenmoor are
providing contracting services in connection with five pre-let supported
living developments for psychiatric and learning disabled people who are
housed and given support by local authorities and other social care
organisations. The developments themselves are progressing well with
four in various stages of construction and we expect the projects to
deliver attractive returns.
In the Company's previous interim report, we reported that the Company
had invested a total of GBP1.4 million into Huntly Trading Limited
("Huntly") and Isaacs Trading Limited ("Isaacs"), two qualifying
services companies which were actively pursuing opportunities to develop
their businesses. We are pleased to report that, in November 2012,
Huntly and Isaacs joined a limited liability partnership with other
contracting companies and have entered into their first contracting
contract with FreshStart Living. These companies will provide
GBP668,000 (as part of a GBP3.5 million project involving other
companies backed by Puma VCTs) of project management and contracting
services. These services will be provided in connection with the
development and construction by FreshStart Living of 116 apartments (all
of which were pre-sold when the contract was entered into) at a property
called Trafford Press, 2 miles south east of Manchester city centre.
In December 2012, the Company completed a GBP600,000 investment (as part
of a GBP1.5 million financing with other Puma VCTs) into Brewhouse and
Kitchen Limited, which is managed by two highly experienced pub sector
professionals, to facilitate the acquisition of freehold pubs and
install a micro brewery within the main area of each pub. The
investment is largely in the form of senior debt, secured with a first
charge over the business and each freehold site acquired. Funds can be
utilised to a maximum 65% loan-to-value ratio, and are expected to
produce a return to the Company of at least 7 per cent. per annum. In
March 2013, the Company invested a further GBP320,000 (as part of GBP1.6
million across the Puma VCTs) into Brewhouse and Kitchen, taking total
exposure to GBP920,000. This further investment, again largely in the
form of senior debt, is to be used to purchase further pubs, subject to
our approval of each purchase. The terms are similar to the first loan
to this company.
Most recently, the Company concluded another qualifying transaction, by
investing GBP1.4 million into Saville Services Limited, a contracting
company, alongside other Puma VCTs. Saville Services is deploying the
funds to provide contracting services in relation to the construction of
a private detached housing development in the countryside outside
Aberdeen, under contract to Churchill Homes Limited, a longstanding
Aberdeenshire developer.
Non-Qualifying Investments
When the fund began investing in 2010, we chose a portfolio of bonds,
hedge funds and hedge funds of funds. We reviewed the portfolio and
liquidated several of these during 2012 for an overall small gain.
We retained a number of the best performing investments of this
portfolio throughout the period, most of which were bond funds and one
residual hedge fund. At the start of 2013, we became concerned that
bonds had become overvalued relative to equities. Anticipating a change
in market sentiment regarding bonds and a switch into equities, we
decided to take profits on all of these holdings at the start of 2013, a
decision which seems to have been vindicated by subsequent market
movements.
We have adopted a strategy for the non-qualifying portfolio of moving
away from quoted investments where possible and instead investing in
secured non-qualifying loans offering a good yield with hopefully
limited downside risk. These loans take longer to identify and execute,
but should work well for the Company into the medium term.
The first of these was made in August 2012, when the Company completed a
GBP1,250,000 non-qualifying loan. This was as part of a GBP4 million
financing with other Puma VCTs to Puma Brandenburg Finance Limited, a
subsidiary of Puma Brandenburg Holdings Limited. It is secured on a
portfolio of flats in the middle class area of central Berlin, Germany.
The facility attracts a fixed interest rate of 5% per annum. Since the
loan was made, the property market in this area of Berlin has been very
strong, further enhancing the excellent security we have for this loan.
In December 2012, the Company completed a second non-qualifying loan of
GBP860,000. This was to provide, together with other Puma VCTs, an
innovative GBP2.5 million revolving credit facility to Organic Waste
Management Trading Limited (effected via a loan to Buckhorn Lending
Limited, which on-lent the money). The facility provides working
capital for the purchase of used cooking oil for conversion into
bio-diesel. The ultimate borrower owns a large oil refining plant in
Birkenhead and is processing cooking oil to sell to obligated off-take
parties (petrol and diesel retailers). The facility is structured to
mitigate risks by being capable of being drawn only once approved
back-to-back purchase and sale contracts have been entered into with
approved counterparties. The facility bears interest at 1.5% per month
with a 5% per annum non-utilisation rate.
Outlook
We are pleased now to have invested a substantial proportion of the
funds raised by the Company in secured loans, both qualifying and
non-qualifying. 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.
In accordance with the HMRC VCT rules the Company had three years to
invest 70 per cent of the portfolio (on an HMRC basis) into qualifying
investments. Having now achieved this 70% qualifying status, we are now
primarily focusing on the monitoring of our existing investments and
considering the options for exits.
Shore Capital Limited
29 July 2013
Investment Portfolio Summary
As at 31 March 2013
Valuation as a % of
Valuation Cost Gain/(loss) Net Assets
GBP'000 GBP'000 GBP'000
As at 31 March 2013
Qualifying Investment
- Unquoted
Brewhouse & Kitchen
Limited 920 920 - 9%
Saville Services
Limited 1,400 1,400 - 14%
SIP Communications plc 490 700 (210) 5%
Mirfield Contracting
Limited 860 860 - 9%
Huntly Trading Limited 700 700 - 7%
Isaacs Trading Limited 700 700 - 7%
Frederica Trading
Limited 880 880 - 9%
Glenmoor Trading
Limited 880 880 - 9%
Total Qualifying
Investments 6,830 7,040 (210) 69%
Non-Qualifying
Investments
Buckhorn Lending
Limited 860 860 - 9%
Puma Brandenburg
Finance Limited 1,250 1,250 - 13%
Total Non-Qualifying
investments 2,110 2,110 - 22%
Total Investments 8,940 9,150 - 91%
Balance of Portfolio 939 939 - 9%
Net Assets 9,879 10,089 - 100%
Of the investments held at 31 March 2013, 86 per cent are incorporated
in England and Wales and 14 per cent incorporated in Guernsey.
Percentages have been calculated on the valuation of the assets at the
reporting date.
Income Statement
For the period ended 31 March 2013
Period from 1 January Year ended 31 December
2012 to 31 March 2013 2011
Note Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gain/(loss) on investments 8 (c) - 49 49 - (376) (376)
Income 2 481 - 481 222 - 222
481 49 530 222 (376) (154)
Investment management fees 3 (58) (174) (232) (54) (163) (217)
Other expenses 4 (252) - (252) (173) - (173)
(310) (174) (484) (227) (163) (390)
Return/(loss) on ordinary activities before taxation 171 (125) 46 (5) (539) (544)
Tax on return on ordinary activities 5 - - - - - -
Return/(loss) on ordinary activities after tax attributable
to equity shareholders 171 (125) 46 (5) (539) (544)
Basic and diluted
Return/(loss) per Ordinary Share (pence) 6 1.25p (0.91p) 0.34p (0.04p) (3.94p) (3.98p)
The total column represents the profit and loss account and the revenue
and capital columns are supplementary information.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued in
the period.
No separate Statement of Total Recognised Gains and Losses is presented
as all gains and losses are included in the Income Statement.
Balance Sheet
As at 31 March 2013
Registered No: 07036487
As at As at
Note 31 March 2013 31 December 2011
GBP'000 GBP'000
Fixed Assets
Investments 8 8,940 7,608
Current Assets
Debtors 9 236 17
Cash at bank and in hand 813 4,243
1,049 4,260
Creditors - amounts falling due within one year 10 (109) (120)
Net Current Assets 940 4,140
Total Assets less Current Liabilities 9,880 11,748
Creditors - amounts falling due after more than one
year (including convertible debt) 11 (1) (1)
Net Assets 9,879 11,747
Capital and Reserves
Called up share capital 12 137 137
Capital reserve - realised (549) (584)
Capital reserve - unrealised (210) (50)
Revenue reserve 10,501 12,244
Shareholders' Funds 9,879 11,747
Net Asset Value per Ordinary Share 13 72.26p 85.92p
Diluted Net Asset Value per Ordinary Share 13 72.26p 85.92p
The financial statements were approved and authorised for issue by the
Board of Directors on 29 July 2013 and were signed on their behalf by:
Raymond Pierce
Chairman
29 July 2013
Cash Flow Statement
For the period ended 31 March 2013
Period from
1 January Year ended
2012 to 31 31 December
March 2013 2011
GBP'000 GBP'000
Profit/(loss) on ordinary activities before
taxation 46 (544)
(Loss)/gain on investments (49) 376
(Increase)/decrease in debtors (219) 51
Decrease in creditors (11 ) (14)
Foreign exchange gain on cash - 1
Net cash outflow from operating activities (233) (130)
Capital expenditure and financial investment
Purchase of investments (9,400) (4,577)
Proceeds from sale of investments 8,117 7,546
Acquisition costs - (13)
Net cash (outflow)/inflow from capital expenditure
and financial investment (1,283) 2,956
Equity dividend paid (1,914) (957)
Net cash (outflow)/inflow before financing (3,430) 1,869
(Decrease)/increase in cash in the period (3,430) 1,869
Reconciliation of net cashflow to movement in net
funds
(Decrease)/increase in cash in the period (3,430) 1,869
Net funds at start of period 4,243 2,374
Net funds at end of period 813 4,243
Reconciliation of Movements in Shareholders' Funds
For the period ended 31 March 2013
Capital
Called Share reserve Capital
up share Premium - 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 2011 137 13,264 (110) 17 (58) 13,250
Capital
reconstruction - (13,264) - - 13,264 -
Loss after
taxation
attributable
to equity
shareholders - - (474) (67) (5) (546)
Dividends paid - - - - (957) (957)
Balance as at
31 December
2011 137 - (584) (50) 12,244 11,747
Return after
taxation
attributable
to equity
shareholders - - (85) (210) 171 46
Transfer - - (50) 50 - -
Dividends paid - - (1,914) (1,914)
Balance as at
31 March 2013 137 - (549) (210) 10,501 9,879
Distributable reserves comprise: Capital reserve-realised, Capital
reserve-unrealised and the Revenue reserve. At the period end
distributable reserves totalled GBP9,742,000 (2011: GBP11,610,000).
The Capital reserve-realised shows gains/losses that have been realised
in the period due to the sale of investments, and related costs. The
Capital reserve-unrealised shows the gains/losses on investments still
held by the company not yet realised by an asset sale.
Notes to the Accounts
For the period ended 31 March 2013
1. Accounting Policies
Basis of Accounting
Puma High Income VCT plc ("the Company") was incorporated and is
domiciled in England & Wales. The financial statements have been
prepared under the historical cost convention, modified to include the
revaluation of investments held at fair value, and in accordance with UK
Generally Accepted Accounting Practice ("UK GAAP") and the Statement of
Recommended Practice, 'Financial Statements of Investment Trust
Companies and Venture Capital Trusts' ("SORP") revised in 2009.
Income Statement
In order to better reflect the activities of a Venture Capital Trust and
in accordance with guidance issued by the Association of Investment
Companies ("AIC"), supplementary information which analyses the Income
Statement between items of a revenue and capital nature has been
presented alongside the Income Statement. The net return of GBP46,000 as
per the Income Statement on page 26 is the measure that the Directors
believe is appropriate in assessing the Company's compliance with
certain requirements set out in s274 of the Income Tax Act 2007.
Investments
All investments have been designated as fair value through profit or
loss, and are initially measured at cost which is the best estimate of
fair value. A financial asset is designated in this category if acquired
to be both managed and its performance is evaluated on a fair value
basis with a view to selling after a period of time in accordance with a
documented risk management or investment strategy. All investments held
by the Company have been managed in accordance with the investment
policy set out on page 12. Thereafter the investments are measured at
subsequent reporting dates at fair value. Listed investments and
investments traded on AIM are stated at bid price at the reporting date.
Hedge funds are valued at their respective quoted Net Asset Values per
share at the reporting date. Unlisted investments are stated at
Directors' valuation with reference to the International Private Equity
and Venture Capital Valuation Guidelines ("IPEVC") and in accordance
with FRS26 "Financial Instruments: Measurement":
-- Investments which have been made within the last twelve months or where
the investee company is in the early stage of development will usually be
valued at the price of recent investment except where the company's
performance against plan is significantly different from expectations on
which the investment was made in which case a different valuation
methodology will be adopted.
-- Investments may be valued by applying a suitable price-earnings ratio to
that company's historical post tax earnings. The ratio used is based on a
comparable listed company or sector but discounted to reflect lack of
marketability. Alternative methods of valuation include net asset value
where such factors apply that make this or alternative methods 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 investments are taken to unrealised capital reserves.
It is not the Company's policy to exercise control over investee
companies. Therefore the results of the companies are not incorporated
into the revenue account except to the extent of any income accrued.
Cash at bank and in hand
Cash at bank and in hand comprises of cash on hand and demand deposits.
Equity instruments
Equity instruments are classified according to the substance of the
contractual arrangements entered into. An equity instrument is any
contract that evidences a residual interest in the assets of the company
after deducting all of its liabilities. Equity instruments issued by the
company are recorded at proceeds received net of issue costs.
Notes to the Accounts
For the period ended 31 March 2013
1. Accounting Policies (continued)
Income
Dividends receivable on listed equity shares are brought into account on
the ex-dividend date. Dividends receivable on unlisted 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 negotiated performance fees payable to
the Investment Manager, Shore Capital Limited at 20 per cent of the
aggregate excess over GBP1 per Ordinary Share returned to Ordinary
shareholders. This incentive will only be exercisable once the holders
of Ordinary Shares have received distributions of GBP1 per share. The
performance fee is accounted for as an equity-settled share-based
payment.
FRS 20 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. Any change in fair value in the period 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 which
are charged to capital; and
-- the investment management fee, 75 per cent of which has been charged to
capital to reflect an element which is, in the directors' opinion,
attributable to the maintenance or enhancement of the value of the
Company's investments in accordance with the Board's expected long-term
split of return; and
-- the performance fee which is allocated proportionally to revenue and
capital based on the respective contributions to the Net Asset Value.
Taxation
Corporation tax is applied to profits chargeable to corporation tax, if
any, at the applicable rate for the period. The tax effect of different
items of income/gain and expenditure/loss is allocated between capital
and revenue return on the marginal basis as recommended by the SORP.
Deferred tax is recognised in respect of all timing differences that
have originated but not reversed at the balance sheet date, where
transactions or events that result in an obligation to pay more, or
right to pay less, tax in 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 years. Deferred tax is measured on a non-discounted basis at
the tax rates that are expected to apply in the years in which timing
differences are expected to reverse, based on tax rates and laws enacted
or substantively enacted at the balance sheet date.
Notes to the Accounts
For the period ended 31 March 2013
1. Accounting Policies (continued)
Reserves
Realised losses and gains on investments and foreign exchange
transactions, transaction costs, the capital element of the 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 foreign exchange transactions and
the capital element of the performance fee are also taken through the
Income Statement and recognised in the Capital Reserve - Unrealised. The
performance fee to be effected through share-based payment is taken to
the Other Reserve and the total revenue gain or loss on the Income
Statement is taken to the Revenue Reserve.
Foreign exchange
The functional and presentational currency of the Company is Sterling.
Transactions denominated in foreign currencies are translated into
Sterling at the rates ruling at the dates that they occurred. Assets
and liabilities denominated in a foreign currency are translated at the
appropriate foreign exchange rate ruling at the balance sheet date.
Translation differences are recorded as unrealised foreign exchange
losses or gains and taken to the Income Statement.
Debtors
Debtors include accrued income which is recognised at amortised cost,
equivalent to the fair value of the expected balance receivable.
Dividends
Final dividends payable are recognised as distributions in the financial
statements when the Company's liability to make payment has been
established. The liability is established when the dividends proposed by
the Board are approved by the Shareholders. Interim dividends are
recognised when paid.
Change in reporting date
The Company has changed its reporting date to 31 March 2013 during the
year and so the accounts are for the 15 month period ended 31 March
2013.
2. Income
Period from 1 January Year ended 31 December
2012 to 31 March 2013 2011
GBP'000 GBP'000
Income from investments
Income from investments 439 148
Arrangement fees 16 -
455 148
Other income
Bank deposit income 26 74
481 222
Notes to the Accounts
For the period ended 31 March 2013
3. Investment Management Fees
Period from 1 January 2012 Year ended 31 December
to 31 March 2013 2011
GBP'000 GBP'000
Shore Capital Limited 232 242
Fee rebate - (25)
232 217
Shore Capital Limited (Shore Capital) was 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 Shore Capital will be paid an annual fee of 2 per cent of the
Net Asset Value payable quarterly in arrears calculated on the relevant
quarter end NAV of the Company. These fees are capped, the Investment
Manager having agreed to reduce its fee (if necessary to nothing) to
contain total annual costs (excluding performance fee and trail
commission) to within 3.5 per cent of Net Asset Value. The breach of the
fee cap is adjusted for in the current period resulting in a credit of
GBP28,000 to reduce total annual running costs for this year to 3.5% of
Net Asset Value. Total annual costs this year were 3.5% of the year end
Net Asset Value (2011: 3.3%).
4. Other expenses
Period from
1 January Year ended
2012 to 31 31 December
March 2013 2011
GBP'000 GBP'000
Administration - Shore Capital Fund Administration
Services Limited 46 42
Directors' Remuneration 80 56
Social security costs 7 4
Auditor's remuneration for statutory audit 17 17
Insurance 2 4
Legal and professional fees (13) 14
FSA, LSE and registrar fees 28 17
Trail commission 52 -
Other expenses 33 19
252 173
Shore Capital Fund Administration Services Limited provides
administrative services to the Company for an aggregate annual fee of
0.35 per cent of the Net Asset Value of the Fund, payable quarterly in
arrears.
The total fees paid or payable (excluding VAT and employers NIC) in
respect of individual Directors for the period are detailed in the
Directors' Remuneration Report commencing on page 17. The Company had
no employees (other than Directors) during the period. The average
number of non-executive Directors during the year was four (2011: four).
The Auditor's remuneration of GBP14,000 (2011: GBP14,000) has been
grossed up in the table above to be inclusive of VAT.
Notes to the Accounts
For the period ended 31 March 2013
5. Tax on Ordinary Activities
Period from
1 January Year ended
2012 to 31 31 December
March 2013 2011
GBP'000 GBP'000
UK corporation tax charged to revenue - -
UK corporation tax charged to capital - -
UK corporation tax charge for the period - -
Factors affecting tax charge for the period
Return/(loss) on ordinary activities before
taxation 46 (544)
Tax charge calculated on return/(loss) on ordinary
activities before taxation at the applicable rate
of 20% 9 (109)
Non taxable capital income 25 108
Tax losses carried forward - 1
Utilisation of tax losses brought forward (44) -
Non deductible expenses 10 -
- -
The income statement shows the tax charge allocated to revenue and
capital. Capital returns are not taxable as VCTs are exempt from tax on
realised capital gains subject to continuing compliance with the VCT
regulations.
No provision for deferred tax has been made in the accounts. No deferred
tax assets have been recognised as the timing of their recovery cannot
be foreseen with any certainty. Due to the Company's status as a Venture
Capital Trust and the intention to continue meeting the conditions
required to obtain approval in the foreseeable future, the Company has
not provided deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
Notes to the Accounts
For the period ended 31 March 2013
6. Basic and diluted return per Ordinary Share
Period from 1 January 2012 to 31 March 2013
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Return for the period 171 (125) 46
Weighted average number of
shares 13,671,870 13,671,870 13,671,870
Return per share 1.25p (0.91p) 0.34p
Year ended 31 December 2011
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Loss for the period (5) (539) (544)
Weighted average number of
shares 13,671,870 13,671,870 13,671,870
Loss per share (0.04)p (3.94)p (3.98)p
The total return/(loss) per ordinary share is the sum of the revenue
return and capital return.
7. Dividends
The directors do not propose a final dividend in relation to the period
ended 31 March 2013 (year ended 31 December 2011: nil). Interim
dividends of 7p per Ordinary Share each were paid on 27 February 2012
and 19 February 2013. Each dividend payment totalled GBP957,000.
Notes to the Accounts
For the period ended 31 March 2013
8. Investments
Historic cost Market value Historic cost Market value
as at 31 March as at 31 March as at 31 as at 31
(a) Summary 2013 2013 December 2011 December 2011
GBP'000 GBP'000 GBP'000 GBP'000
Qualifying
venture
capital
investments 7,040 6,830 - -
Non qualifying
investments 2,110 2,110 7,659 7,608
9,150 8,940 7,659 7,608
(b) Movements in Qualifying venture Non qualifying
investments capital investments investments Total
GBP'000 GBP'000 GBP'000
Opening value at 1
January 2012 - 7,608 7,608
Purchases at cost 7,040 2,360 9,400
Disposals:
Proceeds - (8,117) (8,117)
Realised net
gains/(losses) on
disposals - 259 259
Net unrealised loss (210) - (210)
Valuation at 31 March
2013 6,830 2,110 8,940
Book cost at 31 March
2013 7,040 2,110 9,150
Net unrealised
gains/(losses) at 31
March 2013 (210) - (210)
Valuation at 31 March
2013 6,830 2,110 8,940
(c) Gains/(losses) on investments
The gains/(losses) on investments for the period shown in the Income
Statement on page 26 is analysed as follows:
Period from
1 January Year ended
2012 to 31 31 December
March 2013 2011
GBP'000 GBP'000
Realised gains/(losses) on disposal 259 (297)
Net unrealised losses on revaluation in respect of
investments held at the period end - (67)
Transaction costs - (12)
Net unrealised losses on revaluation in respect of
investments held at the period end (210) -
49 (376)
Notes to the Accounts
For the period ended 31 March 2013
8. Investments - continued
(d) Quoted and unquoted Historic cost as at 31 Market value as at 31
investments March 2013 March 2013
GBP'000 GBP'000
Quoted investments - -
Unquoted investments 9,150 8,940
9,150 8,940
(e) Significant interests
As at 31 March 2013, the Company held more than 20% of the equity of the
following undertakings. These holdings are included within the unquoted
investments disclosed above and are held as part of the Company's
investment portfolio.
Percentage
of equity
directly
held in Fair value of Company's investment as at 31 March
Investee Investee 2013
Company Company GBP'000
Saville
Services
Limited 23% 1,400
Mirfield
Contracting
Limited 50% 860
Huntly
Trading
Limited 47% 700
Isaacs
Trading
Limitedd 48% 700
Frederica
Trading
Limited 47% 880
Glenmoor
Trading
Limited 47% 880
Buckhorn
Trading
Limited 33% 860
6,280
Graham Shore, a director of the Company, is also a director of Mirfield
Contracting Limited, Huntly Trading Limited, Isaacs Trading Limited,
Frederica Trading Limited, Glenmoor Trading Limited, Buckhorn Trading
Limited and Saville Services Limited. The Company is able to exercise
significant influence over all of the above-named investee companies.
These investments have not been accounted for as associates or joint
ventures since FRS 9: Associates and Joint Ventures and the SORP require
that Investment Companies treat all investments held as part of their
investment portfolio in the same way, even those over which the Company
has significant influence.
Further details of these investments are disclosed in the Investment
Portfolio Summary on pages 8 to 12 of the Annual Report.
Notes to the Accounts
For the period ended 31 March 2013
9. Debtors
As at 31 March 2013 As at 31 December 2011
GBP'000 GBP'000
Accrued income 236 17
10. Creditors - amounts falling due within one year
As at 31 March 2013 As at 31 December 2011
GBP'000 GBP'000
Accruals and deferred income 109 120
11. Creditors - amounts falling due after more than
one year (including convertible debt)
As at 31 March 2013 As at 31 December 2011
GBP'000 GBP'000
Loan notes 1 1
On 11 November, 2009, the Company issued Loan Notes in the amount of
GBP1,000 to a nominee on behalf of the Investment Manager. The Loan
Notes accrue interest of 5 per cent per annum.
As holders of the Loan Notes Shore Capital will be entitled to a
performance related incentive of 20 per cent of the aggregate excess on
any amounts realised by the Company in excess of GBP1 per Ordinary Share,
and Shareholders will be entitled to the balance. This incentive to be
effected through the issue of shares in the Company will only be payable
once the holders of Ordinary Shares have received distributions of GBP1
per share (whether capital or income). The performance incentive
structure provides a strong incentive for the Investment Manager to
ensure that the Company performs well, enabling the Board to approve
distributions as high and as soon as possible.
In the event that distributions to the holders of Ordinary Shares
totalling GBP1 per share have been made the Loan Notes will convert into
sufficient Ordinary Shares to represent 20 per cent of the enlarged
number of Ordinary Shares.
No performance fee is currently payable as the Ordinary Shares have not
received enough distributions to date. However, when the total return
is greater than GBP1, a performance fee will be expensed in accordance
with FRS 20 Share-based Payment.
The amount of the performance fee will be calculated as 20 per cent of
the excess of the net asset value over GBP1 per issued share. This
amount will be debited to the Income Statement and credited to other
reserve within Equity Shareholder's Funds.
Notes to the Accounts
For the period ended 31 March 2013
12. Called Up Share Capital
As at 31 March 2013 As at 31 December 2011
GBP'000 GBP'000
13,671,870 ordinary shares of 1p
each 137 137
13. Net Asset Value per Ordinary Share
As at As at
31 March 2013 31 December 2011
Net assets 9,879,000 11,747,000
Shares in issue 13,671,870 13,671,870
Dilutive effect of performance fee - -
13,671,870 13,671,870
Net asset value per ordinary share
Basic 72.26p 85.92p
Diluted 72.26p 85.92p
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. The Company held the following
categories of financial instruments.
As at 31 March 2013 As at 31 December 2011
GBP'000 GBP'000
Assets at fair value through
profit or loss
Investments managed through Shore
Capital Limited 8,940 7,608
Loans and receivables
Cash at bank and in hand 813 4,243
Interest, dividends and other
receivables 236 17
Other financial liabilities
Financial liabilities measured at
amortised cost (110) (121)
9,879 11,747
Notes to the Accounts
For the period ended 31 March 2013
14. Financial Instruments (continued)
Management of risk
The main risk the Company faces from its financial instruments is 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 amounts of financial assets best
represents the maximum credit risk exposure at the balance sheet date.
The Company's financial assets maximum exposure to credit risk is as
follows:
As at 31 March 2013 As at 31 December 2011
GBP'000 GBP'000
Investments in loans and loan
notes 5,830 -
Cash at bank and in hand 813 4,243
Interest, dividends and other
receivables 236 17
6,879 4,260
The majority of the cash held by the Company at the period end is split
between an A rated U.K. bank and a BBB rated South African bank.
Bankruptcy or insolvency of either bank may cause the Company's rights
with respect to the receipt of cash held to be delayed or limited. The
Board monitors the Company's risk by reviewing regularly the financial
position of the banks and should it deteriorate significantly the
Investment Manager will, on instruction of the Board, move the cash
holdings to another bank.
Credit risk associated with interest, dividends and other receivables
are predominantly covered by the investment management procedures.
Investments in loan and loan notes and bonds comprise 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 management 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
throughout the period 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 Report of the
Directors on page 14. The management of market price risk is part of the
investment management process. The portfolio is managed with an
awareness of the effects of adverse price movements through detailed and
continuing analysis, with an objective of maximising overall returns to
shareholders.
Notes to the Accounts
For the period ended 31 March 2013
14. Financial Instruments (continued)
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.
100 per cent of the Company's investments at 31 March 2013 are unquoted
investments.
Liquidity risk
Details of the Company's unquoted investments are provided in the
Investment Portfolio summary on page 7. By their nature, unquoted
investments may not be readily realisable, the Board regularly considers
exit strategies for these investments. As at the period end, the Company
had no borrowings other than loan notes amounting to GBP1,000 (2011:
GBP1,000) (see note 11).
The Company's liquidity risk associated with investments is managed on
an ongoing basis by the Investment Manager in conjunction with the
Directors and in accordance with policies and procedures in place as
described in the Report of the Directors. The Company's overall
liquidity risks are monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses.
Notes to the Accounts
For the period ended 31 March 2013
14. Financial Instruments (continued)
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.
At the period end and throughout the period, the Company's only
liability subject to interest rate risk were the Loan Notes of GBP1,000
at 5.0 per cent (see note 11).
Interest rate risk profile of financial assets
The following analysis sets out the interest rate risk of the Company's
financial assets.
Average Period 31
interest until 31 March December
Rate status rate maturity 2013 2011
GBP'000 GBP'000
Brewhouse &
Kitchen
Limited Floating 11.3% Five years 276 -
Saville
Services
Limited Floating 5.5% Six years 420 -
SIP
Communications
plc Fixed 11.1% Four years 490 -
Mirfield
Contracting
Limited Floating 2.5% Nine years 602 -
Huntly Trading
Limited Floating 2.5% Nine years 490 -
Isaacs Trading
Limited Floating 5.5% Nine years 210 -
Frederica
Trading
Limited Floating 2.5% Nine years 616 -
Glenmoor
Trading
Limited Floating 2.5% Nine years 616 -
Buckhorn
Lending
Limited Floating 8.6% Five years 860 -
Puma
Brandenburg
Finance
Limited Fixed 5.0% Two years 1,250
Cash at bank Floating 0.9% 670 3,133
32 days
Cash at bank Floating 0.9% notice 128 1,087
Cash at bank Floating 0.9% 15 15
Balance of
financial
assets Non-interest bearing 3,346 7,512
9,989 11,747
The non-interest bearing assets include investments in equity
instruments that have no fixed dividend rate.
An increase in 1% in Bank of England base rate would have increased the
net assets attributable to the Company's shareholders and the total
profit for the year by GBP49,000 (2011: GBP42,000). A decrease of 1%
would have had an equal but opposite effect.
None of the loan stocks held by the Company are convertible.
Notes to the Accounts
For the period ended 31 March 2013
14. Financial Instruments (continued)
Fair value hierarchy
Fair values have been measured at the end of the reporting period as
follows:-
As at 31
March Level 1 Level 2 Level 3
2013 'Quoted prices' 'Observable inputs' 'Unobservable inputs' Total
At fair
value
through
profit
and
loss - - 8,940 8,940
As at 31
December Level 1 Level 2 Level 3
2011 'Quoted prices' 'Observable inputs' 'Unobservable inputs' Total
At fair
value
through
profit
and
loss 6,355 1,253 - 7,608
Financial assets 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 - Unadjusted quoted prices in active markets for identical assets
('quoted prices');
-- Level 2 - Inputs (other than quoted prices in active markets for
identical assets) that are directly or indirectly observable for the
asset ('observable inputs'); or
-- Level 3 - Inputs that are not based on observable market data
('unobservable inputs').
The Level 3 investments have been valued at the price of recent
investment in line with the Company's accounting policies and IPEVC
guidelines. Further details are provided in the significant investments
section on pages 7 to 9 of the annual report.
Reconciliation of fair value for level 3 financial instruments held at
the year end:
Unquoted shares Loan notes Total
GBP'000 GBP'000 GBP'000
Movements in the income statement:
Balance as at 1 January 2012 - - -
Unrealised losses in the income
statement (210) - (210)
Realised gains in the income statement - - -
(210) - (210)
Purchases at cost 3,320 5,830 9,150
Sales proceeds - - -
Balance as at 31 March 2013 3,110 5,830 8,940
Notes to the Accounts
For the period ended 31 March 2013
15. Capital management
The Company's objectives when managing capital are to safeguard the
Company's ability to continue as a going concern and to 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 is and must be, and remain,
invested in the relatively high risk asset class of small UK companies
within three years of that capital being subscribed.
The Company accordingly has limited scope to manage its capital
structure in the light of changes in economic conditions and the risk
characteristics of the underlying assets. Subject to this overall
constraint upon changing the capital structure, the Company may adjust
the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares, or sell assets if so required 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 the liabilities is not directly related to
managing the return to shareholders. There has been no change in this
approach from the previous period.
16. Contingencies, Guarantees and Financial Commitments
There were no commitments, contingencies or guarantees of the Company at
the period-end.
17. Controlling Party and Related Party Transactions
In the opinion of the Directors there is no immediate or ultimate
controlling party.
The Company has appointed Shore Capital Limited, a company of which
Graham Shore is a director, to provide investment management services.
During the period GBP232,000 (2011: GBP217,000) was due in respect of
investment management fees. The balance owing to Shore Capital Limited
at the period-end was GBP21,000 (2011: GBP60,000).
The Company has appointed Shore Capital Fund Administration Services
Limited, a related company to Shore Capital Limited, to provide
accounting, secretarial and administrative services. During the period
GBP46,000 (2011: GBP42,000) was due in respect of these services. The
balance owing to Shore Capital Fund Administration Services Limited at
the period-end was GBP9,000 (2011: GBP10,000).
This announcement is distributed by Thomson Reuters on behalf of Thomson
Reuters clients.
The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and other
applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the
information contained therein.
Source: Puma High Income VCT PLC via Thomson Reuters ONE
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