Half-yearly report
Pennine AIM VCT plc
Half Yearly Report for the six months ended 31 July 2008
RECENT PERFORMANCE SUMMARY
31 July 31 July 31 Jan
2008 2007 2008
pence pence pence
Net asset value per Ordinary Share 44.1 70.7 54.7
Cumulative distributions per Ordinary 88.1 85.1 85.1
Share
Total return per Ordinary Share 132.2 155.8 139.8
Net asset value per 'D' Share 86.7 94.2 93.1
Cumulative dividends per 'D' Share 1.0 - -
Total return per 'D' Share 87.7 94.2 93.1
CHAIRMAN'S STATEMENT
The worsening global financial crisis has unsurprisingly been the
most influential factor in the performance of your Company over the
six months ended 31 July 2008. As an AIM-focussed VCT which is close
to fully invested, the Company is heavily exposed to changes in
market sentiment and is very restricted in steps it might take to
reduce that exposure.
Net Asset Value
At 31 July 2008, the Net Asset Value ("NAV") per Ordinary Share stood
at 44.1p, a decrease of 7.6p or 13.9% since 31 January 2008 (after
adjusting for the dividend paid of 3p per Ordinary Share in June
2008).
The NAV per 'D' Share stood at 86.7p at 31 July 2008, a decrease of
5.4p or 5.8% since 31 January 2008 (after adjusting for the dividend
of 1p per 'D' Share paid in June 2008).
Venture capital investments
Ordinary Share pool
The Ordinary Share pool is essentially fully invested and, with very
limited liquidity in the AIM market, investment activity has been
low.
The pool invested �159,000 in one new investment and two follow-on
investments. In the case of the follow-on investments, both were in
companies which might have faced significant difficulties had their
fundraisings not been successful. The Board are conscious that this
situation may become more commonplace in the current climate.
In order to generate funds for the follow on investments, the Manager
made some small part disposals of the holdings in Aero Inventory and
Connaught, releasing proceeds of �207,000.
Almost all AIM stocks within the portfolio showed falls in value over
the period. Total unrealised losses for the six months were �972,000.
Full details of the portfolio and activities are shown below.
'D' Share pool
Although the 'D' Share pool is much smaller that the Ordinary Share
pool, it still has a reasonable proportion of its funds to be
invested and has therefore been more active in the period.
Five investments were made at a total cost of �413,000. Of this
total, �150,000 was invested into unquoted businesses which own
substantial assets. With the current state of the AIM market, the
Directors feel that shifting focus to some extent to lower risk
investments is desirable.
There were no disposals from the 'D' Share pool. Unrealised losses
for the period totalled �69,000.
Full details of the portfolio and activities are shown on below.
Fixed income and other investments
Ordinary Share pool
In line with the investment policy, the Ordinary Share pool holds a
small proportion of its funds in listed fixed income investments and
hedge funds. The portfolio showed a small unrealised gain over the
period of �2,000.
'D' Share pool
The 'D' Share pool holds a portfolio of non-VCT qualifying
investments comprising gilts and a FTSE index tracker. The market
price of the FTSE index tracker fell over the period producing an
unrealised loss of �51,000, while the value of the gilts was almost
unchanged.
Revenue and Dividend
The loss for the period was �1,178,000 (2007 return: �822,000),
comprising a revenue loss of �25,000 and a capital loss of
�1,153,000.
In line with the Company's normal practice, no interim dividend will
be paid for either class of shares.
Repurchase of shares
The Company continues to operate a policy of buying in shares that
become available in the market to ensure liquidity for Shareholders.
During the period, the Company purchased 333,076 Ordinary shares at
an average price of 48.3p per share. These shares were subsequently
cancelled. No 'D' Shares were acquired in the period.
Historically, the Company has purchased its own shares at a 10%
discount to the NAV. The Board notes that many other VCTs now
undertake share buybacks at higher discounts. Although, for the time
being, the Board does not intend any change, it will regularly review
the policy and will consider increasing the discount if it believes
that liquidity and market conditions warrant it.
Risk 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:
(i) investment risk associated with investing in small and
immature businesses;
(ii) failure to maintain approval as a VCT.
In both cases the Board is satisfied with the Company's approach to
these risks. Although the Company has significant exposure to the
relatively immature businesses quoted on AIM, the Company seeks to
mitigate risk associated with this as far it can by holding a
well-diversified portfolio.
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
It has become clear, particularly in recent weeks, that we are now in
a period of almost unprecedented financial instability. The severe
illiquidity of most AIM stocks, along with the restrictions imposed
by the VCT regulations, means that the Investment Manager is very
limited in any action it can take.
The investment portfolio is reasonably well spread across industrial
sectors and does include some unquoted investments which are less
vulnerable to swings in sentiment. However, with so much uncertainty
for the general economic outlook for the next year or so, there is
risk that further value could be lost.
Hugh Gillespie
Chairman
UNAUDITED SUMMARISED BALANCE SHEET
as at 31 July 2008
As at As at
31 Jul 31 Jan
As at 31 Jul 2008 2007 2008
Ordinary 'D'
Shares Shares Total Total Total
�'000 �'000 �'000 �'000 �'000
Investments 5,646 2,437 8,083 12,222 9,939
Current assets
Debtors 47 31 78 97 161
Cash at bank and in hand 197 20 217 275 50
244 51 295 372 211
Less: Creditors falling (55) (28) (83) (91) (87)
due within one year
Net current assets 189 23 212 282 124
Net assets 5,835 2,460 8,295 12,503 10,063
Capital and reserves
Called up share capital 1,323 284 1,607 1,452 1,641
Capital redemption reserve 284 - 284 217 250
Special reserve - - - 187 -
Share premium account 4,984 2,396 7,380 7,602 7,380
Capital reserve - realised 2,229 (58) 2,171 1,433 2,432
Capital reserve - (3,737) (159) (3,896) 665 (2,638)
unrealised
Revenue reserve (487) (3) (490) (454) (403)
Merger reserve 1,239 - 1,239 1,401 1,401
Equity shareholder's funds 5,835 2,460 8,295 12,503 10,063
Net asset value per:
Ordinary Share 44.1p 70.7p 54.7p
'D' Share 86.7p 94.2p 93.1p
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
31 Jul 2008 31 Jul 31 Jan
2007 2008
Ordinary 'D'
Shares Shares Total Total Total
�'000 �'000 �'000 �'000 �'000
Opening Shareholders' 7,422 2,641 10,063 9,627 9,627
funds
Proceeds from share issue - - - 2,836 2,836
Share issue costs - - - (156) (156)
Repurchase of own shares (162) - (162) (199) (401)
Total recognised (1,025) (153) (1,178) 822 (1,423)
(losses)/gains for the
period
Dividends paid in period (400) (28) (428) (427) (420)
Closing Shareholders' 5,835 2,460 8,295 12,503 10,063
funds
UNAUDITED INCOME STATEMENT
for the period ended 31 July 2008
Six months ended
31 Jul 2008
Revenue Capital Total
Company position �'000 �'000 �'000
Income 112 - 112
(Losses)/gains on investments - (1,084) (1,084)
112 (1,084) (972)
Investment management fees (22) (66) (88)
Other expenses (115) (3) (118)
(Loss)/return on ordinary activities (25) (1,153) (1,178)
Taxation - - -
(Loss)/return attributable to equity (25) (1,153) (1,178)
shareholders
Return per Ordinary Share (0.1p) (7.5p) (7.6p)
Return per 'D' Share (0.4p) (5.0p) (5.4p)
Six months ended Year ended
31 Jul 2007 31 Jan 2008
Revenue Capital Total Total
Company position �'000 �'000 �'000 �'000
Income 153 - 153 339
(Losses)/gains on investments - 877 877 (1,352)
153 877 1,030 (1,013)
Investment management fees (27) (81) (108) (196)
Other expenses (100) - (100) (214)
(Loss)/return on ordinary 26 796 822 (1,423)
activities
Taxation - - - -
(Loss)/return attributable to 26 796 822 (1,423)
equity shareholders
Return per Ordinary Share 0.1p 5.8p 5.9p (9.9p)
Return per 'D' Share 0.8p (1.2p) (0.4p) (1.5p)
Split as:
Six months ended
31 Jul 2008
Revenue Capital Total
�'000 �'000 �'000
Ordinary Shares
Income 83 - 83
(Losses)/gains on investments - (963) (963)
83 (963) (880)
Investment management fees (16) (48) (64)
Other expenses (79) (2) (81)
(Loss)/return on ordinary activities (12) (1,013) (1,025)
Taxation - - -
(Loss)/return attributable to equity (12) (1,013) (1,025)
shareholders
Six months ended Year ended
31 Jul 2007 31 Jan 2008
Revenue Capital Total Total
Ordinary Shares �'000 �'000 �'000 �'000
Income 110 - 110 233
(Losses)/gains on investments - 883 883 (1,303)
110 883 993 (1,070)
Investment management fees (20) (61) (81) (153)
Other expenses (82) - (82) (161)
(Loss)/return on ordinary 8 822 830 (1,384)
activities
Taxation - - - -
(Loss)/return attributable to 8 822 830 (1,384)
equity shareholders
Six months ended
31 Jul 2008
'D' Shares
Income 29 - 29
Losses on investments - (121) (121)
29 (121) (92)
Investment management fees (6) (18) (24)
Other expenses (36) (1) (37)
(Loss)/return on ordinary activities (13) (140) (153)
Taxation - - -
(Loss)/return attributable to equity (13) (140) (153)
shareholders
Six months ended Year ended
31 Jul 2007 31 Jan 2008
'D' Shares
Income 43 - 43 106
Losses on investments - (6) (6) (49)
43 (6) 37 57
Investment management fees (7) (20) (27) (43)
Other expenses (18) - (18) (53)
(Loss)/return on ordinary activities 18 (26) (8) (39)
Taxation - - - -
(Loss)/return attributable to equity 18 (26) (8) (39)
shareholders
UNAUDITED CASH FLOW STATEMENT
for the period ended 31 July 2008
Six months ended Six Year
31 Jul 2008 months ended
ended 31 Jan
Ordinary 'D' 31 Jul 2008
Shares Share Total 2007
Note �'000 �'000 �'000 �'000 �'000
Cash 1
inflow/(outflow) 6 (25) (19) (82)
from operating
activities (166)
Capital expenditure
Purchase of (922) (1,595) (2,517) (3,751) (9,311)
investments
Proceeds on 1,649 1,646 3,295 1,284 6,898
disposal of
investments
Net cash
inflow/(outflow) 727 51 778 (2,467) (2,413)
from capital
expenditure
Equity dividends (402) (28) (430) (427) (420)
paid
Net cash 331 (2) 329 (2,976) (2,999)
inflow/(outflow) before
financing
Financing
Proceeds of share - - - 2,754 2,754
issue
Share issue costs - - - (156) (156)
Purchase of own (162) - (162) (247) (449)
shares
Net cash (162) - (162) 2,351 2,149
(outflow)/inflow from
financing
Increase/ 2 169 (2) 167 (625)
(decrease) in cash (850)
Notes to the cash
flow statement:
1 Cash (outflow)/inflow from
operating activities
(Loss)/gain on (1,025) (153) (1,178) 822 (1,423)
activities before
taxation
Losses/(gains) on 963 121 1,084 (877) 1,352
investments
Increase/(decrease) 73 6 79 (46) (110)
in other debtors
(Decrease)/increase
in accruals and (5) 1 (4) 19 15
deferred income
Net cash
inflow/(outflow) 6 (25) (19) (82) (166)
from operating
activities
2 Analysis of
net funds
Beginning of period 28 22 50 900 900
Net cash 169 (2) 167 (625) (850)
inflow/(outflow)
End of period 197 20 217 275 50
SUMMARY OF INVESTMENT PORTFOLIO
as at 31 July 2008
Unrealised % of
gain/(loss) in portfolio
ORDINARY SHARE POOL Cost Valuation the period
�'000 �'000 �'000
Top twenty venture capital
investments
Connaught plc *** 47 692 26 11.8%
Spice plc 249 447 54 7.6%
Synergy Health plc *** 145 394 76 6.7%
Aero Inventory plc 230 329 (73) 5.6%
Cadbury House Limited * 289 289 - 4.9%
Interserve plc *** 102 239 (11) 4.1%
Hoole Hall Country Club 200 200 - 3.4%
Limited *
FDM Group plc 200 192 (85) 3.3%
Supporta plc 302 149 (25) 2.5%
Clerkenwell Ventures plc 176 136 19 2.3%
RFTRAQ Limited * 167 135 - 2.3%
AT Communications plc 222 127 (42) 2.1%
Neutrahealth plc 216 118 (41) 2.0%
Pubs 'n' Bars plc 322 112 (52) 1.9%
Forward Media Limited * 383 78 - 1.3%
Media Square plc 242 72 (40) 1.2%
Straight plc 179 72 (12) 1.2%
Sanastro plc * 200 70 - 1.2%
Ludorum plc 65 65 - 1.1%
Huveaux plc 145 62 (7) 1.1%
4,081 3,978 (213) 67.6%
Other venture capital 4,118 463 (759) 8.6%
investments
Other investments 1,184 1,205 2 20.5%
Total investments 9,383 5,646 (970) 96.7%
Cash at bank and in hand 197 197 - 3.3%
Total investments 9,580 5,843 (970) 100.0%
(including cash)
Unrealised % of portfolio
gain/(loss) in
'D' SHARE POOL Cost Valuation the period
�'000 �'000 �'000
Venture capital
investments
Cadbury House Limited 100 100 - 4.1%
*
The Thames Club 100 100 - 4.1%
Limited *
Animal Care Group plc 100 97 (5) 3.9%
IS Pharma plc 100 83 (17) 3.4%
Plastics Capital plc 100 75 (20) 3.1%
Tristel plc 63 67 4 2.7%
Clerkenwell Ventures 85 66 9 2.7%
plc
FSG Security plc ** 100 60 (40) 2.4%
Hoole Hall Country 50 50 - 2.0%
Club Limited *
Hoole Hall Spa and 50 50 - 2.0%
Leisure Limited *
Ludorum plc 35 35 - 1.4%
883 783 (69) 31.8%
Other investments 1,713 1,654 (52) 67.4%
Total investments 2,596 2,437 (121) 99.2%
Cash at bank and in - 0.8%
hand 20 20
Total investments 2,616 2,457 (121) 100.0%
(including cash)
All venture capital investments are listed on AIM unless otherwise
stated
* Unquoted **
Quoted on the PLUS-quoted market *** Listed on London Stock
Exchange Main Market
SUMMARY OF INVESTMENT MOVEMENTS
for the period ended 31 July 2008
Additions
Ordinary 'D'
Share Pool Share Pool
�'000 �'000
Venture Capital investments
Forward Media Limited (Unquoted) 11 -
FSG Security plc (Plus Market) - 100
Hill Station plc 67 -
Hoole Hall Spa and Leisure Limited (Unquoted) 50 50
IS Pharma plc - 100
Keycom plc (Plus Market) 41 -
The Thames Club Limited (Unquoted) - 100
Tristel plc - 62
Sundry additions 1 1
170 413
Other Investments
Listed fixed income securities
Treasury 4% Stock 7/3/2009 346 593
Treasury 8% Stock 2009 342 589
688 1,182
Hedge funds
Bluecrest Allblue 25 -
Goldman Sachs Dynamic Opportunities Ltd 25 -
Signet Global Fixed Inc 20 -
70 -
Total 928 1,595
Disposals
Market
value at Total
1 February Disposal Gain/(loss) Realised
Cost 2008 proceeds in period gain
�'000 �'000 �'000 �'000 �'000
ORDINARY POOL
Part disposals
Aero Inventory plc 17 76 76 59 -
Connaught plc 10 125 131 121 6
Daniel Stewart
Securities plc 11 6 5 (6) (1)
38 207 212 174 5
Listed fixed income
securities
Treasury 5% 2008 1,437 1,437 1,437 - -
1,475 1,644 1,649 174 5
'D' SHARE POOL
Treasury 5% 2008 1,645 1,645 1,646 1 1
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
1. The unaudited half yearly financial results cover the six months
to 31 July 2008 and have been prepared in accordance with the
accounting policies set out in the statutory accounts for the year
ended 31 January 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" revised December 2005 ("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
July 2007 and the year ended 31 January 2008 respectively.
5. Net Asset Value per share calculations are based on the following:
Ordinary 'D' Shares
Shares
Net Asset Value per share based on:
Net Assets (�'000) 5,835 2,460
Number of shares in issue at period end 13,236,880 2,836,269
6. Return per share calculations are based on the following:
Ordinary 'D' Shares
Shares
Revenue loss per share based on:
Net revenue return after taxation (�'000) (12) (13)
Capital return per share based on:
Net capital return/(loss) for the financial (1,013) (140)
year (�'000)
Weighted average number of shares in issue 13,524,024 2,836,269
7. Dividends
31 July 2008 31 Jan 2008
Revenue Capital Total Total
�'000 �'000 �'000 �'000
Ordinary Shares:
2008 Final Dividend - 3.0p 34 366 400 -
2007 Final Dividend - 3.0p - - - 420
34 366 400 420
'D' Shares:
2008 Final Dividend - 1.0p 28 - 28 -
8. Reserves
Capital Special Share Capital Capital Revenue Merger
Redemption eserve Premium reserve reserve - reserve reserve
reserve account - unrealised
realised
�'000 �'000 �'000 �'000 �'000 �'000 �'000
Company
position
At 1 February 250 - 7,380 2,432 (2,638) (403) 1,401
2008
Shares 34 - - - - - (162)
repurchased
Capital - - - (69) - - -
expenses
Gains/(losses)
on investments - - - 6 (1,090) - -
Transfer - - 168 (168) - -
between
reserves
Retained net - - - - - (25) -
revenue
Distributions - - - (366) - (62) -
paid
At 31 July 284 - 7,380 2,171 (3,896) (490) 1,239
2008
The Ordinary Capital Reserve - realised, Revenue Reserve and
part of the Merger Reserve are distributable reserves.
9. The unaudited financial statements set out herein do not
constitute statutory accounts within the meaning of Section 240 of
the Companies Act 1985 and have not been delivered to the Registrar
of Companies. The figures for the year ended 31 January 2008 have
been extracted from the financial statements for that year, which
have been delivered to the Registrar of Companies; the auditors'
report on those financial statements was unqualified.
10. 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.
11. Copies of the unaudited half yearly financial reports 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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