Interim Management Statement

RNS Number : 3494Q

Bluehone AIM VCT2 PLC

08 April 2009

 



Bluehone AIM VCT2 plc

Interim management statement

For the three month period from 1 December 2008 to 28 February 2009

Investment Objective

The Company's investment objective is 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 or unquoted companies which anticipate a stock market quotation. 

Performance Summary

Capital return	As at  29 February   2009	As at 30 November  2008	Movement
Ordinary shares
Net assets	£17.7m	£17.9m
Net asset value per share	31.89p	32.32p	(1.3)%
Share price	21.75p	19.00p	14.5%
Discount to NAV	31.8%	41.2%
C shares
Net assets	£1.5m	£1.7m
Net asset value per share	49.88p	56.47p	(11.7)%
Share price	28.50p	45.00p	(36.7)%
Discount to NAV	42.9%	20.3%
Total return	For the three month period ended 28  February 2009
Ordinary shares
Net asset value 1	(1.3)%
Share price2	14.5%
C shares
Net asset value 1	(11.7)%
Share price2	(36.7)%
FTSE AIM3	(3.1)%

1NAV total return = NAV + reinvested dividends; Source: F&C Asset Management  

2Share price total return = mid to mid share price + reinvested dividends; Source: Datastream

3Source: Datastream

  Investment Performance 

Share Capital Changes

In the three month period to 28 February 2009 there were no share buybacks

Investment Activity

Investment Performance

As we move into 2009 the consensus is that the recession is likely to be deeper and more prolonged than had been anticipated in 2008. In response there has been considerable further monetary easing - with interest rates falling from 2% to 0.5% since our last report - and a fiscal stimulus the likes of which the country has not experienced in living memory. It is too early in the cycle to see any evidence that this is having the desired impact and despite unprecedented government intervention on both sides of the Atlantic, commercial lending has not yet restarted. Even quality borrowers are being turned down by banks whose primary focus is to rebuild their own balance sheets, making it difficult for companies to take advantage of exceptionally low interest rates. However in a sign that some life might be returning to the capital markets, some companies have been successful in tapping investors for capital and rights issues appear to be being supported by shareholders - although this fundraising activity is mainly confined to the larger and medium sized corporates, with smaller companies finding it much more difficult to raise funds. 

The results season is in full swing with resilience being shown in some sectors but others reporting earnings weakness and uncertain outlooks. Against this background equity valuations appear to have priced in much of the bad news and companies are looking cheap by historical standards - even with the recent earnings downgrades factored in. Once evidence shows that the coordinated intervention by authorities is having a positive impact then we would expect stock markets to anticipate economic recovery by posting positive gains from these low levels. This will eventually filter down to the smaller company end of the market where a lack of liquidity may result in some sharp upward moves in share prices. 

The FTSE AIM Index (total return) decreased by 3.1 over the quarter which is less than the FTSE SMALL Cap Index (tr) (-5.1%), FTSE 100 Index (tr) (-9.8%) and the FTSE ALL Share Index (tr) (-8.7%). The FTSE AIM Index (tr) has now fallen by 71.3% since the launch of Bluehone AiM VCT2 in December 2000.

The NAV of the ordinary pool decreased by 1.3% to 31.9 pence per share, helped by good performance from the portfolio's new largest holding Vectura, as well as the recovery in some of the other holdings which had fallen previously. On average, however, there were more fallers than risers over the period. On a more positive note the portfolio has recently had good results from Healthcare Locums, FDM, CBG, Craneware, Amino, Netcall and K3 Business Technology, although these have not necessarily resulted in improvements in share prices.

The C share pool did not fare so well with a fall of 11.7% to 49.9 pence per share, with the main detractors being the write off of Infonic (£24k), following the company's move into administration after outstanding loans were called in by its lender; Essentially (£24k) due to a perceived likely reduction in corporate sponsorship; Formjet (£15k) which had a poor trading update and SRT (£15k) with the failure of one division following non payment of licence income from a Chinese customer. Fulcrum Pharma (£24k); IS Pharma (£18k) and CBG (£15k) also declined in value; however there was no particular reason evident for their fall.

Bluehone and the previous Managers, F&C, have been liaising with HM Revenue and Customs to recover on the Company's behalf VAT paid in the past on investment management fees. During the quarter to 28 February 2009 the Company received VAT of £592,000 in respect of the period from the Company's launch in December 2000 to February 2005. The Company also received interest of £156,000 on the VAT recovered. All VAT on management fees paid in the past and interest thereon amounting to £1,235,000 has now been received. 

Investment Activity and Realisations

No new or follow on equity purchases were made during the quarter for either portfolio in order to conserve cash in a deteriorating market.

The purchases during the quarter were: 

Ordinary Portfolio:

Company	Date	Cost (£'000)	VCT status
UK 5.75% 071209	January	780	Non- qualifying
Total purchases		780

C Portfolio:

There were no purchases during the quarter.

Investment Realisation

Ordinary Portfolio:

There were no sales during the quarter

C Portfolio:

There were no sales during the quarter

Top ten investment holdings - combined portfolio

Position as at  28 February 2009	Position as at  30 November  2008	Company	Percentage of net assets as at 28 February 2009
1	(1)	Vectura	10.7
2	(2)	Portland Gas	8.1
3	(10	UK Treasury 5.75% 071209	6.6
4	(3)	Cambridge Sensors	6.1
5	(4)	UK Treasury 4% 070309	4.6
6	(8)	FDM Group	3.2
7	(9)	Quadnetics	3.0
8	(6)	U4EA	2.9
9	(5)	IS Pharma	2.8
10	(7)	Irisys Ltd	2.6
Total			50.6

Sector breakdown - combined portfolio

(Including cash and interest bearing securities)

	Percentage of total  investments at  28 February 2009	Percentage of total  investments at 30 November 2008
Health care	25.2	24.0
Industrials	24.4	25.5
Technology	19.3	19.0
UK Government securities	11.2	7.0
Oil and gas	9.6	8.8
Consumer services	5.3	5.7
Financials	3.2	3.7
Consumer goods	0.9	0.7
Telecommunications	0.9	0.9
Basic materials	0.0	0.1
Net current assets	0.0	4.6
Total	100.0	100.0

Daily and key information 

Further information regarding the Company, including daily net asset values published since the end of the period and quarterly factsheets, can be found at the Company's website www.bluehoneaimvct2.com

Year end:                         30 November 2009

Dividends paid:                No final dividend was proposed for the year ended 30 November 2008. 

Issued Share Capital:    55,370,992 ordinary shares of 10p each and 

     2,950,085 C shares of 50p each

For further information please contact:

Robert Mitchell, Bluehone Investors LLP:        0207 496 8929

Scott Macrae, F&C Asset Management plc:    0207 628 8000

 

END

 

 

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