TIDMPUA
Puma VCT plc
Final Results for the Year Ended 28 February 2010
Highlights
* Successful disposals during the year enabling a substantial return of
capital.
* Since inception, the VCT has already paid 65p in dividends which,
together with the original tax relief, has more than returned the original
investment.
* Fully diluted NAV per share was 39.7p at year end. This represents a
7.1% increase for the year after adjusting for the dividends paid in the
period.
* As envisaged in the original Prospectus, resolutions to be put
forward for a winding up of the VCT.
Sir Aubrey Brocklebank, Chairman of Puma VCT plc ("the Company"), said:
"I am pleased to report upon a successful year for the VCT in which it achieved
major progress in fulfilling its objectives. A large element of the unquoted
qualifying investments was realised successfully and the process of returning
capital to investors advanced significantly.
In accordance with the 2005 Prospectus, the Board is tabling resolutions to
wind-up the VCT as it has now just passed its fifth year. The intention is to
return a large part of the residual capital in the near term, with an orderly
wind-up of the VCT within the two years envisaged by tax legislation."
Enquiries
Shore Capital 020 7408 4090
Graham Shore
Citigate Dewe Rogerson 020 7638 9571
Tom Baldock
Angharad Couch
Notes to Editors
Puma VCT plc is managed by Shore Capital's successful fund management team. The
Company's investment objective is to achieve high distributions to shareholders.
It has invested in a diversified portfolio of smaller companies, primarily
unquoted companies, selecting companies and investment structures where Shore
Capital believed the investment risk was lower than is normal for companies of
this size. Whilst suitable VCT Qualifying Companies were being identified, the
Investment Manager invested the Company's funds in a range of investments
intended to generate a positive return. The VCT continued to hold a proportion
of such products after building up the desired holdings of VCT Qualifying
Companies.
Chairman's Statement
Introduction
I am pleased to report upon a successful year for the VCT in which it achieved
major progress in fulfilling its objectives. During this year, the fifth for the
VCT which begun investing in Spring 2005, a large element of the unquoted
qualifying investments was realised successfully and the process of returning
capital to investors advanced significantly.
The investment environment
At the start of the year the fund held a mixed portfolio of secured loans and
equity in qualifying unquoted companies and qualifying AiM stocks, together with
property related stocks, bonds, bond funds and macro funds. This period marked a
turning point in sentiment in the financial markets. The fear of immediate
banking defaults receded, quantitative easing began to take effect and interest
rates reached their current low level.
In this new environment the stock market began a strong recovery from its low,
led by distressed blue chip financial stocks. However the similarly distressed
small and micro-cap recovered only somewhat and very selectively and remained
plagued by a lack of liquidity. Although the AiM index's recovery saw a rise of
72%, much of this was accounted for by a bounce-back of resource related stocks,
a sector of little relevance to VCTs.
As discussed above, the VCT made significant realisations during the year. The
proceeds funded significant dividends of 62.6 pence during the year. Dividends
paid to shareholders in previous years brought total cash returned to
shareholders who initially received higher rate tax relief to 105 pence,
comprising 65 pence in dividends and 40 pence in tax relief. As a result, the
VCT passed the milestone of returning in cash more than the original investment
made by investors.
Residual net assets at the year end were 39.7 pence per share. This NAV,
together with dividends paid, showed a 7.1% increase in the year. Most elements
of the portfolio contributed to this return in particular the Company's
qualifying AiM quoted stocks (which benefited from the market recovery and the
cautious approach taken by the Investment Manager), bonds and bond funds (which
also performed well during the year and were realised by the year end), and the
qualifying loans.
Venture capital and other qualifying investments
During the year the Company has realised a significant proportion of its
unquoted qualifying holdings in anticipation of the expected wind-up timetable
of the VCT whilst maintaining its qualifying investment percentage well in
excess of the 70% minimum.
At the end of November 2009 the fund fully realised its holding in Cadbury House
Limited ("Cadbury"). The fund originally invested GBP711,000 in Cadbury in 2005 in
equity and mezzanine and between 2006 and 2007 added a further GBP2.11
million. The hotel and health club development project proved highly successful
and secured refinancing from a bank enabling the return of our finance. Its
ability to achieve such refinancing in the teeth of the credit crunch testifies
to its quality.
In December 2009, Albemarle Contracting Limited, a company into which the VCT
had invested GBP1 million in February 2008, was acquired by Forward Internet Group
Limited (formerly TrafficBroker Limited) ("Forward"), a London based internet
search engine specialist. The Company received cash in settlement for the sale
of this investment.
Chairman's Statement - continued
Venture capital and other qualifying investments
In January 2010 Bond Contracting Limited successfully completed its contract to
construct a 141 bed hotel on the outskirts of Winchester and the hotel was sold
to an operator of a number of Holiday Inns. Bond Contracting has repaid the loan
notes held by the fund and the VCT now has only a small equity holding remaining
which should be realised later this year.
In March 2010, just subsequent to the year end, Stocklight Limited (a rare book
dealer and the parent company of Bloomsbury Auctions) repaid its loan notes and
bought back the equity held by the VCT.
Anticipating the winding-up of the VCT the Investment Manager has started to
sell the AiM listed qualifying holdings. This has been and continues to be
carefully managed to balance the need to return good value on these stocks with
the slow trading volumes of turbulent markets.
During the last quarter of the year holdings in Mount Engineering plc and
Alterian plc were fully redeemed and the holding in Patsystems plc was partially
redeemed.
Subsequent to the year end the balance of the Patsystems plc holding was
redeemed. Also Telford Homes plc (which purchased Clifford Contracting Limited
as discussed in the Company's Interim Statements) redeemed 90% of the loan notes
held by the VCT.
Non-qualifying investments
There have also been significant realisations of the non-qualifying portfolio
during the year. As mentioned in the Interim Statement of the Company, the
holdings in Puma Brandenburg Limited and the fixed rate loan to Lakan
Investments Limited were fully realised. The secured loan notes held with INVU
plc (also discussed in the Interim report) were sold subsequent to the year end.
Throughout the year the Investment Manager subscribed into a range of bonds,
bond funds, blue chip equity holdings and macro funds with the aim of
capitalising on the recovery of values in the market. I am pleased to report
that holdings realised during the year generated income of GBP98,000 plus gains of
GBP258,000 on an investment cost of GBP2.24 million, a total return of 16% over the
year.
VAT
As discussed in last year's statement, following a ruling in the European Court,
the Investment Manager had lodged a claim to the HMRC to recover GBP93,000 of VAT
paid on management fees in earlier periods. I am pleased to report that the VCT
has recovered this sum in full plus interest for the period for which it was
due.
Results and dividends
The VCT generated a total return after tax of GBP823,000, equating to a return per
share of 6.81p from the combination of a recovering market and gains from
successful realisations. The board does not propose a final dividend.
Annual General Meeting and Proposal to Wind-Up the VCT
The Annual General Meeting of the VCT will be held at Bond Street House, 14
Clifford Street, London, W1S 4JU on 16 August 2010 at 11am. Notice of the Annual
General Meeting and Form of Proxy are inserted within the annual accounts.
At this meeting, in accordance with the 2005 Prospectus, the Board is tabling
resolutions to wind-up the VCT as it has now just passed its fifth year. The
intention is to return a large part of the residual capital in the near term,
with an orderly wind-up of the VCT within the two years envisaged by tax
legislation. During this period, once such resolutions have been passed by
shareholders, the VCT is permitted to depart from the 70% qualifying rule whilst
retaining its status of tax free distribution to UK taxpayers.
The resolutions will include proposals to appoint liquidators and begin the
process of winding up the fund. If the resolutions are passed the Board will
seek approval from the HMRC to suspend the VCT qualifying rules for up to three
years in accordance with tax legislation and then seek to de-list the
Company. It is expected that the three current directors of the Company would be
proposed as joint voluntary liquidators. This procedure should allow the Board
to return the balance of the capital in an orderly way, with disposals timed
appropriately to enable further substantial distributions by the end of 2010.
Sir Aubrey Brocklebank Bt
Chairman
30 June 2010
Investment Manager's Report
Overall Performance
In its fifth year, the fund has produced a strong performance. As the country
came out of recession, backed by low interest rates and quantative easing, the
stock market began a significant recovery. The fund saw a return of value on its
existing AiM stocks plus we were able to derive strong returns by trading
selected bonds and bond funds during the year. We are pleased to report that, as
a result of these and other factors, the fund has generated a fully diluted
return of 7.1% for the year after adjusting for the 62.6p of dividends paid in
the period. Following several successful realisations and subsequent
distributions the fund was left with a residual NAV of 39.7p per share at the
year end.
Qualifying Investments - unquoted
This year has seen the successful realisation of the bulk of the unquoted
qualifying portfolio. The fund realised in full its holdings in Albemarle
Contracting Limited and Cadbury House Limited as discussed in the Chairman's
Statement.
Puma VCT invested GBP1.5 million in Bond Contracting Limited ("Bond"). Bond was
set-up to operate as a contractor within the leisure sector and actively sought
to enter into contracting arrangements. It entered into a contract as master
contractor to build a 141 room Holiday Inn hotel on the outskirts of Winchester
which was completed in January 2010 and subsequently sold. Upon the sale of the
hotel, Bond received full settlement of the contracting costs plus a margin.
Upon receipt Bond redeemed in full its loan notes with the VCT. Including the
value of the remaining equity holding, the investment has generated a total
return of 9% for the VCT which is a satisfactory result taking into account the
difficult market conditions under which this project was completed.
Stocklight Limited, in which the VCT has invested GBP610,000, is a rare book
dealer and the parent company of Bloomsbury Auctions, which has made progress
expanding its book auction business both in the UK and overseas. Whilst trading
for this business has been tough, subsequent to the year end we successfully
received full repayment of the loan notes. The equity held by the VCT was
re-purchased by the company.
Qualifying Investments - quoted
During the year we successfully realised holdings in Mount Engineering plc and
Alterian plc and a proportion of Patsystems plc with the balance of the holding
redeemed shortly after year end. Mount Engineering and Patsystems constituted
the bulk of the quoted qualifying portfolio, representing 66% of the market
value of the quoted qualifying portfolio as at the beginning of the year under
review.
The fund's holding in Clifford Contracting Limited of GBP1.5 million was sold in
June 2009 to Telford Homes plc in exchange for new shares and secured loan
notes. In accordance with the expected timetable for the VCT winding-up, Telford
redeemed 90% of its loan notes with the VCT subsequent to the year end.
The remaining holdings which constitute the quoted qualifying portfolio have
recovered strongly as value has returned to the market, increasing 113% on the
value as at 28 February 2009 and outperforming the AiM market over this period.
Vertu Motors plc, a volume retailer of both new and used cars, continues to
perform well, gaining market share. In the year ending 31 March 2010, profit
before tax increased to GBP4.6m from GBP0.7m in 2009, helped by acquisitions and
organic growth. The company raised an additional GBP30m of equity adding 16 sales
outlets in 2010, this further increased liquidity in the after market which will
facilitate an exit. The new car market is predicted to rise aided by low
interest rates and a weakened Euro. We expect Vertu to strengthen its market
position in the current year, aided by GBP13m of net cash at year end.
Clarity Commerce Solutions plc is a global supplier of end to end software
solutions for the entertainment, hospitality and leisure sector, Clarity posted
2010 interim results showing a year on year revenue increase of 10%. Strong cash
management, plus the general ease in borrowing rates, reduced interest charges
to a nominal level for the period - with a resultant doubling of profits
in the six months to September 2009 against the same period in 2008. The Company
raised GBP2.7m in 2009 through the issue of new shares, the proceeds being used to
settle earn-outs and strengthen the balance sheet.
Investment Manager's Report
Non-qualifying investments
We have processed successful realisations of Puma Brandenburg Limited and Lakan
Investments Limited during the year as discussed in the Company's Interim
Report.
In the absolute return fund portfolio we redeemed one class of our holding in
the Blackrock UK Emerging Companies Hedge Fund ("Blackrock") which has generated
a total return of 16% since we invested into the fund in March 2008.
Our hedge fund allocations continue to perform strongly. We retained a position
in BlackRock, an equity fund which has delivered positive returns in all market
environments. Additions to the portfolio during the year include BH Macro, a
closed-end listed fund offering excellent return and liquidity profiles, which
was redeemed in December 09 at a total return of 11% on this investment. We also
subscribed GBP250,000 for the Cazenove UK Dynamic Absolute UK Fund in June 2009,
however, following a change of manager, we redeemed from the holding subsequent
to the year end.
Investment Strategy
We continue to focus on improving the liquidity of the portfolio wherever
possible whilst maintaining an appropriate risk adjusted return. The successful
realisations and subsequent distributions to shareholders this year combined
with the returns achieved have proved this strategy so far. The objective
remains to achieve an orderly winding up of the VCT's assets at the end of its
life, subject to shareholder approval.
Shore Capital Limited
30 June 2010
Investment Portfolio Summary
As at 28 February 2010
+------------------------+--+---------+-------------+-+-----------+------------+
| | |Valuation|Original Cost| |Gain/(Loss)|Valuation as|
|Investment | | | | | | |
| | | GBP'000 | GBP'000 | | GBP'000 | % of NAV |
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Qualifying Investments -| | | | | | |
|Unquoted | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
|Bond Contracting Limited| | 120| 244| | (124)| 3%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Stocklight Limited | | 610| 610| | -| 12%|
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Qualifying Investments -| | | | | | |
|Quoted | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|@UK plc | | 9| 415| | (406)| 0%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Clarity Commerce | | 92| 142| | (50)| 2%|
|Solutions plc | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
|I-Design Group plc | | 16| 59| | (43)| 0%|
+------------------------+--+---------+-------------+-+-----------+------------+
|INVU plc | | 3| 119| | (116)| 0%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Patsystems plc | | 426| 266| | 160| 9%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Sport Media Group plc | | 12| 305| | (293)| 0%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Telford Homes Plc | | 1,513| 1,513| | -| 31%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Universe Group plc | | 81| 174| | (93)| 2%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Vertu Motors plc | | 376| 593| | (217)| 8%|
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Total Qualifying | | 3,258| 4,440| | (1,182)| 67%|
|Investments | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Non - Qualifying | | | | | | |
|Investments - Unquoted | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|INVU loan notes | | 296| 296| | -| 6%|
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Non - Qualifying | | | | | | |
|Investments - Quoted | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Blackrock UK Emerging |* | 449| 302| | 147| 9%|
|Cos Hedge Fund Limited | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
|Cazenove UK Dynamic |**| 254| 250| | 4| 5%|
|Absolute UK Fund | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
|The Hotel Corporation | | 310| 413| | (103)| 6%|
|plc | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Total Non - Qualifying | | 1,309| 1,261| | 48| 26%|
|Investments | | | | | | |
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Total investments | | 4,567| 5,701| | (1,134)| 93%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Cash at bank | | 250| 250| | -| 5%|
+------------------------+--+---------+-------------+-+-----------+------------+
|Net current assets | | 123| 123| | -| 2%|
+------------------------+--+---------+-------------+-+-----------+------------+
+------------------------+--+---------+-------------+-+-----------+------------+
|Net assets | | 4,940| 6,074| | (1,134)| 100%|
+------------------------+--+---------+-------------+-+-----------+------------+
Of the investments held at 28 February 2010 85 per cent (2009 - 84 per cent) are
incorporated in England and Wales, 15 per cent (2009 - 8 per cent) in the Cayman
Islands, nil per cent (2009 - 1 per cent) in Europe and nil per cent the rest of
the world (2009 - 7%). Percentages have been calculated on the valuation of the
assets at the reporting date.
All quoted investments are listed on AiM with the exception of those noted
below:
* Listed on the Irish Stock Exchange.
** Traded directly through investment manager of the investee fund
A detailed analysis of the loan stock holdings is provided in note 18 on page
41.
Bond Contracting Limited is majority owned by VCTs managed by Shore Capital
Limited, Graham Shore is a Director of this company.
Significant Investments
Bond Contracting Limited
Source of financial
Cost ( GBP'000): 244 data - Last filed 30/04/09
accounts:
Investment comprises: Turnover ( GBP'000): 4,454
Ordinary shares 244 Loss before tax (132)
( GBP'000): ( GBP'000):
Debt ( GBP'000): - Retained loss ( GBP'000): (132)
Valuation method: Net Assets Net assets ( GBP'000): 1,773
Valuation ( GBP'000): 120 Earnings per share (p) (0.00)
Income received by the
Company from this
holding in the year
( GBP'000): - Dividends per share (p) -
Proportion of equity 12%
held:
Equity managed by Shore 60%
Capital Ltd
Bond Contracting Limited (Bond) entered into a contract to construct a 141
bedroom hotel near Winchester. Having secured planning permission construction
began in October 2008 and was completed and the hotel sold in the first quarter
of 2010.
Patsystems plc
www.patsystems.com
Source of financial
Cost ( GBP'000): 266 data - Last audited 31/12/09
accounts:
Investment comprises: Turnover ( GBP'000): 22,097
Ordinary shares 266 Profit before tax 4,346
( GBP'000): ( GBP'000):
Debt ( GBP'000): - Profit after tax 3,362
( GBP'000):
Valuation method: Bid Market Price Net assets ( GBP'000): 23,508
Valuation ( GBP'000): 426 Earnings per share 1.8
(p)
Income received by
the Company from this 8 Dividends per share 0.382
holding in the year (p)
( GBP'000):
Proportion of equity 0.96%
held:
Equity managed by 1.62%
Shore Capital Ltd
Patsystems was established in 1994 as one of the original independent software
vendors to develop electronic trading solutions. Today Patsystems are one of the
world's leading software providers for professional, technical and retail
traders. The professional Trading System (PTS) provides fully scaleable, open
trading which links intermediaries and end users. PTS provides intermediaries
with real time routing of customer orders and users with a trading front that
includes real time one click trading and position management.
Significant Investments (continued)
Stocklight Limited
www.shapero.com
Source of financial
Cost ( GBP'000): 610 data - Last audited 31/12/07
accounts:
Investment Turnover ( GBP'000): 15,173
comprises:
Ordinary shares 61 Loss before tax (1,659)
( GBP'000): ( GBP'000):
Debt ( GBP'000): 549 Loss after tax (1,659)
( GBP'000):
Valuation method: Discounted cashflow
based on post year
end redemption Net assets ( GBP'000): 5,307
Valuation ( GBP'000): 610 Earnings per share (2.1)
(p)
Income received by
the Company from
this holding in the Dividends per share
year ( GBP'000): 71 (p) -
Proportion of 0.6%
equity held:
Equity managed by 3%
Shore Capital Ltd
Stocklight Limited owns 100 per cent of Bloomsbury Auctions and trades as
Bernard J Shapero Rare Books, an internationally recognised dealer in
antiquarian and rare books. Bernard Shapero, who owns the business with his
business partner Tommaso Zanzotto, has been dealing in antiquarian books for
over 20 years. The company bought its current premises in St George Street,
Mayfair, in 1996.
Telford Homes plc
www.telfordhomes.plc.uk
Source of financial
Cost ( GBP'000): 1,513 data - Last audited 31/03/09
accounts:
Investment comprises: Turnover ( GBP'000): 106,662
Ordinary shares 151 Profit before tax 4,343
( GBP'000): ( GBP'000):
Debt ( GBP'000): 1,362 Profit after tax 3,023
( GBP'000):
Valuation method: Price of recent
investment Net assets ( GBP'000): 50,305
Valuation ( GBP'000): 1,513 Earnings per share (p) 8.1
Income received by the
Company from this
holding in the year Dividends per share
( GBP'000): 52 (p) -
Proportion of equity 0.7%
held:
Equity managed by 3%
Shore Capital Ltd
Telford Homes plc ("Telford"), the AiM listed residential property developer in
East London noted for
regeneration projects within public sector partnerships.
Significant Investments (continued)
Vertu Motors Plc
www.vertumotors.com
Source of financial
Cost ( GBP'000): 593 data - Last audited 28/02/10
accounts:
Investment comprises: Turnover ( GBP'000): 755,340
Ordinary shares Profit before tax 4,626
( GBP'000): 593 ( GBP'000):
Profit after tax 3,782
Debt ( GBP'000): - ( GBP'000):
Valuation method: Bid Market Price Net assets ( GBP'000): 90,522
Earnings per share 2.23
Valuation ( GBP'000): 376 (p)
Income received by -
the Company from this
holding in the year Dividends per share
( GBP'000): - (p)
Proportion of equity 0.5%
held:
Equity managed by 1.68%
Shore Capital Ltd
Vertu Motors Plc owns and acquires motor retail operations in the form of
franchised dealerships and used car only operations. Company is the 9(th)
largest motor retail group in the UK - operating 45 dealerships in volume
sector.
Directors' Biographies
Sir Aubrey Brocklebank Bt, ACA (Chairman) (58)
Sir Aubrey worked for Guinness Mahon from 1981 to 1986, initially in its
corporate finance department before assisting in the establishment of a
specialist development capital department. From 1986 to 1990 he was a director
of Venture Founders Limited, managing a GBP12 million venture capital fund, which
had been raised to invest in early stage ventures. He managed the Avon
Enterprise Fund (a venture capital fund of circa GBP4.5 million investing in
approximately 20 companies) from 1990 until all investments had been realised in
1997. He is on the board of eight other VCTs, the Downing Distribution VCT 1 plc
(as chairman), Keydata AiM VCT plc and Keydata AiM VCT II plc (both as
chairman), Close Second AiM VCT plc and Pennine 6 VCT plc (both as a
non-executive director), Puma VCT II plc, Puma VCT III plc and Puma VCT IV plc
(as chairman). He is and has also been a director of a number of companies, some
of which are, or have been, quoted on AiM.
David Michael Brock (60)
David was, until July 1997, a main board director of MFI Furniture Group plc and
managing director of MFI International Limited having been involved at a senior
level in both MFI's management buy out and its subsequent flotation. He started
his career at Marks and Spencer Group plc. He is currently chairman of Jane
Norman (Holdings) Limited, Episys Limited and Elderstreet VCT plc.
Graham Shore (54)
Graham is a former partner of Touche Ross (now Deloitte LLP) and was responsible
for the London practice advising the telecommunications and new media
industries. At Touche Ross he undertook strategic and economic assignments for a
wide range of clients including appraisals of venture capital opportunities. In
1990, Graham joined Shore Capital as Managing Director, and has been involved in
managing Shore Capital-promoted investment funds Puma I, the JellyWorks
portfolio, Puma II and the Puma VCTs. This has involved the evaluation of new
deals and representing the funds with investee companies. Graham has been
involved with AIM since its inception as both a corporate financier and investor
and with private equity for more than 20 years.
Report of the Directors
The Directors present their annual report and the audited financial statements
of the Company for the year ended 28 February 2010.
Principal Activities and Status
The principal activity of the Company is the making of investments in qualifying
and non-qualifying holdings of shares or securities. The Company is an
investment company within the meaning of Section 833 of the Companies Act 2006.
The Company has been granted provisional approval by the Inland Revenue under
Section 274 of the Income and Corporation Taxes Act 2007 as a Venture Capital
Trust for the year ended 28 February 2010. The Directors have managed, and
continue to manage, the Company's affairs in such a manner as to comply Section
274 of the Income and Corporation Taxes Act 2007.
The Company has no employees (other than the Directors).
The Company's ordinary shares of 1p each have been listed on the Official List
of the UK Listing Authority since 29 April 2005.
Investment Policy
Puma VCT plc seeks to achieve its overall investment objective (of proactively
managing the assets of the fund with an emphasis on realising gains in the
medium term) to maximise distributions from capital gains and income generated
by the Company's assets. It intends to do so whilst maintaining its qualifying
status as a VCT, by pursuing the following Investment Policy:
Asset Mix
The Company may invest in a mix of qualifying and non-qualifying assets. The
qualifying investments may be quoted on AiM/OFEX/Irish Stock Exchange or be
unquoted companies. The Company may invest in a diversified portfolio of growth
oriented qualifying companies which seek to raise new capital on flotation or by
way of a secondary issue. The Company has the ability to structure deals to
invest in private companies with an asset-backed focus to reduce potential
capital loss. Since 29 February 2008, the Company must have had in excess of
70% of its assets invested in qualifying investments as defined for VCT
purposes.
The portfolio of non-qualifying investments will be managed with the intention
of generating a positive return. Subject to the Investment Manager's view from
time to time of desirable asset allocation it will comprise quoted and unquoted
investments (direct or indirect) in cash or cash equivalents, bonds, equities,
vehicles investing in property and a portfolio of hedge funds.
A full text of the Company's investment policy can be found within the Company's
prospectus at www.shorecap.co.uk.
Principal risks and uncertainties
The principal risks facing the company relate to its investment activities and
include market price risk, interest rate risk, credit risk and liquidity risk.
An explanation of these risks and how they are managed is contained in note
18 to the financial statements. Additional risks faced by the company are as
follows:
Investment Risk - Inappropriate stock selection leading to underperformance in
absolute and relative terms is a risk which the Investment Manager and the Board
mitigates by reviewing performance throughout the year and formally at Board
meetings. There is also a regular review of the investment mandate and long term
investment strategy by the Board and monitoring of whether the Company should
change its investment strategy.
Regulatory Risk - the Company operates in a complex regulatory environment and
faces a number of related risks. A breach of s274 of the Income Tax Act 2007
could result in the Company being subject to capital gains on the sale of
investments. A breach of the VCT Regulations could result in the loss of VCT
status and consequent loss of tax relief currently available to shareholders.
Serious breach of other regulations, such as the UKLA Listing rules and
the Companies Act 2006 could lead to suspension from the Stock Exchange. The
board receives quarterly reports in order to monitor compliance with
regulations.
Risk Management
The Company's asset mix includes a large proportion of the Company's assets held
in unquoted investments. These investments are not publicly traded and there is
not a liquid market for them, and therefore these investments may be difficult
to realise. The Company may also find it difficult to realise some of the quoted
investments held in its portfolio in the current market conditions.
Report of the Directors (continued)
The Company manages its investment risk within the restrictions of maintaining
its qualifying VCT status by using the following methods:
* the active monitoring of its investments by the Investment Manager
and the Board;
* seeking Board representation associated with each investment, if
possible;
* seeking to hold larger investment stakes by co-investing with other
companies managed by the Investment Manager, so as to gain more influence
over the investment;
* ensuring a spread of investments is achieved.
Gearing
The Company has the authority to borrow up to 25% of the amount received on the
issued share capital but there are currently no plans to take advantage of this
authority.
Results and dividends
The results for the financial year are set out on page 24. The Directors do not
propose a final dividend (2009 - 2.75p). It is the aim of the Directors to
maximise tax free distributions to shareholders by way of dividends paid out of
income received from investments and capital gains received following successful
realisations.
Business Review and Future Developments
The Company's business review and future developments are set out in the
Chairman's Statement and the Investment Manager's Report on pages 3 to 6.
Key performance indicators
At each board meeting, the Directors consider a number of performance measures
to assess the Company's success in meeting its objectives. The Board believes
the Company's key performance indicators are movement in NAV, Total Return and
dividends payable per share. The Board considers that the Company has no non
financial key performance indicators. In addition, the Board considers the
Company's compliance with the Venture Capital Trust Regulations to ensure that
it will maintain its VCT status. The performance of the Company's portfolios and
specific investments is discussed in the Chairman's Statement and Investment
Managers Report on pages 3 to 6.
Environmental and social policy
As a VCT the Company is a pure investment company and therefore has no trading
activities. Due to this the Company does not have a policy on either
environmental or social and community issues.
Capital Structure
The authorised and issued share capital of the Company is detailed in note 13 of
these accounts.
During the year ended 28 February 2010, the Company issued no new shares.
Share capital, rights attaching to the shares and restrictions on voting and
transfer
Ordinary shares are freely transferable in both certificated and uncertificated
form and can be transferred by means of the CREST system. There are no
restrictions on the transfer of any fully paid up share.
With respect to voting rights the shares rank pari passu as to rights to attend
and vote at any general meeting of the Company. The Companies' major
shareholders do not have differing voting rights.
Full details of the rights and restrictions attached to the share capital as
required by the Takeover Directive are contained within the Company's prospectus
which can be found at www.shorecap.co.uk.
Repurchase of Ordinary shares
Although the Ordinary Shares are traded on the London Stock Exchange, there is
likely to be an illiquid market and in such circumstances Shareholders may find
it difficult to sell their Ordinary Shares in the market. In order to try to
improve the liquidity in the Ordinary Shares, the Board may establish a buy back
policy whereby the Company will purchase Ordinary Shares for cancellation.
However there are currently no plans to establish such a policy.
Directors
The Directors of the Company during the year and their beneficial interests in
the issued ordinary shares of the Company at 1 March 2009 and 28 February 2010
were as follows:
1p ordinary shares
28 February 2010 1 March 2009
Sir A T Brocklebank Bt, ACA (Chairman) 10,000 10,000
D M Brock - -
Graham Shore 150,000 150,000
All of the Directors' share interests shown above were held beneficially. No
options over the share capital of the Company have been granted to the
Directors. There have been no changes in the holdings of the Directors since the
year end.
The Directors are also Directors of Puma VCT II plc, Puma VCT III plc, Puma VCT
IV plc, Graham Shore is also a director of Puma VCT V plc and Puma High Income
VCT plc, VCTs to which Shore Capital Limited is also the Investment Manager.
Report of the Directors (continued)
Investment management, administration and performance fees
The Company has delegated the investment management of the portfolio to Shore
Capital Limited (Shore Capital). The principal terms of the Company's management
agreement with Shore Capital as applicable during the year ended 28 February
2010, are set out in note 3 of the financial statements.
The Company has delegated company secretarial and other accounting and
administrative support to Shore Capital Fund Administration Services Limited for
an aggregate annual fee of 0.35 per cent of the Net Asset Value of the Fund at
each quarter end, payable quarterly in arrears.
The annual running costs of the Company, for the year, are subject to a cap of
3.5 per cent of the Company's net assets at the year end.
Shore Capital and members of the investment management team 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 will only be
exercisable 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.
The performance incentive has been satisfied through the issue of Loan Notes to
a nominee on behalf of the Investment Manager's group and employees of and
persons related to the investment management team. In the event that
distributions attributable to the Ordinary Shares of 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 performance fee has been expensed in accordance with FRS 20 for share based
payments (see notes 1 and 4).
It is the Directors opinion that the continued appointment of the Investment
Manager, Shore Capital, on the terms agreed is in the best interest of the
shareholders as a whole. The Investment Manager has a proven track record in VCT
management and currently manages over GBP60 million of VCT funds and has a strong
network within the industry.
VCT status monitoring
The Company has retained PricewaterhouseCoopers LLP to advise it on compliance
with VCT requirements, including evaluation of investment opportunities, as
appropriate, and regular review of the portfolio. Although
PricewaterhouseCoopers LLP work closely with the Investment Manager, they report
directly to the Board.
Compliance with the VCT regulations (as described in the Investment Policy) for
the year under review is summarised as follows:
Position at 28 Feb 2010
1. The Company holds at least 70% of its investments in 100%
qualifying companies,
2. At least 30% of the Company's qualifying investments 65.23%
are held in "eligible shares";
3. No investment constitutes more than 15% of the Complied
Company's portfolio at time of investment;
4. The Company's income for each financial year is
derived wholly or mainly from shares and securities; 94.69%
5. The Company distributes sufficient revenue dividends
to ensure that not more than 15% of the income from
shares and securities in any one year is retained;
and Complied
6. A maximum unit size of GBP1 million in each VCT
qualifying investment (per tax year). Complied
Creditor payment policy
The Company's payment policy for the forthcoming year is to ensure settlement of
suppliers' invoices in accordance with their standard terms. As at 28 February
2009 and 28 February 2010 there were nil days' billing from the suppliers of
services outstanding.
Going concern
After making enquiries the Directors believe that it is appropriate to continue
to apply the going concern basis in preparing the financial statements. This is
appropriate as cash reserves are greater than the anticipated average annual
running costs of the Company. Given the nature of the assets held it is
considered that these can be realised with sufficient ease to provide any
additional cash which may be required to enable the Company to meet its
liabilities as they fall due for payment. The directors have considered a period
of 12 months from the date of this report for the purposes of determining the
company's going concern status which has been assessed in accordance with the
guidance issued by the Financial Reporting Council.
Report of the Directors (continued)
Financial Instruments
The material risks arising from the Company's financial instruments are market
price risk, credit risk, liquidity risk, foreign exchange risk and interest rate
risk. The Board reviews and agrees policies for managing each of these risks and
these are summarised in note 18. These policies have remained unchanged since
the beginning of the financial year. As a venture capital trust, it is the
Company's specific business to evaluate and control the investment risk in its
portfolio.
Substantial Shareholdings
As at 28 February 2010 and at the date of this report, the Company was not aware
of any beneficial interest exceeding 3 per cent of any class of the issued share
capital.
Annual General Meeting
The Annual General Meeting of the Company will be held at Bond Street House, 14
Clifford Street, London, W1S 4JU on 16 August 2010 at 11am. Notice of the Annual
General Meeting and Form of Proxy are inserted within this document.
Auditor
The Directors, resolved that Baker Tilly UK Audit LLP be re-appointed as auditor
in accordance with the provisions of the Companies Act 2006, s489. Baker Tilly
UK Audit LLP has indicated its willingness to continue in office.
Statement as to Disclosure of Information to the Auditor
The Directors in office at the date of this report have confirmed that, as far
as they are aware, there is no relevant information of which the auditor is
unaware. Each of the Directors have confirmed that they have taken all the steps
that they ought to have taken as Directors in order to make themselves aware of
any relevant audit information and to establish that it has been communicated to
the auditor.
Statement of Directors' responsibilities
The directors are responsible for preparing the Report of the Directors', the
Directors' Remuneration Report, the separate Corporate Governance Statement and
the financial statements in accordance with applicable law and regulations. They
are also responsible for ensuring the Annual Report includes information
required by the Listing and Disclosure and Transparency Rules of the Financial
Services Authority.
Company law and the Disclosure and Transparency Rules requires the directors to
prepare financial statements for each financial year. Under that law the
directors have elected to prepare the financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting
Standards and applicable law). Under company law the directors must not approve
the financial statements unless they are satisfied that they give a true and
fair view of the state of affairs of the Company and of the profit or loss of
the Company for that period. In preparing those financial statements, the
directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and estimates that are reasonable and prudent;
c. state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements;
d. prepare the financial statements on the going concern basis unless it
is inappropriate to presume that the company will continue in business
The directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the company's transactions and disclose with
reasonable accuracy at any time the financial position of the company and enable
them to ensure that the financial statements and the Directors' Remuneration
Report comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
Each of the directors, whose names and functions are listed in the Directors
Biography on page 11 confirms that, to the best of each persons' knowledge:
a. the financial statements, prepared in accordance with United Kingdom
Generally Accepted Accounting Practice, give a true and fair view of the
assets, liabilities, financial position and profit of the company; and
b. the Chairman's Statement, Investment Manager's Report and Report of the
Directors commencing on page 3 include a fair review of the development and
performance of the business and the position of the company together with a
description of the principal risks and uncertainties that it faces.
Report of the Directors (continued)
Electronic publication
The financial statements are published on www.shorecap.co.uk a website
maintained by the investment manager, Shore Capital. Legislation in the United
Kingdom regulating the preparation and dissemination of the financial statements
may differ from legislation in other jurisdictions.
The directors are responsible for ensuring the Report of the Directors and other
information included in the Annual Report includes information required by the
Listing Rules of the Financial Services Authority.
By order of the Board
Eliot Kaye
Company Secretary
30 June 2010
Directors' Remuneration Report
This report is prepared in accordance with Schedule 420-422 of the Companies Act
2006. A resolution to approve this report will be put to the members at the
Annual General Meeting to be held on 16 August 2010.
Directors' Remuneration Policy
The Board as a whole considers Directors' remuneration and, as such, a
Remuneration Committee has not been
established. The Board's policy is that the remuneration of non-executive
Directors should reflect time spent and the responsibilities borne by the
Directors on the Company's affairs and should be sufficient to enable candidates
of high calibre to be recruited. Directors' fees payable during the year
totalled GBP33,000 in aggregate for Puma VCT plc and Puma VCT II plc of which
GBP21,000 (including VAT) related to Puma VCT plc as set out in note 5.
The Directors contracts are discussed in point (g) in the Corporate Governance
Statement on page 19.
Directors' Remuneration
The Directors received emoluments as detailed below:
Unaudited Current Audited Audited
Annual Fee 2010 2009
12 months 12 months 12 months
GBP GBP GBP
Sir A T Brocklebank Bt, ACA (Chairman) 11,000 11,000 11,000
D M Brock 9,000 9,000 9,000
Graham Shore * - - -
20,000 20,000 20,000
* No fee is paid to Graham Shore, due to his position as director of the
Investment Manager, Shore Capital Limited.
These are the total emoluments, there is no pension or share option scheme.
Brief biographical notes on the directors are given on page 11.
2011 Remuneration
The remuneration levels for the forthcoming year are expected to be at the
annual levels shown in the table above. The Directors shall be paid by the
Company all travelling, hotel and other expenses they may incur in attending
meetings of the Directors or general meetings or otherwise in connection with
the discharge of their duties.
Directors' and Officers liability insurance cover is held by the Company in
respect of the Directors.
On 20 January 2005, the non-executive Directors were appointed for a period of
twelve months after which either party must give three calendar months' notice
to end the contract.
Directors' Remuneration Report (continued)
Performance Graph
The following chart represents the Company's performance from inception to 28
February 2010 and compares the rebased Net Asset Value to a rebased FTSE AiM
Allshare Index which has been chosen as a comparison as it best represents the
spread of investments held by the Company. This has been rebased to 100 at 5
April 2005, the effective start of operations for the Company.
On behalf of the Board
Sir Aubrey Brocklebank Bt
Chairman
30 June 2010
Corporate Governance Statement
The Directors support the relevant principles of the new Combined Code issued in
June 2008 and published on the Financial Reporting Council's Website
(www.frc.org.uk), being the principles of good governance and the code of best
practice, as set out in Section 1 of the FRC Combined Code. Due to the VCT being
a limited life vehicle some areas of the Code have not been complied with, these
are set out in the Compliance Statement below.
The Board
The Company has a Board comprising three non-executive Directors. All of the
Directors are independent as defined by the Combined Code except for Graham
Shore as a result of his holding a Directorship of the Investment Manager. The
Board considers that all Directors have sufficient experience to be able to
exercise proper judgement within the meaning of the Combined Code. The Board has
appointed Sir Aubrey Brocklebank as the senior independent Director who is also
the Chairman. Biographical details of all Board members are shown on page 11.
David Brock is to retire at the forthcoming Annual General Meeting and, being
eligible, offer himself for re-election. The remainder of the Board believe
that he has made valuable contributions since his appointment and remains
committed to his role. The Board therefore recommends that shareholders re-elect
David Brock at the forthcoming AGM. The Board did not use an external search
consultant to search for candidates or advertise this position.
Full Board meetings take place quarterly and additional meetings are held as
required to address specific issues. The board has a formal schedule of matters
specifically reserved for its decision. These include:
* considering recommendations from the Investment Manager,
* making all decisions concerning the acquisition or disposal of
qualifying investments,
* reviewing, annually, the terms of engagement of all third party
advisers (including investment managers and administrators),
* performing the role of Audit Committee (including reviewing the
Company's published financial statements, reviewing internal control and
risk management systems and monitoring the external Auditors independence,
objectivity and the effectiveness of the audit process).
The attendance of individual Directors at full Board meetings during the year
were as follows:
Scheduled Board meetings
Sir A T Brocklebank Bt 4/4
D M Brock 4/4
G B Shore 4/4
The Board has also established procedures whereby Directors wishing to do so in
the furtherance of their duties may take independent professional advice at the
Company's expense.
All Directors have access to the advice and services of the Company Secretary.
The Company Secretary provides the Board with full information on the Company's
assets and liabilities and other relevant information requested by the Chairman,
in advance of each Board meeting.
The Board has not appointed a nominations committee, audit committee or
remuneration committee as they consider the Board to be small and it comprises
wholly non-executive Directors. Appointments of new Directors, audit matters and
Directors' remuneration are dealt with by the full Board.
During the year the Board reviewed the independence of the external auditor and
recommended that they be re-appointed. The Directors receive written
confirmation each year of the auditor's independence. They also considered the
need for an internal audit function and concluded that this function would not
be an appropriate control for a venture capital trust.
The Board reviewed Directors' remuneration during the year. Details of the
specific levels of remuneration to each director are set out in the Directors'
Remuneration Report on page 17, and this is subject to shareholder approval.
Relations with shareholders
Shareholders have the opportunity to meet representatives of the Investment
Management team and the Board at the AGM. The Board is also happy to respond to
any written queries made by shareholders during the course of the year, or to
meet with shareholders if so requested. In addition to the formal business of
the AGM, representatives of the Investment Management team and the Board are
available to answer any questions a shareholder may have.
Separate resolutions are proposed at the AGM on each substantially separate
issue. The Registrars collate proxy votes and the results (together with the
proxy forms) are forwarded to the Company Secretary immediately prior to the
AGM. In order to comply with the Combined Code, proxy votes are announced at the
AGM, following each vote on a show of hands, except in the event of a poll being
called. The notice of the next AGM and proxy form are at the end of this
document.
Corporate Governance Statement (continued)
Financial Reporting
The Directors' statement of responsibilities for preparing the accounts is set
out in the Report of the Directors on page 12, and a statement by the auditors
about their reporting responsibilities is set out in the Auditor's Report on
page 22.
Internal control
The Company has adopted an Internal Control Manual ("Manual"), which has been
compiled in order to comply with the Combined Code. The Manual is designed to
provide reasonable, but not absolute, assurance against material misstatement or
loss, which it achieves by detailing the perceived risks and controls to
mitigate them. The Board is responsible for ensuring that the procedures to be
followed by the advisers and themselves are in place, and review the
effectiveness of the Manual on an annual basis to ensure that the controls
remain relevant and were in operation throughout the year. The Board will
implement additional controls when new risks are perceived and update the Manual
as appropriate.
16
Although the Board are ultimately responsible for safeguarding the assets of the
Company, the Board has delegated, through written agreements, the day-to-day
operation of the Company to the following advisers:
Administration Shore Capital Fund Administration Services Limited
Investment Management Shore Capital Limited
Shore Capital Limited identifies the investment opportunities for the
consideration of the Board who ultimately make the decision whether to proceed
with that opportunity. Shore Capital Limited monitors the portfolio of
investments and makes recommendations to the Board in terms of suggested
disposals and further acquisitions.
Shore Capital Fund Administration Services Limited is engaged to carry out the
accounting function and manages the retention of physical custody of the
documents of title relating to unquoted investments through a custodian. Quoted
investments are held in Crest. Shore Capital Fund Administration Services
Limited regularly reconciles the client asset register with the physical
documents.
The Directors confirm that they have established a continuing process throughout
the year and up to the date of this report for identifying, evaluating and
managing the significant potential risks faced by the Company, and have reviewed
the effectiveness of the internal control systems. As part of this process, an
annual review of the internal control systems is carried out in accordance with
the Financial Reporting Council guidelines for internal control.
Internal control systems include: production and review of monthly bank and
management accounts. All outflows made from the VCT's accounts require the
authority of two signatories from Shore Capital, the Investment Manager. The VCT
is subject to a full annual audit whereby the auditors are the same auditors as
other VCTs managed by the Investment Manager and thus controls are tested on a
frequent basis. Further to this, the Audit Partner has open access to the
Directors of the VCT and the Investment Manager is subject to regular review by
the Shore Capital Compliance Department.
Going Concern
After making enquiries the Directors believe that it is appropriate to continue
to apply the going concern basis in preparing the financial statements. This is
appropriate as cash reserves are significantly greater than the anticipated
average running costs of the Company. Given the nature of the assets held it is
considered that these can be realised with sufficient ease to provide any
additional cash which may be required to enable the Company to meet its
liabilities as they fall due for payment. The directors have considered a period
of 12 months from the date of this report for the purposes of determining the
company's going concern status which has been assessed in accordance with the
guidance issued by the Financial Reporting Council.
Compliance statement
The Listing Rules require the Board to report on compliance with the forty-eight
Combined Code provisions throughout the accounting year. With the exception of
the items outlined below, the Company has complied throughout the accounting
year ended 28 February 2010 with the provisions set out in Section 1 of the
Combined Code. Due to the special nature of the Company being a VCT, the
following provisions of the Combined Code have not been complied with:
a) Provision A1-3 - Due to the size of the Board, they feel it unnecessary to
formalise procedures to appraise the Chairman's performance, as the Board deem
it appropriate to address matters as they arise.
b) Provision A3-3 - Due to the size of the board, the role of Chairman and
senior independent Director are both performed by Aubrey Brocklebank. The
recommendation is for the senior independent Director and Chairman to be
separate positions on the Board.
c) Provision A5-1 - New directors do not receive a full, formal and tailored
induction on joining the Board because matters are addressed on an individual
basis as they arise. Also the Company has no major shareholders so shareholders
are not given the opportunity to meet any new non-executive directors at a
specific meeting other than the annual general meeting.
Corporate Governance Statement (continued)
d) Provision A6-1 - Due to the size of the Board, a formal performance
evaluation of the Board, its committees and the individual Directors has not
been undertaken. Specific performance issues are dealt with as they arise.
e) Provisions C3-1 to C3-6 - Due to the size of the Board, the Company did not
have a formal audit committee.
The Directors do not consider it necessary to appoint an audit committee as the
board consists of a majority of non-executive Directors as recommended by C3-1
of the Combined Code. The Directors consider that the role and responsibility of
the audit committee as set-out in provisions C3-1 to C3-6 have been adopted by
the full board. Relevant matters were dealt with by the full Board.
f) Provisions A4-1 to A4-3 & A4-6, B2-1 to B2-2, - Due to the size of the Board
and because there are no executive directors or senior management, the Company
did not have a formal nominations committee, or remuneration committee. During
the year there have been no changes to the Board of the Directors and the
Directors remuneration remains unchanged.
g) Provision A7-2 - On 20 January 2005 (27 June 2008 For G Shore), the Directors
were appointed for a period of twelve months after which either party must give
three calendar months' notice to end the contract. The recommendation of the
Combined Code is for fixed term renewable contracts. This is deemed unnecessary
by the Board because all Directors are subject to re-election at the first AGM
and from that point forward by rotation at least every three years.
h) Provision A3-1 - the Directors are not considered to be independent as they
hold common directorships under the same Investment Manager. The Board considers
that the Directors have sufficient experience to exercise proper judgment within
the meaning set out by the Combined Code.
Independent Auditor's Report
to the Members of Puma VCT plc
We have audited the financial statements on pages 24 to 43. The financial
reporting framework that has been applied in their preparation is applicable law
and United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
As more fully explained in the Directors' Responsibilities Statement set out on
page 15, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's (APB's)
Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on
the APB's website at www.frc.org.uk/apb/scope/UKP.
Opinion on the financial statements
In our opinion the financial statements:
* give a true and fair view of the state of the company's affairs as at
28 February 2010 and of its result for the year then ended;
* have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
* have been prepared in accordance with the requirements of the
Companies Act 2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
* the part of the Directors' Remuneration Report to be audited has been
properly prepared in accordance with the Companies Act 2006; and
* the information given in the Report of the Directors' for the
financial year for which the financial statements are prepared is consistent
with the financial statements.
* the information given in the Corporate Governance Statement set out
on pages 19 to 21 in compliance with rules 7.2.5 and 7.2.6 in the Disclosure
Rules and Transparency Rules Sourcebook issued by the Financial Services
Authority (information about internal control and risk management systems in
relation to financial reporting process and about share capital structures)
is consistent with the financial statements.
Independent Auditor's Report (continued)
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
* adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches not visited by
us; or
* the financial statements and the part of the Directors'
Remuneration Report to be audited are not in agreement with the accounting
records and returns; or
* certain disclosures of directors' remuneration specified by law
are not made; or
* we have not received all the information and explanations we
require for our audit; or
* a Corporate Governance Statement has not been prepared by the
Company.
Under the Listing Rules we are required to review:
* the directors' statement, set out on page 14, in relation to
going concern; and
* the part of the Corporate Governance Statement on pages 19 to
21 relating to the company's compliance with the nine provisions of the June
2008 Combined Code specified for our review.
RICHARD WHITE (Senior Statutory Auditor)
For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor
Chartered Accountants
2 Bloomsbury Street
London WC1B 3ST
30 June 2010
Income Statement
For the year ended 28 February 2010
+--------------------------+----+---------------------+------------------------+
| | | Year ended| Year ended|
| | | | |
| | | 28 February 2010| 28 February 2009|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | |Revenue|Capital|Total|Revenue| Capital| Total|
| |Note| | | | | | |
| | | GBP'000| GBP'000| GBP'000| GBP'000| GBP'000| GBP'000|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
|Gains/(losses) on |9(c)| | | | | | |
|investments | | -| 740| 740| -| (1,412)|(1,412)|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| Income | 2| 462| -| 462| 584| -| 584|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | 462| 740|1,202| 584| (1,412)| (828)|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| Investment management | 3| | | | | | |
|fees | | 35| 105| 140| 63| 189| 252|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| Performance fees | 4| 39| 102| 141| (75)| (112)| (187)|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| Other expenses | 5| 98| -| 98| 114| -| 114|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | 172| 207| 379| 102| 77| 179|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| Return/(loss) on | | | | | | | |
|ordinary | | | | | | | |
| | | | | | | | |
| activities before | | | | | | | |
|taxation | | 290| 533| 823| 482| (1,489)|(1,007)|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| Tax on ordinary | 6| | | | | | |
|activities | | (62)| 62| -| (72)| 72| -|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| Return/(loss) after | | | | | | | |
|taxation attributable to | | | | | | | |
|equity | | | | | | | |
| | | | | | | | |
| shareholders | | 228| 595| 823| 410| (1,417)|(1,007)|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| Basic and diluted | | | | | | | |
|return/(loss) per Ordinary| | | | | | | |
|Share (pence) | 7|1.89p | 4.92p|6.81p|3.39p |(11.72)p|(8.33)p|
+--------------------------+----+-------+-------+-----+-------+--------+-------+
| | | | | | | | |
+--------------------------+----+-------+-------+-----+-------+--------+-------+
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 year.
No separate Statement of Total Recognised Gains and Losses is presented as all
gains and losses are included in the Income Statement.
The accompanying notes on pages 28 to 43 are an integral part of the financial
statements.
Balance Sheet
As at 28 February 2010
As at As at
28 February 2010 28 February 2009
Note
GBP'000 GBP'000
Fixed Assets
Investments 9(a) 4,567 9,368
Current Assets
Debtors 10 174 134
Cash at bank and in hand 250 2,113
424 2,247
Creditors - amounts falling due within 11
one year (50) (71)
Net Current Assets 374 2,176
Total Assets less Current Liabilities 4,941 11,544
Creditors - amounts falling due after
more than one year 12
(including convertible debt) (1) (1)
Net Assets 4,940 11,543
Capital and Reserves
Called up share capital 13 121 121
Capital reserve - realised 14 1,090 1,016
Capital reserve - unrealised 14 (1,239) (1,760)
Other reserve 14 141 -
Revenue reserve 14 4,827 12,166
Equity Shareholders' Funds 4,940 11,543
Basic Net Asset Value per Ordinary
Share 15 40.87p 95.49p
Diluted Net Asset Value per Ordinary
Share 15 39.70p 95.49p
The financial statements were approved and authorised for issue by the Board of
Directors on 30 June 2010
and were signed on their behalf by:
Sir Aubrey Brocklebank Bt
Chairman
30 June 2010
The accompanying notes on pages 28 to 43 are an integral part of the financial
statements.
Cash Flow Statement
For the year ended 28 February 2010
Year ended Year ended
28 February 2010 28 February 2009
Note
GBP'000 GBP'000
Operating activities
Interest income received 528 551
Dividend income received 33 74
Investment management fees paid (255) (264)
Directors fees paid (21) (22)
Other expenses paid (75) (92)
Net cash inflow from operating 16
activities 210 247
Capital expenditure and financial
investment
Purchase of investments (2,460) (562)
Proceeds from sale of investments 7,963 2,236
Acquisition costs (14) -
Net realised gain/(loss) on forward
foreign exchange contracts 5 (104)
Net cash inflow from capital
expenditure and financial investment 5,494 1,570
Equity dividend paid (7,567) (181)
(Outflow)/inflow in the year (1,863) 1,636
Reconciliation of net cash flow to
movement in net funds
(Decrease)/increase in cash for the (1,863) 1,636
year
Net funds at start of the year 2,113 477
Net funds at the year end 250 2,113
The accompanying notes on pages 28 to 43 are an integral part of the financial
statements.
Reconciliation of Movements in Shareholders' Funds
For the year ended 28 February 2010
+----------------+-------------------------------------------------------------+
| | For the year ended 28 February 2010 |
+----------------+---------+----------+------------+---------+---------+-------+
| | | | | | | |
| | | | | | | |
| |Called up| Capital| Capital| | | |
| | | | | | | |
| | share| reserve-| reserve-| Other| Revenue| Total|
| | | realised| unrealised| reserve| reserve| |
| | capital| | | | | GBP'000|
| | | GBP'000| GBP'000| GBP'000| GBP'000| |
| | GBP'000| | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| At 1 March | 121| 1,016| (1,760)| -| 12,166| 11,543|
|2009 | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| Return after | | | | | | |
|taxation | | | | | | |
|attributable to | -| 74| 521| 141| 228| 964|
|equity | | | | | | |
|shareholders | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| Equity | -| -| -| -| (7,567)|(7,567)|
|dividend paid | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| At 28 February| 121| 1,090| (1,239)| 141| 4,827| 4,940|
|2010 | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| | |
+----------------+-------------------------------------------------------------+
| | For the year ended to 28 February 2009 |
+----------------+---------+----------+------------+---------+---------+-------+
| | | | | | | |
| | | | | | | |
| |Called up| Capital| Capital| | | |
| | | | | | | |
| | share| reserve-| reserve-| Other| Revenue| Total|
| | | realised| unrealised| reserve| reserve| |
| | capital| | | | | GBP'000|
| | | GBP'000| GBP'000| GBP'000| GBP'000| |
| | GBP'000| | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| At 1 March | 121| 1,092| (419)| 187| 11,937| 12,918|
|2008 | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| Return/(loss) | | | | | | |
|after taxation | | | | | | |
|attributable to | -| (76)| (1,341)| (187)| 410|(1,194)|
|equity | | | | | | |
|shareholders | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| Equity | -| -| -| -| (181)| (181)|
|dividend paid | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
| At 28 February| 121| 1,016| (1,760)| -| 12,166| 11,543|
|2009 | | | | | | |
+----------------+---------+----------+------------+---------+---------+-------+
The accompanying notes on pages 28 to 43 are an integral part of the financial
statements.
Notes to the Accounts
For the year ended 28 February 2010
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 revenue of GBP823,000 (2009 a net loss of GBP1,007,000) as per
the Income Statement on page 24 is the measure that the Directors believe
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 to 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
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 either significant or
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.
Notes to the Accounts
For the year ended 28 February 2010
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
on any amounts realised by the Company in excess of GBP1 per Ordinary Share. This
incentive will only be exercisable once the holders of Ordinary Shares have
received distributions of GBP1 per share. The payment of this performance fee will
be effected through 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. The fair value of the share-based payment is calculated by reference to
the fair value of the performance fees accrued at the balance sheet date.
At each balance sheet date, the Company estimates that fair value by
reference to the excess of the net asset value, adjusted for dividends paid,
over GBP1 per share in issue at the balance sheet date. The Company recognises the
impact of the change in shares to be issued 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.
Comparative period
The comparative period runs from 1 March 2008 to 28 February 2009.
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.
Notes to the Accounts
For the year ended 28 February 2010
1. Accounting Policies (continued)
Foreign exchange
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.
Forward contracts and hedging
The Company enters into forward contracts for the sale of foreign
currencies in order to hedge its exposure to fluctuations in currency rates in
respect of some of its investments. These forward contracts are recorded at fair
value through profit and loss. Any foreign exchange gain or loss is recorded by
the Company in the Capital Reserve - unrealised until settled. Once realised,
the gain or loss is taken to the Capital Reserve - realised.
Debtors
Debtors include accrued income which is recognised at amortised cost,
equivalent to the fair value of the expected balance receivable.
Dividends
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.
2. Income
Year ended
28 February 2010 Year ended 28 February 2009
GBP'000 GBP'000
Income from investments
Loan stock and bond interest 399 451
Dividend income 33 64
Investment fee rebate - 14
Other income 12 30
444 559
Other income
Bank deposit interest 12 25
Interest on VAT recovered 6 -
Total income 462 584
The Company had invested during the year in 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 includes investment fee rebates in income. The Company has now
completely redeemed its holding in Puma Absolute Return Fund.
3. Investment Management Fees
Year ended
28 February 2010 Year ended 28 February 2009
GBP'000 GBP'000
Shore Capital Limited 233 252
VAT recovered (93) -
_________________ ____________
140 252
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 has agreed to reduce its fee (if
necessary to nothing) to contain total annual costs (excluding performance fee)
to within 3.5 per cent of Net Asset Value. Total annual costs this year were
1.9% of the year end Net Asset Value after adjusting for dividends (2009 -
1.6%).
Notes to the Accounts
For the year ended 28 February 2010
3. Investment Management Fees (continued)
During the year the Investment Manager submitted a reclaim on behalf of
the Company of GBP93,000 of VAT paid on Management fees to the HMRC following a
recent European Union ruling. The reclaim is for VAT paid on management fees
from the period 1 March 2006 to 31 August 2008. No VAT has been charged on
management fees from September 2008 onwards. A sum of GBP98,431 was received by
the Company subsequent to the year end being the sum of the full reclaim amount
plus interest.
4. Performance Fees
Year ended
28 February
2010 Year ended 28 February 2009
GBP'000 GBP'000
Shore Capital Limited 141 (187)
A reversal of the performance fee had arisen in the year to 28 February
2009 which had been credited to profit or loss in accordance with FRS 20
Share-Based Payment (see note 1).
5. Other expenses
Year ended
28 February 2010 Year ended 28 February 2009
GBP'000 GBP'000
Administration - Shore
Capital Fund Administration 25 44
Services Limited
Directors' remuneration 21 21
Auditor's remuneration for 16 17
statutory audit
Insurance 2 2
Legal and professional fees 9 6
FSA, LSE and registrar fees 19 18
Custody charges 1 -
Other expenses 5 6
98 114
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 year are detailed in the Directors'
Remuneration Report commencing on page 17. The Company had no employees (other
than Directors) during the year. The average number of non-executive Directors
during the year was 3 (2009 - 3).
Notes to the Accounts
For the year ended 28 February 2010
6. Tax on Ordinary Activities
Year ended
Year ended 28 February
28 February 2010 2009
GBP'000 GBP'000
UK corporation tax charged (72)
to revenue reserve (62)
UK corporation tax credited 72
to capital reserve 62
(a) UK corporation tax charge for -
the year -
(b) Factors affecting tax charge
for the year
Total return/(loss) on (1,007)
ordinary activities before taxation 823
Tax charge calculated on
total return/(loss) on ordinary
activities before taxation at the
applicable rate of 21% (2009 - 21%) 173 (212)
Effects of:
Taxable losses b/fwd (40) (32)
Non taxable UK dividend (13)
income (7)
Non taxable Capital 336
(income)/loss (134)
Performance fee (39)
expense/(reversal) 30
Capital expenses in year (22) (40)
Total current tax charge - -
The income statement shows the tax charge allocated to revenue and
capital.
Capital returns are not included 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 current accounting year
although the Company has a deferred tax asset of GBP1,000 (2009 - GBP41,000) arising
from excess management charges of GBP3,000 (2009 - GBP193,000). 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.
7. Basic and diluted return per Ordinary Share
Year ended 28 February 2010 Period ended 28 February 2009
Revenue Capital Total Revenue Capital Total
595,000 823,000 (1,417,000) (1,007,000)
Return/loss
for the year 228,000 410,000
Weighted
average 12,087,700 12,087,700 12,087,700 12,087,700 12,087,700 12,087,700
number of
shares
Return/loss 1.89p 4.92p 6.81p 3.39p (11.72)p (8.33)p
per Ordinary
Share
The total return per ordinary share is the sum of the revenue return and
capital return.
Notes to the Accounts
For the year ended 28 February 2010
8. Dividends
Year ended 28 February Year ended 28 February
2010 2009
GBP'000 GBP'000
Paid in year
2010 Interim revenue
dividend 7,234 -
2009 Final revenue
dividend 333 -
2008 Final revenue
dividend - 181
Total dividends paid
in year 7,567 181
The directors do not propose a final dividend (2009 final - 2.75p).
Notes to the Accounts
For the year ended 28 February 2010
9. Investments
Historic Cost Market Value Historic Cost Market Value
(a) Summary as at 28 as at 28 as at 28 as at 28
February 2010 February 2010 February 2009 February 2009
GBP'000 GBP'000 GBP'000 GBP'000
Qualifying
venture capital
investments 4,440 3,258 9,127 7,609
Non -
qualifying
investments 1,261 1,309 2,004 1,759
5,701 4,567 11,131 9,368
Venture capital Hedge funds & equity Total
(b) Movements in investments investments
investments GBP'000
Opening book cost 9,129 2,002 11,131
Net unrealised (1,520) (243) (1,763)
losses at 28 February 2009
Valuation at 28 7,609 1,759 9,368
February 2009
Purchases at cost 1,513 2,460 3,973
Disposals - proceeds (6,270) (3,259) (9,529)
- realised 70 58 128
net gains on disposal
Net unrealised gains
on revaluation of 337 290 627
investments
Valuation at 28 3,259 1,308 4,567
February 2010
Book cost at 28 4,442 1,261 5,703
February 2010
Net unrealised
(losses)/gains at 28 (1,183) 47 (1,136)
February 2010
Valuation at 28 3,259 1,308 4,567
February 2010
(c) Gains/(losses) on investments
The gains/(losses) on investments for the year shown in the Income
Statement on page 24 is analysed as follows:
Year ended
28 February Year ended 28 February
2010 2009
GBP'000 GBP'000
Realised gains on disposal 100 130
Transaction costs (14) -
Foreign exchange gain/(loss) - realised 31 (89)
Foreign exchange gains - unrealised on
forward foreign exchange contracts - 54
Foreign exchange (losses)/gains - (52) 46
unrealised on investments
Net unrealised gains/(losses) on
revaluation in respect of investments held at
the year end 675 (1,553)
740 (1,412)
Notes to the Accounts
For the year ended 28 February 2010
9. Investments (continued)
Historic Cost Market Value Historic Cost Market Value
(d) Quoted and as at 28 as at 28 as at 28 as at 28
unquoted February 2010 February 2010 February 2009 February 2009
investments
GBP'000 GBP'000 GBP'000 GBP'000
Quoted
investments 3,189 2,179 4,279 2,496
Unquoted
investments 2,512 2,388 6,852 6,872
5,701 4,567 11,131 9,368
Market Value as at
(e) Disposals of unquoted Net disposal proceeds Cost 28 February 2009
investments in the year
GBP'000 GBP'000 GBP'000
Clifford Contracting 1,515 1,515 1,515
Limited
Redemption of Lakan 104 85 105
Investments loan
Cadbury House Limited 2,110 2,110 2,110
Albemarle Contracting 992 1,000 1,000
Limited
Part redemption of 1,340 1,288 1,532
Bond Contracting Limited
6,061 5,988 6,262
It is the Company's policy to exercise either significant or controlling
influence over investee companies.
10. Debtors
As at 28 February 2010 As at 28 February 2009
GBP'000 GBP'000
Fair value of forward - 4
foreign exchange contracts
Prepayments and accrued 174 130
income
______________ ______________
174 134
11. Creditors - amounts falling due within one year
As at 28 February 2010 As at 28 February 2009
GBP'000 GBP'000
Accrued management and (50) (71)
administration costs
(50) (71)
As at 28 February As at 29 February
2010 2009
GBP'000 GBP'000
Assets Liabilities Assets Liabilities
Forward foreign exchange - - 4 -
contracts - EUR EUR
- - 4 -
Notes to the Accounts
For the year ended 28 February 2010
12. Creditors - amounts falling due after more than
one year (including convertible debt)
As at
28 February As at 28 February
2010 2009
GBP'000 GBP'000
Loan Notes (1) (1)
On 21 January, 2005, the Company issued Loan Notes in the amount of GBP1,000
to a nominee on behalf of the Investment Manager's group and employees of and
persons related to the investment management team. The Loan Notes accrue
interest of 5 per cent per annum.
Shore Capital and members of the investment management team 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. Also, a diluted NAV per share will be calculated to reflect
the impact of this conversion (see page 25).
The amount of the performance fee has been calculated as 20 per cent of
the excess of the net asset value over GBP1 per issued share of the 2006 net asset
value. This amount has been credited to the Income Statement and debited to
other reserve within Equity Shareholder's Funds.
13. Called Up Share Capital
As at
28 February As at 28 February
2010 2009
GBP'000 GBP'000
Authorised:
25,000,000 ordinary shares of 1p each (2009: 250 250
25,000,000)
Allotted and fully paid:
12,087,700 ordinary shares of 1p each (2009: 121 121
12,087,700)
The Company did not issue any shares during the year ended 28 February
2010.
Notes to the Accounts
For the year ended 28 February 2010
14. Capital and Reserves
+----------------+------------+--------------+----------+----------+-------+
| | | | | | |
| | Capital| Capital| | | |
| | | | Other| Revenue| |
| | reserve-| reserve-| reserve| reserve| Total|
| | realised| unrealised| | | |
| | | | GBP'000| GBP'000| GBP'000|
| | GBP'000| GBP'000| | | |
+----------------+------------+--------------+----------+----------+-------+
+----------------+------------+--------------+----------+----------+-------+
|At 1 March 2009 | 1,016| (1,760)| -| 12,166| 11,422|
+----------------+------------+--------------+----------+----------+-------+
+----------------+------------+--------------+----------+----------+-------+
|Net gains on | | | | | |
|realisation of | | | | | |
|investments | 100| -| -| -| 100|
+----------------+------------+--------------+----------+----------+-------+
|Foreign exchange| | | | | |
|gain realised | 31| -| -| -| 31|
+----------------+------------+--------------+----------+----------+-------+
|Net unrealised | | | | | |
|gains on | | | | | |
|revaluation of | | | | | |
|investments, | -| 623| -| -| 623|
|forward foreign | | | | | |
|exchange | | | | | |
|contracts and | | | | | |
|cash | | | | | |
+----------------+------------+--------------+----------+----------+-------+
|Transaction | | | | | |
|costs | (14)| -| -| -| (14)|
+----------------+------------+--------------+----------+----------+-------+
|Management fees | | | | | |
|charged to | | | | | |
|capital | (105)| -| -| -| (105)|
+----------------+------------+--------------+----------+----------+-------+
|Performance fee | | | | | |
|charged to | | | | | |
|capital | -| (102)| -| -| (102)|
+----------------+------------+--------------+----------+----------+-------+
|Performance fee | | | | | |
|to be effected | | | | | |
|through | | | | | |
|share-based | | | | | |
|payment | -| -| 141| -| 141|
+----------------+------------+--------------+----------+----------+-------+
|Retained net | | | | | |
|revenue for the | | | | | |
|year | -| -| -| 228| 228|
+----------------+------------+--------------+----------+----------+-------+
|Taxation relief | | | | | |
|on capital | | | | | |
|expenses | 62| -| -| -| 62|
+----------------+------------+--------------+----------+----------+-------+
|Equity dividend | | | | | |
|paid | -| -| -| (7,567)|(7,567)|
+----------------+------------+--------------+----------+----------+-------+
|Balance at 28 | | | | | |
|February 2010 | 1,090| (1,239)| 141| 4,827| 4,819|
+----------------+------------+--------------+----------+----------+-------+
The other reserve represents the cumulative amount of performance fees
which have been expensed since the Company's inception. Upon realisation or
reversal of the performance fees, the other reserve will be reduced to nil with
a corresponding entry within equity.
Distributable reserves comprise: Capital reserve-realised, Capital reserve
unrealised and the Revenue reserve. At the year end there were GBP4,678,000 (2009
- GBP11,422,000) of reserves available for distribution. The Capital
reserve-realised shows gains/losses that have been realised in the year 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.
15. Net Asset Value per Ordinary Share
28 February 2010 28 February 2009
Basic Diluted Basic Diluted
Net assets ( GBP) 4,940,000 4,940,000 11,543,000 11,543,000
Number of Ordinary Shares 12,087,700 12,443,325 12,087,700 12,087,700
Net Assets Value per Ordinary 40.87p 39.70p 95.49p 95.49p
Share (p)
There is a dilution impact from the future issuance of additional shares
to effect the performance fee payable to the Investment Manager. Although the
conditions of the performance fee have not been met at the year-end, the
following disclosure has been provided to show the impact as if the performance
fee was effected at the year end (see note 1).
Calculation of number of 28 February 2010 28 February 2009
shares
Basic Diluted Basic Diluted
Number of Ordinary Shares 12,087,700 12,087,700 12,087,700 12,087,700
Dilutive effect of performance - 355,625 - -
fee (see note 1)
At year end 12,087,700 12,443,325 12,087,700 12,087,700
Notes to the Accounts
For the year ended 28 February 2010
16. Reconciliation of total return before taxation to net cash inflow from
operating activities
Year ended
28 February
2010 Year ended 28 February 2009
GBP'000 GBP'000
Total return/(loss) before 822 (1,006)
taxation
(Gains)/losses on investments (740) 1,412
Decrease in debtors 7 42
Decrease in creditors (20) (14)
Performance fee to be effected 141 (187)
through share-based payment
Net cash inflow from operating 210 247
activities
17. Analysis of Changes in Net Funds
Year ended
28 February
2010 Year ended 28 February 2009
GBP'000 GBP'000
Beginning of year 2,113 477
Net cash (outflow)/inflow (1,863) 1,636
As at year end 250 2,113
18. 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, Net Asset Value, discounted cashflow or at the price of
recent investment in accordance with IPEVC guidelines (see note 1). 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, all of which are included in the balance
sheet at fair value at 28 February 2010:
2010 2009
GBP'000 GBP'000
Assets at fair value through profit or loss
Investments managed through Shore Capital Limited 4,567 9,368
Loans and receivables
Cash at bank and in hand 250 2,113
Interest, dividends and other receivables 174 134
Other financial liabilities
Financial liabilities measured at amortised cost (51) (72)
4,940 11,543
Management of risk
The main risks the Company faces from its financial instruments in the
current and prior year 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.
Notes to the Accounts
For the year ended 28 February 2010
18. Financial Instruments (continued)
Credit risk
Credit risk is the risk that a 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 which is monitored 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:
2010 2009
GBP'000 GBP'000
Investments in fixed interest instruments 2,207 2,404
Investments in floating rate instruments - 3,348
Cash and cash equivalents 250 2,113
Interest, dividends and other receivables 174 134
2,631 7,999
The Investment Manager evaluates credit risk on loan stock instruments
prior to investment, and as part of its ongoing monitoring of investments. The
loan stock instruments have a first or second charge over the assets of the
investee company. Credit risk arising on fixed interest instruments is mitigated
by close involvement with the management of the investee companies along with
review of their trading results and the quality of the asset backing of the
financial instruments.
Credit risk arising on floating rate instruments is mitigated by investing
into vehicles upon which the Investment Manager, Shore Capital Limited, has
board representation.
All the quoted assets of the Company are held by Pershing Securities
Limited, the Company's custodian. Bankruptcy or insolvency of the custodian may
cause the Company's rights with respect to securities held by the custodian to
be delayed or limited. The Board monitors the Company's risk by reviewing the
custodian's internal control reports.
Substantially all of the cash held by the Company is held by a large
double AA- rated U.K. bank. Bankruptcy or insolvency of the bank may cause the
Company's rights with respect to the receipt of cash held to be delayed or
limited. The Board monitors the Company's risk by reviewing regularly the
financial position of the bank and should it deteriorate significantly the
Investment Manager will, on instruction of the Board, move the cash holdings to
another bank.
Credit risk associated with interest, dividends and other receivables are
predominantly covered by the investment management procedures.
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 market positions or unquoted investments in
the face of price movements. The Investment Manager actively monitors market
prices throughout the year and reports to the Board, which meets regularly in
order to consider investment strategy.
The Company's strategy on the management of investment risk is driven by
the Company's investment policy as outlined in the Report of the Directors on
page 12. 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 year ended 28 February 2010
18. Financial Instruments (continued)
Investments in unquoted investments 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.
Investments in AiM traded companies, by their nature, involve a higher
degree of risk than investments in the main market. Some of that risk can be
mitigated by diversifying the portfolio across business sectors and asset
classes. The Company's overall market positions are monitored by the Board on a
quarterly basis.
Investments in hedge funds can have a perception of high market price
risk. The Company's strategy in respect of hedge funds is to invest in funds
that have underlying positions that are liquid and independently
marked-to-market.
33 per cent of the Company's investments are traded on AiM, listed on the
London Stock Exchange or other similar exchanges. 15 per cent of the Company's
investments are quoted hedge funds and 52 per cent are unquoted investments.
The table below outlines the individual impact to the valuation of the
investments of a 5 per cent change to quoted stocks, quoted hedge funds and
unquoted investments. The change outlines the potential increase or decrease in
net assets attributable to the Company's shareholders and the total return for
the year.
2010 2009
GBP'000 GBP'000
Quoted stocks +/- 74 90
Quoted hedge funds +/- 35 35
Unquoted investments +/- 119 344
228 469
Liquidity risk
The unquoted holdings consisted of five equity investments and nine loan
notes. 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. The portfolio of quoted hedge funds and equities is held to
offset the liquidity risk associated with unquoted investments. As at the year
end, the Company had no borrowings other than loan notes amounting to GBP1,000
(see note 12).
The Company's financial instruments include investments in AiM-traded
companies, which by their nature, involve a higher degree of risk than
investments in the main market. As a result, the Company may not be able to
liquidate quickly some of these investments at an amount close to their fair
value in order to meet its liquidity requirements.
The Company's hedge funds are considered to be readily realisable as they
are redeemable at monthly stated NAVs.
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. At 28
February 2010 these investments were valued at GBP2,278,000 (2009: GBP4,609,000).
Notes to the Accounts
For the year ended 28 February 2010
18. Financial Instruments (continued)
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 28 February
2010. All of the loan stock investments are unquoted and hence not 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 12).
Cash flow interest rate risk
The Company has exposure to interest rate movements primarily through its
cash deposit which tracks the Bank of England base rate, the loan notes held
with Albemarle, Bond and Clifford Contracting were also subject to movements in
the base rate up to the date they were redeemed. During the year, the Company
earned interest income from cash with its custodian, Pershing Securities
Limited.
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 28 February
2010.
Interest rate risk profile of financial assets
The Company's financial assets, other than the fixed interest loan stock
investments noted above and non-interest bearing investments, are floating rate.
The following analysis sets out the interest rate risk of the Company's
financial assets.
Year ended
28 February Year ended
Rate status 28 February
Average Period 2010 2009
interest until
rate maturity GBP'000 GBP'000
Cash at bank Floating rate * 0.9% - 250 2,113
Albemarle - 700
Contracting 2.52%
loan note Floating rate Redeemed
Bond Contacting 3.61% - 1,288
loan note Floating rate ** Redeemed
Clifford - 1,360
Contracting 2.52%
loan note Floating rate Redeemed
Cadbury House - 840
loan stock C 7%
units Fixed rate Redeemed
Cadbury House - 910
loan stock B 11%
units Fixed rate Redeemed
INVU loan note Fixed rate 8% 2 months 296 -
Stocklight loan 9% 366 366
stock Fixed rate 1 month
Stocklight loan 13.33% 183 127
stock D units Fixed rate 1 month
Stocklight loan 8.9% - 56
stock D units Fixed rate 1 month
Experian 6.375% - 293
Finance Bonds Fixed rate Redeemed
Telford Homes 8.88% 1,362 -
loan note Fixed rate 4 years
Lakan 18.65% - 105
investments Fixed rate Redeemed
Balance of Non-interest 2,534 3,457
assets bearing -
* Benchmark rate is Bank of England base 4,991 11,615
rate, 0.5% at the year end
** Benchmark rate is UK 3 month LIBOR
The non-interest bearing assets include investments in hedge funds and
equity instruments that have no fixed dividend or interest rate.
An increase of 1 point in UK base rate as at the reporting date would have
increased the net assets attributable to the Company's shareholders and
decreased the total loss for the year by GBP3,000 (2009: increased the net assets
and profit by GBP55,000). A decrease of 1 per cent 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 year ended 28 February 2010
18. Financial Instruments (continued)
Fair value hierarchy
Fair values have been measured at the end of the reporting period as follows:-
Year ended 28 Level 1 Level 2 Level 3
February 2010 'Quoted 'Observable 'Unobservable Total
prices' inputs' inputs'
Financial
assets
At fair value
through profit 1,925 254 2,388 4,567
and loss
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, Net Asset Value or discounted cashflow based on post year end
redemptions in line with the Company's accounting policies and IPEVC guidelines.
19. 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.
Notes to the Accounts
For the year ended 28 February 2010
20. Contingencies, Guarantees and Financial Commitments
There were no commitments, contingencies or guarantees of the Company at
the year-end.
21. 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 year
GBP140,000 (2009 - GBP252,000) was due in respect of investment management fees. The
balance owing to Shore Capital Limited at the year-end was GBP16,000 (2009 -
GBP37,000).
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 year GBP25,000 (2009 -
GBP44,000) was due in respect of these services. The balance owing to Shore
Capital Fund Administration Services Limited at the year-end was GBP3,000 (2009 -
GBP6,000).
22. Subsequent events
Subsequent to the year end the Company realised several of its holdings as
discussed in further detail in the Chairman's Statement and the Investment
managers report. The holdings fully redeemed were Stocklight Limited, the
remaining balance of Patsystems plc and the INVU plc loan notes, also Telford
Homes plc redeemed 90% of its loan notes.
[HUG#1428749]
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(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.
All reproduction for further distribution is prohibited.
Source: PUMA VCT PLC via Thomson Reuters ONE
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