Half-year Report

Interim Report

For the period ended 31 August 2020

Officers and Professional Advisers

Highlights

· Proposed dividend of 5p per share, bringing dividends paid since inception to 21p per share.

· Covid-19 pandemic continues to impact on the Company's portfolio.

· NAV per share of 90.86p at the half year (adding back 16p per share dividends paid to date). This reflects a 1.99p per share post-tax loss in the period, arising from a reduced valuation of the qualifying investments portfolio principally to reflect the impact of Covid-19.

Chairman's Statement 

Introduction

Once again, we are reporting against the backdrop of major economic disruption caused by the Covid-19 pandemic. Whilst recent announcements relating to potential vaccines have buoyed sentiment, the impact of the measures taken to deal with Covid-19 continue to impact the entire economy and touch almost every sector. 

Whilst it may be too early to comment on the medium-term effects on investment markets and values, the short-term impact on many of the Company's investments has been significant. Details of these investments, and their current holding values, are set out below.

In normal circumstances, your VCT would begin the process of liquidating all its assets, winding up and returning its cash to the shareholders. However, as announced earlier this year in the Company's annual report, the Board has decided to delay convening a General Meeting of the Company at which resolutions would be proposed to place the Company into members' solvent liquidation. The Board continues to keep this matter under regular review in light of the delays to realisations likely to be caused by the Covid-19 disruption. Meanwhile, the Company continues to meet its minimum qualifying investment percentage of 80 per cent and the Board remains focused on shareholders' wish to liquidate the portfolio on reasonable terms as soon as possible.

Dividend

As reported in the Company's annual report, the Company paid a dividend of 6p per ordinary share earlier this year. The Board is pleased to announce that it has approved a further dividend of 5p per Ordinary Share. This dividend is an interim dividend, but as it fulfils the aim set out in the Prospectus it is expected to be the only dividend in respect of the period to 28 February 2021 and will bring dividends paid since inception to 21p per share.

The ex-dividend date will be 10 December 2020 and the record date 11 December 2020. The dividend will be paid to shareholders on or about 7 January 2021.

Investments

Qualifying Investments

Having met and maintained its minimum qualifying investment percentage, and in light of its remaining planned life, the Company has not made any new qualifying investments during the period. We report as follows on its current portfolio of qualifying investments.

Warm Hearth - Pubs with Microbreweries

In the Company's last annual report, the Company reported a reduction of £1.7 million in the carrying value of the Company's original £2.5 million investment into Warm Hearth Limited, a hospitality and leisure business with two freehold pub assets in Chester and Wilmslow. Both units are franchisee pubs of Brewhouse & Kitchen Ltd ("B&K") and trade in their name. In line with government regulations, B&K closed their units in March with the vast majority of unit staff furloughed. During this period, the company took advantage of government support packages including the Job Retention Scheme and Rates Relief. Costs were tightly controlled, with the benefit of both sites being freehold.

The Wilmslow site reopened successfully in August and benefitted from the 'Eat Out to Help Out' scheme. The unit in Chester reopened later, in September, given its central location and lack of outdoor space. Both units opted to offer a 25% discount on all food from Mondays to Wednesdays beyond August, independently from the government scheme, to drive mid-week trade. Both sites have now again been closed as a result of the second national lockdown from 5th November but will continue to benefit from government support (furlough) and the extension of the VAT discount to March 2021 (reduced from 20% to 5%) once they reopen.

Whilst we have been pleased with the actions taken by the management team in response to the pandemic, the recent headwinds facing the pub industry have been exacerbated by the impact of Covid-19, with consequent downward pressure on values. In recognition of this, the Company has made a further reduction in the carrying value of its holding, generating an unrealised loss in the period of £555,000.

Mini Rainbows - Children's Nurseries

As previously reported, the Company invested £2.5 million as part of a £5 million investment into Mini Rainbows Limited, which owns and operates mature children's day nurseries in the Central Belt of Scotland, from Edinburgh to Glasgow. During the first lockdown, the schools remained closed with nursery level staff furloughed. The company continued to engage with parents throughout this period which resulted in a successful reopening in July, the expectation being that nurseries will remain open in Scotland under each of the 'Tiers' or in lockdown. The majority of staff have been taken off the Job Retention Scheme and the company expects that all staff will be taken off this scheme when it ends. The schools have performed well since opening in their respective locations, and occupancy continues to grow steadily. The company continues to explore further acquisition opportunities in Scotland.

Growing Fingers Limited - Children's Nursery

As previously reported, the Company invested £980,000 (as part of a £2.8 million investment, alongside other Puma funds) into Growing Fingers Limited, a new purpose-built, 108-place nursery school in Wendover, Buckinghamshire, an affluent commuter town with direct links to London. Building was underway pre-Covid-19, however, in line with government restrictions, the site was closed and restarted in July with weekly site monitoring visits from Clerk of Works to ensure the build remains on track. The construction is due to reach Practical Completion by the end of the year, and pre-marketing continues in preparation for the opening of the school, which is expected in February 2021.

Applebarn Nurseries Limited - Children's Nursery

The Company has invested £1.1 million (as part of a £2.9 million investment, alongside other Puma funds) into Applebarn Nurseries Limited, a custom-built, 120-place children's day nursery in Altrincham, South Manchester which opened in September 2018 and has been continuing to ramp up as occupancy builds, reaching profitability in the year. The management team includes a successful operator of nurseries, together with an experienced developer and contractor. The nursery continued to operate for children of key workers through the first lockdown in line with government regulations, and all staff were retained without being furloughed. The nursery reopened fully in August 2020, although working in 'bubbles', which allowed for the school to operate but at reduced capacity, with 72 students instead of 120.

Kid and Play Limited - Children's Nursery

In October 2017, the Company invested £1.7 million (as part of a £3.4 million investment, alongside other Puma funds) into Kid & Play Limited. The company has developed a 110-place children's day nursery which was originally expected to open in Spring 2020 but experienced some interruptions to the building works due to Covid-19, so reached Practical Completion in May 2020 and opened in August 2020. Thanks to the focus on digital and online marketing during the first Covid-19 lockdown, advance interest in the nursery was very encouraging and the nursery reached 27% occupancy by October 2020 and continues to track in line with budget.

Signal Building Services - Construction Projects

In September 2017, the Company invested £1 million (as part of a total investment round of £2 million) into Signal Building Services Limited, a business specialising in delivering turnkey solutions to construction projects led by a management team with over 40 years of combined experience in the construction sector. Signal Building Services is currently working on the construction of a 41-unit residential scheme in North-West London. It has also recently been working on the construction of a 22-apartment supported living scheme in Wigan which completed successfully during the period, generating an attractive margin for Signal Building Services.

Knott End Pub Company Limited - Pubs with Microbreweries

As previously reported, the Company has invested just over £2.1 million (as part of a £7.3 million qualifying investment alongside another Puma VCT) in Knott End Pub Company Limited which has entered into a franchise agreement with Brewhouse & Kitchen Limited ("B&K") to roll out a portfolio of pubs offering on-site craft micro-brewing activities and good quality food. B&K is an award winning national branded operator, which now has 24 sites offering craft brewing activities, and is run by an experienced management team. Knott End operates two pubs, one in Milton Keynes, Buckinghamshire and the other in Horsham, West Sussex.

In line with the rest of the industry Knott End had to close both units during the first lockdown in response to the Covid-19 pandemic. The business took advantage of government support packages including the Job Retention Scheme (furlough) and Rate Reliefs, VAT reductions of food (July 2020 extended to March 2021) and the 'Eat Out to Help Out' scheme for August 2020.

The company and the B&K brand platform are innovating its offering to adapt to the current environment. One example of this is its investment into technology, resulting in B&K rapidly rolling out their new order and payment platform, 'B&K On Tap'. This will provide customers with comfort around social distancing, and deliver staff efficiencies, adding extra robustness to the operating model. These digital solutions will facilitate the company in understanding their customer base in more detail.

Whilst the business is well funded, uncertainty due to Covid-19 remains and there is yet to be clarity on potential restrictions over the festive period, a key period for pubs. On this basis, and given the downward pressure on pub valuations as a result of the pandemic, the Company has made a further reduction in the carrying value of the holding, generating an unrealised loss in the period of £184,000.

Pure Cremation Holdings Limited - Crematorium and Direct Cremations

In November 2017, the Company invested just over £2 million (as part of a £7.35 million investment, alongside other Puma funds) into Pure Cremation Holding Limited, a leading provider of direct cremations meeting the needs of a growing number of people in the United Kingdom who want a respectful cremation arranged without any funeral, leaving them free to say farewell how, where and when is right for them. The company's revenue has grown consistently since our investment, and the business has moved into profitability. Our investment has driven marketing activity, increasing awareness of the business' direct cremations and prepaid funeral plans. The investment also helped the company build its own bespoke crematorium facility, driving down per-unit costs and providing a platform for considerable further growth. Pure Cremation's experienced management team has delivered impressive growth in a sector poised for rapid expansion.

The business has experienced very high demand during the current year and was able to continue operating safely through the Covid-19 disruption. It also donated TV advertising space to Marie Curie to help the charity raise much needed funds for its emergency appeal. The sale of 'pre-need' (i.e. purchase of a funeral plan providing committed funding for a direct cremation) and 'at-need' services have remained strong, and the business is expanding to cover mainland Scotland given the growing traction in this region. As the business continues to deliver consistent growth in revenue and EBITDA, the Company has reflected an increase in the carrying value of its holding, generating an unrealised gain in the period of £201,000.

Sunlight Education Nucleus Limited - Special Educational Needs Schools

In November 2017, the Company invested £1.35 million (as part of a £4.7 million investment, alongside other Puma funds) into Sunlight Education Nucleus Limited, a company seeking to develop, own and operate a series of special educational needs schools across the United Kingdom. The first school, which opened in September 2019 in Stafford, West Midlands, continued to operate throughout lockdown in line with government regulation that vulnerable children, and those with education health and care plans, could continue attending school at the discretion of the parents and guardians. A small number of pupils attended the school in early lockdown, and at-home services were provided for students remaining at home. This school is now trading ahead of forecasts for pupil headcount. The second site in Crewe has finished refurbishment and is expected to open with four times the number of students originally forecast. Both schools have increased efforts to hire new staff in order to cater for the rising demand.

Non-Qualifying Investments

Supported Living, Nottingham and Liverpool

As previously reported, a loan of £1,623,000 was advanced (through an affiliate, Mayfield Lending Limited) to various entities within the Carislease group of companies. The loan was funding for the acquisition and development of a series of supported living schemes in Nottingham and Liverpool. This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling £4.8 million, was secured with a first charge over the sites, many of which had already been pre-sold. We are pleased to report that the loan was repaid in full following the period end.

Mixed Residential Commercial Development, Bloomsbury

As previously reported, a £1.2 million loan (as part of a total facility of £17.97 million) was advanced to Cudworth Limited (through the VCT's affiliate Mayfield Lending Limited and Meadow Lending Limited) to fund the construction of a mixed residential and commercial development in Bloomsbury, London, close to the British Museum and 600m from King's Cross station. We are pleased to report that the loan was repaid in full during the period.

Supported Living, Northumberland

In June 2018 the Company committed loans (through affiliates, Mayfield Lending Limited and Latimer Lending Limited) of £1.46 million to Homelife Developments Hexham Ltd to facilitate the construction of a 9-apartment supported living scheme in Northumberland. We are pleased to report that the loan was repaid in full during the period.

Care Homes for the Elderly, Willenhall and Lichfield

A loan of £1,926,000 was advanced (through affiliates, Mayfield Lending Limited and Meadow Lending Limited) to various entities within the Macc Care group of companies. The loan was to fund the stabilisation of a newly built 73-bed care home in Willenhall (between Wolverhampton & Walsall) and the acquisition of a site in Lichfield which is the subject of a planning application for a 90-bed care home. This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling £7.7 million, is secured with a first charge over the two sites. Occupancy at Willenhall remains positive and the planning application at Lichfield is expected to be determined in the coming months.

Purpose Built Student Accommodation, Brighton

A loan of £1,250,000 was advanced (through an affiliate, Meadow Lending Limited) to Alumno Student Brighton Living (Brighton) Limited. The loan was to fund the acquisition and development of a 71-unit purpose-built student accommodation unit in Brighton. This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling £8.47 million, is secured with a first charge over the site. Brighton is one of the university towns which has had a strong demand for new-build quality student accommodation and the developer has a long track record, having developed over 5,000 units to date. Construction is progressing well with a view to opening in line with the beginning of the 2021/22 academic year.

Aparthotel, Glasgow

A pre-development bridge loan of £836,000 was advanced (through affiliates, Palmer Lending Limited and Meadow Lending Limited) to Citihome Glasgow Limited against a site with planning permission for a 156-room aparthotel in central Glasgow. This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling £3.3 million, is secured with a first charge over the site and is backed by a personal guarantee from the developer. Since the loan was advanced, the developer successfully increased the planning permission to 204 rooms. The loan is due to mature on 30 November 2020 and the borrower is in discussions with the lenders with respect to a refinance or restructuring.

Supported Living, Atherstone

A loan of £540,000 was advanced (through affiliates, Meadow Lending Limited and Sloane Lending Limited) to HBP Group Limited to facilitate the development of 16 supported-living flats in Atherstone, Warwickshire. This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling £1.7 million, is secured with a first charge over the property. The scheme benefits from a pre-let with a leading housing association and a rental void agreement with a large care provider. Practical completion is expected in the coming months.

Care Homes for the Elderly, the Wirral

During the period, a loan of £700,000 was advanced (through an affiliate, Sloane Lending Limited) to various entities within the Athena Healthcare group of companies. This loan, together with loans from other vehicles managed and advised by the Investment Manager totalling £14 million is supporting the stabilisation of two newly built 80-bed care homes in the Wirral, near Liverpool. Both care homes are performing well - one at 78% occupancy and one at 93% occupancy - and have not, to-date, had any Covid-19 related issues.

Care Home for the Elderly, Cumbria

Shortly before the period end, loans totalling of £1,603,000 were advanced to facilitate the development of a new 70-bed care home in Brampton, Cumbria. The loans were made through affiliates, Mayfield Lending Limited and Meadow Lending Limited and were advanced together with facilities from other vehicles managed and advised by the Investment Manager totalling £11.7 million. The developer has significant previous experience of developing and operating care homes and the loans are secured with a first charge over the site.

Results and Net Asset Value ("NAV")

The Company recorded a loss of £607,000 in the period (representing a 1.99p per share post-tax loss) as a result of changes made in holding values in the qualifying investments portfolio. Accordingly, the NAV per share at the period end was 74.86p, which equates to 90.86p after adding back dividends paid to date.

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 and has reported no issues in this regard for the Company to date. PwC also assists the Investment Manager in establishing the status of investments as qualifying holdings and will continue to assist the Investment Manager in monitoring rule compliance.

Principal risks and uncertainties

The measures taken to deal with Covid-19 have caused, and continue to cause, major economic disruption across all sectors. The consequences of this for the value of the Company's investment portfolio constitute the principal risk and uncertainty for the Company in the second half of the year.

Outlook

The Company's funds are invested in a balanced portfolio of both qualifying and non-qualifying investments. Whilst the Covid-19 pandemic has presented a number of significant unforeseen economic and social challenges for the UK and global economy, the management teams in our portfolio companies and the developers who have received loans from our affiliates have responded well. The objective of the Board remains to balance the maximising of shareholder returns with the desire to achieve an orderly winding up of the Company's assets as soon as possible.

Harold Paisner

Chairman

26 November 2020

Income Statement (unaudited)

For the period ended 31 August 2020

The total 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 31 August 2020

Cash Flow Statement (unaudited)

For the period ended 31 August 2020

Statement of Changes in Equity (unaudited)

For the period ended 31 August 2020

Notes to the Interim Report

For the period ended 31 August 2020

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 and Venture Capital Trusts" ("SORP") and in accordance with the Financial Reporting Standard 102 ("FRS102").

2. Return per Ordinary Share

The total loss per share of 1.99p is based on the loss for the period of £607,000 and the weighted average number of shares in issue as at 31 August 2020 of 30,511,969 calculated from the date of the first receipt of proceeds from the issue of ordinary share capital.

3. Net asset value per share

4. Management fees

The Company pays the Investment Manager an annual management fee of 2% 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. Financial information provided

The financial information for the period ended 31 August 2020 has not been audited and does not comprise full financial statements within the meaning of Section 423 of the Companies Act 2006. The interim financial statements have been prepared on the same basis as will be used to prepare the annual financial statements.

6. Investment portfolio summary

Of the investments held at 31 August 2020, all are incorporated in England and Wales.

Copies of this Interim Statement will be made available on the website: http://www.pumainvestments.co.uk/pages/view/investors-information-vcts