TIDMPUMA
Puma VCT VII plc
("The Company")
Final Results for the Period Ended 31 December 2012
Highlights
-- Six qualifying investments made in 2012, qualifying investments
were at 43% of net assets (on an HMRC basis) at the year end.
-- Two further qualifying investments made post year end.
Qualifying investments now at 62% on HMRC basis.
-- Two non-qualifying secured loans made, offering a higher yield
than most quoted secured bonds or deposits.
-- 10p per share of dividends paid since inception, 5p in respect
of 2012, equivalent to a 7.1% per annum tax-free running yield on net
investment.
-- Gain in NAV (adding back dividends) of 0.91p per share.
-- Strong pipeline of investments as the Company approaches its
second anniversary of investment.
Enquiries
Shore Capital 020 7408 4090
Graham Shore
Chairman's Statement
Introduction
I am pleased to present to you as Chairman the annual report for Puma
VCT VII plc for the period to 31 December 2012, its second year of
investment.
The Company began investing in May 2011 having completed its
fund-raising and 2011 was therefore not a full year. The Company has
made strong progress in 2012: it has now deployed a substantial
proportion of its funds in medium-term investments, both qualifying and
non-qualifying.
VCT qualifying investments
During the year the Company completed six VCT-qualifying investments,
deploying a total of GBP4.9 million. Details of these investments can
be found in the Investment Manager's report, below. The Investment
Manager continues to review suitable qualifying opportunities and has
already made further qualifying investments in the current year to
ensure the Company is on course to meet its HMRC qualifying targets.
Non-qualifying investments
The Company's strategy is to seek a good return from its non-qualifying
investments as well as its qualifying investments. In 2011 the Company
acquired a portfolio of bonds and hedge funds, many of which it sold
during 2012 for a small gain.
The Company also held a portfolio of bond funds and one residual hedge
fund, which it retained at the year end. Anticipating a change in
market sentiment regarding bonds, the Investment Manager decided to take
profits on all of these holdings at the start of 2013.
During the period, the Company also completed two non-qualifying loans
for a total of GBP2.3 million and a further loan of GBP650,000 after the
year end. Details of these can be found in the Investment Manager's
report below. In anticipation of the strong pipeline of loan
opportunities, the Investment Manager has taken the view to continue to
hold a portion of the portfolio on cash deposit.
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 will assist the investment manager in
establishing the status of investments as qualifying holdings in the
future.
Results and dividends
The Company reported a profit of GBP123,000 for the year (2011: GBP638,
000 loss), equivalent to a profit of 0.91p per ordinary share
(calculated on the weighted average number of shares). The Net Asset
Value per ordinary share ("NAV") at the period end was 86.5p. The NAV
per share reflects the payment of a dividend of 5.0p per share during
the year. Following the year end, an interim dividend of 5p per
Ordinary Share was paid on 25 February 2013 in respect of the year ended
31 December 2012.
Outlook
The Investment Manager has continued to meet a number of companies which
are potentially suitable for investment and has a strong pipeline of
opportunities which may lead to suitable investments. We will update you
in due course as investments are completed.
Although there is an increased demand from smaller companies seeking
finance as they perceive that the economy has stabilised, the
restrictions on availability of bank finance continues to be restricted.
Moreover the terms on which target companies can raise finance from
banks remain problematic. This has increased and should continue to
increase the demand for our offering and also improve the terms we can
secure when we offer finance. There are many suitable companies which
are well-managed, in good market positions, and which can offer security
and need our finance. We therefore believe the Company is strongly
positioned to select a portfolio to deliver attractive returns to
shareholders in the medium to long term.
David Buchler
Chairman
30 April 2013
Investment Manager's Report
Introduction
As set out in the Chairman's Statement, the on-going 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
smaller companies on a secured basis. We have also seen a significant
increase in our pipeline of potential investments. In particular, we
are seeing many established companies which have substantial assets or
predictable revenue streams, over which a security can be taken.
Qualifying investments
As indicated in the Company's interim report, prior to 5 April 2012, the
Company invested GBP3.76 million into four qualifying contracting
companies. These four companies, Frederica Trading Limited, Glenmoor
Trading Limited, Huntly Trading Limited and Jephcote Trading Limited,
have been actively pursuing opportunities to deploy their financial
resources.
We are pleased to report that, in November 2012, Frederica Trading
Limited and Glenmoor Trading Limited joined a limited liability
partnership with other contracting companies and has entered into its
first contracting contract with HB Community Solutions. These companies
will provide GBP1.76 million (as part of a GBP5.4 million project
involving other companies backed by Puma VCTs) of project management and
contracting services. These services will be provided to a series of
developments constructing pre-let accommodation for large healthcare
groups providing supported living services for psychiatric and learning
disabled service users.
Furthermore, we are pleased to report that, in November 2012, Huntly
Trading Limited joined a limited liability partnership with other
contracting companies and has entered into its first contracting
contract with FreshStart Living. This will provide GBP476,000 (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 of
116 apartments, all of which were pre-sold when the contract was entered
into, by FreshStart Living at a property called Trafford Press, 2 miles
south east of Manchester city centre.
In December 2012, the Company completed a GBP450,000 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 of at least 7 per cent per annum.
Subsequent to the year end, the Company invested a further GBP800,000
(as part of GBP1.6 m across the PUMA VCTs) into Brewhouse and Kitchen,
taking total exposure to GBP1,250,000. 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.
As reported in the Company's interim report, the Company invested
GBP700,000 (as part of a GBP1.4 million Puma VCT financing) into SIP
Communications Plc. SIPCOM provides hosted IP telephony and unified
communications products and services and is a leading hosting provider
for 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.
The Company has very recently (23 April 2013) concluded another
qualifying transaction, by investing GBP1.1m 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.
In accordance with the HMRC VCT rules the Company has three years to
invest 70 per cent of the portfolio (on an HMRC basis) into qualifying
investments. We are well on track to achieve this, with a current
percentage of 62%.(43% at the year end)
Non-qualifying investments
When the fund began investing in 2011, we chose a portfolio of bonds,
hedge funds and hedge fund of funds. We reviewed the portfolio and
liquidated a number of these during 2012 for an overall small gain.
We retained a number of best performing of this portfolio throughout the
year, 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 VCT into the medium term.
The first of these was made in August 2012, when the Company completed a
GBP1,330,000 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.
This was GBP881,000 to Buckhorn Lending Limited, which itself (having
received loans from various other Puma VCTs) extended an innovative
GBP2.5 million revolving credit facility to Organic Waste Management
Trading Limited ("OWM"). 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 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.
A further loan was made after the year end to Countywide Property
Holdings Limited of GBP650,000 (in conjunction with another Puma VCT
investing on the same basis). Countrywide Property Holdings owns a 5.6
acre residential site in Brackley, Northamptonshire, which is in an
advanced stage in the planning process and which has been sold, subject
to planning, to a major house-builder. Our loan has a first charge over
the property and is for a term of 14 months at 9.71% per annum.
Investment Strategy
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 the both the qualifying and non-qualifying portfolios whilst
balancing these returns with maintaining an appropriate risk exposure
and ensuring there is significant liquidity in the portfolio to free up
cash for qualifying investments as they arise.
During the period, the Investment Management team have met and continue
to meet a substantial number of companies which are potentially suitable
for investment. In accordance with our mandate we have maintained a
cautious approach and are performing thorough due diligence work on
several potential investments. Over the course of the next year, the
Company will build the qualifying portfolio to the required 70 per cent.
We have a strong deal-flow and are meeting many potential investee
companies with several interesting opportunities firmly in the pipeline.
Shore Capital Limited
30 April 2013
Investment Portfolio Summary
As at 31 December 2012
Valuation as a % of
Valuation Cost Gain/(loss) Net Assets
GBP'000 GBP'000 GBP'000
As at 31 December 2012
Qualifying Investment
- Unquoted
Brewhouse & Kitchen
Limited equity 315 315 - 3%
Brewhouse & Kitchen
Limited loan notes 135 135 - 1%
Frederica Trading
Limited equity 264 264 - 2%
Frederica Trading
Limited Loan Notes 616 616 - 5%
Glenmoor Trading
Limited equity 264 264 - 2%
Glenmoor Trading
Limited Loan Notes 616 616 - 5%
Huntly Trading Limited
B equity 300 300 - 3%
Huntly Trading Limited
Loan Notes 700 700 - 6%
Jephcote Trading
Limited equity 700 700 - 6%
Jephcote Trading
Limited Loan Notes 300 300 - 3%
SIP Communications plc
equity 210 210 - 2%
SIP Communications plc
Loan Notes 490 490 - 4%
Total Qualifying
Investments 4,910 4,910 - 42%
Non-Qualifying
Investments
Buckhorn Lending
Limited loan notes 881 881 - 8%
Blackrock UK Emerging
Cos Hedge Fund
Limited* 633 600 33 5%
Jupiter Strategic Bond
Fund* 855 781 74 7%
Neuberger Berman High
Yield* 129 120 9 1%
Pimco Global Investors
Diversified Income
Fund* 692 635 57 6%
iShares iBoxx
Corporate Bonds* 536 483 53 5%
iShares iBoxx Non
Financial* 851 798 53 7%
Puma Brandenburg
Finance Limited loan 1,330 1,330 - 11%
Total Non-Qualifying
investments 5,907 5,628 279 50%
Total Investments 10,817 10,538 279 92%
Balance of assets
(net) 865 865 8%
Net Assets 11,682 11,403 279 100%
Of the investments held at 31 December 2012, 88 per cent are
incorporated in England and Wales, 12 per cent in Europe. Percentages
have been calculated on the valuation of the assets at the reporting
date.
*Quoted investments listed on the LSE.
Income Statement
For the year ended 31 December 2012
Year ended 31 December Period from 30 September
2012 2010 to 31 December 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) - 312 312 - (439) (439)
Income 2 274 - 274 146 - 146
274 312 586 146 (439) (293)
Investment management fees 3 (56) (168) (224) (48) (144) (192)
Other expenses 4 (239) - (239) (153) - (153)
(295) (168) (463) (201) (144) (345)
Return/(loss) on ordinary activities before taxation (21) 144 123 (55) (583) (638)
Tax on return/(loss) on ordinary activities 5 - - - - - -
Return/(loss) on ordinary activities after tax attributable
to equity shareholders (21) 144 123 (55) (583) (638)
Basic and diluted
Return/(loss) per Ordinary Share (pence) 6 (0.16p) 1.07p 0.91p (0.66p) (7.05p) (7.71p)
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 December 2012
As at As at
Note 31 December 2012 31 December 2011
GBP'000 GBP'000
Fixed Assets
Investments 8 10,817 6,729
Current Assets
Debtors 9 75 14
Cash at bank and in hand 926 5,608
1,001 5,622
Creditors - amounts falling due within one year 10 (135) (115)
Net Current Assets 866 5,507
Total Assets less Current Liabilities 11,683 12,236
Creditors - amounts falling due after more than one
year (including convertible debt) 11 (1) (1)
Net Assets 11,682 12,235
Capital and Reserves
Called up share capital 12 135 135
Capital reserve - realised (718) (405)
Capital reserve - unrealised 279 (178)
Revenue reserve 11,986 12,683
Equity Shareholders' Funds 11,682 12,235
Basic and diluted Net Asset Value per Ordinary Share 13 86.48p 90.57p
Cash Flow Statement
For the year ended 31 December 2012
Period
from 30
September
Year 2010 to
ended 31 31
December December
2012 2011
GBP'000 GBP'000
Return/(loss) on ordinary activities before taxation 123 (638)
(Gains)/losses on investments (312) 439
Increase in debtors (61) (14)
Increase in creditors 20 116
Net cash outflow from operating activities (230) (97)
Capital expenditure and financial investment
Purchase of investments (7,434) (10,326)
Proceeds from sale of investments 3,660 3,168
Transaction costs (2) (10)
Net cash outflow from capital expenditure and financial
investment (3,776) (7,168)
Equity dividend paid (676) -
Net cash outflow before financing (4,682) (7,265)
Financing
Proceeds received from issue of ordinary share capital - 13,135
Expenses paid for issue of share capital - (263)
Proceeds received from issue of redeemable preference
shares - 13
Redemption of redeemable preference shares - (13)
Proceeds received from convertible loan notes - 1
Net cash inflow from financing - 12,873
(Decrease)/increase in cash (4,682) 5,608
Net funds at start of the period 5,608 -
Net funds at the period end 926 5,608
Reconciliation of net cashflow to movement in net
funds
(Decrease)/Increase in cash in the period (4,682) 5,608
Net funds at start of period 5,608 -
Net funds at end of period 926 5,608
Reconciliation of Movements in Shareholders' Funds
For the year ended 31 December 2012
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
Shares issued
in the period 135 13,374 - - - 13,509
Expenses of
share issues - (636) - - - (636)
Capital
reconstruction - (12,738) - - 12,738 -
Return after
taxation
attributable
to equity
shareholders - - (405) (178) (55) (638)
Balance as at
31 December
2011 135 - (405) (178) 12,683 12,235
Return after
taxation
attributable
to equity
shareholders - - (149) 293 (21) 123
Realisation of
revaluations
from prior
period - - (164) 164 - -
Dividends paid - - - - (676) (676)
Balance as at
31 December
2012 135 - (718) 279 11,986 11,682
Distributable reserves comprise: Capital reserve-realised, Capital
reserve-unrealised and the Revenue reserve. At the period end
distributable reserves totalled GBP11,547,000 (2011: GBP12,100,000). On
14 December 2011 the share premium account was cancelled moving the
balance into distributable reserves in order to pay out the 5p interim
dividend on 5 March 2012.
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 year ended 31 December 2012
1. Accounting Policies
Basis of Accounting
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 profit of GBP123,000
as per the Income Statement 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. 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 investment are taken to unrealised capital reserves.
It is not the Company's policy to exercise a controlling influence 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.
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 year is
recognised in the Income Statement with a corresponding adjustment to
equity.
Expenses
All expenses (inclusive of VAT) are accounted for on an accruals basis.
Expenses are charged wholly to revenue, with the exception of:
-- expenses incidental to the acquisition or disposal of an
investment charged to capital; and
-- the investment management fee, 75 per cent of which has
been charged to capital to reflect an element which is, in the
directors' opinion, attributable to the maintenance or enhancement
of the value of the Company's investments in accordance with the
boards 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 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.
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
revenue element of 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 base 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.
2. Income
Year ended 31 December Period from 30 September
2012 2010 to 31 December 2011
GBP'000 GBP'000
Income from investments
Loan stock interest 118 -
Bond yields 124 73
242 73
Other income
Bank deposit income 32 73
274 146
3. Investment Management Fees
Year ended 31 December Period from 30 September
2012 2010 to 31 December 2011
GBP'000 GBP'000
Shore Capital Limited 224 202
Fee rebates - (10)
224 192
Shore Capital Limited (Shore Capital) 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 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. Total
annual costs this year were 3.5% of the year end Net Asset Value (2011:
2.8%).
In the prior period the Company invested in the Puma Absolute Return
Fund Limited which is also managed by Shore Capital Limited. An
arrangement was in place to avoid the double charging of management and
performance fees. The Company has set off investment fee rebates
against the management fee charge.
4. Other expenses
Period from
30
September
Year ended 2010 to 31
31 December December
2012 2011
GBP'000 GBP'000
Administration - Shore Capital Fund Administration
Services Limited 41 34
Directors Remuneration 61 52
Social security costs 5 5
Auditor's remuneration for statutory audit 17 16
Insurance 4 3
Legal and professional fees 8 16
FSA, LSE and registrar fees 37 19
Trail commission 54 -
Other expenses 12 8
239 153
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 Company had no employees (other than Directors) during the year.
The average number of non-executive Directors during the year was 3
(2011: 3).
The Auditor's remuneration of GBP14,000 (2011: GBP14,000) has been
grossed up in the table above to be inclusive of VAT.
5. Tax on Ordinary Activities
Period
from 30
September
Year ended 2010 to 31
31 December December
2012 2011
GBP'000 GBP'000
UK corporation tax charged to revenue reserve -
UK corporation tax charged to capital reserve -
UK corporation tax charge for the period -
Return / (loss) on ordinary activities before
taxation 123 (638)
Factors affecting tax charge for the period
Tax charge calculated on return / (loss) on ordinary
activities before taxation at the applicable rate
of 20% (25) (128)
Capital income not taxable 29 109
Tax losses carried forward (4) 19
-
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 that they comply and continue to comply
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.
6. Basic and diluted return per Ordinary Share
Year ended 31 December 2012
Revenue Capital Total
GBP'000 GBP'000 GBP'000
(Loss)/return for the
year (21) 144 123
Weighted average number
of shares 13,508,927 13,508,927 13,508,927
(Loss)/return per share (0.16)p 1.07p 0.91p
Period from 30 September 2010 to 31 December 2011
Revenue Capital Total
GBP'000 GBP'000 GBP'000
Loss for the period (55) (583) (638)
Weighted average number
of shares 8,272,330 8,272,330 8,272,330
Loss per share (0.66)p (7.05)p (7.71)p
The total 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 year
ended 31 December 2012 (2011: nil). Interim dividends of 5p per Ordinary
Share were paid on 5 March 2012 and 25 February 2013. Each dividend
payment totalled GBP676,000.
8. Investments
Historic cost Market value Historic cost Market value
as at 31 as at 31 as at 31 as at 31
(a) Summary December 2012 December 2012 December 2011 December 2011
GBP'000 GBP'000 GBP'000 GBP'000
Qualifying
venture
capital
investments 4,910 4,910 - -
Non qualifying
investments 5,628 5,907 6,907 6,729
10,538 10,817 6,907 6,729
(b) Movements in Qualifying venture Non-qualifying
investments capital investments investments Total
GBP'000 GBP'000 GBP'000
Opening value - 6,729 6,729
Purchases at cost 4,910 2,524 7,434
Disposals:
Proceeds - (3,660) (3,660)
Realised net gains
on disposals - 21 21
Net unrealised gains
in the year - 293 293
Valuation at 31
December 2012 4,910 5,907 10,817
Book cost at 31
December 2012 4,910 5,628 10,538
Net unrealised gains
at 31 December 2012 - 279 279
Valuation at 31
December 2012 4,910 5,907 10,817
(c) Gains/(losses) on investments
The gains/(losses) on investments for the period shown in the Income
Statement is analysed as follows:
Period from 30 September
Year ended 31 December 2010 to 31 December
2012 2011
GBP'000 GBP'000
Realised net
gains/(losses) on
disposal 21 (251)
Transaction costs (2) (10)
Net unrealised
gains/(losses) in the
year 293 (178)
312 (439)
(d) Quoted and unquoted Historic cost as at 31 Market value as at 31
investments December 2012 December 2012
GBP'000 GBP'000
Quoted investments 3,417 3,696
Unquoted investments 7,121 7,121
10,538 10,817
(e) Significant interests
As at 31 December 2012, 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 Fair value of Company's investment as at 31 December
held in Investee Company 2012
Puma
Puma VCT Funds
VCT High managed by
Investee 8 Income Shore
Company Company plc plc Capital GBP'000
Frederica
Trading
Limited 50% - 50% 100% 880
Glenmoor
Trading
Limited 50% - 50% 100% 880
Huntly
Trading
Limited 50% - 50% 100% 1,000
Jephcote
Trading
Limited 50% 50% - 100% 1,000
Buckhorn
Lending
Limited 33% 33% 33% 100% 881
4,641
Graham Shore, a director of the Company, is also a director of Puma VCT
8 plc, Puma High Income VCT plc, Frederica Trading Limited, Glenmoor
Trading Limited, Huntly Trading Limited and Jephcote Trading 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.
9. Debtors
As at 31 December 2012 As at 31 December 2011
GBP'000 GBP'000
Prepayments and accrued income 75 14
10. Creditors - amounts falling due within one year
As at 31 December 2012 As at 31 December 2011
GBP'000 GBP'000
Accruals and deferred income 135 115
11. Creditors - amounts falling due after more than
one year (including convertible debt)
As at 31 December 2012 As at 31 December 2011
GBP'000 GBP'000
Loan notes 1 1
On 29 November 2010, 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
realised once the holders of Ordinary Shares have received dividends of
GBP1 per share (whether capital or income). The performance incentive
structure provides a strong incentive for the Investment Manager to
ensure that the Company performs well, enabling the Board to approve
distributions as high and as soon as possible.
In the event that distributions to the holders of Ordinary Shares
totalling GBP1 per share have been made the Loan Notes will convert into
sufficient Ordinary Shares to represent 20 per cent of the enlarged
number of Ordinary Shares.
The amount of the performance fee will be calculated as 20 per cent of
the excess of the net asset value (adjusted for dividends paid) over
GBP1 per issued share.
12. Called Up Share Capital
As at 31 December 2012 As at 31 December 2011
GBP'000 GBP'000
13,508,927 ordinary shares of
1p each 135 135
13. Net Asset Value per Ordinary Share
As at As at
31 December 2012 31 December 2011
Net assets 11,682,000 12,235,000
Shares in issue 13,508,927 13,508,927
Net asset value per share
Basic 86.48p 90.57p
Diluted 86.48p 90.57p
14. Financial Instruments
The Company's financial instruments comprise its investments, cash
balances, debtors and certain creditors. Fixed Asset investments held
are valued at Bid market prices or price of recent investment. 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 December 2012 As at 31 December 2011
GBP'000 GBP'000
Assets at fair value through
profit or loss
Investments managed through
Shore Capital Limited 10,817 6,729
Loans and receivables
Cash at bank and in hand 926 5,608
Interest, dividends and other
receivables 75 14
Other financial liabilities
Financial liabilities measured
at amortised cost (136) (116)
11,682 12,235
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, foreign currency 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 December 2012 As at 31 December 2011
GBP'000 GBP'000
Investments in loans and loan
notes 5,068 -
Cash at bank and in hand 926 5,608
Interest, dividends and other
receivables 75 14
6,069 5,622
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 loans, 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
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. 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 to produce a conservative and accurate valuation.
34 per cent of the Company's investments are listed on the London Stock
Exchange and 66 per cent are unquoted investments.
Liquidity risk
Details of the Company's unquoted investments are provided in the
Investment Portfolio summary. By their nature, unquoted investments may
not be readily realisable, the Board considers exit strategies for these
investments throughout the period for which they are held. As at the
period end, the Company had no borrowings other than loan notes
amounting to GBP1,000 (see note 11).
The Company's liquidity risk associated with investments is managed on
an ongoing basis by the Investment Manager in conjunction with the
Directors and in accordance with policies and procedures in place as
described in the Report of the Directors. The Company's overall
liquidity risks are monitored on a quarterly basis by the Board.
The Company maintains sufficient investments in cash and readily
realisable securities to pay accounts payable and accrued expenses.
Fair value interest rate risk
The benchmark that determines the interest paid or received on the
current account is the Bank of England base rate, which was 0.5 per cent
at 31 December 2012. 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.
At the year end and throughout the year, the Company's only liability
subject to fair value interest rate risk were the Loan Notes of GBP1,000
at 5.0 per cent (see note 11).
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.
Average
interest Period until
Rate status rate maturity 2012 2011
GBP'000 GBP'000
Cash at bank -
RBS Floating 0.9% - 607 2,593
Cash at bank -
Investec Fixed 1.7% 32 day notice 304 3,007
Cash held by
custodian- Non-interest
Pershing bearing - - 14 8
Brewhouse &
Kitchen loan
notes Floating 10.8% 5 years 135 -
Frederica
Trading
Limited loan
notes Floating 2.5% 10 years 616 -
Glenmoor
Trading
Limited loan
notes Floating 2.5% 10 years 616 -
Huntly Trading
Limited loan
notes Floating 2.5% 10 years 700 -
Jephcote
Trading
Limited loan
notes Floating 5.5% 10 years 300 -
SIP
Communications
plc loan
notes Floating 11.0% 3 years 490 -
Buckhorn
Lending loan
notes Fixed 5.0% 5 years 881 -
Balance of
financial
assets Non-interest bearing - 7,155 6,743
11,818 12,351
Foreign currency risk
The reporting currency of the Company is Sterling. The company has not
held any non-Sterling investments during the period.
Fair value hierarchy
Fair values have been measured at the end of the reporting period as
follows:-
As at 31
December Level 1 Level 2 Level 3
2012 'Quoted prices' 'Observable inputs' 'Unobservable inputs' Total
At fair
value
through
profit
and
loss 3,696 - 7,121 10,817
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 6,183 546 - 6,729
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 - Unadjusted quoted prices in active markets for
identical asset or liabilities ('quoted prices');
-- Level 2 - Inputs (other than quoted prices in active markets for
identical assets or liabilities) that are directly or indirectly
observable for the asset or liability ('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.
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:
Unrealised losses in the income
statement - - -
Realised gains in the income statement - - -
- - -
Purchases at cost 2,053 5,068 7,121
Sales proceeds - - -
Balance as at 31 December 2012 2,053 5,068 7,121
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
continue to provide returns for shareholders 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 it 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 GBP224,000 (2011: GBP192,000) was due in respect of
investment management fees. The balance owing to Shore Capital Limited
at the period-end was nil (2011: GBP62,000).
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
GBP41,000 (2011: GBP34,000) was due in respect of these services. The
balance owing to Shore Capital Fund Administration Services Limited at
the period-end was nil (2011: GBP11,000).
As detailed in the prospectus of the fund, issue costs of 2% were
charged to cover the cost of launching the fund. In September 2011 a
payment of GBP263,000 was made to Shore Capital Ltd in relation to these
issue costs.
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 VCT VII PLC via Thomson Reuters ONE
HUG#1698170
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