Final Results

AIM VCT2 PLC 24 January 2003 To: Company Announcements From: AiM VCT2 plc Date: 24 January 2003 Investment Objective To provide shareholders with a tax efficient means of gaining long term capital growth and an attractive dividend stream primarily through investment in a diversified portfolio of AiM companies and unquoted companies seeking a stock market listing within 18 months. • Net asset value per share of 77.48 pence. • Eighteen further investments made, totalling £8.1 million. • Total dividends of 2.1 pence per share. Introduction I The period since the Company was launched has coincided with one of the most difficult bear markets of recent times which has had a severe negative impact on smaller company investment returns generally and those of the AiM Market in particular. Against this difficult investment climate the Board draw some comfort that the overall performance of AiM VCT2 is better than most of its VCT peers launched in the winter of 2000/01 and also relative to the AiM market itself. Performance I Since the spring of the year 2000 stock markets around the world have been in a downward trend reacting initially to the bursting of the technology bubble which had developed as the Millennium approached and then to deteriorating economic conditions throughout the western world. This year markets have been severely impacted by the threat of world terrorism, numerous corporate scandals and the spectre of recession. Investors have reacted by withdrawing from the equity markets, resulting in lower levels of shares traded, increasing price volatility and severely depressed share prices. Smaller companies have been particularly badly affected by this deterioration of investor confidence, finding it difficult to raise finance for their growth plans and suffering in many cases sharp reductions to their market valuations. In addition investors have shied away from the younger and less well-established companies, or those not yet showing a profit, which characterises many of the constituents of the AiM market. As a result the FTSE AIM Index fell by 32.74% in the twelve months to 30 November 2002 and has now fallen 58.93% since the launch of AiM VCT2 in December 2000. This has been a very difficult environment in which to make investment gains and, against this background, the net asset value of AiM VCT2 has fallen by 18.44% over the past year to 77.48 pence per share. A little under half the net funds raised at launch have been invested in qualifying VCT investments and the performance of this part of the portfolio shows a reduction of 31% since launch. Whilst disappointing, this is significantly less than the contraction of the AIM Index itself. The performance of AiM VCT2 has undoubtedly been helped by continued exposure to a large proportion of a short dated government security held within the portfolio and the decision by the Managers to limit the amount of shareholders' funds being committed to the equity markets. The Company's share price has fared less well, falling from 80 pence at the beginning of the year to 57.5 pence at 30 November 2002. This has been driven by a small amount of shares being sold to the market with little corresponding buying interest. The share price has therefore fallen to a 25.8% discount to the Company's net asset value, which is surprising given that some 44 pence per share of the Company's net asset value comprises cash or government security. During the year the Board exercised its powers to buy back £296,000 worth of shares from the market for cancellation. Results and Dividends I As with last year the majority of the Company's earnings have been derived from the income earned on the holding in government security. As anticipated there has been little dividend income coming from the equity investments made to date, as it is expected that companies in the early stages of their business plans will not be in a position to pay significant dividends to their shareholders. Earnings for the year amounted to £890,000 and from this the Board is declaring a final dividend of 1.0 pence per share. Together with the interim dividend of 1.1 pence per share the total dividend for the year is 2.1 pence per share (2.2 pence per share 2001). The final dividend will be paid to shareholders on 11 April 2003. Investment Programme I The Managers have made further progress with the investment programme, investing £8.1 million across 23 VCT qualifying companies during the year. The AiM market attracted fewer new issues in 2002 due to the falling market and investor apathy towards smaller companies. In addition there was a much reduced number of VCT qualifying new issues in evidence throughout the year, which has meant a smaller pool of potential investment opportunities for AiM VCT2. The performance of companies backed during the year was mixed. Most are in the early stages of their business plans and it is too early to comment on their progress. However, a small number of companies did not perform well due to management failings or their markets not developing as hoped and this has been reflected in sharp reductions in their market valuations. Since launch £18.7 million has been invested across 36 individual companies. To meet the VCT requirement to invest at least 70% of net funds in qualifying companies by AiM VCT2's third anniversary there is a need to invest £27.8 million by that date. Taking the sum invested to date into consideration leaves a further £9.1 million to be invested this year. The Managers have been cautious about investing in the market throughout the past two years and have tended to invest at levels below the maximum £1 million allowed per company and to spread the investment risk over a more diversified portfolio than at first envisaged. Nevertheless, whilst the rate of investment is historically low, the Managers believe there are likely to be sufficient investment opportunities available in 2003 and the Board remains confident that the VCT tests will be achieved. Outlook I This bear market is already one of the longest recorded and valuations generally are at quite reasonable levels, so it is to be hoped that significant falls from here may be short-lived. Against this background the Company's portfolio is shaping up well and AiM VCT2 remains in a strong financial position to take advantage of the depressed valuations often being given to smaller companies. It is hoped the investments made during this difficult period will provide considerable upside potential on a market receovery. Enquiries: Robert Mitchell / Bill Brown Investment Managers ISIS Asset Management plc Tel: 0207 506 1100 Rhonda Nicoll Secretary ISIS Asset Management plc Tel: 0131 465 1074 Audited Statement of Total Return (incorporating the revenue account) of the Company Year to 30 November 2002 Revenue Capital Total £'000 £'000 £'000 Losses on investments - (6,855) (6,855) Income 1,711 - 1,711 Investment management fee (206) (618) (824) Other expenses (329) - (329) Return on ordinary activities before taxation 1,176 (7,473) (6,297) Tax on ordinary activities (286) 151 (135) Return attributable to equity shareholders 890 (7,322) (6,432) Dividends in respect of equity shares (871) - (871) Transfer to / (from) reserves 19 (7,322) (7,303) Return per ordinary share: 2.14p (17.61)p (15.47)p Audited Statement of Total Return (incorporating the revenue account) of the Company Period from 3 October 2000 to 30 November 2001 Revenue Capital Total £'000 £'000 £'000 Gains on investments - 200 200 Income 2,154 - 2,154 Investment management fee (224) (671) (895) Other expenses (279) - (279) Return on ordinary activities before taxation 1,651 (471) 1,180 Tax on ordinary activities (473) 192 (281) Return attributable to equity shareholders 1,178 (279) 899 Dividends in respect of equity shares (919) - (919) Transfer to / (from) reserves 259 (279) (20) Return per ordinary share: 2.96p (0.70)p 2.26p Audited Balance Sheet As at As at 30 November 30 November 2002 2001 £'000 £'000 Fixed Assets Quoted on the Alternative Investment Market 7,381 6,885 Quoted on OFEX 1,791 676 UK government security 18,385 28,253 Unquoted investments 4,291 3,556 31,848 39,370 Net current assets 182 266 Net assets 32,030 39,636 Financed by: Shareholders' funds 32,030 39,636 Net asset value per ordinary share: 77.48p 95.00p Ordinary shares in issue 41,338,064 41,722,333 Summarised Audited Statement of Cash Flows Period from Year to 3 October 30 November 2000 to 2002 30 November 2001 £'000 £'000 Net cash flow from operating activities 1,410 855 Tax Paid (283) - Capital expenditure and financial investment (240) (39,411) Equity dividends paid (917) (460) ----------- ----------- Net cash flow before financing (30) (39,016) Financing (303) 39,656 ----------- ----------- (Decrease)/increase in cash (333) 640 ----------- ----------- Reconciliation of net cash flow to movement in net cash (Decrease)/increase in cash (333) 640 Net cash at 1 December 2001 / 3 October 2000 640 - ----------- ----------- Net cash at 30 November 307 640 ----------- ----------- Reconciliation of operating profit to net cash flow from activities Net revenue before taxation 1,176 1,651 Management fee charged to capital 34 (175) Decrease / (increase) in debtors 259 (946) (Decrease) / increase in creditors (59) 325 ----------- ----------- Net cash flow from operating activities 1,410 855 ----------- ----------- Notes 1. The audited results which cover the year to 30 November 2002 have been drawn up in accordance with applicable accounting standards and adopting the Statement of Recommended Practice for Financial Statements of Investment Trust Companies and on the assumption that the Company maintains VCT status. 2. There were 41,338,064 ordinary shares in issue at 30 November 2002 (2001: 41,722,333). During the period 384,269 ordinary shares of 10p each were bought in by the Company for cancellation (2001: 113,750). 3. Revenue and capital returns for the year to 30 November 2002 are based on a weighted average of 41,579,408 (2001: 39,726,696) ordinary shares in issue during the period. 4. Income for the year to 30 November is derived from: 2002 2001 £'000 £'000 Dividend Income 43 - Fixed interest investment 1,628 2,027 Deposit interest 40 121 Underwriting commission - 6 1,711 2,154 5. The final proposed dividend of 1.0 pence per ordinary share will be paid on 11 April 2003, subject to shareholder approval, to eligible shareholders on the register on 7 February 2003. 6. These are not full accounts in terms of Section 240 of the Companies Act 1985. Full audited accounts for the period to 30 November 2001 have been lodged with the Registrar of Companies. The annual report for the year to 30 November 2002 will be sent to shareholders shortly and will then be available for inspection at 100 Wood Street, London, the registered office of the Company. Both the audited accounts for the year to 30 November 2002 and 2001 contain unqualified audit reports. 7. The Annual General Meeting will be held on 10 April 2003 at 11.00am. This information is provided by RNS The company news service from the London Stock Exchange

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