TIDMPMH
Puma High Income VCT plc
Final Results for the Year Ended 31 December 2011
Highlights
* 14p per Ordinary Share of dividends paid to date, equivalent to a 10% per
annum tax-free running yield on net investment.
* Two qualifying investments made and terms agreed for a third investment.
* Strong pipeline of qualifying investments as the Company approaches its
second anniversary.
Enquiries
Shore Capital 020 7408 4090
Graham Shore
Buchanan Communications 020 7466 5000
Richard Oldworth
Jeremy Garcia
Helen Chan
Chairman's Statement
Introduction
I am pleased to present the Company's second Annual Report which is for the year
ended 31 December 2011.
As envisaged in the Company's prospectus, the company has for the second year in
succession paid a dividend of 7p per ordinary share, equivalent to a 10% tax-
free running yield on shareholder's net investment. The fully diluted net asset
value per share ("NAV") at 31 December 2011 was 85.9p, which was struck before
this second dividend was paid. Since the period end, after adjusting for this
dividend, the NAV has increased by 0.75%.
Qualifying VCT investments
As indicated in the interim report, the Company agreed terms to invest up to
GBP860,000 into Mirfield Contracting Limited ("MCL") during the period. As a
member of a limited liability partnership with other contracting companies, MCL
will provide project management services to a GBP3.8 million development of town
houses in Mirfield, a commuter suburb of Leeds near Wakefield.
Since the period end, the Company has completed on one qualifying investment and
agreed terms for another, which will together invest GBP2.5 million. Details of
these can be found in the Investment Manager's report below. The Investment
Manager has continued to review a number of other suitable qualifying
investments, generated by a strong pipeline, and expects to make further
qualifying investments during the coming year to ensure the Company is on course
to meet its HMRC qualifying target.
Non-qualifying investments
Her Majesty's Revenue and Customs ("HMRC") restrict the amount of income the
Company can receive from cash deposits. Accordingly, and as set out in the
Prospectus, the Company invested approximately GBP10.8 million during the period
in a range of bond funds, absolute return funds and a partly hedged equity
income fund. A significant market downturn began shortly after we invested.
The short interval meant that we had little income from this period to offset
any capital effect of such market fluctuations. This cost the Company some 4p
per share in NAV. However, despite these difficult market conditions the
portfolio has stabilised since the final quarter of the year and is now in a
position to see some rebound in 2012.
VCT qualifying status
PricewaterhouseCoopers LLP ("PwC") provides the Board and the Investment Manager
with advice on the ongoing compliance with HMRC rules and regulations concerning
VCTs. PwC also assists the Investment Manager in establishing the status of
investments as qualifying holdings.
Results and dividends
The Company reported a loss of GBP544,000 for the year, a loss of 3.98p per
ordinary share, attributable to the performance of the Company's non-qualifying
investments which is discussed above. However, a second interim dividend of 7p
per Ordinary Share was paid on 5 March 2012 in respect of the year ended 31
December 2011, taking the total of dividends paid to date to 14p per Ordinary
Share, equivalent to a 10% per annum tax-free running yield on the net
investment by shareholders.
Outlook
The Investment Manager has met a number of companies which are potentially
suitable for investment. There is a good flow of opportunities which may lead to
suitable investments. The restrictions on availability of bank credit continue
to affect the terms on which target companies can raise finance. This should
both increase the demand for our offering and improve the terms we can secure
when we offer finance. There are many suitable companies which are well-managed,
in good market positions, and which can offer security and need our finance. We
therefore believe the Company is strongly positioned to assemble a portfolio to
deliver attractive returns to shareholders in the medium to long term.
Ray Pierce
Chairman
Investment Manager's Report
Overall Performance
As discussed in the Chairman's Statement, the performance of the Company has
been affected by the difficult market conditions during the period, resulting
from the ongoing European sovereign debt crisis and fears of a double-dip
recession. This resulted in a final NAV of 92.92p (after adding back the
dividend paid during the year). Whilst this represents a decrease of 4.33 per
cent on the NAV at the end of the last accounting period, it compares favourably
to general market performance during the period. The portfolio has rallied
since the year end.
Qualifying investments
During the year, the Company agreed terms on its first VCT qualifying
investment, being the GBP860,000 investment into Mirfield Contracting Limited
referred to in the Chairman's Statement.
Since the period end, the Company has completed a GBP700,000 investment (as part
of a GBP1,400,000 financing with another Puma VCT) into SIP Communications Plc, a
fast growing business which sells hosted IP telephony and hosted unified
communications products and services. The investment is largely in the form of
senior secured debt and is expected to produce a return of at least 8 per cent.
per annum with potential for further upside through a warrant. We have also
agreed terms to invest up to GBP1,800,000 (as part of a GBP5,400,000 financing with
other Puma VCTs) into a business which will provide project management and
contracting services in healthcare. This is undertaking a series of developments
comprising pre-let accommodation for large healthcare groups providing supported
living services for psychiatric and learning disabled service users.
In accordance with our mandate we have maintained a cautious approach and are
performing thorough due diligence work on several other investment
opportunities. The Company needs to invest at least 70% of its assets into
qualifying ventures by the end of its third fiscal year. We continue to review
investment opportunities in order to meet this target in the most effective way.
Non-qualifying investments
After a difficult third quarter, the portfolio stabilised in the last quarter of
the year and has since generated a total return of 0.75 per cent of the year end
NAV (including interest from cash held on deposit).
Due to the return of the European debt crisis to the fore of investors' minds at
the end of July, virtually all growth-sensitive assets experienced heavy falls
in August and September. As such, equities were completely removed from the
portfolio at the end of August, with investments in high yield bonds also
significantly reduced. The proceeds were reinvested into investment grade
corporate bonds, with a bias towards those issued by non-financial
organisations, which benefited from falling long term yields during the period.
The portfolio of bond funds generated a total loss of 0.72 per cent for the
period. These funds suffered from the significant market downturn; however we
consider that the underlying funds chosen did well to maintain capital in such
circumstances whilst generating the yield which the VCT will need to achieve
under HMRC regulations.
We believe that these remaining funds are strongly positioned to deliver strong
capital gains for the Company throughout 2012. Two corporate bond funds which we
purchased in the last quarter of the year had already generated returns of 1.5
per cent at the period end.
Outlook
The continuing tighter market in credit for companies since the financial crisis
of 2008 has engendered and, we believe is likely to continue to engender, a
strong demand for the type of finance offered by the Company and our pipeline of
potential qualifying deals remains strong. We will update you in due course as
investments are completed.
Shore Capital Limited
Investment Portfolio Summary
As at 31 December 2011
Gain/
Valuation Original Cost (Loss) Valuation as
Investment GBP'000 GBP'000 GBP'000 % of NAV
=-------------------------------------------------------------------------------
Qualifying Investments -
Unquoted - - - -
Qualifying Investments - Quoted - - - -
----------------------------------------------
Total Qualifying Investments - - - -
----------------------------------------------
Non - Qualifying Investments -
Unquoted
BlueBay Macro Fund ** 629 600 29 5%
CapeView Azri Azri Fund ** 624 600 24 5%
Non - Qualifying Investments -
Quoted
BH Global 439 444 (5) 4%
Blackrock UK Emerging Cos Hedge
Fund Limited * 614 591 23 5%
GLG European Alpha Alternatives 429 430 (1) 4%
Henderson UK Absolute Return
Fund 308 304 4 3%
iShares iBoxx Corporate Bonds 468 459 9 4%
iShares iBoxx Non Financial 733 725 8 6%
Jupiter Strategic Bond Fund 777 796 (19) 6%
Neuberger Berman High Yield 234 235 (1) 2%
Pimco Global Investors Hedged
Income * 598 613 (15) 5%
Puma Absolute Return Fund * 1,787 1,900 (113) 16%
----------------------------------------------
Total Non - Qualifying
Investments 7,608 7,659 (51) 65%
----------------------------------------------
Total investments 7,608 7,659 (51) 65%
Cash at bank 4,243 4,243 36%
Net current assets and
liabilities (104) (104) (1)%
----------------------------------------------
Net assets 11,747 11,798 (51) 100%
----------------------------------------------
Of the investments held at 31 December 2011, 20 per cent are incorporated in
England and Wales, 47 per cent in the Cayman Islands, 17 per cent in Europe and
16 per cent in Ireland. Percentages have been calculated on the valuation of the
assets at the reporting date.
All quoted investments are listed on the LSE with the exception of those noted
below:
* Listed on the Irish Stock Exchange.
** Traded directly through investment manager of the investee fund.
As at 31 December 2011 the Company held 22.8% of the Class B shares of the Puma
Absolute Return Fund (PARF). At this date PARF was also held by Puma VCT V plc
and also Puma VCT VII plc, funds to which Shore Capital Limited is also the
Investment Manager.
Income Statement
For the year ended 31 December 2011
Year ended|For the period 7 October 2009
31 December 2011| to
| 31 December 2010
|
Revenue Capital Total| Revenue Capital Total
Note GBP'000 GBP'000 GBP'000| GBP'000 GBP'000 GBP'000
|
|
(Losses) / Gains 8 (c) |
on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- (376) (376)| 54 54
|
Income 2 222 - 222| 131 - 131
|
|
|
222 (376) (154)| 131 54 185
|
|
|
|
|
Investment 3 |
management fees 54 163 217| 49 148 197
|
Other expenses 4 173 - 173| 140 - 140
|
|
|
227 163 390| 189 148 337
|
|
|
Loss on ordinary |
activities before |
taxation (5) (539) (544)| (58) (94) (152)
|
Tax on ordinary 5 |
activities - - - | - - -
|
|
|
Loss after taxation |
attributable to |
equity |
shareholders (5) (539) (544)| (58) (94) (152)
|
|
|
|
|
Basic and diluted |
loss per Ordinary |
Share (pence) 6 (0.04)p (3.94)p (3.98)p| (0.50)p (0.80)p (1.30)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 period.
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 are an integral part of the financial statements.
Balance Sheet
As at 31 December 2011
2011 2010
Note GBP'000 GBP'000
Fixed Assets
Investments 8 7,608 10,923
Current Assets
Debtors 9 17 87
Cash at bank and in hand 4,243 2,374
4,260 2,461
Creditors - amounts falling due within one year 10 (120) (133)
Net Current Assets 4,140 2,328
Total Assets less Current Liabilities 11,748 13,251
Creditors - amounts falling due after more than one
year 11 (1) (1)
Net Assets 11,747 13,250
Capital and Reserves
Called up share capital 12 137 137
Share premium account - 13,264
Capital reserve - realised 13 (584) (110)
Capital reserve - unrealised 13 (50) 17
Revenue reserve 13 12,244 (58)
Equity Shareholders' Funds 11,747 13,250
Basic and diluted Net Asset Value per Ordinary
Share 14 85.92p 96.91p
The accompanying notes are an integral part of the financial statements.
Cash Flow Statement
For the year ended 31 December 2011
Year ended For the period 7 October
31 December 2009 to
2011 31 December 2010
Note GBP'000 GBP'000
Operating activities
Interest income received 246 96
Investment management fees paid (226) (134)
Directors fees paid (59) (39)
Other expenses paid (91) (35)
Net cash outflow from operating 15
activities (130) (112)
Equity dividend paid (957)
Capital expenditure and
financial investment
Purchase of investments (4,577) (11,615)
Proceeds from sale of 7,546 741
investments
Net realised loss on forward
foreign exchange contracts (2) -
Acquisition costs (11) (13)
Net cash inflow / (outflow)
from capital expenditure and
financial investment 2,956 (10,887)
Financing
Proceeds received from issue of - 13,521
ordinary share capital
Expenses paid for issue of - (149)
share capital
Proceeds received from issue of -
redeemable preference shares 50
Redemption of redeemable -
preference shares (50)
Proceeds received from -
convertible loan notes 1
Net cash inflow from financing - 13,373
Inflow in the year/period 1,869 2,374
Reconciliation of net cash flow
to movement in net funds
Increase in cash for the 1,869 2,374
year/period
Net funds at start of the 2,374 -
year/period
Net funds at the year/period 4,243 2,374
end
The accompanying notes are an integral part of the financial statements.
Reconciliation of Movements in Shareholders' Funds
For the year ended 31 December 2011
Called up Share Capital Capital
share Premium reserve- reserve- Revenue
capital Account realised unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2011 137 13,264 (110) 17 (58) 13,250
Capital
reconstruction - (13,264) - - 13,264 -
Return after
taxation
attributable to
equity
shareholders - - (474) (67) (5) (546)
Equity dividend
paid - - - - (957) (957)
---------------------------------------------------------------
At 31 December
2011 137 - (584) (50) 12,244 11,747
---------------------------------------------------------------
For the period ended 31 December 2010
Called up Share Capital Capital
share Premium reserve- reserve- Revenue
capital Account realised unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Share issues in
the period 137 13,535 - - - 13,672
Expenses of
share issues - (271) - - - (271)
Return after
taxation
attributable to
equity
shareholders - - (110) 17 (58) (151)
----------------------------------------------------------------
At 31 December
2010 137 13,264 (110) 17 (58) 13,250
----------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
Notes to the Accounts
For the year ended 31 December 2011
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").
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 loss of GBP544,000 as per the Income Statement 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 with the investment policy. Thereafter the investments are measured
at subsequent reporting dates at fair value. Listed investments and investments
traded on AiM are stated at bid price at the reporting date. Hedge funds are
valued at their respective quoted Net Asset Values per share at the reporting
date. Unlisted investments are stated at Directors' valuation with reference to
the International Private Equity and Venture Capital Valuation Guidelines
("IPEVC") and in accordance with FRS26 "Financial Instruments: Measurement":
* Investments which have been made within the last twelve months or where the
investee company is in the early stage of development will usually be valued
at the price of recent investment except where the company's performance
against plan is significantly different from expectations on which the
investment was made in which case a different valuation methodology will be
adopted.
* Investments may be valued by applying a suitable price-earnings ratio to
that company's historical post tax earnings. The ratio used is based on a
comparable listed company or sector but discounted to reflect lack of
marketability. Alternative methods of valuation include net asset value
where such factors apply that make this or alternative methods more
appropriate.
Realised surpluses or deficits on the disposal of investments are taken to
realised capital reserves, and unrealised surpluses and deficits on the
revaluation of investment are taken to unrealised capital reserves.
It is not the Company's policy to exercise 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 31 December 2011
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 realisation 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.
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 31 December 2011
1. Accounting Policies (continued)
Foreign exchange
The base currency of the Company is Sterling. Transactions denominated in
foreign currencies are translated into Sterling at the rates ruling at the dates
that they occurred. Assets and liabilities denominated in a foreign currency
are translated at the appropriate foreign exchange rate ruling at the balance
sheet date. Translation differences are recorded as unrealised foreign exchange
losses or gains and taken to the Income Statement.
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.
Comparative period
The comparative period runs from 7 October 2009 to 31 December 2010.
2. Income
Year ended Period from 7 October to 31 December
31 December 2011 2010
GBP'000 GBP'000
Income from investments
Bond interest 148 58
148 58
Other income
Bank deposit interest 74 73
Total income 222 131
Notes to the Accounts
For the year ended 31 December 2011
3. Investment Management Fees
Year ended 31 December 2011 Period to 31 December 2010
GBP'000 GBP'000
Shore Capital Limited 242 212
Fee rebates (25) (15)
Total income 217 197
Shore Capital Limited (Shore Capital) has been appointed as the Investment
Manager of the Company for an initial period of five years, which can be
terminated by not less than twelve months' notice, given at any time by either
party, on or after the fifth anniversary. The board is satisfied with the
performance of the Investment Manager. Under the terms of this agreement Shore
Capital will be paid an annual fee of 2 per cent of the Net Asset Value payable
quarterly in arrears calculated on the relevant quarter end NAV of the Company.
These fees are capped, the Investment Manager having agreed to reduce its fee
(if necessary to nothing) to contain total annual costs (excluding performance
fee) to within 3.5 per cent of Net Asset Value. Total annual costs this year
were 3.5% of the year end Net Asset Value.
The Company had invested during the year in the Puma Absolute Return Fund
Limited which is also managed by Shore Capital Limited. An arrangement is in
place to avoid the double charging of management and performance fees. The
Company has set off investment fee rebates against the management fee charge.
4. Other expenses
Year ended
31 December 2011 Period to 31 December 2010
GBP'000 GBP'000
Administration - Shore Capital Fund 42 35
Administration Services Limited
Directors' remuneration 56 48
Social security costs 4 4
Auditor's remuneration for statutory 17 11
audit
Insurance 4 4
Legal and professional fees 14 18
FSA, LSE and registrar fees 17 13
Other expenses 19 7
173 140
Shore Capital Fund Administration Services Limited provides administrative
services to the Company for an aggregate annual fee of 0.35 per cent of the Net
Asset Value of the Fund, payable quarterly in arrears.
The Company had no employees (other than Directors) during the year. The
average number of non-executive Directors during the year was 4.
The Auditor's remuneration of GBP14,000 has been grossed up to be inclusive of
VAT.
Notes to the Accounts
For the year ended 31 December 2011
5. Tax on Ordinary Activities
Year ended
31 December 2011 Period to 31 December 2010
GBP'000 GBP'000
UK corporation tax charged to
revenue reserve - -
UK corporation tax credited to
capital reserve - -
(a) Current tax
credit/(charge) for the year - -
(b) Factors affecting tax
charge for the year
Total return on ordinary (5) (58)
activities before taxation
Tax charge calculated on total
return on ordinary activities
before taxation at the applicable
rate of 20% (2010 - 21%) (1) (12)
Tax losses carried forward 1 12
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 period
although the company has a deferred tax asset of GBP65,000 (2010 - GBP34,000)
arising from excess management charges of GBP164,000 (2010 - GBP160,000). This
deferred tax asset has not been recognised as the timing of their recovery
cannot be foreseen with any certainty. Due to the Company's status as a Venture
Capital Trust and the intention to continue meeting the conditions required to
obtain approval in the foreseeable future, the Company has not provided deferred
tax on any capital gains and losses arising on the revaluation or disposal of
investments.
6. Basic and diluted return per Ordinary Share
Year ended 31 December 2011 Period ended 31 December 2010
Revenue Capital Total Revenue Capital Total
Return/(loss) (5,000) (539,000) (544,000) (58,000) (94,000) (152,000)
for the
year/period
13,671,870 13,671,870 13,671,870 11,702,845 11,702,845 11,702,845
Weighted
average number
of shares
Return/(loss) (0.04)p (3.94)p (3.98)p (0.50)p (0.80)p (1.30)p
per Ordinary
Share
The total loss per ordinary share is the sum of the revenue return and capital
return.
7. Dividends
The directors do not propose a final dividend in relation to the year ended 31
December 2011. An interim dividend of 7p per Ordinary Share was paid on 5 March
2012 in respect of the year ended 31 December 2012.
Year ended
31 December 2011 Period ended 31 December 2010
GBP'000 GBP'000
Paid in year/period
2011 Interim revenue dividend 957 -
Notes to the Accounts
For the year ended 31 December 2011
8. Investments
Historic Cost Market Value Historic Cost Market Value
as at 31 as at 31 as at 31 as at 31
(a) Summary December 2011 December 2011 December 2010 December 2010
GBP'000 GBP'000 GBP'000 GBP'000
Qualifying venture
capital
investments - - - -
Non - qualifying
investments 7,659 7,608 10,925 10,923
7,659 7,608 10,925 10,923
Venture capital Hedge funds & equity
(b) Movements in investments investments Total
investments GBP'000
Opening book cost - 10,923 10,923
Purchases at cost - 4,577 4,577
Disposals - proceeds - (7,546) (7,546)
- realised net losses on - (298) (298)
disposal
Reversal of unrealised - 2 2
losses on investments
b/fwd
Net unrealised losses on - (50) (50)
revaluation of
investments
Valuation at 31 December - 7,608 7,608
2011
Book cost at 31 December - 7,658 7,658
2011
Net unrealised gains at - (50) (50)
31 December 2011
Valuation at 31 December - 7,608 7,608
2011
(c) Gains on investments
The gains on investments taken to capital reserves for the year shown in the
Income Statement is analysed as follows:
Year ended
31 December 2011 Period to 31 December 2010
GBP'000 GBP'000
Realised (losses) / gains on
disposal (297) 51
Net unrealised (losses) / gains on
revaluation in respect of
investments held at the year end (67) 17
Acquisition costs (11) (13)
Foreign exchange losses - realised
on investments (2) -
Foreign exchange gain - unrealised
on forward foreign exchange
contracts - 18
Foreign exchange gains / (losses) -
unrealised on investments 1 (19)
(376) 54
Notes to the Accounts
For the year ended 31 December 2011
8. Investments - continued
Market Value Historic Cost Market Value
Historic Cost as at 31 as at 31 as at 31
(d) Quoted and as at 31 December 2011 December 2010 December 2010
unquoted December 2011 GBP'000 GBP'000 GBP'000
investments GBP'000
Quoted investments 5,868 5,741 9,760 9,687
Unquoted
investments 1,791 1,867 1,165 1,236
7,659 7,608 10,925 10,923
9. Debtors
As at
31 December 2011 As at 31 December 2010
GBP'000 GBP'000
Fair value of forward foreign exchange - 18
contracts
Prepayments and accrued income 17 40
Other debtors - 29
17 87
10. Creditors - amounts falling due within one year
As at
31 December 2011 As at 31 December 2010
GBP'000 GBP'000
Accrued management and administration (120) (133)
costs
(120) (133)
Notes to the Accounts
For the year ended 31 December 2011
11. Creditors - amounts falling due after more than
one year (including convertible debt)
As at
31 December 2011 As at 31 December 2010
GBP'000 GBP'000
Loan Notes (1) (1)
On 11 November 2009, the Company issued Loan Notes in the amount of GBP1,000 to a
nominee on behalf of the Investment Manager'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.
The amount of the performance fee will be calculated as 20 per cent of the
excess of the net asset value over GBP1 per issued share. This amount will be
debited to the Income Statement and credited to other reserve within Equity
Shareholder's Funds.
12. Called Up Share Capital
As at 31 December 2011 As at 31 December 2010
GBP'000 GBP'000
Allotted and fully paid:
13,671,870 ordinary shares of 1p 137 137
each (2010: 13,671,870)
The Company did not issue any shares during the year ended 31 December 2011.
Notes to the Accounts
For the year ended 31 December 2011
13. Capital and Reserves
Called up Share Capital Capital
share premium reserve- reserve- Revenue
capital reserve realised unrealised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2011 137 13,264 (110) 17 (58) 13,250
Capital - (13,264) - - 13,264 -
reconstruction
Net losses on
realisation of - - (297) - - (297)
investments
Net unrealised
losses on
revaluation of
investments, - - (2) (67) - (69)
forward foreign
exchange
contracts and
cash
Transaction costs - - (11) - - (11)
Management fees
charged to - - (163) - - (163)
capital
Retained net gain - - - - (5) (5)
for the year
Taxation relief
on capital - - (1) - - (1)
expenses
Dividend paid - - - - (957) (957)
---------------------------------------------------------------
Balance at 31 137 - (584) (50) 12,244 11,747
December 2011
---------------------------------------------------------------
On the 2 February 2011 the share premium account was cancelled and made
distributable via the Revenue reserve.
Distributable reserves comprise: Capital reserve-realised, Capital reserve
unrealised and the Revenue reserve. At the year end distributable reserves
totalled GBP11,610,000. On 5 March 2012 an interim dividend of 7p was paid out of
the Revenue reserve.
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.
14. Net Asset Value per Ordinary Share
31 December 2011 31 December 2010
Basic Diluted Basic Diluted
Net assets ( GBP) 11,747,000 11,747,000 13,250,000 13,250,000
Number of Ordinary Shares 13,671,870 13,671,870 13,671,870 13,671,870
Net Assets Value per Ordinary Share 85.92p 85.92p 96.91p 96.91p
(p)
There is a potential dilution impact from the future issuance of additional
shares to effect the performance fee payable to the Investment Manager. The
conditions of the performance fee have not been met at the year end.
Notes to the Accounts
For the year ended 31 December 2011
15. Reconciliation of total return before taxation to net cash inflow
from operating activities
Year ended
31 December
2011 Period to 31 December 2010
GBP'000 GBP'000
Total return before taxation (544) (152)
Gains / (losses) on valuation of 376 (54)
investments
Decrease / (increase) in debtors 51 (39)
Increase / (decrease) in creditors (14) 133
Foreign exchange gain on cash 1 -
Net cash outflow from operating (130) (112)
activities
16. Analysis of Changes in Net Funds
Year ended
31 December
2011 Period to 31 December 2010
GBP'000 GBP'000
Beginning of year/period 2,374 -
Net cash inflow 1,869 2,374
As at year/period end 4,243 2,374
17. 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 31 December 2011:
2011 2010
GBP'000 GBP'000
Assets at fair value through profit or loss
Investments managed through Shore Capital Limited 7,608 10,923
Loans and receivables
Cash at bank and in hand 4,243 2,374
Interest, dividends and other receivables 16 87
Other financial liabilities
Financial liabilities measured at amortised cost (120) (134)
11,747 13,250
Management of risk
The main risks the Company faces from its financial instruments in the current
and prior period 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 period.
Notes to the Accounts
For the year ended 31 December 2011
17. 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 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:
2011 2010
GBP'000 GBP'000
Cash and cash equivalents 4,243 2,374
Interest, dividends and other receivables 17 87
4,260 2,461
The cash held by the Company at the year end is split between an A rated U.K.
bank and a BBB rated South African 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.
All the investments 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.
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. 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 31 December 2011
17. 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.
84 per cent of the Company's investments are traded on AiM, listed on the London
Stock Exchange or the Irish Stock Exchange. 47 per cent of the Company's
investments are quoted hedge funds and 16 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. 5 Per cent is being used as it is in line with what the
current year end NAV has moved compared to last year's NAV. The change outlines
the potential increase or decrease in net assets attributable to the Company's
shareholders and the total return for the year.
2011 2010
GBP'000 GBP'000
Quoted equities +/- - 265
Quoted bonds and bond funds +/- 139 184
Quoted hedge funds +/- 179 35
Unquoted investments +/- 63 62
381 546
Liquidity risk
The Company's two unquoted holdings are traded directly through the investment
manager of the investee fund and are considered to be readily realisable as they
are redeemable at monthly stated NAVs. As at the year end, the Company had no
borrowings other than loan notes amounting to GBP1,000 (see note 11).
The Company's quoted hedge funds are also 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 31 December 2011
these investments were valued at GBP4,243,000 (2010: GBP2,374,000).
Notes to the Accounts
For the year ended 31 December 2011
17. 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 31 December
2011.
At the year end and throughout the year, the Company's only liability subject to
fair value interest rate risk were the Loan Notes of GBP1,000 at 5.0 per cent (see
note 11).
Cash flow interest rate risk
The Company has exposure to interest rate movements primarily through its cash
deposits which track the Bank of England base rate. During the year, the Company
earned interest income from deposits held with RBS, Lloyds and Investec.
The benchmark that determines the interest paid or received on the current
account is the Bank of England base rate, which was 0.5 per cent at 31 December
2011.
Interest rate risk profile of financial assets
The Company's financial assets, apart from the non-interest bearing investments,
are floating rate. The following analysis sets out the interest rate risk of the
Company's financial assets.
Year ended Period ended
31 December 31 December
Average Period until 2011 2010
Rate status interest rate maturity GBP'000 GBP'000
* Floating
Cash at bank rate 0.9% - 3,148 220
Cash at bank Floating rate 1.65% 32 day notice 1,087 2,154
Balance of
assets Non-interest bearing 7,512 10,876
* Benchmark rate is Bank of 11,747 13,250
England base rate
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 per cent 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 GBP42,000. A decrease of 1 per cent would
have had an equal but opposite effect.
Foreign currency risk
The reporting currency of the Company is Sterling. During the year the Company
held one Euro denominated investment which was fully disposed of in August 2011.
The Group entered into forward contracts for the sale of foreign currencies in
order to hedge its exposure to fluctuations in currency rates in respect of this
holding until the date of disposal. These forward contracts were recorded at
fair value through profit and loss and any changes in value were taken to the
capital account.
Notes to the Accounts
For the year ended 31 December 2011
17. Financial Instruments (continued)
Fair value hierarchy
Fair values have been measured at the end of the reporting period as follows:-
Level 2 Level 3
Year ended 31 Level 1 'Quoted 'Observable 'Unobservable
December 2011 prices' inputs' inputs' Total
Financial assets
At fair value 6,355 1,253 - 7,608
through profit
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 period end redemptions in line
with the Company's accounting policies and IPEVC guidelines.
18. 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 31 December 2011
19. Contingencies, Guarantees and Financial Commitments
There were no commitments, contingencies or guarantees of the Company at the
year end.
20. 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
GBP217,000 (2010: GBP197,000) was due in respect of investment management fees. The
balance owing to Shore Capital Limited at the year end was GBP60,000
(2010: GBP67,000).
The Company has appointed Shore Capital Fund Administration Services Limited, a
related company to Shore Capital Limited, to provide accounting, secretarial and
administrative services. During the period GBP42,000 (2010: GBP35,000) was due in
respect of these services. The balance owing to Shore Capital Fund
Administration Services Limited at the year end was GBP10,000 (2010: GBP12,000).
This announcement is distributed by Thomson Reuters on behalf of
Thomson Reuters clients. The owner of this announcement warrants that:
(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Puma High Income VCT PLC via Thomson Reuters ONE
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