Interim Report
Puma VCT III plc Interim Report
For the six months ended 30 June 2008
Chairman's Statement
This statement forms the Interim Management Report for the half year
ended 30 June 2008.
Highlights
* Net asset value per share of 95.25p. This represents a 0.7%
decrease from year-end (adding back the 1.5p 2007 final dividend
paid at the end of the period) compared to a decrease of 27.4% on
the FTSE AIM Index for the same period.
* �3.9 million invested into qualifying investments in the
period.
* Several large qualifying investments in the pipeline.
Introduction
During the six months to 30 June 2008, the investment manager's
conservative approach has held Puma VCT III plc's performance stable
though the continuing turmoil inflicting the wider financial markets,
resulting in a small drop in NAV.
The fund has a remit to invest in both unquoted and AIM/Plus listed
equities, but the investment manager has concentrated upon
investments in unquoted companies. The focus in unquoted investments
is on providing secured mezzanine finance rather than taking an
equity risk. The fund also holds some AIM stocks where the
Investment Manager considered that the fund-raising offered good
medium term value.
This strategy has proven to be prudent as the AIM market fell 27.4%
during the six months to 30 June 2008, suffering from the continuing
economic downturn affecting global financial markets. It is likely
that the value of typical unquoted equities of a kind in which VCTs
can invest will have fallen by the same amount or more. In the same
period the Company is reporting a fall of only 0.7% (adding back the
1.5p 2007 final dividend paid at the end of the period) in the NAV
per share which now stands at 95.25p.
The fall in value is primarily attributable to the Company's AIM
quoted stocks, many of which are trading at a discount to their
respective net asset values. This is less to do with the quality of
these companies than the continuing result of the volatility and
sentiment in the stock market for smaller companies that we reported
on at the year end.
New Qualifying investments
The Company completed three qualifying transactions during the period
totalling �3,890,000. The investments were into Bond Contracting
Limited, Clifford Contracting Limited and Albemarle Contracting
Limited. All three of these are private equity investments,
primarily of mezzanine, under which the investment manager has a seat
on the board and has direct involvement in underlying investment
decisions.
Bond Contracting Limited was set-up to acquire companies or to
operate within the leisure sector and actively sought to enter into
contracting arrangements during the period. We are pleased to report
that the company has recently entered into its first significant
construction contract within this space.
Both Albemarle Contracting Limited and Clifford Contracting Limited
have been actively pursuing opportunities to either acquire companies
or to operate within the business consultancy sector and we expect
news of positive developments over the coming year.
Existing Qualifying investments
Of the existing unquoted stocks, the �2.3m investment in Cadbury
House Hotel & Country Club plc (Cadbury House), the leisure centre
and hotel complex near Bristol, continues to trade very well and
ahead of budget. Also, Cadbury House had applied for planning
permission to build an extension to the hotel containing a further 58
bedrooms and the application is expected to be considered by the
relevant committees over the next few months. This should generate
further value to the Company's existing investment.
The Company invested �985k in Stocklight, the parent company of
Bloomsbury Auctions. This investment is in mezzanine finance and is
very well secured both by freehold commercial property and a
well-spread inventory of rare books. Stocklight is trading
profitably as a group, but the company has invested significantly in
establishing a global footprint of its auction business. The auction
sites in Rome and New York are taking time to generate a return, but
overall our investment is secure.
The value of the quoted qualifying stocks at the period end was
�690,000, compared to �927,000 at the year end and is responsible for
the bulk of the fall in NAV in the period. This reflects the
difficult market conditions facing all AIM stocks. However these
stocks make up only 4% of the overall portfolio and we expect that at
least some of the recent falls will reverse in due course.
The qualifying portfolio now consists of nine investments
representing approximately 47% of assets as at 30 June 2008. With
several large qualifying investments expected to be made in the
near-term, your board is confident that the requirement for at least
70% to be invested in qualifying companies will be met within the
three year timescale.
Non-qualifying investments
The market value of the non-qualifying investment portfolio was
�8,490,000 at the period end against an underlying book cost of
�8,228,000. This portfolio consists of three elements, listed
stocks, hedge funds and a non-qualifying private equity investment.
Performance for this portfolio for the six months was relatively
flat with the fall in value of the listed stocks largely off set by
gains on the hedge fund holdings.
The non-qualifying private equity investment is in a hotel
development project on the outskirts of Winchester in the green
belt. There is a large premium value for securing a planning
permission in this location and we expect, in due course, to record a
gain on this holding. At present we are carrying it at cost.
Construction of a 120 bedroom hotel, to be a Holiday Inn Express, is
expected to begin in September and to take about a year.
Results and dividends
As set-out in the 2007 accounts, a dividend of 1.5p per ordinary
share was declared during the period and paid on 2 July 2008. Your
Board is not proposing a dividend in relation to this interim period
but reiterates the intention to distribute a large element of the
available income and, if appropriate, realised capital gains in due
course.
Year end change
During the period the Company took the opportunity to change its
financial year end from 31 December to 28 February. Puma VCT III is
now required to be 70% invested in qualifying investments by 28
February 2009. The next Annual Report will be for the period to this
date.
VAT on management fees
The Government has announced that VCTs will be exempt from paying VAT
on investment management fees with effect from 1 October 2008,
following a European Court of Justice judgement against the
Government in a case relating to VAT payable by investment trusts.
This represents a prospective annual cost saving for the Company of
around �65,000. More recently, the Government has conceded that VCTs
will be able to obtain a repayment of VAT paid on management fees in
earlier periods (the benefit of this has not been included in the
current NAV). We will report on our progress in respect of this
beneficial development in due course.
Principal risks and uncertainties
It is clear that the UK economy is turning down at present and may go
into recession. The consequences of this for our investment
portfolio constitute the principal risk and uncertainty for the
Company in the second half of the year.
Outlook
The Investment Manager continues to review opportunities as potential
investee companies look for alternate sources of debt finance brought
about by tighter credit conditions. The VCTs offering of mezzanine
and equity finance for asset-backed growing companies continues to be
attractive benefiting from the ability to increase the sum offered by
spreading the investment across the five Puma VCTs.
The current portfolio of private equity holdings are sustaining their
strong position and limit the Company's risk exposure in qualifying
investments. The AIM qualifying stocks, a small element of the
portfolio, have not performed well during the period but the
Investment Manager is monitoring them closely and expects at least
some of current losses to reverse in due course.
The investment manager is seeking new qualifying opportunities which
match the risk averse mandate of the Company. The Company has
sufficient cash resources to capitalise on any opportunities which
arise and the timing for making investments into mezzanine in solid
private companies is now much more favourable.
I look forward to reporting the progress of the Company with the next
Annual Report for the period ended 28 February 2009.
Sir Aubrey Brocklebank Bt
Chairman
22 August 2008
Income Statement (unaudited)
For the six months ended 30 June 2008
Six months ended Six months ended Year ended
30 June 2008 30 June 2007 31 December 2007
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Note �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
(Loss)/gains
on
investments - (274) (274) - 653 653 - (707) (707)
Income 430 - 430 191 - 191 523 - 523
430 (274) 156 191 653 844 523 (707) (184)
Investment
management
fees 4 54 162 216 59 178 237 116 347 463
Performance
fees 51 (51) - 12 95 107 45 (102) (57)
Other
expenses 68 - 68 71 - 71 142 - 142
173 111 284 142 273 415 303 245 548
(Loss)/return
on ordinary
activities
before
taxation 257 (385) (128) 49 380 429 220 (952) (732)
Tax on return
on ordinary
activities (52) 52 - (3) 3 - (40) 40 -
(Loss)/return
on ordinary
activities
after tax
attributable
to
equity
shareholders 205 (333) (128) 46 383 429 180 (912) (732)
(Loss)/return
per Ordinary
Share (pence) 2 1.05p (1.70)p (0.65)p 0.23p 1.96p 2.19p 0.92p (4.68)p (3.76)p
The revenue column of this statement is the profit and loss of the
Company. All revenue and capital items in the above statement derive
from continuing operations. No operations were acquired or
discontinued in the period.
Balance Sheet (unaudited)
As at 30 June 2008
As at As at As at
30 June 30 June 31 December
Note 2008 2007 2007
�'000 �'000 �'000
Fixed Assets
Investments 7 16,390 17,464 14,850
Current Assets
Debtors 376 129 172
Cash 2,274 2,890 4,221
2,650 3,019 4,393
Creditors - amounts falling
due within one year (161) (151) (236)
Dividend payable (293) - -
Net Current Assets 2,196 2,868 4,157
Total Assets less Current
Liabilities 18,586 20,332 19,007
Creditors - amounts falling
due after more than one year
(including convertible debt) (1) (1) (1)
Net Assets 18,585 20,331 19,006
Capital and Reserves
Called up share capital 195 195 195
Capital reserve - realised (521) 140 (110)
Capital reserve - unrealised (327) 640 (405)
Other reserve - 164 -
Revenue reserve 19,238 19,192 19,326
Equity Shareholders' Funds 18,585 20,331 19,006
Net Asset Value per Ordinary
Share 3 95.25p 104.19p 97.40p
Diluted Net Asset Value per
Ordinary Share 3 95.25p 103.35p 97.40p
Cash Flow Statement (unaudited)
For the six months ended 30 June 2008
Six months Six months Year ended
ended ended 31 December
30 June 2008 30 June 2007 2007
�'000 �'000 �'000
Operating activities
Investment income received 242 165 385
Investment management fees paid (205) (346) (579)
Cash paid to directors (7) (7) (14)
Foreign exchange gain/(loss) on 24
cash (46) 37
Other cash payments (68) (91) (143)
Net cash outflow from operating
activities (84) (242) (327)
Capital expenditure and
financial investment
Purchase of investments (2,678) (5,305) (7,370)
Proceeds from sale of
investments 923 3,563 6,870
Acquisition costs - - -
Net realised (loss)/gain on
forward foreign exchange
contracts (108) 33 207
Net cash outflow from capital
expenditure and financial
investment (1,863) (1,709) (293)
Management of liquid resources 1,709 - (2,796)
Decrease in cash (238) (1,951) (3,416)
Reconciliation of net cash flow
to movement in net funds
Decrease in cash for the period (238) (1,951) (3,416)
(Decrease)/increase in liquid
resources for the period (1,709) - 2,796
Net cash at start of the period 4,221 4,841 4,841
Net funds at the period end 2,274 2,890 4,221
Reconciliation of Movements in Shareholders' Funds (unaudited)
For the six months ended 30 June 2008
Called
up Capital Capital
share reserve- reserve- Other Revenue
capital realised unrealised reserve reserve Total
�'000 �'000 �'000 �'000 �'000 �'000
Six months ended 30 June 2008
Balance at 1
January 2008 195 (110) (405) - 19,326 19,006
Total recognised
(losses)/gains
for the period - (411) 78 - 205 (128)
Dividends payable - - - - (293) (293)
Balance at 30
June 2008 195 (521) (327) - 19,238 18,585
Six months ended 30 June 2007
Balance at 1
January 2007 195 288 109 57 19,146 19,795
Total recognised
(losses)/gains
for the period - (148) 531 107 46 536
Balance at 30
June 2007 195 140 640 164 19,192 20,331
For the year ended 31 December 2007
At 1 January 2007 195 288 109 57 19,146 19,795
Total recognised
(losses)/gains
for the year - (398) (514) (57) 180 (789)
Balance at 31
December 2007 195 (110) (405) - 19,326 19,006
Notes to the Interim Report
For the six months ended 30 June 2008
1. Accounting Policies
The financial statements have been prepared under the historical cost
convention, modified to include the revaluation of fixed asset
investments, and in accordance with applicable Accounting Standards
and with the Statement of Recommended Practice, "Financial Statements
of Investment Trust Companies" ("SORP") December 2005. Although this
SORP principally applies to Investment Trusts, many of the
characteristics of Investment Trusts are shared by VCTs therefore the
Company will continue to follow the SORP until investment company
status is revoked.
2. Return per Ordinary Share
The total loss per share of 0.65p (30 June 2007 - return of 2.19p) is
based on the loss for the period of �128,000 (30 June 2006 - profit
of �429,000) and the weighted average number of shares in issue as at
30 June 2008 of 19,512,692 (30 June 2007 - 19,512,692).
3. Net asset value per share
+-------------------------------------------------------------------+
| | | | Net Asset Value per |
| | | | share |
| |-------------+-------------+---------------------|
| | Net assets | Shares in | Basic | Diluted |
| Period | | issue | | |
|-----------------+-------------+-------------+----------+----------|
| 30 June 2008 | �18,585,000 | 19,512,692 | 95.25p | 95.25p |
|-----------------+-------------+-------------+----------+----------|
| 31 December | �19,006,000 | 19,512,692 | 97.40p | 97.40p |
| 2007 | | | | |
|-----------------+-------------+-------------+----------+----------|
| 30 June 2007 | �20,331,000 | 19,512,692 | 104.19p | 103.35p |
+-------------------------------------------------------------------+
4. Management fees
The Company pays the Investment Manager an annual management fee of
2% (plus VAT) of the Company's net assets. The fee is payable
quarterly in arrears. The annual management fee is allocated 75% to
capital and 25% to revenue.
5. Related Party Transactions
Related party transactions are described the 2007 Annual Report and
Accounts on page 36. There were no other related party transactions
during the 6 months ended 30 June 2008.
6. The financial information for the six months ended 30
June 2008 and 30 June 2007 has not been audited and does not comprise
full financial statements within the meaning of Section 240 of the
Companies Act 1985. The financial information for the year ended 31
December 2007 has been extracted from the company's full financial
statements for the year then ended that have been delivered to the
Registrar of Companies, and on which the report of the Auditors was
unqualified. The interim financial statements have been prepared on
the same basis as the annual financial statements.
Notes to the Interim Report continued
For the six months ended 30 June 2008
7. Investment portfolio summary
Cost Valuation Gain/ Valuation as a %
As at 30 June 2008 �'000 �'000 (loss) of Net Assets
Qualifying investment -
unquoted
Albemarle Contracting Ltd 1,000 1,000 - 5%
Bond Contracting Ltd 1,000 1,000 - 5%
Clifford Contracting Ltd 1,890 1,890 - 10%
Cadbury House Hotel &
Country Club plc 2,335 2,335 - 13%
Stocklight Limited 985 985 - 5%
Qualifying investment -
quoted
Clarity Commerce Solutions
plc 230 78 (152) 1%
Mount Engineering plc 188 198 10 1%
Sport Media plc 493 106 (387) 1%
Vertu Motors plc 500 308 (192) 2%
Total qualifying
investments 8,621 7,900 (721) 43%
Non-qualifying investments
Hedge fund portfolio 5,366 5,990 624 32%
Loan stock - interest
bearing 1,074 1,186 112 6%
Other quoted investments 1,788 1,314 (474) 7%
Total non-qualifying
investments 8,228 8,490 262 45%
Total investments 16,849 16,390 (459) 88%
Balance of portfolio 2,195 2,195 - 12%
Net Assets 19,044 18,585 (459) 100%
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