Interim Results

AIM VCT2 PLC 02 August 2004 To: RNS From: AiM VCT2 plc Date: (2) August 2004 Investment Objective AiM VCT2 plc aims to provide shareholders with a tax efficient means of gaining long term capital growth and an attractive dividend stream through investment in a diversified portfolio of AiM companies and unquoted companies which anticipate a stock market listing within 18 months. Interim Results - Period Ended 31 May 2004 • Net asset value per share of 91.27 pence. • New and follow-on investments totalled £7.1 million. Performance | The Company's net asset value per share made a modest gain of 3 per cent during the first half year, increasing to 91.27 pence per share, although this masks some significant movements both upwards and downwards in the valuations of individual holdings within the portfolio. During the first six months the Company's share price increased by 13.8 per cent to 82.5 pence. In the new year the Board appointed Teather & Greenwood as brokers and financial advisers to AiM VCT2 and the Board is pleased to say that with their help the discount to the net asset value at which the Company's shares trade has been better managed. At the end of May 2004 this discount was 9.6 per cent, which compares well with the 18.2 per cent level at the year end and is also better than many competing VCTs. During the first half year the Company bought back for cancellation shares worth £525,000 and the Board renewed its authority to buy back a proportion of the Company's share capital at this year's AGM held in April 2004. Results and Dividends | In revenue terms the Company made a loss of £31,000 and the Board is not in the position to recommend an interim income dividend. In the past the majority of the Company's earnings have been derived from holdings in government securities. This income has declined as the Company's holding in government securities has been sold in order to provide funds for the investment programme. Furthermore, AiM VCT2 invests in companies that are generally in the early stages of their growth plans and as such the Board do not expect to receive significant dividends from them for the time being. However, one of the advantages of the VCT is the ability to pay capital dividends as a result of realised capital profits from the sale of underlying investments. It is the Board's intention in future to seek to realise investments, as market conditions permit, in order to create capital dividends. During the first half year some such profitable sales have occurred but not of sufficient magnitude to justify a capital dividend at this stage. The Board will revisit the possibility of one at the year-end. Investment Programme | The Managers continued to take advantage of a steady flow of investment opportunities during the first half year. Twenty one new holdings were added to the portfolio including seven new companies joining AiM, two joining OFEX, one new unquoted investment opportunity and eleven existing companies that had further rounds of funding. In addition eight portfolio holdings raised further funds and were supported by the Trust. During the first half year a total of £7,097,000 was invested in the equity portfolio. The Managers also took advantage of favourable market conditions and strong early share price performance by taking profits from the Company's holdings in RingProp, Scott Tod, Straight and Pilat. Whilst the Managers have reduced exposure to these investments the Trust still retains significant holdings in them. It has been the Managers' strategy for AiM VCT2 to invest in a wide number of companies in order to increase diversification, whilst at the same time helping mitigate some of the inherent risks associated with smaller company investment. As a result of this strategy at 31 May 2004 the portfolio comprised 82 individual holdings well diversified by industry sector and business maturity. The AiM VCT2 portfolio has undergone considerable expansion over the past twelve months and, whilst the Managers will always be on the lookout for new ideas, a period of less activity is likely in the second half of the year. Managing Shareholders Needs | The Board is pleased that a number of shareholders took advantage of the Offer for Subscription, which closed on 8 April 2004. This Offer was the last to enable the rollover of capital gains into new shares in AiM VCT2 and raised £1.88 million. At the AGM in April shareholders approved the launch of a new 10 per cent Offer for Subscription, which has so far raised a further £398,000 and remains open for new investors. This new Offer reflects the changes in taxation benefits announced in the budget on 17 March 2004, designed to enhance further the attraction of subscription into VCTs. For the period of the next two tax years, 2004/05 and 2005/06, the ability to defer a liability to capital gains tax in new VCT shares has been withdrawn. This has been replaced with an increase in up-front income tax relief from a rate of 20 per cent to 40 per cent on subscription amounts, combined with a doubling to £200,000 of the individual annual investment limit. Outlook | So far this year AiM has experienced a high level of fundraising activity either by new companies looking to join the market or by existing listed companies. Whilst this has presented AiM VCT2 with many interesting investment opportunities there are signs that some indigestion is being felt by investors generally. As a result, smaller company shares and the smallest AiM company shares in particular are finding it difficult to make much headway as we move into the summer months. Whilst the Board feel the economic background is broadly positive for smaller companies it may not be until the autumn or later part of the year, before valuations move ahead again. After a busy period AiM VCT2's portfolio has become more fully invested and the Board anticipate a lower level of investment activity in the second half. Enquiries: Robert Mitchell/Bill Brown Investment Manager ISIS Asset Management plc Tel: 020 7506 1100 Unaudited Statement of Total Return (incorporating the revenue account) of the Company Six Months to 31 May 2004 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 1,360 1,360 Income 210 - 210 Investment management fee (114) (343) (457) Other expenses (127) - (127) Return on ordinary activities before tax (31) 1,017 986 Tax on ordinary activities - - - Return attributable to Equity shareholders (31) 1,017 986 Dividends in respect of (1) - (1) equity shares Transfer (from)/to reserves (32) 1,017 985 Return per ordinary share: (0.07)p 2.42p 2.35p Unaudited Statement of Total Return (incorporating the revenue account) of the Company Six Months to 31 May 2003 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 164 164 Income 730 - 730 Investment management fee (89) (267) (356) Other expenses (122) - (122) Return on ordinary activities before tax 519 (103) 416 Tax on ordinary activities (121) 77 (44) Return attributable to Equity shareholders 398 (26) 372 Dividends in respect of (248) - (248) equity shares Transfer to/(from) reserves 150 (26) 124 Return per ordinary share: 0.96p (0.06)p 0.90p Audited Statement of Total Return (incorporating the revenue account) of the Company Year to 30 November 2003 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 4,972 4,972 Income 1,187 - 1,187 Investment management fee (194) (580) (774) Other expenses (292) - (292) Return on ordinary activities before tax 701 4,392 5,093 Tax on ordinary activities (179) 175 (4) Return attributable to Equity shareholders 522 4,567 5,089 Dividends in respect of (498) - (498) equity shares Transfer to reserves 24 4,567 4,591 Return per ordinary share: 1.26p 11.03p 12.29p Unaudited Balance Sheet As at As at As at 31 May 31 May 30 November 2004 2003 2003* £'000 £'000 £'000 Fixed Assets Quoted on the Alternative Investment Market 28,862 9,879 22,263 Quoted on OFEX 2,888 1,754 2,238 UK government securities 392 15,750 7,719 Unlisted investments 5,001 4,464 4,714 ________ ________ ________ 37,143 31,847 36,934 Net current assets/(liabilities) 2,275 369 (179) ________ ________ _______ Net assets 39,418 32,216 36,755 ________ ________ ________ Financed by: Shareholders' funds 39,418 32,216 36,755 ________ ________ ________ Net asset value per ordinary share: 91.27p 77.77p 88.59p Ordinary shares in issue 43,188,084 41,426,291 41,490,367 *These figures are audited Summarised Unaudited Statement of Cash Flows Six months to Six months to Year to 31 May 31 May 30 November 2004 2003 2003* £'000 £'000 £'000 Net cash (outflow)/inflow (59) 571 1,384 from operating activities Tax paid - - (136) Capital expenditure and (1,310) (6) 1,196 financial investment Equity dividends paid (250) (413) (662) Net cash (outflow)/inflow (1,619) 152 1,782 before financing Financing 1,463 61 134 (Decrease)/increase in cash (156) 213 1,916 Reconciliation of net cash flow to movement in net cash (Decrease)/increase in cash (156) 213 1,916 Opening net cash 2,223 307 307 Net cash at 31 May / 30 2,067 520 2,223 November Profit on ordinary activities before taxation (31) 519 701 Management fee charged to capital (13) 4 (20) (Increase)/decrease in debtors (5) 86 674 (Decrease)/increase in creditors (10) (38) 29 Net cash (outflow)/inflow from operating activities (59) 571 1,384 *These figures are audited Notes 1. The unaudited interim results which cover the six months to 31 May 2004 have been drawn up in accordance with the applicable accounting standards, adopting the accounting policies set out in the statutory accounts for the year ended 30 November 2003. 2. There were 43,188,084 ordinary shares in issue at 31 May 2004 (31 May 2003: 41,426,291; 30 November 2003: 41,490,367). During the six months ended 31 May 2004 the Company issued 2,321,717 ordinary shares and bought back for cancellation 624,000 ordinary shares at a cost of £525,274. 3. Earnings for the six months to 31 May 2004 should not be taken as a guide to the results for the full year and are based on a weighted average of 42,105,278 (31 May 2003: 41,362,850; 30 November 2003: 41,403,710) ordinary shares in issue during the period. 4. Income for the period to 31 May is derived from: 2004 2003 £'000 £'000 Equity investment 75 31 Fixed interest investment 107 685 Deposit interest 28 14 ____ ____ 210 730 5. These are not statutory accounts in terms of Section 240 of the Companies Act 1985 and are unaudited. The full audited accounts for the period to 30 November 2003, which were unqualified, have been lodged with the Registrar of Companies. No statutory accounts in respect of any period after 30 November 2003 have been reported on by the Company's auditors or delivered to the Registrar of Companies. 6. Copies of the interim report will be mailed to shareholders shortly, and will be available from the Registered Office of the Company at 100 Wood Street, London EC2V 7AN. This information is provided by RNS The company news service from the London Stock Exchange

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