Interim Results

Advent 2 VCT PLC 23 October 2003 Advent 2 VCT plc 23 October 2003 INTERIM REPORT FOR THE HALF YEAR ENDED 31 AUGUST 2003 The Board of Advent 2 VCT plc announces the results of the Company for the half year ended 31 August 2003 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 remaining holding in ADVA AG Optical Networking was sold for £0.1 million. The aggregate returns from the sale of the holding represent a total return multiple of 3.8 times the original cost. - During the period, the Company made follow-on investments totalling £0.5 million in three existing portfolio companies. - Provisions against two portfolio companies were reduced following an upturn in their trading performances, however, full provisions were made against the cost of two investments and a partial provision was introduced against one other investment. Half year Year Half year ended ended ended 31/08/03 28/02/03 31/08/02 (Unaudited) (Audited) (Unaudited) pence pence pence - Earnings per ordinary share (1.7) (15.1) (0.6) - Net asset value per share 45.4 51.0 60.9 - Dividends since inception (gross) 21.8 21.8 21.8 - Net asset value plus dividends 67.2 72.8 82.7 - 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 The six months to 31 August 2003 has seen a continuation of the challenging market conditions facing our portfolio companies and has largely been a period of retrenchment. With continuing constraints on significant capital expenditure by large companies (the principal customers of our portfolio companies) and a lack of opportunities to realise investments, the Manager has focussed its efforts on controlling the portfolio to ensure that investee companies will be able to take advantage of any recovery, the first signs of which are now becoming evident. The net asset value per share has suffered a further small decrease from 51.0p as at 28 February 2003 to 45.4p at 31 August 2003. Investment Activity The constraints on available cash resources have limited follow-on investment activity to £0.5 million in three companies. This activity has been partly funded by the sale of the remaining holding in ADVA AG. Although the residual holding in ADVA was sold at a small loss, overall the investment realised a total return multiple of 3.8 times the original cost of £1.7 million. A number of investments in the portfolio have shown improved performance during the period. EnSeal Systems, Footfall, DNA Research Innovations and INCA Digital Printers continued to make good progress while Elam-T closed a significant funding round at the same price as our original cost. Advanced Visual Technology and VectorCommand both increased sales and bottom-line performance and so the provision against the cost of each investment was reduced from 50% to 25%. Provisions were made against three investments. A 50% provision was made against the original cost of the investment in Prism Tech due to its failure to meet sales budgets and full provisions were made against the cost of the investments in Radiant Networks and Weston Antennas, which were unable to raise finance to continue the development of their respective technologies and sales. The general improvement in stock market sentiment has resulted in an increase in the value of the quoted shares in the portfolio, with XKO Group in particular benefiting from its strong trading performance. Borrowing As advised in my February 2003 statement, the Company has agreed a borrowing facility of £1.5 million with its bankers, of which £200,000 was drawn at 31 August 2003. Balance sheet The net asset value per share as at 31 August 2003 was 45.4p compared with 51.0p as at 28 February 2003. The investments in the portfolio have been valued in accordance with valuation guidelines issued by the British Venture Capital Association. Dividend The Company has made no gains in the period and the limited cash resources have resulted in minimal income returns. The Board is therefore not recommending an interim dividend. Outlook While market conditions remain difficult generally, there are some signs of an impending recovery, as evidenced by large companies beginning to reinstate their capital expenditure plans and a gradual return of merger and acquisition activity. If these early trends continue, the Board believes that the Company should be well placed to benefit from such a recovery as the majority of portfolio investments are now trading at or near cash breakeven or better and some are already increasing sales. Although it is too early to be optimistic about prospects, the Board is hopeful that it can report better news to investors in future. ROGER BROOKE Chairman Profit and Loss Account for the half year ended 31 August 2003 Half year ended Year ended Half year ended 31/08/03 28/02/03 31/08/02 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Investment income and deposit interest 90 413 307 Investment management fees (177) (423) (368) Other expenses (108) (218) (175) ------- ------- ------- Operating loss (195) (228) (236) (Loss)/profit on realisation of (424) (5,184) 23 investments ------- ------- ------- Loss on ordinary activities before (619) (5,412) (213) taxation Tax on ordinary activities - - - ------- ------- ------- Loss on ordinary activities after taxation (619) (5,412) (213) Dividends - - - ------- ------- ------- Balance transferred from reserves (619) (5,412) (213) ------- ------- ------- Earnings per share (1.7)p (15.1)p (0.6)p ------- ------- ------- Statement of Total Recognised Gains and Losses Half year ended Year ended Half year ended 31/08/03 28/02/03 31/08/02 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Loss for the period (619) (5,412) (213) Net unrealised loss on revaluation of (1,415) (6,521) (8,181) investments ------- ------- ------- Total recognised losses relating to the (2,034) (11,933) (8,394) period ------- ------- ------- All items in the above statement are derived from continuing operations. Balance Sheet as at 31 August 2003 31/08/03 28/02/03 31/08/02 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Fixed assets Venture capital investments Listed 733 274 220 Quoted on Deutsche Bourse - 59 47 Unquoted 15,777 17,666 20,985 ------- ------- ------- 16,510 17,999 21,252 Current assets Debtors 162 516 226 Cash and money 159 192 490 market deposits ------- ------- ------- 321 708 716 Creditors Amounts falling due within one year Other creditors (564) (406) (128) ------- ------- ------- (564) (406) (128) Net current (liabilities)/assets (243) 302 588 ------- ------- ------- Net assets 16,267 18,301 21,840 ------- ------- ------- Capital and reserves Called up share capital 1,793 1,793 1,793 Share premium account 23,581 23,581 23,581 Capital redemption reserve 9 9 9 Revaluation reserve (11,123) (9,708) (11,368) Profit and loss account 2,007 2,626 7,825 ------- ------- ------- Equity shareholders' funds 16,267 18,301 21,840 ------- ------- ------- Net asset value per ordinary share 45.4p 51.0p 60.9p ------- ------- ------- Cashflow Statement for the half year ended 31 August 2003 31/08/03 28/02/03 31/08/02 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Reconciliation of operating loss to net cashflow from operating activities Operating loss (195) (228) (236) Increase/(decrease) in creditors 158 251 (27) Decrease/(increase) in debtors 209 (190) (83) Amortisation of bonds - 5 5 ------- ------- ------- Net cash inflow/(outflow) from operating 172 (162) (341) activities ------- ------- ------- Taxation - 5 - Net capital expenditure and financial (205) (879) (583) investment Management of liquid resources - 236 53 Financing - 796 796 ------- ------- ------- Decrease in cash for the period (33) (4) (75) ------- ------- ------- Reconciliation of net cashflow to movement in net funds Decrease in cash for the period (33) (4) (75) Net funds at start of period 190 194 194 ------- ------- ------- Net funds at end of period 157 190 119 ------- ------- ------- Reconciliation of movement in shareholders' funds Half year ended Year ended Half year ended 31/08/03 28/02/03 31/08/02 (Unaudited) (Audited) (Unaudited) £'000 £'000 £'000 Opening shareholders' funds 18,301 29,438 29,438 Issue of shares - 883 883 Repurchase and cancellation of shares - (87) (87) Total recognised losses for the period (2,034) (11,933) (8,394) ------- ------- ------- Closing shareholders' funds 16,267 18,301 21,840 ------- ------- ------- Contacts for information: Advent Fund Managers Limited 020 7932 2100 Sir David Cooksey Les Gabb Capital MS&L 020 7878 3181 Annabel O'Connor Teather & Greenwood 020 7426 9000 Jonathan Becher END This information is provided by RNS The company news service from the London Stock Exchange

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