Half-yearly report

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 £409,000 of proceeds. Additionally, the Company's investment in Hoole Hall Country Club Limited underwent a reorganisation, which resulted in the Company realising and reinvesting £750,000 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 £1.5 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 £5 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 £1,000. Results and dividends The loss on activities during the period was £1.6 million, comprising a revenue loss of £75,000 and a capital loss of £1.6 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 £'000 £'000 £'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 £'000 £'000 £'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 £'000 £'000 £'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 £'000 £'000 £'000 £'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 £'000 £'000 £'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 £'000 £'000 £'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 £'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) £'000 £'000 £'000 £'000 £'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 £19,000 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 £'000 £'000 £'000 £'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 £'000 £'000 £'000 £'000 £'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--- This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.