Puma Alpha Vct. Regulatory News (PUAL)

HIGHLIGHTS

- Launched as a new evergreen VCT and listed on the London Stock Exchange

- Three qualifying investments already made

- Significant portion of NAV still held as cash

CHAIRMAN'S STATEMENT

Your Board is pleased to present the first report and financial statements for Puma Alpha VCT plc ('the Company') for the period to 29 February 2020.

Fundraising

We are happy to report that at the period end the Company had raised £4,006,470 and since the period end a further £1,881,381 has been raised. The Company was admitted for listing on the premium market of the London Stock Exchange on 5 June 2020.

Whilst this is a success - and made Puma Alpha VCT the largest new VCT on the market at the end of the 2019/20 tax year - it is likely that fund raising would have been much higher were it not for the impact of Covid-19 and the assorted policy responses to it. 

However, the Company is well above its minimum size and will be able to pursue its objectives in line with its stated Investment Policy.

Investment Portfolio

We are pleased to report that, despite only having been launched on 15 January 2020, the Company made two qualifying investments in the period alongside other Puma managed funds. These investments were: £475,000 into British automotive engineering firm Dymag; and £450,000 into cycling apparel business Le Col. These were followed post year end by a further £279,000 investment into Le Col and a £600,000 investment into health and wellness engagement business TicTrac. Given the impact of Covid-19, this is good progress. 

Of particular note was the fact that the last of these investments was completed remotely on 23 March 2020 during the very uncertain initial stages of the Covid-19 outbreak. That this was possible is testament to the capabilities of the Manager but, more importantly, the investment was able to be re-priced for the environment it was completed in. That, together with the significant portion of its Net Asset Value ("NAV") held in cash, leaves the Company well positioned to build a compelling portfolio of 'post Covid' opportunities, without the large legacy portfolios that many other VCTs will be managing through the current crisis and for the foreseeable future. In fact, one of the Company's investments, into cycling apparel business Le Col, has performed so strongly since completion that it has been revalued upwards by £178,000 in the Company's accounts, despite the relatively short period of hold.

At the time of writing, we are encouraged by the flow of prospective qualifying investments which are under consideration by the Manager, including through the Covid-19 crisis so far. The investment team have heads of terms agreed for two further potential investments so we take comfort that we will continue to make good progress. There is also an opportunity for the Manager to target businesses likely to benefit from the changed post Covid-19 landscape, and to explore how prospective investments fared during the crisis.

Net Asset Value

The Company's NAV stood at 98.27p at the period end of 29 February 2020. This reflects the £178,000 upwards revaluation of one of the Company's qualifying investments, referred to above, less initial set-up fees and running costs. The Company's profit for the period was £134,000. The Company has not to date held listed equities or other liquidity management tools outside cash, so has not suffered from the associated volatility. Allocation of non qualifying holdings will continue to be considered by the Investment Manager as the economic outlook and global policy response to the Covid-19 crisis continue to evolve. As the Board concluded that the pandemic was a non-adjusting post balance sheet event, the impact of COVID-19 is not reflected in the fair value of the Company's investments as at 29 February 2020. We understand that this treatment is being adopted by other funds with similar year-ends.

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 and other specialist advisors will continue to assist the Investment Manager in establishing the status of potential investments as qualifying holdings. PwC will continue to monitor rule compliance and maintaining the qualifying status of the Company's holdings in the future. 

Outlook

Notwithstanding the considerable uncertainty arising from the Covid-19 pandemic and the unprecedented policy measures put in place to contain it, we do look to the future with confidence. The UK benefits from an active SME ecosystem and the Manager has a strong reputation as a provider of capital to well managed later stage businesses. Furthermore, despite pressure on the banks for more activity in support of SMEs - and despite a number of formal schemes of support - bank lending remains, and is likely to remain, very challenging for even the best small businesses. This, coupled with the institutional support that the Manager is able to offer its portfolio companies makes - in our view - an equity offer from the Company even more compelling. We therefore consider the Company to be strongly positioned to assemble a portfolio capable of delivering attractive returns to shareholders.

Egmont Kock

Chairman

26 June 2020

INVESTMENT MANAGER'S REPORT

Introduction

Since the Company's year end, the global economy and financial markets have been impacted significantly by the Covid-19 pandemic. These are unprecedented times that have disrupted personal and working life for almost everyone. Since the emergence of the pandemic in the UK, we have been actively working with portfolio companies to protect Shareholder value whilst, at the same time, complying with Government guidelines. Our existing monitoring cycle involves very close contact with portfolio companies. However, we have significantly increased our level of interaction with portfolio companies and changed our portfolio review meeting from monthly to weekly, as we carefully assess each company's cash management and outlook.

During this time, we have worked closely with external and internal advisory resources to support our portfolio companies. This has involved providing companies with in-depth resources on available support packages and hosting calls with advisers to deliver guidance on key topics such as employment law, available funding and scenario cash planning. Our aim was to ensure management teams could concentrate on running their businesses rather than scrutinising Government support schemes. Where appropriate, portfolio companies have made use of Government-led support, including the Coronavirus Job Retention Scheme and the Coronavirus Business Interruption Loan Scheme (CBILS).

As the situation has evolved, we have continued to work closely with portfolio companies to help them with strategies to conserve cash during this period of contraction and, if required, outline emergency funding options. Retaining a long-term view, the team has also worked with portfolio companies to position them to capitalise on the opportunities for growth that may arise. We have placed particular emphasis on helping them manage costs as aggressively as possible, making appropriate use of government support schemes and assessing opportunities to reopen efficiently with a focus on agile trading, adapted to new consumer and business behaviours.

Investments

Qualifying Investments

Le Col Holdings Limited - Sports Apparel

In February 2020, the Company invested £450,000 in Le Col Holdings, as part of a £4.85 million investment, £2.5 million of which came as a second tranche. Le Col is a premium cycling apparel brand founded by former professional cyclist, Yanto Barker. The brand's mission is to bring professional level kit to the amateur market, whilst still acknowledging technical sportswear's increasingly fashion led desirability. Revenues have continued to grow strongly during the period of investment especially within E-commerce, the largest sales channel. Sponsorship of the Team Bahrain McLaren (which is helping to bring the brand to the world stage), and partnerships with both Bradley Wiggins and the online community, Strava, will drive sales activation and increase overall brand awareness. Notably, Le Col is the second largest branded 'club' outside of Strava's own. In light of these successes, the Board have decided to revalue upwards the holding.

Post period end, during the Covid lockdown, the business has continued to perform very strongly, aided by the focus on cycling as a permitted form of exercise. The company recently hired a Head of Digital from Asics to support the continued growth of the e-commerce channel.

Dymag Group - High performance wheel manufacturer

In January 2020 the Company invested £475,000 into Dymag Group Limited, as part of a £4.8 million investment alongside other Puma funds, £1.2 million of which came as a second tranche. Dymag is a British designer and manufacturer of carbon-fibre car and motorbike wheels. These are high end, lightweight wheels for performance use. The investment into Dymag was to continue supporting its work of refining production process and lowering unit cost. The global market for carbon wheels was developing strongly before the impact of Covid-19, with several automotive companies announcing medium-size production runs of carbon wheels on high-profile vehicles. The Renault Megane RS Trophy R, which features a carbon wheel option, is just one example of the increasing appeal of the technology and adoption at lower price points.

Post period end, the Company has experienced reduction and delay in revenue levels since the outbreak of Covid-19. Decisions were made to cut or defer operating costs, and to make full use of available Government initiatives. Extensions of payments due to several major suppliers and Government have been agreed. We are pleased that some sources of revenue remain strong, such as online motorbike wheel sales and wheel turner projects, generating short-term cashflow.

Post year end the Company made a further investment as follows:

Tictrac Limited - Health Engagement Platform

In March 2020, post period end, the Company invested £600,000 in Tictrac Limited as part of a £5 million investment round. Tictrac is a personalised health and wellness platform. Tictrac collates day-to-day data from consumers through 'wearable' fitness trackers, to give people targeted information to help improve their health. The Company collaborates with experts and world-renowned centres of expertise in health, behavioural change and data science and its customers include some of the world's biggest healthcare providers and insurers, including Aviva, Allianz and Prudential. Since investment, Tictrac continues to work with its existing client-base and insurers to roll out the platform to their customers and end users. With the renewed emphasis on the need for employers to engage with the health and wellbeing of their employees during lockdown, Tictrac chose to make its platform available on a free trial basis to UK employers who want to support their workforce during the crisis. The Company has successfully built a strong pipeline of new clients as a result of this.

Investment Strategy

We are pleased to have already invested in three diverse businesses. The Company continues to make good progress following the period end and is seeing a solid pipeline of prospective qualifying investments. There are many suitable businesses which are well-managed, in good market positions and which need our investment.

The Company's sector agnostic investment mandate boosts our ability to examine the market for businesses that have demonstrated resilience during unprecedented levels of turbulence. This enables us to be opportunistic in seeking the best possible scenarios for investment. As the market emerges from the Covid-19 pandemic, we anticipate considerable demand for equity finance from strong but cash starved growth businesses, resulting in a continued robust pipeline of investment opportunities. We therefore believe the Company is strongly positioned to assemble a portfolio capable of delivering attractive returns to shareholders.

Puma Investment Management Limited

26 June 2020

Investment Portfolio Summary

As at 29 February 2020 

Of the investments held at 29 February 2020, all are incorporated in England and Wales.

Income Statement

For the period ended 29 February 2020

All items in the above statement derive from continuing operations. 

There are no gains or losses other than those disclosed in the Income Statement.

The total column of this statement is the Statement of Total Comprehensive Income of the Company prepared in accordance with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. The supplementary revenue and capital columns are prepared in accordance with the Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued by the Association of Investment Companies.

Balance Sheet

As at 29 February 2020

The financial statements on pages 19 to 34 were approved and authorised for issue by the Board of Directors on 26 June 2020 and were signed on their behalf by:

Egmont Kock

Chairman

Statement of Cash Flows

For the period ended 29 February 2020

Statement of Changes in Equity

For the period ended 29 February 2020

Distributable reserves comprise: Capital reserve-realised, and the Revenue reserve. At the year end, distributable revenue reserves were £nil.

The Capital reserve-realised includes gains/losses that have been realised in the period due to the sale of investments, net of related costs. The Capital reserve-unrealised represents the investment holding gains/losses and shows the gains/losses on investments still held by the Company not yet realised by an asset sale.

Share premium represents premium on shares issued less issue costs.

The revenue reserve represents the cumulative revenue earned less cumulative distributions.

1. Accounting Policies

Accounting convention

Puma Alpha VCT plc ("the Company") was incorporated in England on 11 April 2019 and is registered and domiciled in England and Wales. The Company's registered number is 11939975. The registered office is Cassini House, 57 St James's Street, London, England, SW1A 1LD. The Company is a public limited company (limited by shares). The Company's principal activities and a description of the nature of the Company's operations are disclosed in the Strategic Report.

The financial statements have been prepared under the historical cost convention, modified to include investments at fair value, and in accordance with the requirements of the Companies Act 2006, including the provisions of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and with FRS 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' ("FRS 102") and the Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in October 2019 by the Association of Investment Companies ("the SORP").

Monetary amounts in these financial statements are rounded to the nearest whole £1,000, except where otherwise indicated.

Going concern

The Directors have considered a period of 12 months from the date of this report for the purposes of determining the Company's going concern status which has been assessed in accordance with the guidance issued by the Financial Reporting Council. After making enquiries, including consideration of the impact of COVID-19 on the Company's current financial position and expected cash flows for the period of the review, the Directors believe that it is appropriate to continue to apply the going concern basis in preparing the financial statements. This is appropriate as the Company has access to cash reserves greater than the anticipated annual running costs of the Company.

Investments

All investments are measured at fair value. They are all held as part of the Company's investment portfolio and are managed in accordance with the investment policy set out on page 10.

Listed investments are stated at bid price at the reporting date.

Unquoted investments are stated at fair value by the Directors with reference to the International Private Equity and Venture Capital Valuation Guidelines ("IPEV") as follows:

· 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 either the price of recent investment or cost 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 in debt instruments will usually be valued by applying a discounted cash flow methodology based on expected future returns of the investment.

· Alternative methods of valuation such as multiples or net asset value may be applied in specific circumstances if considered 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 investments are taken to unrealised capital reserves.

Income

Dividends receivable on listed equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted 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 agreed performance fees payable to the Investment Manager, Puma Investment Management Limited, and members of the investment management team at 20% of the amount by which the Performance Value per Share at the end of an accounting period exceeds the High Water Mark (being the higher of 120p and the highest Performance Value per Share at the end of any previous accounting period), and multiplied by the number of Shares in issue at the end of the relevant period.

Section 26 of FRS 102 "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.

At each balance sheet date, the Company estimates that fair value by reference to any excess of the net asset value, adjusted for dividends and any performance fees paid, over the High Water Mark (as defined above) per share in issue at the balance sheet date. Any change in fair value is recognised 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% 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 Board's 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 the 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 periods. Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods 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, transaction costs, the capital element of the investment 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 the capital element of the performance fee are also taken through the Income Statement and are recognised in the Capital Reserve - Unrealised.

Debtors

Debtors include other debtors and accrued income which is recognised at amortised cost, equivalent to the fair value of the expected balance receivable.

Creditors

Creditors are initially measured at the transaction price and subsequently measured at amortised cost, being the transaction price less any amounts settled.

Dividends

Final 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. Interim dividends are recognised when paid.

Key accounting estimates and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates and assumptions will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets within the next financial year relate to the fair value of unquoted investments, especially due to the impact of COVID-19, which is a non-adjusting post balance sheet event as disclosed in note 17. Further details of the unquoted investments are disclosed in the Investment Manager's Report on pages 4 to 6 and notes 7 and 13 to the financial statements.

2. Investment Management Fees

Puma Investment Management Limited ("Puma Investments") 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 Puma Investments will be paid an annual fee of 2% of the Net Asset Value payable quarterly in arrears calculated on the relevant quarter end NAV of the Company. These fees commenced on 16 January 2020 (the date of the first share allotment). 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 and trail commission) to within 3.5% of Net Asset Value. Total costs this period were 1.1% of the Net Asset Value.

In addition to the investment manager fees disclosed above, during the period ended 29 February 2020, Puma Investments Management Limited charged fees totalling £120,194 in relation to share issue costs. The fees were to cover the costs of launching the VCT.

3. Other expenses

Puma Investment Management Limited provides administrative services to the Company for an aggregate annual fee of 0.35% of the Net Asset Value of the Fund, payable quarterly in arrears.

The Company had no employees (other than Directors) during the period. The average number of non-executive Directors during the period was 3. The non-executive Directors are considered to be the Key Management Personnel of the Company with total remuneration for the period of £9,000 including social security costs.

No retirement benefits are accruing to the directors and no pension contributions were made by the Company on behalf of the directors. Directors' share interests are disclosed in the Directors' Report on page 14. The Directors do not hold share options. There is no requirement for the Directors to hold shares in the Company.

The Auditor's remuneration of £15,000 has been grossed up in the table above to be inclusive of VAT.

4. Taxation

Capital returns are not taxable as the Company is exempt from tax on realised capital gains whilst it continues to comply with the VCT regulations, so no corporation tax is recognised on capital gains or losses. Due to the intention to continue to comply with the VCT regulations, the Company has not provided for deferred tax on any realised or unrealised capital gains and losses. No deferred tax asset has been recognised in respect of the tax losses carried forward due to the uncertainty as to recovery.

5. Basic and diluted profit/(loss) per Ordinary Share

The adjusted profit/(loss) per share set out below is calculated using the weighted average number of shares in issue from the date of the first allotment of ordinary shares on 15 January 2020 to 29 February 2020. The Directors believe that this adjusted profit/(loss) per share is more relevant to shareholders as it reflects the return from the date of investment.

6. Dividends

The Directors will not propose a resolution at the Annual General Meeting to pay a final dividend.

7. Investments

7. Investments (continued)

The Company's investments are revalued each year, so until they are sold any unrealised gains or losses are included in the fair value of the investments.

All the Company's investments as at 29 February 2020 were unquoted.

Further details of these investments (including the unrealised gain in the period) are disclosed in the Chairman's Statement, Investment Manager's Report, Investment Portfolio Summary and Significant Investments on pages 1 to 8 of the Annual Report.

8. Debtors

Other debtors includes cash held by the company share registrar of £530,000.

9. Creditors - amounts falling due within one year

Other creditors comprise amounts due to the investment manager relating to costs paid on the Company's behalf and share issue costs.

Redeemable preference shares were issued for total consideration £12,500 to Puma Investment Management Limited, being one quarter paid up, so as to enable the Company to obtain a certificate under s.761 of the Companies Act 2006.

Each of the redeemable preference shares carries the right to a fixed, cumulative, preferential dividend of 0.1% per annum (exclusive of any imputed tax credit available to shareholders) on the nominal amount thereof but confers no right to vote except as otherwise agreed by the holders of a majority of the Shares. On a winding-up, the redeemable preference shares confer the right to be paid the nominal amount paid on such shares. The redeemable preference shares are redeemable at any time at par by the Company and by the holder. Each redeemable preference share which is redeemed, shall, thereafter be cancelled without further resolution or consent.

10. Management Performance Incentive Arrangement

On 5 July 2019, the Company entered into an Agreement with the Investment Manager such that they will be entitled to a performance incentive fee payable in relation to each accounting period, subject to the Performance Value per Share being at least 120p at the end of the relevant period. The amount of the performance incentive fee will be equal to 20% of the amount by which the Performance Value per Share at the end of an accounting period exceeds the High Water Mark (being the higher of 120p and the highest Performance Value per Share at the end of any previous accounting period), and multiplied by the number of Shares in issue at the end of the relevant period.

The performance incentive structure provides a strong incentive for the Investment Manager to ensure that the Company performs well, enabling the Board to approve distributions as high and as soon as possible.

The profit and loss expense for the period in relation to this Agreement is £nil.

11. Called Up Share Capital

The Company was incorporated on 11 April 2019 with 2 Ordinary shares issued at par and on 25 June 2019, 50,000 £1 redeemable preference shares were issued as one quarter paid up for cash consideration of £12,500. The Company has issued the following shares to raise funds for future investments.

On 15 January 2020, 3,468,037 Ordinary shares of £0.01 each were allotted and issued at £1 per share for total cash consideration of £3,468,037.

On 26 February 2020, 538,433 Ordinary shares of £0.01 each were allotted and issued at £1 per share for total cash consideration of £538,433.

Post year end, the following allotments were made:

On 12 March 2020, 558,101 Ordinary shares of £0.01 each were allotted and issued at £1 per share for total cash consideration of £558,101.

On 23 March 2020, 203,348 Ordinary shares of £0.01 each were allotted and issued at £1 per share for total cash consideration of £203,348.

On 3 April 2020, 807,157 Ordinary shares of £0.01 each were allotted and issued at £1 per share for total cash consideration of £807,157.

On 29 May 2020, 312,775 Ordinary shares of £0.01 each were allotted and issued at £1 per share for total cash consideration of £312,775.

12. Net Asset Value per Ordinary Share

13. Financial Instruments

The Company's financial instruments comprise its investments, cash balances, debtors and certain creditors. The fair value of all of the Company's financial assets and liabilities is represented by the carrying value in the Balance Sheet. Excluding cash balances, the Company held the following categories of financial instruments at 29 February 2020:

Management of risk

The main risks the Company faces from its financial instruments 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 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.

Credit risk

Credit risk is the risk that the 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 Company's maximum exposure to credit risk is as follows:

The cash held by the Company at the year-end is held in RBS. 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. Other receivables is primary cash held by the share registrar, which has been remitted to the company since year end, and cash at the company's brokers, that is subject to reviews consistent with the banks noted above.

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 investments in the face of price movements. The Investment Manager actively monitors market prices and reports to the Board, which meets regularly in order to consider investment strategy.

The Company's strategy on the management of market price risk is driven by the Company's investment policy as outlined in the Strategic Report on page 10. 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.

Holdings in unquoted investments may 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.

All of the Company's investments are unquoted investments.

Liquidity risk

Details of the Company's unquoted investments are provided in the Investment Portfolio summary on page 7. By their nature, unquoted investments may not be readily realisable and the Board considers exit strategies for these investments throughout the period for which they are held. As at the year end, the Company had no borrowings.

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 Directors' Report and the Strategic Report. The Company's overall liquidity risks are monitored on a quarterly basis by the Board. The Company maintains access to sufficient cash resources to pay accounts payable and accrued expenses.

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 0.75% at 29 February 2020.

Cash flow interest rate risk

The Company has exposure to interest rate movements primarily through its cash deposits which track either the Bank of England base rate or LIBOR.

Interest rate risk profile of financial assets

The Company's only asset at 29 February 2020 that earning interest was cash at bank of £2,455,000, which was accruing interest at 0.25% p.a..

Foreign currency risk

The reporting currency of the Company is Sterling. The Company has not held any non-Sterling investments during the period.

Fair value hierarchy

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 - Fair value is measured using the unadjusted quoted price in an active market for identical assets.

· Level 2 - Fair value is measured using inputs other than quoted prices that are observable using market data.

· Level 3 - Fair value is measured using unobservable inputs.

Fair values have been measured at the end of the reporting period as follows:-

The Level 3 investments have been valued in line with the Company's accounting policies and IPEV guidelines. Further details of these investments are provided in the Significant Investments section of the Annual Report on page 8.

14. 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 provide an adequate return to shareholders by allocating its capital to assets commensurate with the level of risk.

By its nature, the Company must have an amount of capital, at least 80% (as measured under the tax legislation) of which 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, issue new shares, or sell assets 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 those liabilities is not directly related to managing the return to shareholders.

15. Contingencies, Guarantees and Financial Commitments

There were no commitments, contingencies or guarantees of the Company at the period-end.

16. Controlling Party

In the opinion of the Directors there is no immediate or ultimate controlling party.

17. Post Balance Sheet Events

On 11 March 2020, the World Health Organisation declared COVID-19 a global pandemic and on 23 March 2020, the UK Government imposed a lockdown on the whole population. The Directors consider that COVID-19 is a non-adjusting post balance sheet event. The pandemic will significantly impact the UK economy and may materiality impact the prospects of a number of the Company's investments and cause a material reduction in the fair value of the Company's investments. The Directors are unable to quantify the full financial impact of COVID-19 on the fair value of its investment portfolio. Further details of the investments are set out in the Chairman's Statement and Investment Manager's Report on pages 1 to 6.

As detailed in note 11, since the year end 1,881,381 ordinary shares have been issued for cash consideration of £1,881,381. On 5 June 2020 the company's ordinary shares were listed on the London Stock Exchange.

The financial information set out in this announcement does not constitute the Company's statutory financial statements in accordance with section 434 Companies Act 2006 for the period ended 29 February 2020, but has been extracted from the statutory financial statements for the period ended 29 February 2020 which were approved by the Board of Directors on 26 June 2020 and will be delivered to the Registrar of Companies. The Independent Auditor's Report on those financial statements was unqualified and did not contain any emphasis of matter nor statements under s 498(2) and (3) of the Companies Act 2006.

Copies of the full annual report and financial statements for the period ended 29 February 2020 will be available to the public at the registered office of the Company at Cassini House, 57 St James's Street, London, SW1A 1LD and will be available for download from www.pumainvestments.co.uk.