Final Results

Advent 2 VCT PLC 08 April 2003 ADVENT 2 VCT PLC 8 April 2003 RESULTS FOR THE YEAR ENDED 28 FEBRUARY 2003 The Board of Advent 2 VCT plc announces the results of the Company for the year ended 28 February 2003. Highlights - 0.9 million was raised in April 2002 through an offer for subscription of shares to fund follow-on investment activity. - In January 2003, the investment in Dencare Management Group was sold to Oasis Healthcare, a company listed on AIM, in exchange for shares and £0.5 million in cash. - During the period, the Company made follow-on investments totalling £2.6 million in ten existing portfolio companies. - Market conditions have resulted in three investments being written off, full provisions being made against the cost of two investments and partial provisions being introduced or increased against the cost of seven investments. Year Year ended ended 28 February 2003 28 February 2002 - Earnings per ordinary share (15.1)p (1.4)p - Net asset value per ordinary share 51.0p 84.3p - Net asset value per ordinary share (including all gross dividends paid and proposed) 72.8p 106.1p - A final dividend is not being recommended. - The Company continues to exceed the 70% requirement for investment in Qualifying Holdings set by the Inland Revenue. Chairman's Statement In my interim statement, I advised shareholders that the Company was enduring a turbulent period and I am sorry to report that these conditions have persisted throughout the remainder of the year. The negative attitude of markets toward the technology sector has resulted in a lack of both funding and liquidity opportunities, and these, together with a significant downturn in the market sectors into which many of our companies are selling, have resulted in further downward pressure on the value of the portfolio. In consequence, the net asset value per share has declined from 84.3p at 28 February 2002 to 51.0p as at 28 February 2003. Capital increase An offer was made to shareholders in March 2002 to subscribe for additional new ordinary shares in the Company, which raised £920,000 that provided funding for follow-on investments within the portfolio. Investment activity During the year a total of £2.6 million was invested in ten existing portfolio companies to meet their ongoing funding requirements. There were no new investments made during the year, and follow-on activity has been constrained by the lack of available cash within the Company. In January 2003, Dencare Management Group Ltd was sold to Oasis Healthcare plc (a company whose shares are traded on AIM) at a small discount to cost for a consideration comprising both new Oasis ordinary shares and a cash element of £0.5 million. On the other hand, investments in three companies, Displaymate Touchscreens Ltd, Intersolar Group Ltd and Optical Micro Devices Ltd were written off in the year and full provision has been made against the cost of the investments in Nexan Group Ltd and Rodaris Pharmaceuticals Ltd. In addition, provisions against cost have either been introduced or increased on a further seven companies. At the end of the year, the portfolio comprised 24 companies compared with 27 at the end of the previous year. The Company continues to exceed the 70% minimum requirement set by the Inland Revenue for qualifying holdings, thereby maintaining continued Venture Capital Trust status. Balance sheet The net asset value per share as at 28 February 2003 was 51.0p (net of dividends declared in prior periods) compared with 84.3p as at 28 February 2002. The investments in the portfolio have been valued in accordance with guidelines issued by the British Venture Capital Association. Dividend The Company has made no gains in the year and limited cash resources have resulted in low income returns. The Board is therefore not recommending a dividend. The gross cumulative dividends paid since the inception of the Company is 21.8p. Purchase of own shares In May, the Company repurchased and cancelled 100,000 shares. The Company has made occasional market purchases of its own shares to provide an additional measure of liquidity in the market for the Company's shares, as well as enhancing the net asset value for the remaining shareholders. However, repurchases can only be made when the cash position of the Company allows and it is therefore impractical to make any such purchases until there is far greater liquidity in the Company. Borrowing The Board has become increasingly concerned about the lack of cash available within the Company and the impact that the inability to make follow-on investments in portfolio companies' funding rounds may have on the equity position and valuation of portfolio holdings. Consequently, the Company has agreed a borrowing facility of £1.5 million with its bankers to provide funding in those situations where an inability to invest may have a severely adverse impact on the valuation and prospects for the Company's holding in a portfolio company. Advent Ltd has agreed to provide a guarantee for such borrowings. Outlook At the end of a poor year for the portfolio, I should like to be able to offer a rosier view of the immediate prospects, but there seems little imminent likelihood of a sustained recovery in markets and the economy at large, and therefore little hope of a short term recovery in the portfolio's fortunes. In these circumstances, the Manager's approach is to 'batten down the hatches' and to take all necessary measures to ensure that portfolio companies can trade through the current hard times and prosper when the markets and economy return to health. This involves ensuring that portfolio companies' management teams acknowledge and adapt to the new reality and either aim to reach cash breakeven at the earliest opportunity or stretch their cash reserves to the maximum extent. The Manager is confident that the majority of the remaining portfolio companies have the potential to develop significant value if and when circumstances improve. Indeed, there are a number of companies, such as Inca, EnSeal Systems and DNA Research Innovations, which are bucking the general trend and making solid progress even in the current environment. On the other hand, the ability of even good companies to raise finance is proving difficult, and could result in the reduction of company valuations. The Board shares the inevitable concern of shareholders at the rapid decline in the net asset value of the Company but is satisfied that the Manager is adopting the correct approach to maximise the possibility of gains over the longer term. Neither the Manager nor the Secretary are currently drawing fees from the Company and this, together with the willingness of Advent Ltd to guarantee the proposed bank borrowing, is indicative of the Manager's belief in the future prospects for the portfolio. Roger Brooke Chairman PROFIT AND LOSS ACCOUNT for the year ended 28 February 2003 2003 2002 £'000 £'000 -------- -------- Investment income and deposit interest 413 497 Investment management fees (423) (815) Other expenses (218) (211) -------- -------- Operating loss (228) (529) (Loss)/profit on realisation of investments (5,184) 50 -------- -------- Loss on ordinary activities before taxation (5,412) (479) Tax on ordinary activities - - -------- -------- Loss on ordinary activities after taxation (5,412) (479) Dividends - - -------- -------- Balance transferred from reserves (5,412) (479) ======== ======== Earnings per share (15.1)p (1.4)p ======== ======== STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 2003 2002 £'000 £'000 -------- -------- Loss for the year (5,412) (479) Unrealised loss on revaluation of investments (6,521) (3,374) -------- -------- Total recognised loss relating to the year (11,933) (3,853) ======== ======== BALANCE SHEET as at 28 February 2003 2003 2002 £'000 £'000 -------- -------- FIXED ASSETS Investments 17,999 28,830 CURRENT ASSETS Debtors 516 331 Money market and other deposits 2 238 Cash 190 194 -------- -------- 708 763 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (406) (155) -------- -------- NET CURRENT ASSETS 302 608 -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 18,301 29,438 ======== ======= CAPITAL AND RESERVES Called-up share capital 1,793 1,746 Share premium account 23,581 22,750 Capital redemption reserve 9 4 Revaluation reserve (9,708) (3,187) Profit and loss account 2,626 8,125 -------- -------- Equity shareholders' funds 18,301 29,438 ======== ======== Net asset value per ordinary share 51.0p 84.3p -------- -------- CASH FLOW STATEMENT for the year ended 28 February 2003 2003 2002 £'000 £'000 CASH FLOW FROM OPERATING ACTIVITIES AND RETURNS ON INVESTMENTS: Investment income received 372 219 Deposit and similar interest received 46 204 Investment management fees paid (423) (815) Secretarial fees paid (66) (63) Other cash payments (91) (94) -------- -------- NET CASH OUTFLOW FROM OPERATING ACTIVITIES AND RETURNS ON INVESTMENT (162) (549) -------- -------- TAXATION 5 440 -------- -------- FINANCIAL INVESTMENT: Purchase of unquoted investments and investments quoted on AIM (2,552) (5,605) Net proceeds on sale of unquoted investments 612 - Net proceeds on sale of quoted investments - 4 Redemption and sale of listed fixed income investments 1,061 1,609 --------- -------- NET CASH OUTFLOW FROM FINANCIAL INVESTMENT (879) (3,992) --------- -------- EQUITY DIVIDENDS PAID: Dividends paid on ordinary shares - - --------- -------- NET CASH OUTFLOW FROM PAYMENT OF EQUITY DIVIDENDS - - -------- -------- NET CASH OUTFLOW BEFORE FINANCING AND LIQUID RESOURCE MANAGEMENT (1,036) (4,101) --------- -------- MANAGEMENT OF LIQUID RESOURCES: Movement in money market and other deposits 236 4,187 -------- -------- FINANCING: Issue of ordinary shares 926 - Expenses on share issue (43) - Repurchase and cancellation of shares (87) (31) -------- -------- NET CASH INFLOW/(OUTFLOW) FROM FINANCING 796 (31) -------- -------- (DECREASE)/INCREASE IN CASH (4) 55 ======== ======== RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS 2003 2002 £'000 £'000 -------- -------- Opening shareholders' funds 29,438 33,322 Issue of ordinary shares 883 - Total recognised gains and losses for year (11,933) (3,853) Repurchase and cancellation of shares (87) (31) -------- -------- Closing shareholders' funds 18,301 29,438 -------- -------- The audit report on the full financial statements has yet to be signed. The preliminary announcement is prepared on the same basis as set out in the previous year's annual accounts. The preliminary announcement does not represent the Company's statutory accounts. The statutory accounts for the year ended 28 February 2002 have been delivered to the Registrar and included the report of the auditors which was unqualified and did not contain a statement under either section 237(2) or section 237(3) of the Companies Act 1985. This preliminary announcement was approved by the Board on 7 April 2003. Contacts for information: Advent Fund Managers - 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 LXESXDEFE

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