Interim Results
AIM VCT2 PLC
18 July 2003
To: RNS
From: AiM VCT2 plc
Date: 18 July 2003
Investment Objective
AiM VCT2 plc aims to provide shareholders with a tax efficient means of gaining
long term capital growth and an attractive dividend stream through investment in
a diversified portfolio of AiM companies and unquoted companies which anticipate
a stock market listing within 18 months.
Interim Results - Period Ended 31 May 2003
• Net asset value per share of 77.77 pence.
• Seven new investments made, totalling £1.4 million.
• Interim dividend of 0.60 pence per share.
Performance I Initially the smaller company end of the market lagged in the
recovery with much of the running being made by the more liquid, larger
companies. As the market's recovery gained momentum, however, the valuations of
smaller companies embarked on a general catch-up. AiM has been the last sector
of the market to move and the recovery has not been as marked as yet. Over the
six months since 1 December 2002 the FTSE AIM Index has increased by 2.1%,
having continued falling in the first few months of the year and then bouncing
back by 13.4% from its low point. Against this background AiM VCT2 has also
experienced some fluctuations in the value of its holdings, which have not
always reflected the progress being made by the underlying companies themselves.
The Company's net asset value per share rose by 0.4% to 77.77 pence in the first
half of the year.
Since the launch of the Company, shareholders have received 4.3 pence per share
in dividends and will receive a proposed interim dividend of 0.6 pence in due
course. Taking into account these distributions, the decline in shareholders'
initial investment is 17.3% which compares favourably to a fall in the FTSE AIM
Index of 58% since December 2000.
Earnings and Dividends I Earnings for the period amounted to £0.73 million and
were predominantly derived from the holding in a fixed income government
security. This revenue has enabled the Board to declare an interim dividend of
0.6 pence per share to be paid to shareholders on 29 August 2003.
Investment Programme I The Managers have continued with their cautious approach
to the investment programme by investing a further £2.1 million across seven new
holdings as well as a number of follow-on investments into existing portfolio
companies. Given the difficult market conditions that have prevailed since the
Company was launched the Managers have followed a strategy of slow but steady
investment of the initial funds raised into VCT qualifying companies, whilst
conserving the value of the remaining funds through investment in a fixed
interest government security. This is undoubtedly part of the reason why AiM
VCT2's net asset value has remained robust when the AiM market itself has
deteriorated.
To date £19.7 million has been invested across a portfolio of 41 individual
companies, which equates to 53% of net funds raised, and since the period end a
further £1.4 million has either been invested or committed into other qualifying
investments. Since April, there has been a small but noticeable improvement in
the number of companies seeking to raise funding on the AiM market and also in
investors' willingness to support them, and the Managers are receiving a steady
flow of investment opportunities for consideration. However, should there be
insufficient suitable investment opportunities available during the remainder of
the year then there is an alternative mechanism available which gives the Board
confidence that the VCT tests, and the 70% test in particular, will be achieved
by the Company's third anniversary.
The Company's holding in fixed interest security was reduced by £2.3 million to
provide the funds for investment in VCT qualifying holdings and by the end of
the period the remaining holding was worth £15.7 million or 38 pence per share.
Offer for Subscription I The Board exercised its powers to launch a share issue
of up to 10 per cent of the existing issued share capital. It is intended that
this Offer will remain open all year until it is renewed at the next annual
general meeting or until fully taken up. The Offer provides shareholders and
other investors with the opportunity to 'top-up' their investment in AiM VCT2
and receive the VCT tax relief attributable to new shares
The Board has continued to buy back shares from the market and a further £21,422
worth of shares have been cancelled as a result. The Company's share price has
responded favourably to this modest activity, improving 21% since the year end
to 69.5 pence and thereby narrowing the discount to net asset value to 10.6%.
Outlook I The current rally in the market is welcome and appears to be filtering
down into the smaller AiM quoted stocks. There has also been a general
improvement in the level of share trading activity which is evidence, perhaps,
that the private investor is tentatively re-entering the market. The
sustainability of the rally depends upon evidence of an improving economic
background, some green shoots of which are appearing in the USA, but of which
there are still few signs over here. Nevertheless, the UK economy is better
placed than mainland Europe and is not saddled with an over strong currency.
After three years of bear markets it is encouraging that investors are looking
ahead and planning for recovery, so long as that recovery ultimately appears.
With funds available of over £14 million AiM VCT2 remains in a strong position
to take advantage of new investment opportunities. The Board therefore look
forward with cautious optimism to reporting further progress for the Company at
the year-end.
Enquiries: Robert Mitchell/Bill Brown
Investment Manager
ISIS Asset Management plc Tel: 020 7506 1100
Unaudited Statement of Total Return (incorporating the revenue account) of the
Company
Six Months to
31 May 2003
Revenue Capital Total
£'000 £'000 £'000
Gains on investments - 164 164
Income 730 - 730
Investment management fee (89) (267) (356)
Other expenses (122) - (122)
Return on ordinary activities
before tax 519 (103) 416
Tax on ordinary activities (121) 77 (44)
Return attributable to
Equity shareholders 398 (26) 372
Dividends in respect of equity shares (248) - (248)
Transfer to/(from) reserves 150 (26) 124
Return per ordinary share: 0.96p (0.06)p 0.90p
Unaudited Statement of Total Return (incorporating the revenue account) of the
Company
Six Months to
31 May 2002
Revenue Capital Total
£'000 £'000 £'000
Losses on investments - (3,547) (3,547)
Income 907 - 907
Investment management fee (108) (326) (434)
Other expenses (140) - (140)
Return on ordinary activities
before tax 659 (3,873) (3,214)
Tax on ordinary activities (117) 49 (68)
Return attributable to
Equity shareholders 542 (3,824) (3,282)
Dividends in respect of equity shares (458) - (458)
Transfer to/(from) reserves 84 (3,824) (3,740)
Return per ordinary share: 1.30p (9.17)p (7.87)p
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 tax 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
Unaudited Balance Sheet
As at As at As at
31 May 31 May 30 November
2003 2002 2002
£'000 £'000 £'000
Fixed Assets
Quoted on the Alternative Investment Market 9,879 8,680 7,381
Quoted on OFEX 1,754 2,121 1,791
UK government securities 15,750 21,304 18,385
Unlisted investments 4,464 2,650 4,291
________ ________ ________
31,847 34,755 31,848
Net current assets 369 1,029 182
________ ________ _______
Net assets 32,216 35,784 32,030
________ ________ ________
Financed by:
Shareholders' funds 32,216 35,784 32,030
________ ________ ________
Net asset value per ordinary share: 77.77p 86.01p 77.48p
Ordinary shares in issue 41,426,291 41,602,333 41,338,064
Summarised Unaudited Statement of Cash Flows
Six months to Six months to Year
to
31 May 31 May 30 November
2003 2002 2002
£'000 £'000 £'000
Net cash flow from operating activities 571 842 1,410
Tax paid - - (283)
Capital expenditure and financial investment (6) 844 (240)
Equity dividends paid (413) (459) (917)
Net cash inflow/(outflow) before financing 152 1,227 (30)
Financing 61 (97) (303)
Increase/(decrease) in cash 213 1,130 (333)
Reconciliation of net cash flow to movement in net cash
Increase/(decrease) in cash 213 1,130 (333)
Opening net cash 307 640 640
Net cash at 31 May / 30 November 520 1,770 307
Reconciliation of net revenue before taxation to net cash
flow from operating activities
Profit on ordinary activities before taxation 519 659 1,176
Management fee charged to capital 4 10 34
Decrease in debtors 86 229 259
Decrease in creditors (38) (56) (59)
Net cash flow from operating activities 571 842 1,410
Notes
1. The unaudited interim results which cover the six months to 31 May 2003 have
been drawn up in accordance with the applicable accounting standards,
adopting the accounting policies set out in the statutory accounts for the
year ended 30 November 2002.
2. There were 41,426,291 ordinary shares in issue at 31 May 2003 (31 May 2002:
41,602,333; 30 November 2002: 41,338,064). During the six months ended 31
May 2003 the Company issued 120,227 ordinary shares and bought back for
cancellation 32,000 ordinary shares at a cost of £21,422.
3. Earnings for the six months to 31 May 2003 should not be taken as a guide to
the results for the full year and are based on a weighted average of
41,362,850 (31 May 2002: 41,683,653; 30 November 2002: 41,579,408) ordinary
shares in issue during the period.
4. Income for the period to 31 May is derived from:
2003 2002
£'000 £'000
Equity investment 31 11
Fixed interest investment 685 877
Deposit interest 14 19
____ ____
730 907
5. In accordance with the Statement of Recommended Practice 'Financial
Statements of Investment Trust Companies' published by the Association of
Investment Trust Companies in January 2003, the marginal rate of tax is
applied to taxable net revenue. In previous years, the effective rate of
corporation tax was applied to taxable net revenue. This change to the
method of allocation has had the effect of decreasing the net revenue return
for the six months ended 31 May 2003 by £49,000, and increasing the capital
return by the same amount.
6. The interim dividend of 0.60p will be paid on 29 August 2003 to shareholders
on the register on 1 August 2003.
7. These are not statutory accounts in terms of Section 240 of the Companies Act
1985 and are unaudited. The full audited accounts for the period to 30
November 2002, which were unqualified, have been lodged with the Registrar
of Companies.
8. Copies of the interim report will be mailed to shareholders shortly, and will
be available from the Registered Office of the Company at 100 Wood Street,
London EC2V 7AN.
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