Interim Results

Advent 2 VCT PLC 19 October 2001 Advent 2 VCT plc 19 October 2001 Interim Report for the half year ended 31 August 2001 Objective The objective of Advent 2 VCT is to provide investors with an attractive return, principally by maximising the stream of dividend distributions from the income and capital gains generated by a portfolio of investments mainly in established unquoted companies in the United Kingdom. Highlights - During the period, the company made investments totalling £1.9 million. - As at 31 August 2001, the company had 75.7% of its investments in Qualifying Holdings. This exceeds the 70% minimum requirement set by the Inland Revenue. - Two portfolio investments were revalued to third party transaction prices in line with BVCA guidelines. Optical Micro Devices Ltd was revalued to £1.8 million, a multiple of 2.3 times cost and Intersolar Group Ltd was revalued to £3.6 million, a multiple of 1.9 times cost. - Post Impressions (Systems) Ltd was acquired by Snell & Wilcox Ltd in a share for share offer, resulting in a write down of the original investment. Half year Half year ended Year ended ended 31 August 2001 28 February 31 August 2000 2001 (unaudited) (audited) (unaudited) pence pence pence Earnings per share (0.8) 15.1 15.6 Net asset value per share 92.8 95.3 108.8 Net asset value per share plus all 114.6 117.1 130.6 gross dividends paid since inception - An interim dividend is not being recommended. Venture Capital Trust status Advent 2 VCT has been granted approval under section 842AA of the Income and Corporation Taxes Act 1988 and it is intended that the business of the company be carried on so as to comply with that section. Chairman's Statement This interim report of Advent 2 VCT covers the half-year ended 31 August 2001. Progress in investment In the past 6 months a total of £1.9 million was invested. £1.7 million was invested in existing portfolio companies and £0.2 million was invested in Snell & Wilcox Ltd, as a part of the deal in which that company acquired Post Impressions (Systems) Ltd. Of the £1.7 million invested in existing portfolio companies, £1.1 million was part of new financing rounds and £0.6 million was for further tranches committed previously. As at 31 August 2001, the company had 75.7% of its investments in Qualifying Holdings, exceeding the 70% minimum requirement set by the Inland Revenue. Disposal During the period, Post Impressions (Systems) Ltd, a company involved in developing software for post production applications for the media and entertainment industry, was acquired by Snell & Wilcox Ltd in a share for share offer. Snell & Wilcox is an established company operating in the broadcasting and post production market. The transaction valued the Snell & Wilcox shares received at £67,000, well below the £598,000 invested in Post Impressions. However, due to the difficulties that have been encountered by companies operating in this sector, the Manager considers the combined group will benefit from each other's core competencies and place it in a better position in the market. Development of the portfolio During the period, two investments were revalued as a result of third party transactions. Optical Micro Devices Ltd, a company involved in the opto-electronics components industry was revalued to £2.4 million. However, given the current market volatility, the directors have taken a conservative view and limited the upward revaluation. The resulting valuation of £1.8m still represents a multiple of 2.3 times cost. Another portfolio company, Intersolar Group Ltd, a manufacturer of solar powered consumer products, was revalued to £3.6 million. This represents a valuation of 1.9 times cost. However, provisions of 25% were made against Weston Antennas Ltd and Interactive Control Solutions Ltd. Weston Antennas Ltd was previously valued by reference to a third party transaction price. During the period, share prices continued to fall across the global stock markets resulting in significant falls in the valuation of quoted companies within the portfolio. This was especially the case with technology stocks and the holdings in XKO Group plc, listed on the London Stock Exchange, and ADVA Optical Networking AG, listed on the German Neuer Markt were particularly effected. Dividend As stated in the annual report, the transition from investments in fixed interest securities to venture capital investments has inevitably led to a decline in income. Consequently, the Board is not recommending an interim dividend. The gross cumulative total dividends paid since the inception of the company is 21.8p. Balance Sheet The net asset value per share at 31 August 2001 was 92.8p (net of dividends declared in prior periods), compared with 95.3p at 28 February 2001. The venture capital investments have been valued in accordance with the British Venture Capital Association guidelines, under which, inter alia, unquoted investments are not normally revalued above cost for at least 12 months after the date of acquisition. Purchase of Own Shares In August, the company repurchased 44,148 shares. As stated in my previous statement, occasional market purchases by the company of its own shares provide an additional measure of liquidity in the market for the company's shares and enhance the net asset value per share for the company's remaining shareholders. Therefore it continues to be a policy of the company to consider the repurchase of shares when they become available. Outlook The market continues to show volatility with conditions especially difficult in the technology sector. The Board expects the uncertainty in the markets to continue in the foreseeable future. However, the Board is confident that the portfolio contains investments with significant value potential. Your Manager's efforts are concentrated on working closely with these companies so that this value can be realised on eventual exit. However, the current environment will inevitably result in divestment opportunities taking longer to achieve and will therefore require us to be patient. Profit and Loss Account for the half year ended 31 August 2001 Half year to 31 Year ended 28 Half year to 31 August 2001 February 2001 August 2000 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Investment income and deposit 324 1,106 728 interest Investment management fees (402) (902) (445) Other expenses (187) (258) (152) ______ ______ ______ Operating(loss)/profit (265) (54) 131 Profit on realisation of - 5,325 5,318 investments ______ ______ ______ (Loss)/profit on ordinary (265) 5,271 5,449 activities before taxation Tax on ordinary activities - - (7) ______ ______ ______ (Loss)/profit on ordinary (265) 5,271 5,442 activities after taxation Dividends - (4,861) (4,861) ______ ______ ______ Balance transferred (from)/to (265) 410 581 reserves ______ ______ ______ Earnings per share (0.8)p 15.1p 15.6p Statement of Total Recognised Gains and Losses Half year Year ended Half year to to 31 August 28 February 31 August 2001 2001 2000 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 (Loss)/profit for the period (265) 5,271 5,442 Net unrealised (loss)/ gain on (610) (1,672) 2,866 revaluation of investments ______ ______ ______ Total recognised (losses)/gains relating (875) 3,599 8,308 to the period ______ ______ ______ All items in the above statement are derived from continuing operations. Balance Sheet as at 31 August 2001 31 August 28 February 31 August 2001 2001 2000 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Fixed assets Venture capital investments Listed 213 1,119 1,727 Quoted on Neuer Markt 118 701 4,358 Unquoted 26,534 23,552 17,267 ______ ______ ______ 26,865 25,372 23,352 Listed fixed income investments 2,685 2,704 16,798 ______ ______ ______ 29,550 28,076 40,150 Current assets Debtors 524 1,045 1,149 Cash and money 2,500 4,564 2,126 market deposits ______ ______ ______ 3,024 5,609 3,275 Creditors Amounts falling due within one year Dividend payable - - 4,861 Corporation tax - 192 199 Other creditors 158 171 334 ______ ______ ______ 158 363 5,394 Net current assets/(liabilities) 2,866 5,246 (2,119) ______ ______ ______ Net assets 32,416 33,322 38,031 ______ ______ ______ Capital and reserves Called up share capital 1,746 1,748 1,748 Share premium account 22,750 22,750 22,750 Capital redemption reserve 4 2 2 Revaluation reserve (423) 187 4,725 Profit and loss account 8,339 8,635 8,806 ______ ______ ______ Equity shareholders' funds 32,416 33,322 38,031 ______ ______ ______ Net asset value per ordinary share 92.8p 95.3p 108.8p ______ ______ ______ Cashflow Statement for the half year ended 31 August 2001 31 August 28 31 August 2001 February 2000 2001 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Reconciliation of operating (loss)/profit to net cashflow from operating activities Operating (loss)/profit (265) (54) 131 Decrease in creditors (12) (132) (319) (Increase)/decrease in debtors (47) 177 (190) Amortisation of bonds 22 180 100 Income from First Fibre rolled into base cost of ADVA holding - - (140) ______ ______ ______ Net cash (outflow)/ inflow from operating activities (302) 171 (418) ______ ______ ______ Taxation 255 (36) 105 Net capital expenditure and financial (1,986) 4,226 (2,625) investment Equity dividends paid - (5,316) (455) Management of liquid resources 2,118 877 3,261 Financing (31) (32) (32) ______ ______ ______ Increase/(decrease) in cash for the period 54 (110) (164) ______ ______ ______ Reconciliation of net cashflow to movement in net funds Increase/(decrease) in cash for the period 54 (110) (164) Net funds at start of period 139 249 249 ______ ______ ______ Net funds at end of period 193 139 85 ______ ______ ______ Reconciliation of movement in shareholders' funds Half year to Year to Half year to 31 August 28 February 31 August 2001 2001 2000 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Opening shareholders' funds 33,322 34,616 34,616 Total recognised (losses)/gains for (875) 3,599 8,308 period Repurchase and cancellation of shares (31) (32) (32) Dividends appropriated - (4,861) (4,861) ______ ______ ______ Closing shareholders' funds 32,416 33,322 38,031 ______ ______ ______ Contacts for information: Advent Venture Partners 020 7630 9811 Sir David Cooksey GCI 020 7398 0822 Annabel O'Connor

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