Growth Capital

Puma VCT 2009 Interim Report

For the six months ended 31 August 2009
Chairman's Statement

Highlights

Introduction

During the six months to 31 August 2009 the Company has seen a significant recovery of its holdings both in the qualifying and non-qualifying portfolios as the AiM quoted stocks recovered. In addition to the increase in value of the existing listed holdings the Investment Manager has been able to take advantage of new opportunities presented as the markets have shown signs of recovery. The Company's net asset value grew by 7.6% during the period, before accrued performance fees.

The gain in value is primarily attributable to the Company's AiM quoted stocks, however some of these continue to trade at a discount to their respective net asset values and the Investment Manager hopes that the Company will continue to see a recovery in the values of these holdings in the second half.

Qualifying investments

The six months to 31 August 2009 have seen progress for the Company's qualifying investments.

In May 2009 Cadbury House Limited, the leisure centre and hotel complex near Bristol, was granted planning permission to build an extension to the hotel containing a further 48 bedrooms. The construction is expected to commence in the next few months.

As announced at the year end, the Company's holding in Clifford Contracting Limited of £1,513,000 has been sold in the period to Telford Homes plc in exchange for new shares and secured loan notes. This investment continues to be qualifying for VCT purposes and the exit has been targeted to coincide with the expected wind-up timetable of the VCT.

Bond Contracting Limited (in which the Company has invested £1.5m) is in the final stages of constructing a 141 bed Hotel on the outskirts of Winchester. It is on target to complete the construction in the current year and be operational in early 2010.

At 31 August 2009 the listed holdings within the Company's qualifying portfolio were valued at £1,319,000. This represents an unrealised gain of £477,000 over the value of £842,000 as at the year end.

Non-qualifying investments

The Investment Manager has taken advantage of new opportunities presented as the markets have shown signs of recovery, focusing on corporate bonds and other bond funds. This strategy has generated £58,000 in bond interest during the period, together with profits of £36,000 from disposals of bonds.

Just subsequent to the period end the Company fully realised its fixed rate loan stock holding in Lakan investments. The loan was put in place in November 2007 and has generated an IRR of over 21% during its life.

The VCT also exited from Puma Brandenburg (in which it had originally invested into at £1) as a result of its takeover at 60p per share by Shore Capital Group plc. The 60p exit price represented a premium of approximately 40 per cent. to the closing price on 10 June 2009, being the last practicable business day before the takeover was announced.

During the period VCT and VCT II invested in £500,000 secured loan notes of INVU plc of which £296,000 was for this VCT. These loan notes bear an attractive coupon and the term coincides with the expected VCT wind-up strategy.

Results and dividends

As set-out in the accounts for the period ended 28 February 2009, a dividend of 2.75p per ordinary share was declared during the period and paid on 16 September 2009.  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.

Principal risks and uncertainties

Although the UK economy has shown some limited signs of a recovery so far this year, economic risks remain.  The consequences of this for our investment portfolio represent one of the principal risks and uncertainties for the Company in the second half of the year.

Outlook

Despite the strong performance in the period we also remain cautious of the risk of a further downturn in stock markets. Our existing private equity investments are largely in the form on secured loans and limit the Company's risk exposure. The quoted holdings have performed well during the period but the values of these still reflect the prospects for a long period of economic uncertainty and reduced liquidity in small cap stocks. However, liquidity has improved in the larger more successful holdings.

Realisations and end of VCT life

We are now focused on improving the liquidity of the portfolio wherever possible whilst maintaining an appropriate risk/return. The full realisations of Lakan Investments and Puma Brandenburg Ltd in the period go someway towards this. The new investments in INVU plc and Telford Homes plc have been structured consistent with the objective of achieving an orderly winding up of the VCT assets at the end of its life.

As we draw near to the end of its life we are reviewing how we wind up the Fund and manage its assets in line with this requirement. To meet VCT rules, the process of formal winding up cannot begin until 1 June 2010, 5 years on from the closing of the two VCTs' flotations. However if significant capital is realised before this point, it is the intention of the Board to distribute it.

Recent Net Asset Value

The fully diluted net asset value per share as at 30 September 2009 was 99.46p after the payment of the 2.75p dividend mentioned above.

I look forward to reporting the progress of the Company with the next Annual Report for the year ended 28 February 2010.

Sir Aubrey Brocklebank Bt

Chairman

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