Interim Results

Advent 2 VCT PLC 17 October 2002 Advent 2 VCT plc 17 October 2002 INTERIM REPORT FOR THE HALF YEAR ENDED 31 AUGUST 2002 The Board of Advent 2 VCT plc announces the unaudited interim results of the company for the half year ended 31 August 2002. Objective The objective of Advent 2 VCT has been to invest in unquoted companies in the technology sector which could provide investors with an attractive return. Highlights - £0.9 million was raised in April 2002 through an offer for subscription of shares to fund follow-on investment activity. - During the period, the company made follow-on investments totalling £1.38 million. - Market conditions have resulted in full provision being made against the cost of three investments, whilst partial provision has been made against the cost of a further four investments. Half year Year Half year ended ended ended 31 August 2002 28 February 2002 31 August 2001 (unaudited) (audited) (unaudited) pence pence pence - Earnings per share (0.6) (1.4) (0.8) - Net asset value per share 60.9 84.3 92.8 - Net asset value per share plus all gross dividends paid since inception 82.7 106.1 114.6 - An interim dividend is not being recommended. - The company continues to exceed the 70% requirement for investment in Qualifying Holdings set by the Inland Revenue. 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 In March 2002, at the time of my annual statement, I reported that it had been a particularly difficult year for this company's portfolio, which had suffered from the change in market sentiment towards the technology sector. In the seven months since that time stock markets worldwide have fallen much further and there are no indications of a recovery of confidence in technology companies. The net asset value of the company has declined from 84.3p per share at 28 February 2002 to 60.9p at 31 August 2002 as it has been necessary to make increased provisions for portfolio companies that are encountering difficulties in this environment. The lack of liquidity continues to be a major problem as the company has limited resources for continued funding of its portfolio and the number of investors prepared to back technology companies is very few. The offer to subscribe for additional shares in the Company earlier in the year was taken up by a number of shareholders and a total of £920,000 was raised which has helped to fund follow-on investment activity. Investment activity Many of the companies in this portfolio are still at the stage where they need further rounds of finance to fund their continued growth. It is, however, important that they adapt their strategies and funding requirements to match the changed investment environment and your Manager has been working closely with them to achieve this. During this six-month period further investments totalling £1.38 million were made in seven portfolio companies. The principal investments were in Weston Antennas (£250,000), Casella Group (£250,000), Footfall (£250,000) and EnSeal Systems (£150,000). Several portfolio companies will need funding beyond the resources of the Company and other potential sources of funding are therefore being explored. However, during these difficult times, not all companies are able to make the changes required to survive. We have therefore reflected this in our portfolio valuations by making full provision against the cost of three companies: Optical Micro Devices, Rodaris Pharmaceuticals and Nexan. Within the portfolio there is competition for the limited resources available for follow-on funding. Displaymate Touchscreens had received some further support but it became clear during the summer that it was not building sales at the speed and to the level required to justify continued investment. In the absence of any other sources of finance, it was necessary to appoint a receiver and we anticipate recovering £180,000 from this investment. We have also introduced provisions in the case of four further portfolio companies: VectorCommand, Adeptra, Internet Pro Video to reflect the Manager's concerns over the commercial progress of these companies, and Radiant Networks, to recognise funding risk in the current markets. It was also necessary to revalue the investment in Intersolar back to cost. The valuation of Intersolar had been increased following a third party investment in the company at a higher valuation in September 2001. Since that time the company has explored the possibility of flotation on both the main market and the Alternative Investment Market but has finally concluded that this is not feasible in the current environment despite considerable indications of support. We believe that, in more normal market conditions, this company would have successfully floated. Dividend There has been no significant income during this period as the fixed interest portfolio has been realised to fund follow-on investments. The Board is not recommending an interim dividend. Balance Sheet The net asset value per share at 31 August 2002 was 60.9p compared with 84.3p per share at 28 February 2002. The venture capital investments have been valued in accordance with the British Venture Capital Association guidelines. Purchase of Own Shares In May, the company repurchased and cancelled 100,000 shares at an average price of 87.2p per share, at a total cost of £87,222. Outlook It seems unlikely that there will be any improvement in stock market sentiment until there are clear signs of sustained economic recovery and current political uncertainties are removed. Liquidity within the portfolio therefore remains a distant prospect. The Manager is working hard to ensure that portfolio companies survive this difficult period but this is challenging when other sources of funding for technology companies have all but dried up and the investment capacity of the Company is very limited. The Manager has therefore undertaken a detailed review of the portfolio and has identified the likely cash requirements of the most promising companies. To enable these companies to fulfil their potential and maximise returns to shareholders the Manager intends to establish a borrowing facility, although such a facility will be limited to less than 10% of the current portfolio value. Whilst I understand that the performance of the portfolio is not what you, as shareholders, would have hoped to see, it is important to put that performance into the context of the general market. The company was launched in March 1998 and taking into account the income tax relief received, a qualifying shareholder's cash investment in the company at that time was 80p. The company has paid gross dividends of 21.8p to date which when combined with the current net asset value of 60.9p give a total return to shareholders of 82.7p, or 3.4% of the cash investment. During the same period, the FTSE 100 index has fallen 28.7% and the FTSE All Share index by 36.0%. The Manager and I continue to believe that the portfolio contains companies that have the potential to enhance this return. The key in the current climate is survival and those companies that do survive will be well placed to make good returns for investors once the recovery comes. ROGER BROOKE Chairman Profit and Loss Account for the half year ended 31 August 2002 Half year ended Year ended Half year ended 31 August 2002 28 February 2002 31 August 2001 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Investment income and deposit interest 307 497 324 Investment management fees (368) (815) (402) Other expenses (175) (211) (187) ------- ------- ------- Operating loss (236) (529) (265) Profit on realisation of investments 23 50 - ------- ------ ------- Loss on ordinary activities before taxation (213) (479) (265) Tax on ordinary activities - - - ------- ------- ------- Loss on ordinary activities after taxation (213) (479) (265) Dividends - - - ------- ------- ------- Balance transferred from reserves (213) (479) (265) ------- ------- ------- Earnings per share (0.6)p (1.4)p (0.8)p Statement of Total Recognised Gains and Losses Half year ended Year ended Half year ended 31 August 2002 28 February 2002 31 August 2001 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Loss for the period (213) (479) (265) Net unrealised losses on revaluation of investments (8,181) (3,374) (610) ------- ------- ------- Total recognised losses relating to the period (8,394) (3,853) (875) ------- ------- ------- All items in the above statement are derived from continuing operations. Balance Sheet as at 31 August 2002 31 August 2002 28 February 2002 31 August 2001 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Fixed assets Venture capital investments Listed 220 198 213 Quoted on Neuer Markt 47 120 118 Unquoted 20,985 27,439 26,534 ------- ------- ------- 21,252 27,757 26,865 Listed fixed income investments - 1,073 2,685 ------- ------- ------- 21,252 28,830 29,550 Current assets Debtors 226 331 524 Cash and money market deposits 490 432 2,500 ------- ------- ------- 716 763 3,024 Creditors Amounts falling due within one year Other creditors 128 155 158 ------- ------- ------- 128 155 158 Net current assets 588 608 2,866 ------- ------- ------- Net assets 21,840 29,438 32,416 ------- ------- ------- Capital and reserves Called up share capital 1,793 1,746 1,746 Share premium account 23,581 22,750 22,750 Capital redemption reserve 9 4 4 Revaluation reserve (11,368) (3,187) (423) Profit and loss account 7,825 8,125 8,339 ------- ------- ------- Equity shareholders' funds 21,840 29,438 32,416 ------- ------- ------- Net asset value per ordinary share 60.9p 84.3p 92.8p ------- ------- ------- Cashflow Statement for the half year ended 31 August 2002 31 August 2002 28 February 2002 31 August 2001 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Reconciliation of operating loss to net cashflow from operating activities Operating loss (236) (529) (265) Decrease in creditors (27) (16) (12) Increase in debtors (83) (41) (47) Amortisation of bonds 5 37 22 ------- ------- ------- Net cash outflow from operating activities (341) (549) (302) ------- ------- ------- Taxation - 440 255 Net capital expenditure and financial investment (583) (3,992) (1,986) Management of liquid resources 53 4,187 2,118 Financing 796 (31) (31) ------- ------- ------- (Decrease)/ increase in cash for the period (75) 55 54 ------ ------- ------- Reconciliation of net cashflow to movement in net funds (Decrease)/ increase in cash for the period (75) 55 54 Net funds at start of period 194 139 139 ------- ------- ------- Net funds at end of period 119 194 193 ------- ------- ------- Reconciliation of movement in shareholders' funds Half year ended Year ended Half year ended 31 August 2002 28 February 2002 31 August 2001 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Opening shareholders' funds 29,438 33,322 33,322 Issue of ordinary shares 883 - - Repurchase and cancellation of shares (87) (31) (31) Total recognised losses for the period (8,394) (3,853) (875) ------ ------- ------- Closing shareholders' funds 21,840 29,438 32,416 ------- ------- ------- Contacts for information: Advent Limited - 020 7932 2100 Sir David Cooksey Les Gabb GCI Financial - 020 7398 0822 Annabel O'Connor Teather & Greenwood - 020 7426 9000 Jonathan Becher This information is provided by RNS The company news service from the London Stock Exchange

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