Final Results

 
TIDMPNV5 
 
Pennine AIM VCT 5 plc 
Final Results for the year ended 30 September 2008 
 
FINANCIAL HIGHLIGHTS 
 
                                                         2008    2007 
                                                        pence   pence 
 
 
Net asset value (per share)                              34.2    92.2 
 
Cumulative distributions paid since launch               30.0     2.5 
 
Total  return   (net   asset  value   plus   cumulative  64.2    94.7 
distributions paid) 
 
Final proposed dividend (per share)                       Nil     1.0 
 
 
 
CHAIRMAN'S STATEMENT 
I am pleased  to report  that, despite  prevailing market  conditions 
during the year, the Company paid a Special Dividend totalling  26.5p 
per share on  30 July  2008 thereby returning  the 30p  per share  to 
investors  as  set  out  on  the  prospectus.   The  combination   of 
Shareholder's receipt of  the 40p  initial tax  relief and  dividends 
totalling 30p has now  effectively reduced Shareholder's original  GBP1 
per share investment to 30p per share. 
 
It is,  however, with  regret that  I report  that diminishing  stock 
market prices,  combined with  the  current ongoing  global  economic 
turmoil,  have  resulted  in  a  notable  decline  in  the  Company's 
performance for the year to 30 September 2008. 
 
Net Asset Value 
At 30 September 2008, the Company's Net Asset Value per share ("NAV") 
stood at 34.2p,  a decrease  of 30.5p  (33.1%) over  the year  (after 
adjusting for dividends  totalling 27.5p  per share  paid during  the 
year).  This movement can be analysed as follows: 
 
 
                                    Pence per share 
 
                              GBP'000 
Retained investments: 
Full list investments            35             0.2 
AIM quoted investments      (4,942)          (21.9) 
Plus quoted investments        (50)           (0.2) 
Unquoted investments        (1,292)           (5.7) 
 
                            (6,249)          (27.6) 
Realised investments                          (2.1) 
Net expenditure over income 
                                              (0.5) 
Share buyback effect                          (0.3) 
 
                                             (30.5) 
 
 
The Total Return  (NAV per  share plus cumulative  dividends paid  to 
date) of the Company now stands at 64.2p. 
 
Venture capital investments 
With the emphasis for the year  under review being the return of  the 
30p to investors, new investment activity was low although the  Board 
approved three new and two follow-on investments totalling GBP800,000. 
 
Additionally, two  of the  Company's investments  were  re-structured 
during the year, and of the GBP1.5 million total proceeds received from 
the original  investments, GBP1.1  million was  invested into  the  new 
entities. 
 
The Company  undertook an  increased level  of disposals  during  the 
period in  order to  partly  fund the  Special Dividend,  with  total 
proceeds  from  sales  received  in  the  market  amounting  to  GBP1.6 
million.  The  net realised  loss arising  on the  disposal of  these 
investments, combined with the two restructured investments, amounted 
to GBP478,000. 
 
At the year end the Company's venture capital portfolio was valued at 
GBP7.1 million, which  comprised GBP62,000 in  full list companies,  GBP4.3 
million of AIM  quoted companies, GBP133,000  in Plus quoted  companies 
and GBP2.6 million in  unquoted companies two  of which, Cadbury  House 
Limited  and  Hoole  Hall  Country   Club  Limited,  are  backed   by 
substantial assets. 
 
It is especially disappointing to note that those investments  listed 
on the  stock exchange  retained within  portfolio were  particularly 
affected by the weak stock markets, falling in value by GBP4.9  million 
over the twelve month period to GBP4.5 million against an original cost 
of GBP10 million. 
 
The  Company's   unquoted   portfolio,   which   includes   de-listed 
investments, was written down by GBP1.3 million over the year.   RFTRAQ 
Limited  and  Doubletake  Portraits   Limited  were  both   re-valued 
downwards in view of the lack of progress and the challenges they now 
face. 
 
Further  details  of  the  Company's  venture  capital   investments, 
including valuations, additions, disposals  and performance, are  set 
out within the Investment Manager's report and Review of  Investments 
below. 
 
Listed fixed income securities 
During the  year,  the  Company  disposed  of  gilts  totalling  GBP6.0 
million, and  realising a  net gain  of GBP1,000  against the  previous 
carrying value.   Their  proceeds  were  used  to  fund  the  Special 
Dividend,  and  also  to  purchase  the  new  investments   mentioned 
previously. 
 
The remaining  gilt was  valued  at GBP346,000  at  the year  end  with 
unrealised gains thereon amounting to GBP2,000.  At the year end,  5.9% 
of  the  Company's  assets  were  held  in  cash  and  fixed   income 
securities. 
 
Results 
The loss on  activities after  taxation for the  year was  GBP6,851,000 
(2007: GBP150,000),  comprising  a revenue  profit  of GBP112,000  and  a 
capital loss of GBP6,963,000. 
 
Following the payment of the 26.5p Special Dividend during the  year, 
the Board  is not  proposing  a final  dividend  for the  year  under 
review. 
 
Share buybacks / Tender offer 
During  the   year  the   Company   purchased  294,338   shares   for 
cancellation, in  order  to provide  an  exit for  investors,  at  an 
average price of 72.9p per share. 
 
The Board took the  decision, in May 2008,  to suspend its policy  of 
making market purchases  of its own  shares policy in  order to  have 
better control over the Company's cash and liquid resources. 
 
The Board is aware that some Shareholders may now wish to sell all or 
part of their shareholding and will find this difficult now that  the 
Company is not making market purchases of its own shares. 
 
In order to assist such  Shareholders while maintaining control  over 
the Company's liquidity, the Board is proposing to undertake a Tender 
Offer.  The Tender  Offer will  be for  up to  a total  of 1  million 
shares and will be undertaken at a  price equal to a discount of  10% 
to the latest NAV. 
 
Full details are provided in the Tender Offer document which is being 
sent to Shareholders  with the  Annual Report.  The  Tender Offer  is 
subject to Shareholder approval, which is being sought by  Resolution 
6 at the forthcoming AGM. 
 
The Board regularly  reviews the Company's  share buyback policy  and 
may make changes  should circumstances change.  Resolution 5 will  be 
proposed at the forthcoming AGM  to give the directors the  authority 
to make market purchases of the  Company's shares as they see fit  to 
do so. Currently,  it remains  a priority  for the  Board to  closely 
manage the Company's liquidity.  For  this reason, it seems  unlikely 
that the Company will  resume market purchases of  its shares in  the 
short term.  If  this situation  continues, the  Board will  consider 
undertaking further tender offers. 
 
Articles of Association 
At the forthcoming AGM, the  Board will seek Shareholder approval  to 
update the Company's Articles of Association. Resolution 7, which  is 
a special  resolution,  proposes  the adoption  of  new  Articles  of 
Association which incorporate a number of changes which are  required 
as a result of the implementation of the Companies Act 2006. 
 
Annual General Meeting 
The Company's fourth AGM will be held at Kings Scholars House, 230 
Vauxhall Bridge Road, London, SW1V 1AU at 12 noon on 4 March 2009. 
 
Three items of Special Business are being proposed at the meeting  to 
update the Articles of Association,  to renew the authority to  allow 
the Company to make market purchases of the Company's shares, and  to 
undertake a Tender Offer for the Company's shares. 
 
Outlook 
Since the year end,  the global financial crisis  has deepened and  a 
recession period has now commenced.  The FTSE AIM All-Share index has 
fallen by more than 25% since  30 September 2008 and, at 31  December 
2008, the Company's NAV had fallen to 28.1p per share. 
 
The Company is  now significantly  smaller than  it was,  and has  no 
prospect of substantial growth.  The Board is committed to continuing 
to pay a steady dividend yield to Shareholders, subject to liquidity, 
and is reviewing strategies  which will allow  this to continue  into 
the future. 
 
Andrew Davison 
Chairman 
 
INVESTMENT MANAGER'S REPORT 
We present an  overview of the  investment management activities  for 
the year ended 30 September 2008. 
 
Market commentary 
The last twelve months has been a challenging time for equity markets 
and a particularly torrid time  for the smaller companies market.  UK 
smaller company share  prices have been  under pressure since  credit 
markets tightened in response to defaults in the US sub prime market. 
 A readjustment of risk throughout the last year saw investors taking 
a more cautious stance towards smaller companies. The worst falls  in 
share prices occurred from mid June as the banking crisis intensified 
with a shortage  of credit hitting  companies with leveraged  balance 
sheets.  Investors also had  to contend with  rising inflation and  a 
deteriorating economic outlook hitting retail consumer confidence. 
 
For the record the FTSE 100 Share  Index showed a fall over the  year 
of 24.1% whilst the FTSE small cap index fell 35.7% and the AIM index 
declined 44.3%. 
 
Portfolio additions 
A schedule of the additions during the year is shown below: 
 
Boomerang Plus  plc   is an  independent television  producer with  a 
strong business in Welsh language productions for S4C.  The group was 
founded in 1994 and admitted to  AIM in November 2007 when it  raised 
GBP3 million to pay  down debt, provide working  capital and funds  for 
future acquisition opportunities.   Pennine AIM VCT  5 plc  initially 
invested GBP225,000 at 158p a share. 
 
Ludorum plc    came  to  AIM  in 2006  with  a  strategy  to  develop 
entertainment related intellectual property and manage the commercial 
exploits of the IP rights.  In November 2007 the company raised  GBP1.3 
million  for  the  further   development  of  its  animated   series, 
Chuggington.  Pennine  AIM VCT  5  plc invested  GBP175,000 at  100p  a 
share. 
 
Plastics Capital plc is  a specialist plastics products  manufacturer 
operating in  niche markets.   The company  raised GBP16.2  million  to 
restructure its  balance  sheet and  pay  down debt  which  had  been 
accrued from  previous  acquisitions.  The  company  came to  AIM  in 
December 2007 and Pennine AIM  VCT 5 plc initially invested  GBP185,000 
at 100p a share. 
 
Hill Station plc  is an  ice manufacturer based at Cwmbran.   Pennine 
AIM VCT 5 plc  made its initial investment  of GBP500,000 in 2005.   In 
2006 and 2007  further funding  was provided  totalling GBP469,000,  to 
help with working capital following a short fall in sales owing to  a 
very wet summer in  2007 and also to  assist with the acquisition  of 
the So Real  Ice Company, a  rival ice cream  manufacturer.  A  sharp 
increase in raw material costs coupled with suppliers imposing  lower 
credit limits saw  a need  for further working  capital.  In  January 
2008 Pennine AIM VCT 5 plc  provided GBP135,000, the majority of  which 
was via a 10% loan note.  Sales improved, helped by deliveries to new 
customers.  In late March the  company's bank unexpectedly imposed  a 
cap on their factoring facility well  below normal terms at the  time 
when the company were looking to  build stock for the summer  season. 
This news had a  damaging effect on the  confidence of the  customers 
and resulted in a loss of  business and sales falling below  budget. 
By late summer 2008 it was  clear that the company would not  survive 
the winter months  without a  further injection of  cash.  Given  the 
fragile state of the  business, Pennine AIM VCT  5 plc together  with 
other investors declined to support  the rescue plan and the  company 
was placed into administration in early October 2008. 
 
Double Take  Portraits  Limited   is  a leading  photographic  studio 
business.  Pennine  AIM VCT  5 plc  made its  original investment  in 
October 2006 with further monies provided in 2007 to assist with  the 
financing of the opening of  a new studio in Manchester.   Additional 
working capital has been required  to allow the business to  continue 
to grow.   In  March 2008  the  existing convertible  loans  and  the 
accrued interest were converted into  equity enabling the company  to 
attract further investment from existing and new investors. 
 
Cadbury House Limited   is a country  club set in  14 acres close  to 
Bristol airport.   Following  redevelopment  of the  hotel  and  spa, 
trading has been strong and the company undertook a re-structuring to 
bring in some new investors. Pennine Aim VCT 5's original  investment 
of GBP755,000, in Cadbury House Country Club and Spa Limited,  produced 
proceeds  in  the  re-structuring  of  GBP1,327,000  and  a  profit  of 
GBP572,000. Your Company re-invested GBP1 million of these proceeds  into 
the new company, called Cadbury House Limited. 
 
Spice plc   is  a  provider of  out-sourced infra  structure  support 
services with a strong  presence in the  UK utilities market.   Spice 
acquired Revenue Assurance  Services plc  in a  recommended cash  and 
share acquisition in October  2007.  The effect of  the take over  on 
your Company's original  holding in Revenue  Assurance Services  plc, 
was the receipt of cash of  GBP159,000 and shares in Spice plc,  valued 
at GBP62,000. 
 
Portfolio Review 
Against a weak stock  market and particularly  weak AIM market  there 
were only a few  investments that showed  a positive contribution  to 
the portfolio, although others have  seen their share prices hold  up 
relatively well. 
 
Craneware plc   has  seen its  share  price rise  over 50%  with  the 
company gaining new business  providing their revenue cycle  software 
solutions to assist US hospitals  in reducing billing errors.   Other 
AIM investments have held up well. An increasing number of pub chains 
using Brulines Group plc's  dispensing monitoring equipment,  enabled 
the group to show another year of profits growth.  In late  September 
2008, earlier than expected, BBC2 began the daily weekday showing  of 
Chuggington, an  animated series  for children,  produced by  Ludorum 
plc.  Spice plc   is benefiting from  the significant expenditure  by 
utility companies  on  infrastructure.   New  contract  wins  in  the 
document management area together with the successful integration  of 
CAPS helped IDOX plc. 
 
There have been bid approaches for several of our companies including 
Concateno plc, Boomerang  Plus plc  and Travelzest  plc, although  to 
date none  of these  approaches have  concluded in  a takeover  being 
announced. Since your  company's year end  Travelzest saw its  shares 
fall  when  the  potential  suitor   withdrew  due  to  the   current 
uncertainties in financial markets 
 
Whilst some  of the  falls in  share  prices have  been due  to  poor 
trading others have  been as  a result of  concerns on  debt and  the 
economic outlook.  Amongst those that have announced poor trading  is 
Sport Media Group  plc   who despite a  re-launch in  April has  seen 
falls in circulation  and concerns over  advertising revenues.    The 
Kellan Group plc   (formally Berkeley Scott  Group plc) continues  to 
invest in  growing  its  brands  to become  a  significant  force  in 
recruitment, however the deteriorating  market place has reduced  the 
visibility of their  earnings.  Servoca  plc  has  also been  harshly 
de-rated  on  general  worries  on  the  future  prospects  for   the 
recruitment market,  although  they operate  in  specialist  fields. 
Shrinking company  marketing  budgets  are also  likely  to  hit  the 
profitability of  advertising  companies and  The  Mission  Marketing 
Group plc is expected to be no exception. 
 
AT Communications Group plc  has  seen its shares fall owing to  debt 
concerns although investors  have taken some  comfort from  directors 
buying shares.  Difficult trading in  its core valeting business  saw 
Autoclenz Holdings plc  issue a profits warning. 
 
RFTRAQ Limited's  disappointing sales  progress and  continuing  cash 
requirements has led  us to write  the ordinary shares  down to  zero 
pending stronger  evidence of  progress towards  profitability.   The 
loan stock has been revalued to GBP225,000. 
 
MyHome International plc had been a successful investment Pennine AIM 
VCT 5  invested GBP200,000  in 2005  and realised  profits of  GBP278,000 
through 2006 and 2007.  The  company continued to make  acquisitions, 
including the  ChipsAway  Group  in  October  2007,  which  your  VCT 
declined to support.  In July 2008, the company breached some of  the 
covenants on its  debt and the  bank called in  the loan. The  shares 
were suspended from AIM and in early September the company was placed 
into administration.   This resulted  in the Company's holding  being 
devalued to GBPnil from an opening market value at the beginning of the 
year of GBP713,000. 
 
In August 2007 Clerkenwell Ventures plc  raised GBP26million to  pursue 
the acquisition  of  restaurant  businesses.  Although  a  number  of 
potential acquisitions have been  considered, owing to over  inflated 
valuations, no purchases  have yet  been made.   As a  result of  not 
investing the money raised  the investment has become  non-qualifying 
for Inland Revenue purposes.  The  indiscriminate fall in the  shares 
puts them at a substantial discount to the cash held on their balance 
sheet. 
 
Portfolio disposals 
At the first available opportunity within the VCT rules we  undertook 
some sales  of  existing investments  to  raise sufficient  funds  to 
prepare for the return  of 26.5p a  share, the balance  of the 30p  a 
share which was indicated  would be returned  to share holders  after 
three years.  The  cost of the  26.5p dividend was  GBP5.9 million  and 
paid in  July  2008.  New  investments  through the  year  cost  GBP2.8 
million and sale proceeds raised GBP9.2 million.  Of the sale  proceeds 
GBP6.0 million came from the redemption and sale of short dated  gilts, 
GBP1.5 million from takeovers and reconstructions, with the balance  of 
GBP1.7 million from  2 disposals and  19 partial sales.   Owing to  the 
tight liquidity in many of the companies, sales were undertaken  over 
a three month period. 
 
Outlook 
The economy is expected to  deteriorate further with consumers  under 
pressure  and  company  profits  likely  to  fall.   Although  it  is 
difficult to predict with any certainty how much of this expected bad 
news has been priced into equities, in the case of smaller  companies 
there has been  such a  de-rating that there  is real  value for  the 
patient investor.  Small  companies remain friendless  but as  credit 
markets ease trade buyers could appear should share prices not  start 
to pre-empt the turn for the better in the economic cycle. 
 
Rathbone Investment Management Limited 
 
REVIEW OF INVESTMENTS 
 
Portfolio of investments 
The following investments, all of  which are incorporated in  England 
and Wales, were held at 30 September 2008: 
 
                                                Valuation 
                                                movement 
                            Cost   Valuation      in year        % of 
                           GBP'000       GBP'000        GBP'000   portfolio 
Ten largest venture 
capital investments (by 
value) 
Cadbury House Limited *    1,000       1,000      -             13.2% 
Hoole Hall Country Club      750         750            -        9.9% 
Limited * 
IDOX plc                     294         392           20        5.2% 
Doubletake Portraits         645         363        (282)        4.8% 
Limited * 
Concateno plc                241         355         (37)        4.7% 
Travelzest plc               425         324        (142)        4.3% 
First Care Limited *         275         275            -        3.6% 
Servoca plc                  292         268        (245)        3.5% 
The Mission Marketing        472         236        (334)        3.1% 
Group plc 
Zamano plc                   316         230        (102)        3.1% 
                           4,710       4,193      (1,122)       55.4% 
Other venture capital 
investments 
RFTRAQ Limited *             532         225        (897)        3.0% 
Boomerang Plus plc           201         218           17        2.9% 
Clerkenwell Ventures         300         216        (104)        2.9% 
Group plc 
The Kellan Group plc         500         213        (313)        2.8% 
(formerly Berkeley Scott 
Group plc) 
Ludorum plc                  175         184            9        2.4% 
Telephonetics plc            415         171           16        2.3% 
Brulines Group plc           133         157           13        2.1% 
FDM Group plc                169         156        (119)        2.1% 
Universe Group plc           309         143        (166)        1.9% 
Craneware plc                 77         137           46        1.8% 
Richoux Holdings plc         410         137        (171)        1.8% 
(formerly Gourmet 
Holdings plc) 
FSG Security plc **          250         133         (50)        1.7% 
Jelf Public Limited           79         117         (60)        1.5% 
Company 
AT Communications Group      356         102        (246)        1.4% 
plc 
Plastics Capital plc         158          95         (63)        1.2% 
INVU plc                     200          83        (103)        1.1% 
Waterline Group plc          487          64        (301)        0.9% 
Spice plc ***                 29          62           33        0.8% 
Belgravium Technologies      222          48        (151)        0.6% 
plc 
Autoclenz Holdings plc       362          43        (238)        0.6% 
Business Control             251          42         (62)        0.5% 
Solutions plc 
Bioganix plc                 166          41        (145)        0.5% 
NetServices plc              375          33         (30)        0.4% 
Sport Media Group plc        148          32        (111)        0.4% 
Neutrahealth plc             148          28        (141)        0.4% 
@UK plc                      350          14         (31)        0.2% 
Daniel Stewart Securities     80           9         (48)        0.1% 
plc 
Cellcast plc                 388           3         (25)        0.1% 
Chariot (UK) plc  #          500           -            -           - 
Dipford Group plc #          272           -        (113)           - 
Disperse Group plc #         500           -            -           - 
Hill Station plc           1,119           -        (862)           - 
MyHome International plc     101           -        (713)           - 
# 
Telephone Maintenance        251           -            -           - 
Group plc # 
                          10,013       2,906      (5,129)       38.4% 
Listed fixed income 
securities 
Treasury 4% Stock            344         346            2        4.6% 
07/03/2009 
 
Subtotal                  15,067       7,445      (6,249)       98.4% 
Cash at bank and in hand                 119                     1.6% 
 
Total investments                      7,564                   100.0% 
 
All investments are quoted on AIM unless otherwise stated. 
Key: 
*                                                            Unquoted 
 
#        De-listed AIM quoted investment 
**                   Quoted       on      the       PLUS       Market 
                                        ***        Full List Company 
 
Investment movements for the year ended 30 September 2008 
 
ADDITIONS 
 
 
                                                                Total 
                                                                GBP'000 
Investments in Secondary AIM/ PLUS Market Issues (including 
IPO's) 
Boomerang Plus plc                                                226 
Ludorum plc                                                       175 
Plastics Capital plc                                              185 
                                                                  586 
Follow on investments 
Hill Station plc                                                  150 
Sundry investments                                                  3 
                                                                  153 
Unquoted investments 
Doubletake Portraits Limited                                       70 
Reconstructions/takeovers 
Cadbury House Limited                                           1,000 
Spice plc                                                          62 
                                                                1,062 
 
Total venture capital investments                               1,871 
Listed fixed income securities 
Treasury 4% Stock 07/03/2009                                      997 
 
Total investments                                               2,868 
 
 
DISPOSALS 
 
                             Cost     MV at Proceeds Profit/ Realised 
                                  30/09/07*           (loss)    gain/ 
                                                     vs cost   (loss) 
                            GBP'000     GBP'000    GBP'000   GBP'000    GBP'000 
Reconstructions/takeovers 
Cadbury House Country Club    755     1,306    1,327     572       21 
& Spa Limited 
Revenue Assurance Group plc   126       292      221      95     (71) 
Full disposals 
Accuma Group plc              400        45       30   (370)     (15) 
Debts.Co.UK plc               150        78       38   (112)     (40) 
Partial disposals 
AT Communications Group plc    88        86       65    (23)     (21) 
Autoclenz Holdings plc         63        49       25    (38)     (24) 
Belgravium Technologies plc    28        25       20     (8)      (5) 
Bioganix plc                   90       102       39    (51)     (63) 
Boomerang Plus plc             25        25       28       3        3 
Brulines Group plc             62        67       71       9        4 
Concateno plc                 137       221      201      64     (20) 
Daniel Stewart Securities     200       142       73   (127)     (69) 
plc 
FDM Group plc                  32        51       42      10      (9) 
IDOX plc                        8        10        9       1      (1) 
Jelf Group Public Limited     175       392      383     208      (9) 
Company 
Neutrahealth plc              284       324      218    (66)    (106) 
Plastics Capital plc           28        27       24     (4)      (3) 
Richoux Holdings plc           90        67       44    (46)     (23) 
Spice plc                      33        33       77      44       44 
Sports Media Group pc         102        99       56    (46)     (44) 
The Mission Marketing Group    30        36       21     (9)     (15) 
plc 
Travelzest plc                 76        83       57    (19)     (25) 
Zamano plc                     60        63       75      15       12 
Listed fixed income 
securities 
Treasury 5% Stock 07/03/08  5,481     5,393    5,398    (83)        4 
Treasury 4% Stock             653       653      650     (3)      (3) 
07/03/2009 
Total venture capital       9,176     9,669    9,192      16    (478) 
investments 
 
* Adjusted for purchases in the year 
 
STATEMENT OF DIRECTORS' RESPONSIBILITIES 
The Directors are responsible for preparing the Annual Report and the 
financial  statements   in  accordance   with  applicable   law   and 
regulations. 
 
Company law requires  the Directors to  prepare financial  statements 
for each financial year. Under that law the Directors have elected to 
prepare the financial  statements in accordance  with United  Kingdom 
Generally Accepted  Accounting  Practice (United  Kingdom  Accounting 
Standards and applicable law). The financial statements are  required 
by law to give a  true and fair view of  the state of affairs of  the 
Company and of the profit or loss of the Company for that period. 
 
In preparing those financial statements, the Directors are required 
to: 
 
*   select suitable accounting policies and then apply them 
  consistently; 
*   make judgements and estimates that are reasonable and prudent; 
*   state whether applicable UK Accounting Standards have been 
  followed, subject to any material departures disclosed and 
  explained in the financial statements; 
*   prepare the financial statements on the going concern basis 
  unless it is inappropriate to presume that the company will 
  continue in business. 
 
The Directors are responsible  for keeping proper accounting  records 
which disclose with  reasonable accuracy  at any  time the  financial 
position of  the  Company and  to  enable  them to  ensure  that  the 
financial  statements   comply   with   the   requirements   of   the 
Companies Act 1985.  They are also  responsible for safeguarding  the 
assets of the Company and hence  for taking reasonable steps for  the 
prevention and  detection of  fraud  and other  irregularities.   The 
Directors are  responsible  for  ensuring  that  the  Report  of  the 
Directors and  other information  included in  the Annual  Report  is 
prepared in accordance with company law in the United Kingdom.   They 
are also responsible  for ensuring  that the  Annual Report  includes 
information required by the Listing  Rules of the Financial  Services 
Authority. 
 
INCOME STATEMENT 
for the year ended 30 September 2008 
 
 
                                      2008                         2007 
 
               Revenue   Capital   Total     Revenue   Capital   Total 
               GBP'000     GBP'000     GBP'000     GBP'000     GBP'000     GBP'000 
 
Income             432         -       432       605         -      605 
 
Losses on            -   (6,727)   (6,727)         -     (164)    (164) 
investments 
                   432   (6,727)   (6,295)       605     (164)      441 
 
Investment        (83)     (248)     (331)      (94)     (282)    (376) 
management 
fees 
 
Other            (222)       (3)     (225)     (215)         -    (215) 
expenses 
 
Return on 
ordinary 
activities 
before tax         127   (6,978)   (6,851)       296     (446)    (150) 
 
Tax on            (15)        15         -      (52)        52        - 
ordinary 
activities 
 
Return 
attributable 
to equity 
shareholders       112   (6,963)   (6,851)       244     (394)    (150) 
 
Basic and 
diluted           0.5p   (31.1p)   (30.6p)      1.1p    (1.7p)   (0.6p) 
return per 
share 
 
 
All Revenue  and Capital  items in  the above  statement derive  from 
continuing operations  and represent  one geographical  and  business 
segment.  The total column within the Income Statement represents the 
profit and loss account of the Company. 
 
A Statement  of  Total  Recognised  Gains and  Losses  has  not  been 
prepared as  all  gains  and  losses are  recognised  in  the  Income 
Statement noted above. 
 
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 
for the year ended 30 September 2008 
 
 
                                            2008       2007 
                                         GBP'000       GBP'000 
 
Opening shareholders' funds               20,811     21,318 
Purchase of own shares                     (215)       (18) 
Total recognised losses for the year     (6,851)      (150) 
Dividends paid                           (6,129)      (339) 
 
Closing shareholders' funds                7,616     20,811 
 
 
 
BALANCE SHEET 
as at 30 September 2008 
 
 
                                                    2008         2007 
 
                                           GBP'000   GBP'000 GBP'000  GBP'000 
Fixed assets 
Investments                                        7,445       20,496 
 
Current assets 
Debtors                                      100           180 
Cash at bank and in hand                     119           213 
                                             219           393 
 
Creditors: amounts  falling  due  within    (48)          (78) 
one year 
 
Net current assets                                   171          315 
 
Net assets                                         7,616       20,811 
 
Capital and reserves 
Called up share capital                            2,228        2,257 
Capital redemption reserve                            37            8 
Special reserve                                   12,946       18,414 
Capital reserve - realised                             -          759 
Capital reserve - unrealised                     (7,622)        (879) 
Revenue reserve                                       27          252 
 
Equity shareholders' funds                         7,616       20,811 
 
Basic and  diluted net  asset value  per           34.2p        92.2p 
share 
 
 
CASH FLOW STATEMENT 
for the year ended 30 September 2008 
 
 
                                                      2008       2007 
 
                                                     GBP'000      GBP'000 
 
Net  cash   (outflow)/inflow   from   operating       (56)         28 
activities 
 
Taxation                                                 -       (38) 
 
Capital expenditure 
Purchase of investments                            (2,868)    (6,516) 
Sale of investments                                  9,192      6,753 
Net cash inflow from capital expenditure             6,324        237 
 
Equity dividends paid                              (6,129)      (339) 
 
Net cash inflow/(outflow) before financing             139      (112) 
 
Financing 
Purchase of own shares                               (233)          - 
Net cash outflow from financing                      (233)          - 
 
Decrease in cash                                      (94)      (112) 
 
 
 
NOTES 
1. Basis of Accounting/Accounting policies 
The Company has prepared the financial information under UK Generally 
Accepted Accounting Practice ("UK GAAP")  and in accordance with  the 
Statement of Recommended Practice "Financial Statements of Investment 
Trust Companies"  revised December  2005 ("SORP")  and has  used  the 
historical cost  convention except  for  the revaluation  of  certain 
financial instruments. 
 
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 
revenue is the measure the Directors believe appropriate in assessing 
the Company's compliance with certain requirements set out in Section 
274 Income Tax Act 2007. 
 
2. Return per ordinary share 
Revenue return per ordinary share is based on the net revenue  return 
after taxation of GBP112,000 (2007: GBP244,000), in respect of 22,414,358 
(2007: 22,591,914) ordinary shares, being the weighted average number 
of ordinary shares in issue during the year. 
 
Capital return per ordinary  share is based on  the net capital  loss 
for the financial year of GBP6,963,000 (2007: GBP394,000), in respect  of 
22,414,358 (2007:  22,591,914) ordinary  shares, being  the  weighted 
average number of ordinary shares in issue during the year. 
 
As the Company  has not  issued any convertible  securities or  share 
options, there is no dilutive  effect on return per ordinary  share. 
The return per  share disclosed therefore  represents both basic  and 
diluted return per share. 
 
3. Net asset value per ordinary share 
 
                                     2008                        2007 
                  Net asset                  Net asset 
                      value                      value 
                  per share     Net asset    per share      Net asset 
                                    value                       value 
                      Pence         GBP'000        Pence          GBP'000 
 
Ordinary            34.2         7,616         92.2         20,811 
shares 
 
 
Net asset value per ordinary share is based on net assets at the year 
end, and on 22,276,570 (2007: 22,570,908) ordinary shares, being  the 
number of ordinary shares in issue at the year end. 
 
As the Company  has not  issued any convertible  securities or  share 
options, there  is  no dilutive  effect  on net  asset  per  ordinary 
share.  The net asset value per share disclosed therefore  represents 
both basic and diluted return per share. 
 
4. Principal financial risks 
 
As a Venture  Capital Trust  ("VCT"), the majority  of the  Company's 
assets are represented  by financial  instruments which  are held  as 
part of  the  investment  portfolio. In  order  to  ensure  continued 
compliance with relevant VCT  regulation and to be  in a position  to 
deliver the long term capital growth  which is part of the  Company's 
investment objective, the  Board is very  much aware of  the need  to 
manage  and  mitigate  the   risks  associated  with  the   financial 
instruments held within the investment portfolio. 
 
The management of these risks starts with the application of a  clear 
investment strategy  which has  been developed  by the  Board,  which 
comprises of experienced  investment professionals. Furthermore,  the 
Board has appointed  an experienced investment  manager to whom  they 
have  communicated  the  Company's  investment  strategy  and   whose 
remuneration is  linked  to the  achievement  of that  strategy.  The 
Investment Managers report regularly to the Board on performance, and 
to facilitate the  direct Board  involvement with  key decisions,  on 
whether or not  to invest, disinvest  and the nature,  terms and  the 
security of investments being made. 
 
Further information about the VCT's investment strategy is set out in 
the Directors' Report on page 14. 
 
In assessing the risk profile of its investment portfolio, the  Board 
has identified four principal  classes of financial investment  which 
are analysed within Note 9. All such financial investments are  "fair 
value through the profit and loss account" and are recognised as such 
on initial recognition. 
 
In addition to its investment portfolio, the VCT holds cash  balances 
with one  of the  main  UK banks  and  the Investment  Manager.   The 
Directors consider that  by splitting the  cash balances between  the 
bank and the  Investment Manager,  the risk  profile associated  with 
cash deposits is low,  and thus the carrying  value in the  financial 
statements is a close approximation of its fair value. 
 
A review of the specific financial risks faced by the Company 
follows. 
 
Market risks 
The key market risks to which the Company is exposed are interest 
rate risk and market price risk. 
 
Interest rate risk 
The Company receives interest on cash deposits at a rate agreed  with 
its banker,  while  investments  in loan  stock  and  fixed  interest 
investments predominately attract interest at fixed rates.  A summary 
of the interest rate profile of the Company's investments is shown in 
Note 17.   As  the Company  must  comply with  the  VCT  regulations, 
increases in interest rates could lead to a potential breach of these 
regulations as the  proportion of the  Company's income from  sources 
other than shares  and securities could  exceed the required  level. 
The Company  therefore monitors  the level  of income  received  from 
fixed, floating and non  interest bearing assets  to ensure that  the 
regulations are not breached. The Company has reviewed the  financial 
impact of  the interest  rate risk,  with 1.0%  change in  base  rate 
changing income and the return for the year by GBP3,000 equivalent to a 
3.8% impact  on overall  income receivable  by the  Company.  Such  a 
change would have an immaterial impact on Net Asset Value. 
 
Market price risk 
Market price risk arises from uncertainty about the future prices  of 
financial  instruments  held   in  accordance   with  the   Company's 
investment objectives.   It represents  the potential  loss that  the 
Company might suffer through holding market positions in the face  of 
market movements. At 30  September 2008, the  net unrealised loss  on 
the  quoted  portfolios  (Full  list,  AIM-quoted,  PLUS-quoted   and 
Non-qualifying investments) was GBP5.5 million (2007: GBP1.2 million). 
 
The investments the  Company holds  are, in the  main, thinly  traded 
(due to being traded on the AIM  and Plus Markets) and, as such,  the 
prices are more volatile than those of more widely traded, full list, 
securities.  In addition, the ability  of the Company to realise  the 
investments at their carrying value may  at times not be possible  if 
there are  no willing  purchasers.   The ability  of the  Company  to 
purchase or sell investments is also constrained by the  requirements 
set down for VCTs. 
 
The Board  considers  each  investment purchase  to  ensure  that  an 
acquisition  will  enable  the  Company   to  continue  to  have   an 
appropriate spread of market risk and that an appropriate risk reward 
profile is maintained. 
 
It is  not the  Company's  policy to  use derivative  instruments  to 
mitigate market risk, as the Board believes that the effectiveness of 
such instruments does not justify the cost involved. 
 
The Company's sensitivity to fluctuations in the share prices of  its 
quoted  investments  (AIM-quoted  Plus-quoted   and  Full  List   but 
excluding listed fixed interest investments) is summarised below.   A 
50% fall in the share price in each of the quoted investments held by 
the Company would have an effect as follows: 
 
 
                                                        Impact on NAV 
                        Risk exposure   Impact on Net       per share 
                                               Assets 
                                GBP'000           GBP'000           Pence 
 
50%  fall   in   quoted         4,486         (2,243)          (10.1) 
stocks 
 
 
As the larger  proportion of the  Company's unquoted investments  are 
classed as "asset backed",  a fall in  shares prices generally  would 
have a lesser impact on the  valuation of the unquoted portfolio.   A 
25% fall in the valuations of all of the unquoted investments held by 
the Company would have an effect as follows: 
 
 
                                                        Impact on NAV 
                        Risk exposure   Impact on Net       per share 
                                               Assets 
                                GBP'000           GBP'000           Pence 
 
25%  fall  in  unquoted         2,614           (653)           (2.9) 
investment valuations 
 
 
The Company  also has  exposure to  variations in  the price  of  its 
non-qualifying investments.  As the investment is a government  gilt, 
such securities are  subject to  lower price  fluctuations.   A  2.5% 
fall in the valuation of these assets held by the Company would  have 
the following impact: 
 
 
                                                            Impact on 
                                        Risk    Impact on     NAV per 
                                    exposure   Net Assets       share 
                                       GBP'000        GBP'000       Pence 
 
2.5%    fall     in    value     of 
non-qualifying          investments      345          (9)           - 
(government gilt) 
 
 
In each case, the impact of such  changes on the return for the  year 
would be that same as that on Net Assets and NAV per share. 
 
Credit risk 
Credit risk  is  the  risk  that  the  counterparty  to  a  financial 
instrument is unable to  discharge a commitment  to the Company  made 
under that  instrument.   The  Company's financial  assets  that  are 
exposed to credit risk are summarised as follows: 
 
 
                                                 2008    2007 
                                                 GBP'000   GBP'000 
Fair value through profit or loss assets 
Investments in listed fixed interest investments   345   5,393 
Investments in loan stocks                       1,860   2,661 
Loans and receivables 
Cash and cash equivalents                          119 
 
=--END OF MESSAGE--- 
 
 
 
 
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solely responsible for the content of this announcement.