Annual Financial Report

RNS Number : 2241Q

Aberdeen Grwth Opp VCT2 PLC

06 April 2009

 



Aberdeen Growth Opportunities VCT 2 PLC

Annual Financial Report

The Directors present the Annual Financial Report for the year ended 31 December 2008.

Chairman's Statement

At present, the market values of many companies bear no relation to their underlying trading performance, due to the prospect of falling economic activity hanging over markets now that the credit crunch has evolved into both a financial and an economic problem. This is particularly true of the AIM market where the change in market sentiment has affected individual company values despite in a reduction in Net Asset Value, sound underlying earnings, resulting in a reduction in Net Asset Value. The majority of our investments, however, are in private companies, the valuations of which are not directly affected by stock market movements and where price/earnings performance remains robust. It is intended that there will be lower exposure to AIM in future and that the main focus will continue to be on high-yielding, well-priced, profitable private companies.

The major features of the year are:

• Total Return on Ordinary shares 95.3p per share at year end, down 15.6% over the year

• NAV of Ordinary shares at year end of 84.8p per share

• Total Return on S Shares 97.75p per share at year end, up 0.6% over the year

• NAV of S Share at year end of 95.5p per share

• One successful exit from an unlisted company during the year generating net gains of 1.7p per Ordinary share and 0.6p per S Share.

• Net realised gains from AIM stocks of 1.2p per Ordinary share for the year and 1.7p per S Share

• Dividends proposed of 1.3p per Ordinary share and 1.8p per S Share in respect of the year

Performance

The Total Return per Ordinary Share at 31 December 2008 was 95.3p per share, a decrease of 15.6% over the equivalent figure at December 2007, while for the S Share pool it was almost unchanged at 97.75p compared with 97.2p a year previously, an increase of 0.6% reflecting the differing mix of the two portfolios. The most important measure for a VCT is the total return, being the long term record of dividend payments out of income and capital gains combined with the current NAV. In the short term, the NAV on its own is a less important measure of performance as the underlying investments are long-term in nature and not readily realisable.

At 31 December 2008, the NAV per Ordinary share was 84.8p and the NAV per S Share was 95.5p.

VCT Qualifying Status

The Company is required to meet the 70% qualifying test on the combined pools from 1 January 2010 and continuously thereafter. The Board regularly reviews the status of the criteria that have to be met to continue to qualify as a VCT and I am pleased to confirm that all tests continue to be met. 

Dividends

The Board is proposing a final dividend of 1.3p per Ordinary Share and 1.8p per S Share to be paid on 20 May 2009 to shareholders on the register on 20 April 2009. Including the interim dividends paid in October 2008, the total tax-free yield for the year is 3.87% on the net cost Ordinary Shares and 4.0% on the net cost of S Shares.

Investment Strategy

The strategy remains to build a diversified portfolio of unlisted and AIM investments which offer strong growth prospects and therefore the opportunity for capital gains in the medium to longer term, while maintaining VCT qualifying status. The Company does not currently utilise gearing in making its investments but the Board may elect to take advantage on a selective basis of its ability to borrow up to 15% of Net Asset Value in pursuit of the investment strategy.

Your Board is obliged under the revised Listing Rules to ensure that this and subsequent reports carry additional information on investment policy, in particular statements concerning asset mix, the spread of risk and maximum exposures. This information is contained in the Directors' Report and in the tabular analyses of the two portfolios. 

Valuation Process

Investments held by Aberdeen Growth Opportunities VCT 2 in unquoted companies are valued in accordance with the International Private Equity and Venture Capital Valuation Guidelines.

Investments quoted or traded on a recognised stock exchange including the Alternative Investment Market (AIM) are valued at their bid price.

Portfolio Developments

There was one further successful exit from a company in the Ordinary Share pool unlisted portfolio during the course of the year which was also held by the S Share pool. The net gain from these realisations amounted to 1.7p per Ordinary share and 0.6p per S Share. Details of all investments and divestments during the course of the year are shown in the tables on pages 7 to 10.

There was little opportunity in view of the state of the AIM market to actively trade holdings; however, net gains of £92,000 and £83,000 for the Ordinary shares and S Shares respectively did arise from disposals. The FTSE AIM All-share index fell by an unprecedented 62.4% over the course of the year. 

Co-Investment Scheme of the Manager

The co-investment scheme which allows executive members of the Manager to invest alongside the Company continued in operation during the year. The scheme operates through a nominee company which invests alongside the Company in each and every transaction made by the Company, including any follow-on investments. The scheme more closely aligns the interests of the executives and the Company's shareholders while providing an incentive to enable the Manager to retain the existing skills and capacity of the Manager's investment team in a highly competitive market.

The Future

The unlisted investments held by the Company are generally trading well and are not directly affected by the turmoil which has been experienced in the quoted markets. It appears that the banks are reducing their exposure to commercial lending and the portfolio of unlisted companies may have to manage within their existing facilities; based on their current trading this should not cause any problems to our portfolio. However, if necessary the Company does have the cash to assist where appropriate. We generally hold seats on our investee companies' boards and therefore we are closely involved with those investments as they face the current and expected market conditions. We are of course less closely associated with AIM investments.

There has been little activity in the AIM market in recent months and it seems likely that it will be some time before new opportunities to invest in companies seeking an IPO on that market become available. As before, the Manager will maintain a focus on investing in unlisted companies which offer excellent growth prospects as the Manager believes these companies will offer the opportunity for profitable realisations in due course.

Ian Cormack

Chairman

3 April 2009

Investment Manager's Review

Investment Activity

During the year ended 31 December 2008, ten significant unlisted and AIM investments were completed and a total of £2.8 million was invested of which £1.5 million was from the Ordinary Share pool and £1.3 million was from the S Share pool. At the year end, the portfolio stood at 61 unlisted and AIM investments at a total cost of £10.4 million. Since 31 December 2008, one further new investment has been made at a cost of £311,000.

The following new investments have been completed during the year.

Investment	Date	Activity	Ordinary Shares	S Ordinary Shares	Website
Unlisted
Armannoch Investments	Nov-08	Provider of food services	225	125	No website available
Atlantic Foods	Feb-08	Supplier of food services	199	-	www atlanticfoods.co.uk
Broomco (4136)	Jul-08	Provider of CCTV	24	6	www.id-supportservices.co.uk
Camwatch	Mar-08	Provider of CCTV monitoring and installation services	50	149	www.camwatch.co.uk
Essential Viewing Systems	Jul-08	Provider of video streaming software	21	-	www.essential-viewing.com
MoneyPlus	Jul-08	Provider of debt management services to individuals	76	37	www.moneyplusgroup.co.uk
MS Industrial Services	Dec-08	Provider of industrial cleaning and waste management services to the oil and industrial sectors	37	17	www.msis.uk.com
Nessco	Jun-08	Provider of telecommunication services	124	199	www.nessco.co.uk
TC Communications	May-08	Marketing and communications services agency	159	99	www.tccommunications.co.uk
Training For Travel	Apr-08	Provision of assessment, tuition and or training in travel services	149	174	www.trainingfortravel.com
Valkyrie Capital	Nov-08	Provider of food services	225	125	No website available
Total unlisted investment			1,289	931

			Investment cost £'000
Investment	Date	Activity	Ordinary Shares	S Ordinary Shares	Website
AIM/PLUS
Animalcare	Jan-08	Markets and sells a wide range of pharmaceutical and other premium products and services to vets and vet wholesalers	-	100	www.animalcare.co.uk
Betbrokers	Mar-08	Provider of independent betting brokerage services	66	132	www.betbrokers.com
Brookwell	Jun-08	Closed-ended investment company established to acquire AIM Securities and Listed Securities from financial institutions	14	-	www.brookwelllimited.com
OPG Power Ventures	May-08	Develops, owns and manages power generation plants in India	49	50	www.opgpower.org
Optare	Jul-08	Bus manufacturer and low emission technology group	49	50	www.optare.com
Praesepe	Jul-08	Pursue acquisition and consolidation opportunities in the low-stake, high-volume gaming sector in the United Kingdom and Europe	49	50	www.praesepeplc.com
Total AIM/PLUS investment			227	382
Total			1,516	1,313

Aberdeen Growth Opportunities VCT 2 has co-invested with Aberdeen Income and Growth VCT, Aberdeen Growth VCT I, Aberdeen Growth Opportunities VCT, Talisman First Venture Capital Trust, Gateway VCT and Guinness Flight Venture Capital Trust in some or all of the above transactions and is expected to continue to do so with these as well as other clients of the Manager. The advantage is that, together, the funds are able to underwrite a wider range and size of transaction than would be the case on a stand alone basis.

Portfolio Developments

There was one successful realisation from the unlisted portfolio during the year; ID Support Services was sold for proceeds of £337,000 and £82,000 realising gains of £133,000 and £32,000 for the Original and S Share pools respectively. In each case there is a small element of deferred consideration which may give rise to further proceeds for the Company. In addition repayments of loan stock were received from Homelux Nenplas and Lime Investments as shown on the table on page 10.

During the reporting period six substantial new unlisted investments and four new AIM investments have been added to the portfolio.

Conditions in the AIM market were extremely challenging throughout the year with the FTSE AIM All-share Index declining by 62.4% over the year as first the financial crisis and then the underlying economic conditions affected sentiment. Opportunities to trade the portfolio were therefore much reduced as were the number of new IPOs in which to invest. The opportunity was taken to sell one holding where we perceived limited future upside which resulted in a loss for the Original Pool and there was a limited amount of trading in other stocks but gains of £92,000 and £83,000 were generated for the Original Pool and S Share Pool respectively. The AIM quoted businesses in which we are invested are generally continuing to trade profitably and in line with expectations and their market values bear little or no relation to their underlying profit and cash generation capability.

Investments in the unlisted portfolio are generally trading well and their values are not directly affected by the turmoil in the quoted markets and in many cases increased valuations have been achieved.

Outlook

We anticipate that it will be some time before the number of IPOs in the AIM market recovers to previous levels and therefore there will be few opportunities to invest in that market in the coming year. Conversely and while there are still some difficulties evident in securing appropriate bank funding for new unlisted investments, we will continue to invest selectively in well managed private companies where we perceive excellent growth prospects and therefore medium term financial gain. One of the issues facing many investors will be the availability of bank debt in the coming year. We have invested in businesses where the level of gearing is significantly less than much larger companies and in some cases without recourse to any bank debt. Consequently, we do not anticipate encountering the same degree of difficulty as those providing funding to larger more highly leveraged investments in renewing debt facilities.

Realisations during the financial year 

			Ordinary Share			S Ordinary Share
	Date first invested	Complete/ partial Exit	Cost of shares disposed of £'000	Sales proceeds  £'000	Realised gain/loss £'000	Cost of shares disposed of £'000	Sales proceeds £'000	Realised gain/loss £'000
Unlisted
Homelux Nenplas	2006	Partial	50	50	-	-	-	-
ID Support Services	2007	Complete	204	337	133	50	82	32
Lime Investments	2007	Partial	199	199	-	-	-	-
Others	13			13	-	4	5	1
466				599	133	54	87	33
AIM
Craneware	2007	Partial	141	229	88	46	75	29
Expansys	2007	Complete	31	6	(25)	8	2	(6)
Imprint	2005	Complete	153	58	(95)	-	-	-
Optare	2007	Partial	171	264	93	123	179	56
Pressure Technologies	2007	Complete	95	124	29	-	-	-
Other			99	101	2	32	36	4
			690	782	92	209	292	83
Total			1,156	1,381	225	263	379	116

ABERDEEN GROWTH OPPORTUNITIES VCT 2 PLC

INCOME STATEMENT

For the year ended 31 December 2008

		Ordinary shares			S Ordinary shares			Total
		Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Losses on investments	8	-	(1,459)	(1,459)	-	(42)	(42)	-	(1,501)	(1,501)
Income from investments	2	335	-	335	244	-	244	579	-	579
Other income	2	11	-	11	5	-	5	16	-	16
Investment management fees	3	(20)	(82)	(102)	(15)	(61)	(76)	(35)	(143)	(178)
Other expenses	4	(151)	-	(151)	(85)	-	(85)	(236)	-	(236)
Profit/(loss) on ordinary activities before taxation		175	(1,541)	(1,366)	149	(103)	46	324	(1,644)	(1,320)
Tax on ordinary activities	5	(29)	17	(12)	(28)	13	(15)	(57)	30	(27)
Profit/(loss) on ordinary activities after taxation		146	(1,524)	(1,378)	121	(90)	31	267	(1,614)	(1,347)
Earnings per share (pence)		1.9	(19.4)	(17.5)	2.4	(1.8)	0.6	4.3	(21.2)	(16.9)

 A Statement of Total Recognised Gains and Losses has not been prepared, as all gains and losses are recognised in the Income Statement.

All items in the above statement are derived from continuing operations. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

The total column of this statement is the Profit and Loss Account of the Company. 

Reconciliation of movements in Shareholders' Funds

For the year ended 31 December 2008

	Ordinary Shares	S Ordinary Shares	TOTAL
	£'000	£'000	£'000
Opening Shareholders' funds	8,221	4,831	13,052
Movements in the year
Total (loss)/profit for year	(1,378)	31	(1,347)
Dividends paid - revenue	(118)	(62)	(180)
Dividends paid - capital	(78)	(50)	(128)
Closing Shareholders' funds	6,647	4,750	11,397

  ABERDEEN GROWTH OPPORTUNITIES VCT 2 PLC

INCOME STATEMENT

For the year ended 31 December 2007

	Ordinary Shares			S Ordinary Shares			TOTAL
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
(Losss)/Gains on investments	-	(120)	(120)	-	69	69	-	(51)	(51)
Income from investments	334	-	334	145	-	145	479	-	479
Other income	28	-	28	27	-	27	55	-	55
Investment management fees	(37)	(148)	(185)	(14)	(56)	(70)	(51)	(204)	(255)
Other expenses	(155)	-	(155)	(64)	-	(64)	(219)	-	(219)
Profit/(loss) on ordinary activities before taxation	170	(268)	(98)	94	13	107	264	(255)	9
Tax on ordinary activities	(29)	29	-	(17)	17	-	(46)	46	-
Profit/(loss) on ordinary activities after taxation	141	(239)	(98)	77	30	107	218	(209)	9
Earnings per share (pence)	1.8	3.1	(1.3)	1.8	0.7	2.5	3.6	(2.4)	1.2

A Statement of Total Recognised Gains and Losses has not been prepared, as all gains and losses are recognised in the Income Statement.

All items in the above statement are derived from continuing operations. The Company has only one class of business and derives its income from investments made in shares, securities and bank deposits.

The total column of this Statement is the Profit and Loss Account of the Company.

RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

For the year ended 31 December 2007

	Ordinary Shares	S Ordinary Shares	TOTAL
	£'000	£'000	£'000
Opening Shareholders' funds	8,789	-	8,789
Movements in the period
Total (loss)/profit for year	(98)	107	9
Net proceeds of issue of shares	-	4,724	4,724
Dividends paid - revenue	(39)	-	(39)
Dividends paid - capital	(431)	-	(431)
Closing Shareholders' funds	8,221	4,831	13,052

  ABERDEEN GROWTH OPPORTUNITIES VCT 2 PLC

BALANCE SHEET

As at 31 December 2008

	31 December 2008			31 December 2007
	Ordinary	S Ordinary		Ordinary	S Ordinary
	Shares	Shares	Total	Shares	Shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Fixed assets
Investments at fair value through profit or loss	6,200	4,579	10,779	7,714	4,494	12,208
Current assets
Debtors	216	115	331	152	72	224
Cash and overnight deposits	276	90	366	444	307	751
	492	205	697	596	379	975
Creditors: amounts falling due within one year	(45)	(34)	(79)	(89)	(42)	(131)
Net current assets	447	171	618	507	337	844
Total net assets	6,647	4,750	11,397	8,221	4,831	13,052
Capital and reserves
Called up share capital	784	497	1,281	784	497	1,281
Share premium	-	4,227	4,227	-	4,227	4,227
Distributable reserve	6,660	-	6,660	6,660	-	6,660
Capital reserves - realised	1,049	(12)	1,037	965	(32)	933
Capital reserves - unrealised	(2,074)	(98)	(2,172)	(388)	62	(326)
Revenue reserve	228	136	364	200	77	277
Net assets attributable to Ordinary Shareholders	6,647	4,750	11,397	8,221	4,831	13,052
Net asset value per ordinary share (pence)	84.8	95.5		104.9	97.2

  ABERDEEN GROWTH OPPORTUNITIES VCT 2 PLC

CASH FLOW STATEMENT

For the year ended 31 December 2008

	Year to 31 December 2008			Year to 31 December 2007
	Ordinary	S Ordinary		Ordinary	S Ordinary
	Shares	Shares	Total	Shares	Shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Operating activities
Investment income received	267	207	474	297	56	353
Deposit interest received	12	6	18	36	25	61
Investment management fees paid	(141)	(101)	(242)	(183)	(51)	(234)
Secretarial fees paid	(62)	(34)	(96)	(48)	(13)	(61)
Cash paid to and on behalf of Directors	(53)	(31)	(84)	(39)	(12)	(51)
Other cash payments	(61)	(24)	(85)	(63)	(18)	(81)
Net cash (outflow)/ inflow from operating activities	(38)	23	(15)	-	(13)	(13)
Taxation
Corporation tax	-	-	-	-	-	-
Financial investment
Purchase of investments	(1,516)	(2,709)	(4,225)	(6,407)	(4,459)	(10,866)
Sale of investments	1,582	2,581	4,163	6,818	55	6,873
Net cash inflow/(outflow) from financial investment	66	(128)	(62)	411	(4,404)	(3,993)
Equity dividends paid	(196)	(112)	(308)	(470)	-	(470)
Net cash outflow before financing	(168)	(217)	(385)	(59)	(4,417)	(4,476)
Financing
Issue of ordinary shares	-	-	-	-	4,972	4,972
Expense of share issue	-	-	-	-	(248)	(248)
Net cash inflow from financing	-	-	-	-	4,724	4,724
(Decrease)/increase in cash	(168)	(217)	(385)	(59)	307	248

Notes to the Financial Statements for the year ended 31 December 2008

Accounting Policies - UK Generally Accepted Accounting Practice

(a) Basis of preparation 

The Financial Statements have been prepared under the historical cost convention modified to include the revaluation of investments and in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (the SORP) issued in 2005. The disclosures on Going Concern on page 25 of the Directors' Report form part of these financial statements.

(b) Income 

Dividends receivable on equity shares and unit trusts are treated as revenue for the period on an ex-dividend basis. Where no ex-dividend date is available dividends receivable on or before the year end are treated as revenue for the period. Provision is made for any dividends not expected to be received. The fixed returns on debt securities and non-equity shares are recognised on a time apportionment basis so as to reflect the effective interest rate on the debt securities and shares. Provision is made for any fixed income not expected to be received. Interest receivable from cash and short term deposits and interest payable are accrued to the end of the year.

(c) Expenses 

All expenses are accounted for on an accruals basis and charged to the income statement. Expenses are charged through the revenue account except as follows: 

- expenses which are incidental to the acquisition and disposal of an investment are charged to capital. 

- expenses are charged to realised capital reserves where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In this respect the investment management fee has been allocated 20% to revenue and 80% to realised capital reserves to reflect the Company's investment policy and prospective income and capital growth.

- share issue costs are charged to the share premium account. 

- expenses are allocated between the Original pool or the S Share pool depending on the nature of the expense.

(d) Taxation 

Deferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date, where transactions or events that result in an obligation to pay more tax in the future or right to pay less tax in the future have occurred at the balance sheet date. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods. 

Deferred tax is measured on a non-discounted basis at the tax rates that are expected to apply in the periods in which timing differences are expected to reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date. 

The tax effect of different items of income/gain and expenditure/loss is allocated between capital reserves and revenue account on the same basis as the particular item to which it relates using the Company's effective rate of tax for the period. 

(e) Investments 

In valuing unlisted investments the Directors follow the criteria set out below. These procedures comply with the revised International Private Equity and Venture Capital Valuation Guidelines for the valuation of private equity and venture capital investments. Investments are recognised at their trade date and are valued at fair value, which represent the Directors' view of the amount for which an asset could be exchanged between knowledgeable willing parties in an arm's length transaction. This does not assume that the underlying business is saleable at the reporting date or that its current shareholders have an intention to sell their holding in the near future. 

A financial asset or liability is generally derecognised when the contract that gives rise to it is settled, sold, cancelled or expires. 

1. For Investments completed within the 12 months prior to the reporting date and those at an early stage in their development, fair value is determined using the Price of Recent Investment Method, except that adjustments are made when there has been a material change in the trading circumstances of the company or a substantial movement in the relevant sector of the stock market. 

2. Whenever practical, recent investments will be valued by reference to a material arm's length transaction or a quoted price. 

3. Mature companies are valued by applying a multiple to their fully taxed prospective earnings to determine the enterprise value of the company. 

3.1 To obtain a valuation of the total ordinary share capital held by management and the institutional investors, the value of third party debt, institutional loan stock, debentures and preference share capital is deducted from the enterprise value. The effect of any performance related mechanisms is taken into account when determining the value of the ordinary share capital.

3.2 Preference shares, debentures and loan stock are valued using the Price of Recent Investment Method. When a redemption premium has accrued, this will only be valued if there is a reasonable prospect of it being paid. Preference shares which carry a right to convert into ordinary share capital are valued at the higher of the Price of Recent Investment Method basis and the price/earnings basis, both described above.

4. Where there is evidence of impairment, a provision may be taken against the previous valuation of the investment. 

5. In the absence of evidence of a deterioration, or strong defensible evidence of an increase in value, the fair value is determined to be that reported at the previous balance sheet date. 

6. All unlisted investments are valued individually by Aberdeen Private Equity's Portfolio Management Team. The resultant valuations are subject to detailed scrutiny and approval by the Directors of the Company. 

7. In accordance with normal market practice, investments listed on the Alternative Investment Market or a recognised stock exchange are valued at their bid market price. 

(f) Gains and losses on investments 

When the Company revalues its investments during the year, any gains or losses arising are credited/charged to the income statement.

Income

	Year ended 31 December 2008			Year ended 31 December 2007
	Ordinary Shares	S Ordinary Shares	Total	Ordinary Shares	S Ordinary Shares	Total
Income	£'000	£'000	£'000	£'000	£'000	£'000
Income from investments:
UK dividends	35	17	52	15	1	16
UK unfranked investment income	300	227	527	319	144	463
	335	244	579	334	145	479
Other income:
Deposit interest	11	5	16	28	27	55
Total income	346	249	595	362	172	534
Total income comprises:
Dividends	35	17	52	41	1	42
Interest	311	232	543	321	171	492
	346	249	595	362	172	534

Investments

	Year ended 31 December 2008
	Ordinary Shares				S Ordinary Shares				Total
	Listed	Unit Trusts	Unlisted & AIM	Total	Listed	Unit Trusts	Unlisted & AIM	Total	Listed	Unit Trusts	Unlisted & AIM	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Movements during the year:
Valuation at 1 January 2008	597	-	7,117	7,714	2,992	-	1,502	4,494	3,589	-	8,619	12,208
Unrealised (gain)/loss	(9)	-	397	388	(19)	-	(43)	(62)	(28)	-	354	326
Cost at beginning of year	588	-	7,514	8,102	2,973	-	1,459	4,432	3,561	-	8,973	12,534
Purchases	-	-	1,516	1,516	1,396	-	1,313	2,709	1,396	-	2,829	4,225
Sales proceeds	(201)	-	(1,381)	(1,582)	(2,202)	-	(379)	(2,581)	(2,403)	-	(1,760)	(4,163)
Realised gains	2	-	225	227	2	-	116	118	4	-	341	345
Amortisation of book cost	10	-	1	11	(1)	-	-	(1)	9	-	1	10
Cost at 31 December 2008	399	-	7,875	8,274	2,168	-	2,509	4,677	2,567	-	10,384	12,951
Unrealised gain/(loss)	3	-	(2,077)	(2,074)	42	-	(140)	(98)	45	-	(2,217)	(2,172)
Valuation at 31 December 2008	402	-	5,798	6,200	2,210	-	2,369	4,579	2,612	-	8,167	10,779

	Year ended 31 December 2007
	Ordinary Shares				S Ordinary Shares				Total
	Listed	Unit Trusts	Unlisted & AIM	Total	Listed	Unit Trusts	Unlisted & AIM	Total	Listed	Unit Trusts	Unlisted & AIM	Total
Investments	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Movements during the year:
Valuation at 1 January 2007	2,983	1,040	4,086	8,109	-	-	-	-	2,983	1,040	4,086	8,109
Unrealised loss/(gain)	2	(34)	(94)	(126)	-	-	-	-	2	(34)	(94)	(126)
Cost at beginning of year	2.985	1.006	3.992	7.983	-	-	-	-	2.985	1.006	3.992	7.983
Purchases	1,980	-	4,563	6,543	2,952	-	1,507	4,459	4,932	-	6,070	11,002
Sales proceeds	(4,379)	(1,024)	(1,415)	(6,818)	-	-	(55)	(55)	(4,379)	(1,024)	(1,470)	(6,873)
Realised gains	2	18	374	394	-	-	7	7	2	18	381	401
Amortisation of book cost	-	-	-	-	21	-	-	21	21	-	-	21
Cost at 31 December 2008	588	-	7,514	8,102	2,973	-	1,459	4,432	3,561	-	8,973	12,534
Unrealised gain/(loss)	9	-	(397)	(388)	19	-	43	62	28	-	(354)	(326)
Valuation at 31 December 2007	597	-	7,117	7,714	2,992	-	1,502	4,494	3,589	-	8,619	12,208

Portfolio

	Year ended 31 December 2008			Year ended 31 December 2007
	Ordinary Shares	S Ordinary Shares	Total	Ordinary Shares	S Ordinary Shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000
The portfolio valuation
Held at market valuation:
Listed Fixed Income	402	2,210	2,612	597	2,992	3,589
AIM quoted equities	1,233	512	1,745	3,083	450	3,533
	1,635	2,722	4,357	3,680	3,442	7,122
Unlisted at Directors' valuation:
Unquoted equities	1,103	325	1,428	1,061	236	1,297
Unquoted fixed income	3,462	1,532	4,994	2,973	816	3,789
	4,565	1,857	6,422	4,034	1,052	5,086
Total	6,200	4,579	10,779	7,714	4,494	12,208
Realised gains on historical basis	227	118	345	394	7	401
Net movement in unrealised (depreciation)/appreciation	(1,686)	(160)	(1,846)	(514)	62	(452)
	(1,459)	(42)	(1,501)	(120)	69	(51)

Derivatives and other financial instruments 

The Company's financial instruments comprise securities and other investments, financial investments and guarantees, cash balances and debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement, and debtors for accrued income. The Company may not enter into derivative transactions in the form of forward foreign currency contracts, futures and options without the written permission of the Directors. No derivative transactions were entered into during the period. 

The main risks the Company faces from its financial instruments are (i) market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rates, (ii) interest rate risk, (iii) liquidity risk, and (iv) credit risk. In line with the Company's investment objective, the portfolio comprises only sterling currency securities and therefore has no direct exposure to foreign currency risk. 

The Manager's policies for managing these risks are summarised below and have been applied throughout the period. The numerical disclosures below exclude short-term debtors and creditors, which are included in the balance sheet at fair value. 

Market price risk 

The Company's investment portfolio is exposed to market price fluctuations, which are monitored by the manager in pursuance of the investment objective as set out on page 18. Adherence to investment guidelines and to investment and borrowing policies set out in the management agreement mitigates the risk of excessive exposure to any particular type of security or issuer. These powers and guidelines include the requirement to invest in a minimum of 30 companies across a range of industrial and service sectors at varying stages of development, to closely monitor the progress of these companies and to appoint a non executive director to the board of each company. Further information on the investment portfolio (including sector concentration and deal type analysis) is set out in the Analysis of Unlisted and AIM Portfolio, Investment Manager's Review, Summary of Investment Changes, Investment Portfolio Summary and Largest Unlisted and AIM Investments on pages 5 to 15.

Interest rate risk 

The interest rate risk profile of financial assets at the balance sheet date was as follows:

Ordinary Shares	Fixed Interest	Floating rate	Non interest bearing
At 31 December 2008	£'000	£'000	£'000
Sterling
Listed Fixed Income	402	-	-
Unlisted and AIM	3,462	-	2,336
Cash	-	276	-
	3,864	276	2,336
Ordinary Shares	Fixed Interest	Floating rate	Non interest bearing
At 31 December 2007	£'000	£'000	£'000
Sterling
Listed Fixed Income	597	-	-
Unlisted and AIM	2,973	-	4,144
Cash	-	444	-
	3,570	444	4,144

The listed fixed interest assets have a weighted average life of 0.2 years (2007: 1.2 years) and weighted average interest rate of 5.7% (2007: 5.7%). 

The unlisted fixed interest assets have a weighted average life of 4.2 years (2007: 4.6 years) and weighted average interest rate of 9.75% (2007: 10.1%). The non-interest bearing assets represents the equity and unit trust element of the portfolio. All assets and liabilities of the fund are included in the balance sheet at fair value. 

It is the Directors' opinion that the carrying amounts of these financial assets represent the maximum credit risk exposure at the balance sheet date. 

The interest rate which determines the interest received on cash balances is the bank base rate.

S Ordinary Shares	Fixed Interest	Floating rate	Non interest bearing
At 31 December 2008	£'000	£'000	£'000
Sterling
Listed Fixed Income	2,210	-	-
Unlisted and AIM	1,532	-	837
Cash	-	90	-
	3,742	90	837
S Ordinary Shares	Fixed Interest	Floating rate	Non interest bearing
At 31 December 2007	£'000	£'000	£'000
Sterling
Listed Fixed Income	2,992	-	-
Unlisted and AIM	816	-	686
Cash	-	307	-
	3,808	307	686

The listed fixed interest assets have a weighted average life of 0.6 years (2007: 0.7 years) and weighted average interest rate of 5.7% (2007: 5.6%). 

The unlisted fixed interest assets have a weighted average life of 4.8 years (2007: 4.9 years) and weighted average interest rate of 9.9% (2007: 9.7%). The non-interest bearing assets represent the equity and unit trust element of the portfolio. All assets and liabilities of the fund are included in the balance sheet at fair value. 

It is the Directors' opinion that the carrying amounts of these financial assets represent the maximum credit risk exposure at the balance sheet date. 

The interest rate which determines the interest received on cash balances is the bank base rate. 

Liquidity risk 

Due to their nature, unlisted investments may not be readily realisable and therefore a portfolio of listed assets and cash is held to offset this liquidity risk. 

Credit risk and interest rate risk are minimised by acquiring high quality government treasury stocks or other bonds which have a relatively short time to maturity. See Investment Portfolio Summary on page 13. 

The company, generally, does not hold significant cash balances and any cash held is with reputable banks with high quality external credit ratings. 

Credit risk 

This is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. 

The Company's financial assets exposed to credit risk amounted to the following :

	31 December 2008			31 December 2007
	Ordinary shares	S Ordinary shares	Total	Ordinary  Shares	S Ordinary shares	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Investments in listed fixed interest instruments	402	2,210	2,612	597	2,992	3,589
Investments in unlisted debt securities	3,462	1,532	4,994	2,973	816	3,789
Cash and cash equivalents	276	90	366	444	307	751
	4,140	3,832	7,972	4,014	4,115	8,129

Credit risk arising on fixed interest instruments is mitigated by investing in UK Government Stock. 

All assets which are traded on a recognised exchange and all the Company's cash balances are held by JP Morgan Chase (JPM), the Company's custodian. Should the credit quality or the financial position of JPM deteriorate significantly the Manager will move these assets to another financial institution. 

The manager evaluates credit risk on unlisted debt securities and financial commitments and guarantees prior to investment, and as part of the ongoing monitoring of investments. In doing this, it takes into account the extent and quality of any security held. Typically, unlisted debt securities have a fixed charge over the assets of the investee company in order to mitigate the gross credit risk. The manager receives management accounts from investee companies, and members of the investment management team sit on the boards of investee companies; this enables the close identification, monitoring and management of investment specific credit risk.

There were no significant concentrations of credit risk to counterparties at 31 December 2008 or 31 December 2007.

Price risk sensitivity

The following details the Company's sensitivity to a 10% increase or decrease in the market prices of listed or AIM/PLUS quoted securities, with 10% being the Manager's assessment of a reasonable possible change in market prices. 

At 31 December 2008, if market prices of AIM/PLUS quoted securities had been 10% higher or lower and with all other variables held constant, the increase or decrease in net assets attributable to Ordinary Shareholders for the year would have been £164,000 (2007: £368,000) due to the change on valuation of financial assets at fair value through profit or loss. 

At 31 December 2008, if market prices of listed or AIM/PLUS quoted securities had been 10% higher or lower and with all other variables held constant, the increase or decrease in net assets attributable to S Ordinary Shareholders for the year would have been £272,000 (2007: £344,000) due to the change on valuation of financial assets at fair value through profit or loss.

ABERDEEN GROWTH OPPORTUNITIES VCT 2 

SUMMARY OF INVESTMENT CHANGES - ORDINARY SHARES

For the year ended 31 December 2008 

	Valuation		Net investment	Appreciation	Valuation
	31 December 2007		(disinvestment)	(depreciation)	31 December 2008
	£'000	%	£'000	£'000	£'000	%
Unlisted investments
Equities	1,061	12.9	(32)	74	1,103	16.6
Preference	31	0.4	(11)	-	20	0.3
Loan stocks	2,942	35.8	733	(233)	3,442	51.8
	4,034	49.1	690	(159)	4,565	68.7
AIM investments
Equities	3,083	37.5	(553)	(1,297)	1,233	18.5
Listed investments
Fixed income	597	7.3	(192)	(3)	402	6.0
Total investments	7,714	93.9	(55)	(1,459)	6,200	93.2
Other net assets	507	6.1	(60)	-	447	6.8
Total Assets	8,221	100.0	(115)	(1,459)	6,647	100.0

ABERDEEN GROWTH OPPORTUNITIES VCT 2 

SUMMARY OF INVESTMENT CHANGES - S ORDINARY SHARES

For the period ended 31 December 2008 

	Valuation		Net investment	Appreciation	Valuation
	31 December 2007		(disinvestment)	(depreciation)	31 December 2008
	£'000	%	£'000	£'000	£'000	%
Unlisted investments
Equities	236	4.9	55	34	325	6.8
Preference	4	0.1	(2)	-	2	-
Loan stocks	812	16.8	793	(75)	1,530	32.2
	1,052	21.8	846	(41)	1,857	39.0
AIM investments
Equities	450	9.3	89	(27)	512	10.8
Listed investments
Fixed income	2,992	61.9	(808)	26	2,210	46.5
Total investments	4,494	93.0	127	(42)	4,579	96.3
Other net assets	337	7.0	(166)	-	171	3.7
Total Assets	4,831	100.0	(39)	(42)	4,750	100.0

INVESTMENT PORTFOLIO SUMMARY

As at 31 December 2008

Investment Name	Ordinary Shares				S Ordinary Shares			Total
	Valuation	Cost		% of total assets	Valuation	Cost	% of  total  assets	% of equity held	% of equity held by other clients
Unlisted Investments
Funeral Services Partnership	357	298		5.4%	149	124	3.1%	3.0%	24.6%
Silkwater Holdings (trading as Cyclotech)	346	249		5.2%	138	99	2.9%	4.8%	13.6%
Dalglen 1148 (formerly Money Plus)	316	316		4.8%	158	158	3.3%	7.6%	66.5%
Transys Holdings	285	249		4.3%	171	149	3.6%	4.6%	65.2%
Camwatch	261	261		3.9%	149	149	3.1%	3.4%	37.1%
Training For Travel Group	170	149		2.6%	199	174	4.2%	3.7%	24.0%
Armannoch Investments	225	225		3.4%	125	125	2.6%	25.3%	61.0%
Valkyrie Capital	225	225		3.4%	125	125	2.6%	25.3%	61.0%
Energy Services Investment Company (ESIC)	248	248		3.7%	99	99	2.1%	13.3%	68.3%
Nessco Group Holdings	124	124		1.9%	199	199	4.2%	4.2%	31.9%
MS Industrial Services	220	220		3.3%	101	101	2.1%	4.5%	39.7%
Homelux Nenplas	319	149		4.8%	-	-	-	3.4%	41.6%
TC Communications Holdings	159	159		2.4%	99	99	2.1%	5.4%	29.8%
Atlantic Foods Group	253	199		3.8%	-	-	-	1.1%	7.7%
Adler & Allan Holdings	161	150		2.4%	81	75	1.7%	1.0%	38.5%
Oliver Kay Holdings	238	209		3.6%	-	-	-	1.3%	18.7%
Martel Instruments Holdings	224	224		3.4%	-	-	-	3.2%	30.2%
Essential Viewing Systems	158	184		2.4%	-	-	-	5.6%	35.2%
Enpure Holdings	145	100		2.2%	-	-	-	0.4%	79.2%
Countcar	77	6		1.2%	43	3	0.9%	3.1%	23.7%
Broomco (4136)	24	24		0.3%	6	6	0.1%	0.2%	1.9%
Others	30	813		0.3%	15	35	0.4%
	4,565	4,781		68.7%	1,857	1,720	39.0%
AIM/PLUS
Concateno	153	176		2.3%	31	50	0.7%	0.4%	1.4%
Betbrokers	60	66		0.9%	121	132	2.5%	0.6%	0.5%
Melorio	93	148		1.4%	57	90	1.2%	0.8%	1.2%
Animalcare Group (formerly Ritchey)	-	-		-	145	100	3.1%	0.9%	-
Mount Engineering	98	124	1.5%		28	35	0.6%	0.9%	1.2%
Plastics Capital	79	197	1.2%		20	50	0.4%	0.9%	2.6%
System C Healthcare	94	150	1.4%		-	-	-	0.3%	1.0%
Litcomp	90	100	1.4%		-	-	-	-	4.9%
DM	49	79	0.7%		25	40	0.5%	0.6%	0.5%
AMZ Holdings (formerly Amazing Holdings)	62	151	0.9%		-	-	-	0.5%	1.7%
Essentially Group	44	135	0.7%		16	49	0.3%	0.7%	-
Datong	52	151	0.8%		-	-	-	0.9%	1.1%
Avanti Communications Group	48	69	0.7%		-	-	-	0.1%	1.3%
Praesepe (formerly Aldgate Capital)	20	49	0.3%		20	50	0.4%	2.4%	10.2%
Smart Identity	36	72	0.5%		-	-	-	1.9%	3.4%
Hasgrove	36	49	0.5%		-	-	-	0.2%	1.8%
Formation Group PLC	18	49	0.3%		18	49	0.4%	0.2%	0.7%
Hambledon Mining	31	83	0.5%		-	-	-	0.2%	0.1%
OPG Power Ventures	14	41	0.2%		14	41	0.3%	0.2%	0.2%
Optare Plc (formerly Darwen Group)	14	27	0.2%		13	27	0.3%	0.2%	0.8%
Universe Group	25	100	0.4%		-	-	-	1.2%	1.4%
Others	117	1,078	1.7%		4	76	0.1%
	1,233	3,094	18.5%		512	789	10.8%
Listed fixed income investments
Treasury 4% 07/03/09	402	399	6.0%		1,057	1,047	22.2%
Treasury 5.75% 31/12/09	-	-	-		1,153	1,121	24.3%
	402	399	6.0%		2,210	2,168	46.5%
Total	6,200	8,274	93.2%		4,579	4,677	96.3%

A Other clients of the Aberdeen Asset Management Group.

Other information

The Annual General Meeting will be held on 14 May 2009, commencing at 10.30 a.m.

Returns per Ordinary share have been calculated using the weighted average number of shares in issue during the period of 7,835,163 (2007 - 7,835,163). The Net Asset Value per Ordinary share has been calculated using the number of shares in issue at 31 December 2008 of 7,835,163 (2007 - 7,835,163).

Returns per S Ordinary share have been calculated using the weighted average number of shares in issue during the period of 4,343,413 (2007 - 4,343,413). The Net Asset Value per S Ordinary share has been calculated using the number of shares in issue at 31 December 2008 of 4,972,459 (2007 - 4,972,459).

This Announcement has been prepared on the same basis as the Annual Report and Financial Statements for the year ended 31 December 2008. The Annual Report and Financial Statements for the year ended 31 December 2008 will be filed with the Registrar of Companies and issued to Shareholders.

The financial information contained within this Announcement does not constitute the Company's statutory Financial Statements as defined in Section 240 of the Companies Act 1985. The statutory Financial Statements for the year ended 31 December 2008 have been delivered to the Registrar of Companies and contained an audit report which was unqualified and did not constitute statements under Sections 237(2) or (3) of the Companies Act 1985.

Copies of this announcement will be available to the public at the registered office of the Company, 149 St Vincent Street, Glasgow; at the office of Aberdeen Asset Managers Limited, One Bow Churchyard, London; and on the Company's website at www.agovct2.co.uk.

Responsibility of the Directors in respect of the Annual Financial Report

We confirm that, to the best of our knowledge, the financial statements, prepared in accordance with the applicable set of accounting standards and set out on pages 30 to 44, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and the Directors' Report set out on pages 18 to 25, includes a fair review of the developments and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that they face.

By Order of the Board

ABERDEEN ASSET MANAGEMENT PLC

SECRETARIES

6 April 2009

 

END

 

 

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