Pennine AIM VCT 5 plc (UK) – Half-yearly report

Half-yearly report
Pennine AIM VCT 5 plc
Interim Report for the nine months ended 31 December 2009


RECENT PERFORMANCE

31 Dec
2009
pence 31 Mar
2009
Pence 31 Dec
2008
pence 30 Sept
2008
pence

Net asset value per share 29.3 27.0 28.1 34.2
Cumulative distributions per share (paid) 31.0 30.0 30.0 30.0
Total return per share 60.3 57.0 58.1 64.2


CHAIRMAN’S STATEMENT

There have been some significant developments with your Company in recent months. I am taking this opportunity to bring Shareholders up to date.
Merger discussions

At the end of November 2009, the Company announced that it was in merger discussions with two other VCTs. The Board has agreed heads of terms with Pennine AIM VCT 6 plc and The AIM Distribution Trust plc to create one larger entity by way of “schemes of reconstruction” pursuant to S.110 of the Insolvency Act 1986.

The Board believes that there are significant benefits to Shareholders in being members of a larger VCT, particularly in reduced running costs. The Board is also seeking to take this opportunity to ensure that the enlarged entity has an investment policy that is able to support strong dividend and share buyback policies.

Significant progress has now been made and I anticipate that full details of merger proposals will be sent to Shareholders in the next few weeks.

Change of year-end

In view of the merger discussion above, the Board decided to change the Company’s year-end from 30 September to 31 March, such that the Company’s next audited accounts will be made up to 31 March 2010.
One of the benefits of the change of year-end is that, in the event that the merger proceeds, the Company will not have to suffer the expense of a further audit.

The Company’s last report to Shareholders was the half yearly report to 31 March 2009. In view of the change of year-end, the Board has decided to prepare a second interim report covering the nine months ended 31 December 2009.

Net asset value

At 31 December 2009, the unaudited Net Asset Value (“NAV”) stood at 29.3p, an increase of 3.3p per share (12.2%) since 31 March 2009.
Cumulative dividends paid to date to Shareholders who invested at the Company launch stand at 31p per share. Total return (NAV plus cumulative dividends) now stands at 60.3p per share, compared to an original cost (net of income tax relief) of 60p per share.

Venture capital investments

With the Company effectively fully invested and liquidity within the AIM market continuing to be poor, there has been a reasonably low level of investment activity during the nine-month period. However, there were a small number of realisations and part realisations which produced net realised gains of £336,000.

Of the investments held throughout the period, most of the AIM-quoted stocks showed uplifts in their values as the AIM market in general picked up after the prolonged and substantial falls it experienced since mid-2007.
The most notable increase was the investment in Ludorum which increased in value by £181,000. Ludorum produces the Chuggington children’s television programme and has been very successful in securing global distribution for the programme which opens up substantial merchandising opportunities.

Venture capital investments (continued)
Despite the economic conditions, Double Take Portraits, one of the Company’s unquoted investments, has continued to make progress in developing its photographic studio business. The Company now operates from six locations. Provisions that had previously been made against the investment have now been released, producing an uplift in value in the period of £156,000.

There were unfortunately some exceptions to the general upwards trend. AT Communications and FSG Security both failed during the period producing losses of £115,000 and £58,000 respectively. Travelzest also saw a large fall in its share price of £94,000 primarily as a result of the economy on the travel sector.

The net unrealised gain in the period was £538,000.
Results and dividends

The return on activities during the period was £714,000, comprising a revenue loss of £121,000 and a capital gain of £835,000.

Risks and uncertainties

Under the Disclosure and Transparency Directive, the Board is now required in the Company’s interim reports 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:

(i)investment risk associated with investing in small and immature businesses;

(ii)significant exposure to the volatile and illiquid conditions experienced by the AIM market; and

(iii)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
Although it is pleasing to be able to report a reasonable increase in NAV over the nine-month period, overall performance of the Company remains disappointing. The small size of the Company is now a significant hindrance. The Board believes that the potential merger with two other VCTs, along with the establishment of clear and realistic objectives and an investment policy that makes them achievable, is the best way forward for the Company. I expect to be able to bring you full details of these proposals shortly.

Andrew Davison
Chairman

UNAUDITED SUMMARISED BALANCE SHEET
as at 31 December 2009

31 Dec 31 Dec 30 Sept
2009 2008 2008
(Unaudited) (Unaudited) (Audited)
£’000 £’000 £’000

Fixed assets
Investments 5,376 5,992 7,445

Current assets
Debtors 335 152 100
Cash at bank and in hand 589 151 119
924 303 219
Creditors: amounts falling due within
one year (63) (41) (48)

Net current assets 861 262 171

Net assets 6,237 6,254 7,616

Capital and reserves
Called up share capital 2,128 2,228 2,228
Capital redemption reserve 137 37 37
Special reserve 10,999 12,257 12,946
Capital reserve – realised – – –
Investment holding losses (6,858) (8,267) (7,622)
Revenue reserve (169) (1) 27

Total equity shareholders’ funds 6,237 6,254 7,616

Basic and diluted net asset value per share 29.3p 28.1p 34.2p

UNAUDITED INCOME STATEMENT
for the nine months ended 31 December 2009

(Unaudited)
Revenue Capital Total
£’000 £’000 £’000

Income 43 – 43

Gains/(losses) on investments – 874 874
43 874 917

Investment management fees (13) (39) (52)
Other expenses (note 7) (151) – (151)

Return on ordinary activities before taxation (121) 835 714

Taxation – – –

Return attributable to equity shareholders (121) 835 714

Basic and diluted return per share (0.5p) 3.9p 3.4p

Nine months ended
31 December 2008
(Unaudited) Year ended
30 September 2008
(Audited)
Revenue Capital Total Total
£’000 £’000 £’000 £’000

Income 253 – 253 432

Gains/(losses) on investments – (3,633) (3,633) (6,727)
253 (3,633) (3,380) (6,295)

Investment management fees (45) (133) (178) (331)
Other expenses (note 7) (170) (1) (171) (225)

Return on ordinary activities before taxation 38 (3,767) (3,729) (6,851)

Taxation – – – –

Return attributable to equity shareholders 38 (3,767) (3,729) (6,851)

Basic and diluted return per share 0.2p (16.9p) (16.7p) (30.6p)

All Revenue and Capital items in the above statement derive from continuing operations. The total column within the Incom

e 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.


RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS
for the nine months to 31 December 200
9

9 months
to 9 months
to 12 months
to
31 Dec
2009 31 Dec
2008 30 Sept
2008
(Unaudited) (Unaudited) (Audited)
£’000 £’000 £’000

Opening shareholders’ funds 5,736 15,886 20,811
Repurchase of own shares – – (215)
Total recognised gains/(losses) for the period 714 (3,729) (6,851)
Dividends paid in period (213) (5,903) (6,129)

Closing shareholders’ funds 6,237 6,254 7,616


UNAUDITED CASH FLOW STATEMENT
for the nine months ended 31 December 2009

31 Dec
2009 31 Dec
2008 30 Sept
2008
(Unaudited) (Unaudited) (Audited)
£’000 £’000 £’000
Net cash outflow from operating activities and returns on investments (383) (180) (56)

Capital expenditure

Purchase of investments (227) (1,014) (2,868)
Proceeds from sale of investments 945 1,292 9,192
Net cash inflow from capital expenditure 718 278 6,324

Equity dividends paid (213) (5,903) (6,129)

122 (5,805) 139
Financing
Purchase of own shares (1) – (233)
Net cash outflow from financing (1) – (233)

Increase/(decrease) in cash 121 (5,805) (94)

Notes to the cash flow statement:
1.Net cash inflow from operating activities and returns on investments

Loss on ordinary activities before taxation 714 (3,729) (6,851)
(Gains)/losses on investments (874) 3,633 6,727
(Increase)/decrease in debtors (245) (89) 80
Increase/(decrease) in creditors 22 5 (12)
Net cash outflow from operating activities (383) (180) (56)

2.Analysis of net funds

Beginning of period 468 5,956 213
Net cash inflow/(outflow) 121 (5,805) (94)
End of period 589 151 119


SUMMARY OF INVESTMENT PORTFOLIO
as at 31 December 2009

Cost Valuation Unrealised
gain/(loss)
in period % of
portfolio
£’000 £’000 £’000 by value


Top ten investments (by value)

Cadbury House Holdings Limited * 1,000 1,000 – 16.8%
Hoole Hall Country Club Holdings Limited * 900 900 – 15.1%
Double Take Portraits Limited * 645 519 156 8.7%
Ludorum plc 172 396 181 6.6%
IDOX plc 271 371 36 6.2%
First Care Limited * 327 327 – 5.5%
Zamano plc 316 217 66 3.6%
Servoca plc 292 163 82 2.7%
Brulines Group plc 133 149 50 2.5%
Craneware plc 52 134 45 2.2%
4,108 4,176 616 69.9%

Other venture capital investments 8,126 1,200 (78) 20.2%

12,234 5,376 538 90.1%

Cash at bank and in hand 589 9.9%

Total investments 5,965 100.0%
All venture capital investments are quoted on AIM unless otherwise stated.
* Unquoted


SUMMARY OF INVESTMENT MOVEMENTS
for the nine months ended 31 December 2009

Additions

£’000

Cadbury House Holdings Ltd ** 1,000
First Care Limited 53
Inverness Medical Innovations Inc 75
Hoole Hall Country Club Holdings plc 150
Sundry additions 2
1,280
Disposals

Cost Market
value at
1 April 2009 * Disposal
proceeds Gain/
(loss)
against
cost Total
Realised
gain
£’000 £’000 £’000 £’000 £’000
Cadbury House Limited ** 1,000 1,000 1,000 – –
Concateno plc 241 266 335 94 69
Craneware plc 25 42 59 34 17
FDM Group plc 169 212 325 156 113
Inverness Medical Innovations Inc 75 75 92 17 17
Ludorum plc 3 4 6 3 2
Waterline Group Limited 487 10 128 (359) 118
Liquidations/dissolutions
Bioganix plc 166 – – (166) –
Dipford Group plc 272 – – (272) –
Telephone Maintenance Group plc 251 – – (251) –
2,689 1,609 1,945 (744) 336

* Adjusted for purchases in the period
**Re-invested proceeds as part of a reorganisation


NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

1.The unaudited interim financial results cover the nine months to 31 December 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 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 unaudited figures for the nine month period to 31 December 2008 and the audited figures for year ended 30 September 2008 respectively.

5.Return per share for the period has been calculated on 21,276,570 shares, being the weighted average number of shares in issue during the period.

6.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.

7.Other expenses within the Income Statement are analysed as follows:

Nine months
ended
31 December
2009
(Unaudited) Nine months
ended
31 December
(Unaudited) ended
(Unaudited)
£’000 £’000 £’000
Administration fees 39 60 78
Directors remuneration 26 26 35
Provision against loan stock interest 33 26 26
Trail commission 7 2 12
Registrars fees 8 9 10
Audit fees 8 13 16
Other 30 35 48
151 171 225
8.Dividends

31 December 2009 30 Sept 2008

Revenue Capital Total Total
£’000 £’000 £’000 £’000
Paid
2009 Final – 1.0p – 213 213 –
2008 Special Interim – 26.5p – – – 5,903
2007 Final – 1.0p – – – 226
– 213 213 6,129
9.Reserves

Special
reserve Capital
Redemption
reserve Capital
reserve
– realised Investment
holding
losses Revenue
reserve
£’000 £’000 £’000 £’000 £’000

At 1 April 2009 11,996 137 – (8,477) (48)
Expenses capitalised – – (39) – –
Gains on investments – – 336 538 –
Transfer between reserves (997) – (84) 1,081 –
Dividends paid – – (213) – –
Retained net loss – – – – (121)
At 31 December 2009 10,999 137 – (6,858) (169)

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 interim financial statements have been prepared in accordance with the “Statement: Half-Yearly Financial Reports” issued by the UK Accounting Standards Board and the interim 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 initial period 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 remainder of the financial year; and

b.DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the initial period 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 interim 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.


Published: 17:02 CET 10-02-2010 /HUGIN /Source: Pennine AIM VCT 5 plc /LSE: PNV5 /ISIN: GB00B05L0T69

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