Half-yearly report

 
TIDMPNV5 
 
Pennine AIM VCT 5 plc 
Half-Yearly Report for the six months ended 31 March 2009 
 
CHAIRMAN'S STATEMENT 
 
Conditions continue to be difficult for your Company, with the 
results for the six months ended 31 March 2009 showing another fall 
in net asset value per share ("NAV"). The Company was, however, able 
to successfully undertake a small tender offer during the period 
providing liquidity for some Shareholders who wished to sell part of 
their holdings. 
 
Net asset value 
At the period end, the NAV of the Company stood at 27.0p, a decrease 
of 7.2p (21.0%) since 30 September 2008. While the performance is 
very disappointing, the fall in the FTSE AIM All-Share Index over the 
same period of 33.6% provides some indication of the market 
conditions in which the Company has had to operate. 
 
Venture capital investments 
There was a reasonably low level of portfolio activity during the 
period.  There were a small number of partial disposals and one full 
disposal, which generated GBP409,000 of proceeds.  Additionally, the 
Company's investment in Hoole Hall Country Club Limited underwent a 
reorganisation, which resulted in the Company realising and 
reinvesting GBP750,000 into a new holding company, Hoole Hall Country 
Club Holdings Limited. A summary of the investment additions and 
disposals during the period is shown on below. 
 
Of the AIM-quoted investments held throughout the period, the vast 
majority lost value, such that the total unrealised loss on the 
portfolio for the six-months was GBP1.5 million. 
 
It is not unusual to see smaller companies share prices suffer to a 
greater extent than larger companies as the economy turns down. The 
difference this time has been the speed and severity of the fall in 
smaller company share prices as recorded by the FTSE AIM-All Share 
Index.  The falls have been exacerbated by poor liquidity and 
compounded by forced sellers as smaller company funds such as unit 
trusts, experienced redemptions, necessitating sales of the 
underlying investments into an already weak AIM share market. 
 
The two biggest fallers within the AIM portfolio were the recruitment 
businesses of Servoca and the Kellan Group. Whilst companies are 
concentrating on cost savings rather than recruitment, investor 
concerns are likely to remain until signs of economic growth return 
to the UK economy. With discretionary consumer spending under 
pressure and a failed takeover approach for the company, Travelzest 
saw a sharp fall in its shares.  The poor consumer economic outlook 
saw Clerkenwell Ventures return the majority of their cash to 
shareholders rather than purchase potentially over-valued restaurant 
businesses. 
 
Some of the holdings within the portfolio have continued to show 
profits growth although the shares have fallen with the general 
malaise in the AIM market.  Boomerang Plus, Concateno and IDOX are 
such examples.  There have been some share price rises over the 
period.  Ludorum has successfully delivered its first series to the 
BBC of Chuggington, an animated week day programme of train 
adventures for children,   whilst FDM, despite being heavily focussed 
on the financial sector with its provision of specialist IT 
personnel, delivered a strong set of profit figures with substantial 
cash on the balance sheet. 
 
Around a third of all companies on AIM have a market capitalisation 
of less than GBP5 million.  With profits under pressure and one of the 
primary reasons for being on AIM, that of being able to access 
funding from potential investors, not currently available, we have 
seen an increasing number of companies considering cancelling their 
quote on AIM (delisting) and saving the costs of being quoted.  The 
Board are fully supportive of the Investment Manager's stance that 
they are not generally in favour of companies coming off AIM. 
 
Where companies do come off AIM, the Investment Manager will be 
looking to safeguard the VCT's shareholder interests and where 
possible put in place a shareholders' agreement with the delisting 
company to provide appropriate corporate governance.  In addition, a 
matched bargain share transaction service will be sought. 
 
The Investment Manager has also highlighted to the Board the trend 
amongst an increasing number of companies who are rebasing management 
options which are out of the money after the share price falls. Where 
appropriate the Investment Manager will engage with companies to 
resist such rebasing of options unless it is in the interest of all 
shareholders. 
 
Fixed income securities portfolio 
The Company's one remaining fixed income security matured during the 
period, realising a small loss against the previous market value of 
GBP1,000. 
 
Results and dividends 
The loss on activities during the period was GBP1.6 million, comprising 
a revenue loss of GBP75,000 and a capital loss of GBP1.6 million. 
 
The Company has stated its intention to pay regular dividends of at 
least 3p per annum.  In line with this policy, the Company will pay 
an interim dividend of 1p per share on 31 July 2009 to Shareholders 
on the register at 25 June 2009. 
 
Tender offer 
The Company completed a tender offer in March 2009 in which it 
acquired 1,000,000 of its own shares for cancellation at a price of 
24.3p per share, being a 10% discount to the latest published NAV. 
The tender offer was approximately four times oversubscribed with 
Shareholders who applied being scaled back accordingly. 
 
As I have explained previously, in the current conditions the Company 
does not have a sufficient level of liquid funds to operate an 
ongoing policy of buying back its own shares in the market.  Under 
these circumstances, the Board considers that the tender offer in 
March was successful in making the Company's limited liquid funds 
available on a fair basis to Shareholders who wished to sell all or 
part of their holdings. 
 
Risks and uncertainties 
Under the Disclosure and Transparency Directive, the Board is now 
required in the Company's half-year results to report on principal 
risks and uncertainties facing the Company over the remainder of the 
financial year. 
 
The Board has concluded that the key risks facing the Company over 
the remainder of the financial period are as follows: 
 
*               investment risk associated with investing in small 
  and immature businesses; 
*               significant exposure to the volatile and illiquid 
  conditions experienced by the AIM market; and 
*               failure to maintain approval as a VCT. 
 
The Company's significant exposure to relatively immature businesses 
quoted on AIM can, to some extent, be protected by holding a 
well-diversified portfolio.  With the Company effectively 
fully-invested, management of the exposure to the AIM market 
conditions is reasonably limited.  Although the risks are 
significant, the Board considers that the Company's approach to these 
risks is satisfactory. 
 
The Company's compliance with the VCT regulations is continually 
monitored by the Administration Manager, who regularly reports to the 
Board on the current position.  The Company also retains 
PricewaterhouseCoopers to provide regular reviews and advice in this 
area.  The Board considers that this approach reduces the risk of a 
breach of the VCT regulations to a minimal level. 
 
Outlook 
The Board is conscious that the Company is now small in net asset 
terms and, as a result, believes that the annual running costs 
indemnity provided by the Manager and Administrator may come into 
effect for the current financial year.  The annual running costs 
indemnity provides some protection for Shareholders in preventing 
running costs from exceeding 3.5% of net assets per annum. 
 
It is unlikely that Shareholders will see a significant improvement 
in the performance of the Company in the short-term.  Although the 
FTSE AIM All Share Index has shown some reasonably steady increases 
throughout April and May 2009, with the NAV at the 30 April 2009 
standing at 28.5p, this goes only a little way to repairing the 
damage done over the last 18 months and confidence in the economy 
does not yet appear to be at a sufficient level to support a 
sustained recovery. 
 
 
 
 
Andrew Davison 
Chairman 
28 May 2009 
 
 
UNAUDITED SUMMARISED BALANCE SHEET 
as at 31 March 2009 
 
 
                                       31 Mar    31 Mar   30 Sept 
                                         2009      2008      2008 
                                        GBP'000     GBP'000     GBP'000 
 
Fixed assets 
Investments                             5,167     9,631     7,445 
 
Current assets 
Debtors                                   143       335       100 
Cash at bank and in hand                  468     5,956       119 
                                          611     6,291       219 
 
Creditors: amounts falling due within    (42)      (36)      (48) 
one year 
 
Net current assets                        569     6,255       171 
 
Net assets                              5,736    15,886     7,616 
 
Capital and reserves 
Called up share capital                 2,128     2,227     2,228 
Capital redemption reserve                137        38        37 
Special reserve                        11,996    17,336    12,946 
Capital reserve - realised                  -     1,675         - 
Investment holding losses             (8,477)   (5,461)   (7,622) 
Revenue reserve                          (48)        71        27 
 
Equity shareholders' funds              5,736    15,886     7,616 
 
Basic and diluted net asset value       27.0p     71.3p     34.2p 
per share 
 
 
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS 
for the six months ended 31 March 2009 
 
 
                                        31 Mar    31 Mar   30 Sept 
                                          2009      2008      2008 
                                         GBP'000     GBP'000     GBP'000 
 
Opening shareholders' funds              7,616    20,811    20,811 
Repurchase of own shares                 (244)     (215)     (215) 
Total recognised losses for the period (1,636)   (4,484)   (6,851) 
Dividends paid in period                     -     (226)   (6,129) 
 
Closing shareholders' funds              5,736    15,886     7,616 
 
 
INCOME STATEMENT 
for the six months ended 31 March 2009 
 
 
                                                 Six months ended 
                                                   31 March 2009 
 
                                              Revenue Capital   Total 
                                                GBP'000   GBP'000   GBP'000 
 
Income                                             42       -      42 
 
Losses on investments                               - (1,524) (1,524) 
                                                   42 (1,524) (1,482) 
 
Investment management fees                       (13)    (37)    (50) 
Other expenses (note 5)                         (104)       -   (104) 
 
Return on ordinary activities before taxation    (75) (1,561) (1,636) 
 
Taxation                                            -       -       - 
 
Return attributable to equity shareholders       (75) (1,561) (1,636) 
 
Basic and diluted return per share             (0.3p)  (7.1p)  (7.4p) 
 
 
 
 
 
                                 Six months ended          Year ended 
                                  31 March 2008          30 September 
                                                                 2008 
 
                                 Revenue Capital   Total        Total 
                                   GBP'000   GBP'000   GBP'000        GBP'000 
 
Income                               202       -     202          432 
 
Losses on investments                  - (4,396) (4,396)      (6,727) 
                                     202 (4,396) (4,194)      (6,295) 
 
Investment management fees          (47)   (141)   (188)        (331) 
Other expenses (note 5)            (101)     (1)   (102)        (225) 
 
Return on ordinary activities         54 (4,538) (4,484)      (6,851) 
before taxation 
 
Taxation                             (9)       9       -            - 
 
Return attributable to equity         45 (4,529) (4,484)      (6,851) 
shareholders 
 
Basic and diluted return per        0.2p (20.1p) (19.9p)      (30.6p) 
share 
 
 
 
 
 
All Revenue and Capital items in the above statement derive from 
continuing operations. 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 as noted above. 
 
 
 
 
UNAUDITED CASH FLOW STATEMENT 
for the six months ended 31 March 2009 
 
 
                                           31 Mar    31 Mar   30 Sept 
                                             2009      2008      2008 
                                            GBP'000     GBP'000     GBP'000 
Net cash inflow from operating activities 
and returns on investments                  (162)         5      (56) 
 
Capital expenditure 
Purchase of investments                     (750)   (1,854)   (2,868) 
Proceeds from sale of investments           1,504     8,051     9,192 
Net cash inflow from capital expenditure      754     6,197     6,324 
 
Equity dividends paid                           -     (226)   (6,129) 
 
 
Net cash inflow before financing              592     5,976       139 
 
Financing 
Purchase of own shares                      (243)     (233)     (233) 
Net cash outflow from financing             (243)     (233)     (233) 
 
Increase/(decrease) in cash                   349     5,743      (94) 
 
Notes to the cash flow statement: 
 
1.   Net cash inflow from operating 
activities and returns on investments 
Loss on ordinary activities before        (1,636)   (4,484)   (6,851) 
taxation 
Losses on investments                       1,524     4,396     6,727 
(Increase)/decrease in other debtors         (43)       118        80 
(Decrease)/increase in other creditors        (7)      (25)      (12) 
Net cash inflow from operating activities   (162)         5      (56) 
 
2.   Analysis of net funds 
Beginning of period                           119       213       213 
Net cash inflow/(outflow)                     349     5,743      (94) 
End of period                                 468     5,956       119 
 
 
 
 
 
 
SUMMARY OF INVESTMENT PORTFOLIO 
as at 31 March 2009 
 
 
                                               Unrealised 
                                              gain/(loss)        % of 
                           Cost   Valuation     in period   portfolio 
                          GBP'000       GBP'000         GBP'000    by value 
Top twenty venture 
capital investments 
Cadbury House Limited *   1,000       1,000             -       17.7% 
Hoole Hall Country Club     750         750             -       13.3% 
Holdings Limited * 
Doubletake Portraits        645         363             -        6.5% 
Limited * 
IDOX plc                    271         335          (27)        5.9% 
First Care Limited *        275         275             -        4.9% 
Concateno plc               241         266          (89)        4.7% 
Ludorum plc                 175         219            35        3.9% 
FDM Group plc               169         212            56        3.8% 
Telephonetics plc           415         156          (15)        2.8% 
Zamano plc                  316         151          (79)        2.7% 
Craneware plc                76         129           (7)        2.3% 
The Mission Marketing       472         126         (110)        2.2% 
Group plc 
Travelzest plc              426         118         (206)        2.1% 
AT Communications Group     356         115            13        2.0% 
plc 
RFTRAQ Limited *            533         112         (113)        2.0% 
Boomerang Plus plc          185         102          (99)        1.8% 
Brulines Group plc          133         100          (58)        1.8% 
Servoca plc                 291          81         (186)        1.4% 
Autoclenz Holdings plc      363          67            23        1.2% 
FSG Security plc **         250          58          (75)        1.0% 
                          7,342       4,735         (937)       84.0% 
 
Other venture capital     6,302         432         (548)        7.7% 
investments 
 
                         13,644       5,167       (1,485)       91.7% 
 
Cash at bank and in hand                468                      8.3% 
 
Total investments                     5,635                    100.0% 
 
 
All venture capital investments are quoted on AIM unless otherwise 
stated. 
*   Unquoted 
** Quoted on PLUS Market 
 
SUMMARY OF INVESTMENT MOVEMENTS 
for the six months ended 31 March 2009 
 
Additions 
 
                                           GBP'000 
 
Hoole Hall Country Club Holdings Limited   750 
 
 
Disposals 
 
                                     Market            Gain/    Total 
                                   value at           (loss) realised 
                                  1 October Disposal against    gain/ 
                             Cost    2008 * proceeds    cost   (loss) 
                            GBP'000     GBP'000    GBP'000   GBP'000    GBP'000 
Full disposals 
Disperse Group plc            500         -        -   (500)        - 
Hoole Hall Country Club 
Limited                       750       750      750       -        - 
Jelf Group plc                 79       116       39    (40)     (77) 
 
Partial disposals 
Boomerang Plus plc             16        17       15     (1)      (2) 
Clerkenwell Ventures plc      271       195      257    (14)       62 
IDOX plc                       23        30       30       7        - 
Universe Group plc            191        89       68   (123)     (21) 
 
Fixed interest securities 
Treasury Stock 4% 07/03/09    344       346      345       1      (1) 
                            2,174     1,543    1,504   (670)     (39) 
 
 
* Adjusted for purchases in the period 
 
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS 
 
 
1.   The unaudited half yearly financial results cover the six months 
to 31 March 2009 and have been prepared in accordance with the 
accounting policies set out in the statutory accounts for the year 
ended 30 September 2008 which were prepared under UK Generally 
Accepted Accounting Practice ("UK GAAP") and in accordance with the 
Statement of Recommended Practice "Financial Statements of Investment 
Trust Companies and Venture Capital Trusts" issued in January 2009 
("SORP"). 
 
 
2.   All revenue and capital items in the Income Statement derive 
from continuing operations. 
 
 
3.   The Company has only one class of business and derives its 
income from investments made in shares, securities and bank deposits. 
 
 
4.   The comparative figures were in respect of the period ended 31 
March 2008 and the year ended 30 September 2008 respectively. 
 
 
5.   Other expenses include a charge of GBP19,000 in respect of costs 
relating to the Tender Offer. 
 
 
6.   Return per share for the period has been calculated on 
22,150,196 shares, being the weighted average number of shares in 
issue during the period. 
 
 
7.   NAV per share for the period has been calculated on 21,276,570 
shares, being the number of shares in issue at the period end. 
 
 
8.   Dividends 
 
 
                                   31 March 2009         30 Sept 2008 
 
                             Revenue   Capital   Total          Total 
                             GBP'000       GBP'000   GBP'000          GBP'000 
Paid in period/year 
2008 Special Interim - 26.5p -               -       -          5,903 
2007 Final - 1.0p            -               -       -            226 
                             -               -       -          6,129 
 
 
 
9.   Reserves 
 
                                Capital    Capital Investment 
                     Special redemption    reserve    holding Revenue 
                     reserve    reserve - realised     losses reserve 
                       GBP'000      GBP'000      GBP'000      GBP'000   GBP'000 
 
At 1 October 2008     12,946         37          -    (7,622)      27 
Repurchase of shares   (244)        100          -          -       - 
Expenses capitalised       -          -       (37)          -       - 
Losses on                  -          -       (39)    (1,485)       - 
investments 
Transfer between       (706)          -         76        630       - 
reserves 
Retained net revenue       -          -          -          -    (75) 
At 31 March 2009      11,996        137          -    (8,477)    (48) 
 
 
 
The Special Reserve is available to the Company to enable the 
purchase of its own shares in the market without affecting its 
ability to pay dividends/capital distributions. The Special Reserve, 
Capital Reserve - Realised and Revenue Reserve are all distributable 
reserves. 
 
 
 
10. The unaudited financial statements set out herein do not 
constitute statutory accounts within the meaning of Section 434 of 
the Companies Act 2006 and have not been delivered to the Registrar 
of Companies.  The figures for the year ended 30 September 2008 have 
been extracted from the financial statements for that year, which 
have been delivered to the Registrar of Companies; the Independent 
Auditors' Report on those financial statements was unqualified. 
 
 
11. The Directors confirm that, to the best of their knowledge, the 
half-yearly financial statements have been prepared in accordance 
with the "Statement: Half-Yearly Financial Reports" issued by the UK 
Accounting Standards Board and the half-yearly financial report 
includes a fair review of the information required by: 
 
 
a     DTR 4.2.7R of the Disclosure and Transparency Rules, being an 
indication of important events that have occurred during the first 
six months of the financial year and their impact on the condensed 
set of financial statements, and a description of the principal risks 
and uncertainties for the remaining six months of the year; and 
 
b    DTR 4.2.8R of the Disclosure and Transparency Rules, being 
related party transactions that have taken place in the first six 
months of the current financial year and that have materially 
affected the financial position or performance of the entity during 
that period, and any changes in the related party transactions 
described in the last annual report that could do so. 
 
12. Copies of the unaudited half yearly financial results will be 
sent to Shareholders shortly. Further copies can be obtained from the 
Company's Registered Office and will be available for download from 
www.downing.co.uk. 
 
=--END OF MESSAGE--- 
 
 
 
 
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solely responsible for the content of this announcement.