Interim Management Statement

RNS Number : 1809N

Baronsmead VCT 2 PLC

11 February 2009

 



Baronsmead VCT 2 plc

Interim management statement

For the three month period from 1 October 2008 to 31 December 2008

Financial Headlines

• 4.7p (5.1%) decrease in Net Asset Value (NAV) per share (FTSE All-Share Index fell 11.1%) including:

• • 5.6p (6.1%) fall in AiM investments; and

  • 0.3p (0.4%) gain in unquoted investments

• £4.5m gross proceeds raised by Baronsmead VCT 2 as at 6th February 2009 

• • Existing shareholders of Baronsmead VCT and Baronsmead VCT 2 subscribed 56% of these funds

Investment Objective and Dividend Policy

Baronsmead VCT 2 plc is a tax efficient listed company which aims to achieve long-term capital growth and generate tax-free dividends and capital distributions for private investors.

The Board aims to sustain a minimum annual dividend level at an average of 5.5p per Ordinary Share, mindful of the need to maintain net asset value.  The ability to meet these twin objectives depends significantly on the level and timing of profitable realisations and cannot be guaranteed. There will be variations in the amounts of dividends paid year on year.  In the current economic environment realisations may be difficult to achieve but there are expected to be good opportunities to invest advantageously.

Dividends are normally declared on the publication of the Interim and Annual Results unless circumstances dictate otherwise. Dividends are paid from net revenues and from distributable reserves earned on the profitable realisation of investments, with the amount declared being dependent on the circumstances of the Company at the time.  

Performance Summary

Capital return		As at  31 December 2008	As at  30 September 2008	Movement %
Ordinary shares
	Total net assets	£55.2m	£54.8m
	Net asset value per share	86.96p	91.68p	(5.1%)
	Share price	77.50p	84.50p	(8.3%)
	Premium/(Discount) to NAV	(10.88%)	(7.83%)
	Total return	3 months to 31 December 2008	1 year to  31 December 2008	5 years to  31 December 2008	10 years to 31 December 2008
	Ordinary shares
	Net asset value 1	(5.2%)	(14.7%)	27.5%	69.2%
	Share price2	(8.3%)	(15.8%)	29.3%	73.3%
FTSE All-share3		(10.2%)	(29.9%)	18.7%	12.4%

1NAV Total return = NAV + reinvested dividends; Source: ISIS EP LLP 

2Share price Total return = Mid to mid share price + reinvested dividends; Source: AIC

3FTSE All-share = FTSE All-share Index + reinvested dividends; Source: AIC

Investment Performance 

The period under review was one of severe stress in global financial markets and considerable volatility in the value of quoted shares. As a result, over the quarter to 31 December 2008, the FTSE All-Share index and the FTSE AiM index (without resource companies) fell 11.1% and 30.8% respectively. 

In contrast, the NAV of the Company fell 5.1% over the quarter primarily due to a fall in the value of the AiM-traded portion of the portfolio. In general, companies in the unquoted portion of the portfolio reported solid trading performance resulting in an increase in the value of these investments by 0.8% over the quarter despite lower price earnings ratios being used in most of the valuations.  

In view of the fact that the Company was issuing shares during the period under review, the monthly valuations are shown below.

Date	Baronsmead VCT 2 plc  NAV pence per share
30 September 2008	91.68
31 October 2008	86.17
30 November 2008	85.56
31 December 2008	86.96
% Change of the quarter	-5.1%

Joint Fund Raising with Baronsmead VCT plc

In September 2008, the Company issued a Joint Offer for Subscription of New Ordinary Shares to raise £16m in aggregate. By 14 November 2008 the Joint Offer had raised £5.8m and the Company issued 3,224,314 Ordinary shares at 91.5p per share. By 12 December 2008 the Joint Offer had raised £6.8m and the Company issued a further 588,315 Ordinary shares at 91.0p per share. On 9 January 2009, the Directors of Baronsmead VCT plc and Baronsmead VCT 2 plc announced the extension of the Joint Offer to 3 April 2009 unless fully subscribed earlier.  In addition, the funds being sought under the Joint Offer were increased to an aggregate of up to approximately £22.5 million. 

By 6 February 2009, the Joint Offer had raised £9.0m in aggregate, generating £4.2m (net of issue costs of 5.5%) for the Company.  The new fund raising will increase the cash resources of the Company giving it significant capacity to take advantage of future investment opportunities as they arise and to support existing portfolio companies if needed and justified. Once a measure of economic stability has returned we expect there to be many good investment prospects but at lower prices than in recent years.

The Joint Offer is open to existing shareholders and new investors. There has been strong support from the existing shareholders of Baronsmead VCT and Baronsmead VCT 2.  In the context of a low interest rate environment, the Company's dividend policy has proved particularly attractive to those investors who anticipate being able to receive tax free dividends. 

Investment Activity

Further qualifying investments totalling £0.97m were completed in four companies while gross proceeds from realisations amounted to £0.57m.  Five AiM investments were written off during the quarter with a combined value of £0.17m as at 30 September 2008.  The portfolio decreased in number from 87 to 81 companies.

Investments

Company	Date	Cost (£’000)	VCT status
Follow on Investments
Brulines Holdings plc*	Dec 08	299	Qualifying
Ffastfill*	Nov 08	120	Qualifying
Kafevend	Nov 08	6	Non Qualifying
Nexus	Oct 08	499	Qualifying
Occam	Dec 08	44	Qualifying
Total Q4, 2008		968
* AiM traded investments

Top ten investment holdings

Position as at 31 Dec 2008	Position as at 30 Sept 2008	Company	Percentage of net assets as at 31 Dec 2008
1	1	Scriptswitch	5.08%
2	2	Reed & Mackay	5.01%
3	3	Carnell Contractors	4.30%
4	4	Independent Living Services	3.68%
5	11	Nexus	3.38%
6	7	Cablecom	3.00%
7	6	Kafevend	2.78%
8	9	Quantix	2.71%
9	8	Fishers Outdoor Leisure	2.60%
10	10	Crew Clothing	2.46%
Total			35.00%

Sector breakdown

(excluding cash and interest bearing securities)

	Percentage of total investments at  31 Dec 2008	Percentage of total investments at  30 Sept 2008
Business Services	41	39
Consumer Markets	14	14
IT Support Services	28	29
Healthcare	12	11
Media	5	7
Total	100	100

Net Asset Value as at 31 January 2009 

Baronsmead VCT 2 will be making an allotment of shares under the Joint Offer for Subscription with Baronsmead VCT on 13 February 2009 based on the NAV as at 31 January 2009.  As a result, the Board has undertaken an additional review of the unquoted portfolio valuations at 31 January 2009. Taking account of changes in the values of both the AiM and unquoted portions of the portfolio, the NAV per share at 31 January 2009 fell by 1.0p resulting in a NAV of 85.96 per share.   

Daily and key information 

Further information regarding the Company, including latest financial statements or quarterly factsheets, can be found at the Company's website www.baronsmeadvct2.co.uk

Other than as disclosed in this statement the Board is not aware of any significant events or transactions which have occurred between 31 December 2008 and the date of publication of this statement which would have a material impact on the financial position of the Company.

For further information please contact:

Michael Probin, VCT Investor Relations, ISIS EP LLP on 020 7506 5796 or [e-mail]

Paul Forster   Company Secretary on 020 7506 5652 or [e-mail]

 

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