Interim Results

British SmallerTechCompaniesVCT2PLC 27 September 2002 For immediate release 27 September 2002 BRITISH SMALLER TECHNOLOGY COMPANIES VCT 2 PLC Interim results for the 6 months to 30 June 2002 Net asset value maintained whilst Benchmark Index falls 32%; Current economic climate and valuations present excellent opportunities; £6m available for investment; EGM to approve share buy-backs British Smaller Technology Companies VCT 2 plc ("the Company"), the venture capital trust specialising in smaller technology companies with high growth potential across a range of industrial sectors, today announces its interim results for the six months to 30 June 2002. Financial highlights: Unaudited Unaudited Audited year ended six months period 31 December ended ended 2001 30 June 2002 30 June 2001 Gross revenue £145,000 £106,000 £288,000 Net revenue (loss) profit before and after tax £(10,000) £13,000 £28,000 Return per share (0.14)p 0.29p 0.49p Dividend - - - Net assets £7.21m £6.29m £6.44m NAV per share 92.5p 93.4p 93.7p Investments During the six months under review the economic and market environment - particularly for technology businesses - remained depressed. Notwithstanding this, after adjusting for new funds raised in the period, the Company's net asset value has suffered only a minimal reduction of 2%. The Techmark Index has fallen by 32% over the same period. At this stage, the Company remains cautious about the current economy and the markets in which it is investing. During the period, a total of £664,000 was invested in four companies. Valuations Although market sentiment towards technology-based companies remains weak, the Board believes that, as the portfolio is relatively young and values were already discounted at the time of investment, it is appropriate to leave all but one investment at cost. The exception is Tamesis Limited, where the additional write-down is £75,000. This has resulted in a full provision against this investment on a cumulative basis. Financial Results The net revenue return for the period was a loss of £10,000 or 0.14p per share. After taking account of the loss on capital account, the total return was a loss of £124,000 or 1.69p per share. Fundraising and Shareholder Liquidity The top-up fundraising offer launched in November 2001 closed on 31 May 2002, having raised £922,000. The Board has been considering ways in which shareholder liquidity can be improved given the inherent illiquidity in venture capital trust shares. To this end, the Board intends to convene an Extraordinary General Meeting which will be held on 14 November when shareholders will be asked to approve the conversion of the share premium account into a special distributable reserve for the purpose of buying back shares from shareholders who need to realise their holdings. Outlook Looking ahead, the Chairman, Sir Andrew Hugh Smith, said the Board regarded the current economic climate and depressed corporate asset values as an opportunity to take equity stakes in high-growth potential companies where returns are not expected in the short-term. "The portfolio is still young with more than £6m still available for investment at these lower values offering better opportunities for longer-term capital growth to our shareholders," he said. "Short-term values may yet continue to fall, but this is not necessarily of concern, given the longer-term view taken by the Company. The key consideration is to ensure that adequate future funding streams are in place to fund the investee companies through to market acceptance of their product." For further information, please contact: Phil Cammerman, Yorkshire Fund Managers Tel: 0113 294 5050 David Hardy, Binns & Co Tel: 020 7786 9600 Simon Mountford, Simon Mountford Communications Tel: 01347 844844 CHAIRMAN'S STATEMENT The six months covered by this reporting period have remained difficult in a depressed economic and market environment - particularly for technology businesses. Notwithstanding this, after adjusting for new funds raised in the period, the net asset value of your Company has suffered only a minimal reduction of 2%. This compares to a reduction in the Techmark Index of 32% in the same period. Any early signs of recovery have proved fragile and the decline of corporate asset values in the US has had an impact on UK businesses, an inevitable consequence of today's increasingly global markets. At this stage, we remain cautious about the current economy and the markets in which we are investing. Investment Valuations A total of £664,000 was invested in four companies in the first six months of this financial year. With market sentiment toward technology based companies remaining weak your Board has borne this in mind when valuing the portfolio at this current time. However, with the portfolio being relatively young and buy-in values already discounted at the time of investment it has been felt appropriate to leave all but one investment at cost. The write down on this latter investment, Tamesis Limited, in the period was £75,000, thus resulting in a full provision against this investment on a cumulative basis. Financial Results The net revenue return for the period was a loss of £10,000, or 0.14p per share. After taking account of the loss on capital account the total return was a loss of £124,000, or 1.69p per share. No dividend is being declared in line with the stated aim of the Company. Fund raising and Shareholder liquidity I reported briefly in the last Annual Report on the progress of the top-up fund raising under the prospectus dated 23 November 2001. The offer closed on 31 May 2002 with some £922,000 raised. This was a disappointing result but not totally unexpected in the difficult market conditions. Your Board has been looking at ways in which Shareholder liquidity can be improved given the inherent illiquidity in venture capital trust shares. To this end resolutions will be put to a forthcoming Extraordinary General Meeting on 14 November to enable the share premium account to be converted into a special distributable reserve for the purpose of buying back shares from Shareholders who have a need to realise their holding. Necessarily, such repurchases would be carried out on a discretionary basis and only at prices which did not imply dilution of other shareholders' interests. Notice of the EGM will be sent to Shareholders shortly with a recommendation from the directors to support the resolutions. Your Board and its Investment Adviser, Yorkshire Fund Managers Limited, will continue to look at ways of improving Shareholder liquidity. Outlook Although the current economic climate and general market sentiment, particularly toward technology-based businesses, has depressed corporate asset values, your Board sees this as an opportunity to take equity stakes in high-growth potential companies where returns are not expected in the short term. The portfolio is still young with over £6m still available for investment at these lower values offering better opportunity for longer-term capital growth to our Shareholders. Short-term values may yet continue to fall but this is not necessarily of concern given the longer-term view taken by your Company. The key consideration is to ensure adequate future funding streams are in place to fund the investee companies through to market acceptance of their product. Sir Andrew Hugh Smith Summarised Statement of Total Return Unaudited Unaudited Audited 6 months period ended Year ended ended 30 June 31 December 30 June 2001 2001 2002 £'000 £'000 £'000 Notes Revenue Gross revenue 145 106 288 Administrative expenses (155) (90) (253) Taxation 2 - (3) (7) ------- ------- ------- (10) 13 28 ------- ------- ------- Capital Realised (losses) gains (net) (5) - 72 Unrealised losses net (74) (39) (85) Management fee allocated to capital (35) (15) (49) Tax effect of capital items - 3 7 ------- ------- ------- (114) (51) (55) ------- ------- ------- Total return (124) (38) (27) ==== ==== ==== Appropriated: Revenue Transfer (from) to revenue reserve (10) 13 28 ------- ------- ------- Capital Decrease (increase) on reserves (114) (51) (55) ------- ------- ------- Total return per Ordinary share Revenue (0.14)p 0.29p 0.49p Capital (1.55)p (1.12)p (0.97)p ------- ------- ------- 3 (1.69)p (0.83)p (0.48)p ==== ==== ==== Notes The revenue section of this statement is the profit and loss account of the Company All activity has arisen from continuing operations. There is no difference between the net revenue return on ordinary activities before taxation and the transfer (from) to revenue reserves for the financial period and their historic cost equivalents Summarised Balance Sheet Unaudited Unaudited Audited 30 June 30 June 31 December 2002 2001 2001 £'000 £'000 £'000 Notes Fixed assets Investment portfolio 889 - 300 ------- ------- ------- Current assets Short-term investments 5,733 6,147 5,631 Debtors 207 34 109 Cash and short term deposits 419 122 437 ------- ------- ------- 6,359 6,303 6,177 Creditors: Amounts payable within one year (36) (17) (36) ------- ------- ------- Net current assets 6,323 6,286 6,141 ------- ------- ------- Total net assets 7,212 6,286 6,441 ==== ==== ==== Capital and reserves Called up share capital 780 673 688 Share premium account 6,577 5,651 5,780 Capital reserve (168) (51) (55) Warrant reserve 5 - - Revenue reserve 18 13 28 ------- ------- ------- Equity shareholders' funds 7,212 6,286 6,441 ==== ==== ==== Net asset value per Ordinary share 4 92.5p 93.4p 93.7p Summarised Cash Flow Statement Unaudited Unaudited Audited 6 months period ended Year ended ended 30 June 31 December 30 June 2001 2001 2002 £'000 £'000 £'000 Net cash outflow from operating activities (143) (15) (87) Financial investment (664) - (375) Management of liquid resources (105) (6,186) (5,569) -------- -------- -------- Net cash outflow before financing (912) (6,201) (6,031) Financing 894 6,323 6,468 -------- -------- -------- (Decrease) increase in cash (18) 122 437 -------- -------- -------- Notes to the Financial Statements 1. The interim financial statements have been prepared on a basis consistent with the statutory financial statements for the year ended 31 December 2001. The interim financial statements, which have been approved by the directors, are unaudited and do not constitute full financial statements as defined in section 240 of the Companies Act 1985. The comparative figures for the year ended 31 December 2001 do not constitute full financial statements and have been extracted from the Company's financial statements for the year ended 31 December 2001 which have been reported upon without qualification by the auditors and have been delivered to the Registrar of Companies. 2. Taxation charge Unaudited Unaudited Audited 6 months period Year ended ended ended 31 December 30 June 30 June 2001 2002 2001 £'000 £'000 £'000 Profit on ordinary activities multiplied by standard small company rate of corporation tax in the UK of 20% (2001:20%) (25) (8) (5) Effect of: Non taxable losses on investments (i) 16 8 3 Movement in excess management expenses (ii) 9 - 2 ------ ------ ------ Current tax charge for period - - - ------ ------ ------ (i) Venture Capital Trusts are not subject to corporation tax on these items (ii) The company has no deferred tax liability Taxation charge 3. The revenue return per share is based on net revenue loss from ordinary activities after tax attributable to shareholders of £10,000 (30 June 2001: net revenue £13,000 and 31 December 2001: net revenue £28,000) and on 7,314,199 shares (30 June 2001: 4,551,912 and 31 December 2001: 5,682,000), being the weighted average number of shares in issue during the period. There is no difference between the revenue return per share and the fully diluted revenue return per share in either period. 4. The net asset value per Ordinary share is calculated on attributable assets of £7,212,000 and 7,797,673 shares in issue at the period end (30 June 2001: £6,286,000 and 6,727,878 shares, 31 December 2001: £6,441,000 and 6,876,133 shares). 5. Copies of the interim report can be obtained from the Company's registered office: Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ. This information is provided by RNS The company news service from the London Stock Exchange

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