Half-yearly report

22 SEPTEMBER 2009

NORTHERN 2 VCT PLC

UNAUDITED HALF-YEARLY FINANCIAL REPORT
FOR THE SIX MONTHS ENDED 31 JULY 2009

Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by NVM
Private Equity.  It invests mainly in unquoted venture capital
holdings and aims to provide high long-term tax-free returns to
shareholders through a combination of dividend yield and capital
growth.

Financial highlights:
(comparative figures for the six months ended 31 July 2008)

                                       2009          2008

Net assets                            £44.0m        £47.3m

Net asset value per share              77.1p         83.3p

Return per share
Revenue                                 1.5p          1.6p
Capital                                 9.3p        (4.4)p
Total                                  10.8p        (2.8)p

Interim dividend per share
In respect of the period
Revenue                                 1.0p          1.0p
Capital                                 1.0p          1.0p
Total                                   2.0p          2.0p

Cumulative returns to
shareholders since launch
Net asset value per share              77.1p         83.3p
Dividends paid per share*              44.9p         39.4p
Net asset value plus dividends
paid per share                        122.0p        122.7p

Share price at end of period           49.5p         76.5p


*Excluding proposed interim dividend


For further information, please contact:

NVM Private Equity Limited
Alastair Conn/Christopher Mellor 0191 244 6000
Website:  www.nvm.co.uk



NORTHERN 2 VCT PLC

HALF-YEARLY MANAGEMENT REPORT
FOR THE SIX MONTHS ENDED 31 JULY 2009

The six months to 31 July 2009 saw some recovery in the financial
markets, with the FTSE All-Share index rising by 13% over the period,
but there was relatively little evidence of a sustainable improvement
in the UK economy.  The operating environment for small and
medium-sized companies has continued to be very difficult and seems
likely to remain so for some time to come.  This presents significant
challenges to investors in such companies, and it is therefore
encouraging to report that over the past half year our portfolio has
demonstrated a measure of resilience against the effects of
recession.  We are also pleased to announce today a highly successful
exit from the molecular diagnostics developer DxS, which was our
largest investment by value at 31 July 2009.

Results and dividend

The net asset value (NAV) per share at 31 July 2009, after deducting
the 2008/09 final dividend of 3.5p per share paid in June 2009, was
77.1p (31 January 2009 69.8p) - an increase of 10.5% during the half
year.  The return per share for the period before dividends, as shown
in the income statement, was 10.8p compared with a negative return of
2.8p for the corresponding period last year.  This is a good result
against the background of continuing uncertainty in the economy and
financial markets.

Investment income for the period remained steady at £1.4 million, and
the revenue return per share was down marginally from 1.6p to 1.5p.
These figures reflect the benefit of a significant one-off income
receipt from DxS, without which both income and revenue return per
share would have been considerably lower than in the corresponding
period.  The principal factors affecting income generation have been
firstly the continuing reduction in interest rates, culminating in
base rate being reduced in March 2009 to 0.5% - a level which would
have seemed almost inconceivable twelve months earlier - and secondly
the fact that a number of our unquoted investee companies have come
under pressure from their bankers to defer interest and dividend
payments in order to reduce borrowings.  We are likely to feel the
impact of this more keenly in the second half of the current
financial year.  However the capital return per share recovered
strongly to 9.3p, from minus 4.4p in the corresponding period,
through a combination of realised gains and unrealised revaluation
increases.

The board has declared an unchanged interim dividend of 2.0p per
share, comprising 1.0p revenue and 1.0p capital distribution, which
will be paid on 4 December 2009 to shareholders on the register on 6
November 2009.  Our stated objective is to maintain the annual
dividend at not less than 5.5p per share;  in the current climate
this is a demanding target but we presently expect, in the light of
recent encouraging progress, to declare a final dividend of 3.5p per
share so as to match last year's total.

Investments

The rate of new investment has remained slow and one new unquoted
holding was added during the period:  £995,000 was invested in
Ingleby (1817), a new company formed by an experienced pharmaceutical
industry entrepreneur to acquire high-potential drug development
businesses.  At this stage in the economic cycle our managers expect
to see some interesting new opportunities at realistic valuations and
this should lead to an increase in investment activity.

During the period there were two significant realisations in the
portfolio.  In March Pivotal Laboratories Holdings was sold to the
US-based clinical research services firm ACM, realising proceeds of
£1.6 million and a gain over original cost of £0.7 million, and in
July the public sector software developer Liquidlogic was sold to the
AIM-quoted System C Healthcare for proceeds of £1.2 million and a
gain of £1.0 million.  In both cases there may be a further payment
to come depending on future performance.

Subsequent to 31 July 2009, as referred to above, the company's
investment in DxS has been sold for initial proceeds of £4.4 million
in cash.  DxS, which provides molecular diagnostic products and
services to the healthcare sector, has achieved significant growth
since our original early-stage investment in 2001 and this is a very
satisfactory outcome, representing an overall cash return of over
seven times the money invested.  The initial sale price has been
reflected in the directors' valuation of the investment at 31 July
2009 and we have also been able to recognise some £0.6 million of
accrued investment income which was paid at completion.  Northern 2
VCT may become entitled to receive further capital payments of up to
£3.2 million over the next three years depending on the achievement
by DxS of specified objectives, but no account has been taken of
these in the financial statements at this stage.

The valuation of the continuing portfolio has as usual been subjected
to a careful review, based on a cautious perception of the current
economic outlook and an awareness that many companies are finding it
difficult to maintain their bank borrowing facilities at previous
levels.  This has led to some further reductions in individual
company valuations but we have also been able to recognise a number
of cases where good progress is being made and value has been
enhanced.  However the investment in Foreman Roberts Group, which was
written down to nil value at 31 January 2009, was radically
restructured in July and has now in effect been permanently written
off.

The reserve of cash and near-cash assets available for future
investment remains strong, with approximately £17 million of liquid
resources on the balance sheet at 31 July 2009.

Shareholder issues

We reported six months ago on the difficulties which had been
experienced in relation to the provision of corporate broking and
market-making services to the company.  In April 2009, following a
review of available options, the board appointed Singers Capital
Markets as brokers.  The mid-market share price, which reached a low
point of 34.5p in April, has subsequently recovered to 49.5p at 31
July.  This still represents a discount of over 30% to NAV, and a
tax-free income yield of 11.1% based on a 5.5p annual dividend.

The directors remain willing to use the company's powers to
re-purchase its own shares in order to support market liquidity.  The
buy-back authority granted by shareholders caps the price at which we
can deal at a maximum of 105% of the latest mid-market share price,
which currently prevents us from buying shares at our target discount
to NAV of 10%.  Given this restriction, and having regard to the
general volatility in the financial markets, we have concluded (as
have a number of other VCT boards) that maintaining a fixed 10%
discount is not currently feasible and that for the foreseeable
future we should be prepared to buy back at a wider discount, subject
to market conditions.  This matter will be kept under continuing
review.

At the same time our managers and their colleagues in the VCT sector
are continuing their efforts, supported by the Association of
Investment Companies, to promote the merits of acquiring and
retaining VCT shares as a means of generating substantial tax-free
yields in the long term, at a time when the higher rate of income tax
is about to increase and conventional methods of pension provision
have been proving less than wholly adequate.  We believe that a wider
appreciation by investors of the attractions of VCT shares could help
to reduce discounts to NAV in the sector generally.

VAT on management fees

Following HM Revenue & Customs' acceptance that investment management
fees paid by VCTs should be exempt from VAT, a credit of £414,000 was
recognised in the financial statements for the year ended 31 January
2009 in respect of VAT recoverable for earlier periods.  Discussions
are continuing with a view to possible further recoveries, but the
outcome is not yet sufficiently certain to be reflected in the
current financial statements.

VCT qualifying status

The company has continued to meet the qualifying conditions laid down
by HM Revenue & Customs for maintaining its approval as a VCT.  The
board retains PricewaterhouseCoopers LLP as independent advisers on
VCT taxation matters.

Risk management

The board carries out a regular review of the risk environment in
which the company operates.  There has been no significant change to
the key risks discussed on page 10 of the annual report for the year
ended 31 January 2009, including those resulting from the size and
relative illiquidity of the unquoted and AIM-quoted investments held
by the company.

Prospects

The recent upturn in the financial markets has been taken in some
quarters as an indicator of imminent recovery in the economy.  At
this stage your board and managers consider it appropriate to take a
more cautious view, believing that a return to economic prosperity
may be only gradual while the effects of recent events work their way
through the system.  This will inevitably have an impact on the
short-term prospects for our own investments.  Nevertheless the
portfolio is showing some encouraging signs and this should lead to
further progress being made in the medium term.

On behalf of the Board

DAVID GRAVELLS
Chairman

The unaudited half-yearly financial statements for the six months
ended 31 July 2009 are set out below.

INCOME STATEMENT
(unaudited) for the six months ended 31 July 2009


                  Six mths ended 31 July 2009  Six mths ended 31 July
                                                                 2008
                    Revenue   Capital   Total Revenue Capital   Total
                       £000      £000    £000    £000    £000    £000
Gain on disposal
of
investments              -       703     703       -     159     159
Movements in
value of
investments              -     4,768   4,768       -  (2,559) (2,559)
                     -----     -----   -----   -----   -----   -----
                         -     5,471   5,471       -  (2,400) (2,400)

Income               1,369         -   1,369   1,377       -   1,377
Investment            (102)     (307)   (409)   (129)   (386)   (515)
management fee
Recoverable VAT          -         -       -     119     381     500
Other expenses        (155)        -    (155)   (150)      -    (150)
                     -----     -----   -----   -----   -----   -----
Return on
ordinary
activities
before tax           1,112     5,164   6,276   1,217  (2,405) (1,188)
Tax on return on
ordinary              (242)       89    (153)   (321)      2    (319)
activities
                     -----     -----   -----   -----   -----   -----
Return on
ordinary
activities
after tax              870     5,253   6,123     896  (2,403) (1,507)
                     -----     -----   -----   -----   -----   -----

Return per share       1.5p      9.3p   10.8p    1.6p  (4.4)p  (2.8)p



                                    Year ended 31 January 2009
                                     Revenue  Capital    Total
                                        £000     £000     £000
Gain on disposal of
investments                               -      784      784
Movements in fair value of
investments                               -   (9,985)  (9,985)
                                      -----    -----    -----
                                          -   (9,201)  (9,201)

Income                                2,456        -    2,456
Investment management fee              (246)    (740)    (986)
Recoverable VAT                          99      315      414
Other expenses                         (298)       -     (298)
                                      -----    -----    -----
Return on ordinary activities
before tax                            2,011   (9,626)  (7,615)
Tax on return on
ordinary activities                    (538)     120     (418)
                                      -----    -----    -----
Return on ordinary activities
after tax                             1,473   (9,506)  (8,033)
                                      -----    -----    -----

Return per share                        2.6p  (16.8)p  (14.2)p



RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited) for the six months ended 31 July 2009


                             Six months     Six months     Year ended
                                  ended          ended     31 January
                           31 July 2009   31 July 2008           2009
                                   £000           £000           £000

Equity shareholders'
funds at
1 February 2009                 39,702         43,753         43,753
Return on ordinary
activities
after tax                        6,123         (1,507)        (8,033)
Dividends recognised
in the period                   (1,990)        (1,870)        (3,005)
Net proceeds of share              173          7,466          7,573
issues
Shares purchased for
cancellation                       (36)          (586)          (586)
                                ------         -- ---         ------
Equity shareholders'
funds at
31 July 2009                    43,972         47,256         39,702
                                ------         ------         ------


BALANCE SHEET
(unaudited) as at 31 July 2009


                                 31 July 2009 31 July 2008 31 January
                                                                 2009
                                         £000         £000       £000
Fixed asset investments held
at fair value:
Venture capital investments
Unquoted                              23,577       25,779     21,090
Quoted                                 2,544        2,053      1,823
                                      ------       ------     ------
Total venture capital                 26,121       27,832     22,913
investments
Listed fixed-interest                  5,018       17,548      4,636
investments
                                      ------       ------     ------
Total fixed asset investments         31,139       45,380     27,549
                                      ------       ------     ------
Current assets:
Debtors                                1,465          872        813
Cash and deposits                     12,008        1,565     11,891
                                      ------       ------     ------
                                      13,473        2,437     12,704
Creditors (amounts
falling due within one year)            (640)        (561)      (551)
                                      ------       ------     ------
Net current assets                    12,833        1,876     12,153
                                      ------       ------     ------

Net assets                            43,972       47,256     39,702
                                      ------       ------     ------

Capital and reserves:
Called-up equity share capital         2,852        2,835      2,843
Share premium                         34,181       33,922     34,021
Capital redemption reserve               341          337        337
Capital reserve                        7,472        8,028      8,157
Revaluation reserve                   (2,098)         937     (6,863)
Revenue reserve                        1,224        1,197      1,207
                                      ------       ------     ------
Total equity shareholders' funds      43,972       47,256     39,702
                                      ------       ------     ------

Net asset value per share               77.1p        83.3p      69.8p



CASH FLOW STATEMENT
(unaudited) for the six months ended 31 July 2009


                   Six months ended  Six months ended      Year ended
                       31 July 2009      31 July 2008 31 January 2009
                      £000     £000     £000     £000    £000    £000

Net cash inflow
from
operating                       89               142             574
activities
Taxation:
Corporation tax                  -                 -            (108)
paid
Financial
investment:
Purchase of        (1,528)          (22,619)          (7,864)
investments
Sale/repayment of
investments         3,409            11,580            7,855
                   ------            ------           ------
Net cash
inflow/(outflow)
from financial               1,881           (11,039)             (9)
investment
Equity dividends            (1,990)           (1,870)         (3,005)
paid
                            ------            ------          ------
Net cash outflow
before financing               (20)          (12,767)         (2,548)
Financing:
Issue of ordinary     189             7,886            7,999
shares
Share issue           (16)             (420)            (426)
expenses
Purchase of
ordinary shares
for cancellation      (36)             (586)            (586)
                   ------            ------           ------
Net cash inflow
from
financing                      137             6,880           6,987
                            ------            ------          ------
Increase/(decrease) in
cash and deposits              117            (5,887)          4,439
                            ------            ------          ------

Reconciliation of return before tax
to net cash flow from operating
activities
Return on ordinary
activities
before tax                   6,276            (1,188)         (7,615)
Gain on disposal of
investments                   (703)             (159)           (784)
Movements in fair
value
of investments              (4,768)            2,559           9,985
Increase in debtors           (652)             (517)           (458)
Decrease in creditors          (64)             (553)           (554)
                            ------            ------          ------
Net cash inflow from
operating activities            89               142             574
                            ------            ------          ------

Analysis of movement in
net funds
                         1 February       Cash flows     31 July 2009
                               2009
                               £000             £000             £000

Cash and deposits           11,891               117          12,008
                            ------            ------          ------



INVESTMENT PORTFOLIO SUMMARY
as at 31 July 2009


                                    Cost Valuation % of net assets
                                    £000      £000    by valuation

15 largest investments:
DxS                                  685     4,395            10.0
Paladin Group                      1,307     1,823             4.1
Envirotec                            975     1,785             4.1
Crantock Bakery                    1,107     1,412             3.2
Britspace Holdings                 2,230     1,365             3.1
Axial Systems Holdings             1,004     1,164             2.6
Abermed                              725     1,059             2.4
CloserStill Holdings               1,000     1,000             2.3
Ingleby (1817)                       995       995             2.3
S&P Coil Products                    620       994             2.3
Longhirst Venues                     375       965             2.2
Arleigh International                435       888             2.0
Advanced Computer Software*          429       884             2.0
Optilan Group                      1,000       821             1.9
IG Doors                           1,000       750             1.7
                                  ------    ------           -----
                                  13,887    20,300            46.2
Other venture capital investments 14,090     5,821            13.2
                                  ------    ------           -----
Total venture capital investments 27,977    26,121            59.4
Listed fixed-interest investments  5,260     5,018            11.4
                                  ------    ------           -----
Total fixed asset investments     33,237    31,139            70.8
                                  ------
Net current assets                          12,833            29.2
                                            ------           -----
Net assets                                  43,972           100.0
                                            ------           -----


*Quoted on AIM


The above summary of  results for the six  months ended 31 July  2009
does not constitute statutory financial statements within the meaning
of Section 240  of the Companies  Act 1985, has  not been audited  or
reviewed by  the  company's independent  auditors  and has  not  been
delivered to the Registrar  of Companies.  The  figures for the  year
ended 31 January 2009 have been extracted from the audited  financial
statements for that year, which have been delivered to the  Registrar
of Companies;  the  independent auditors' report  on those  financial
statements  under  Section  235  of   the  Companies  Act  1985   was
unqualified.  The half-yearly financial statements have been prepared
on the  basis  of the  accounting  policies  set out  in  the  annual
financial statements for the year ended 31 January 2009.

The directors  confirm  that  to  the best  of  their  knowledge  the
half-yearly financial  statements have  been prepared  in  accordance
with the Statement "Half-yearly financial  reports" issued by the  UK
Accounting Standards  Board  and  the  half-yearly  financial  report
includes a fair review of the information required by (a) DTR  4.2.7R
of the  Disclosure and  Transparency Rules,  being an  indication  of
important events that have  occurred during the  first six months  of
the financial year and their impact on the condensed set of financial
statements,  and   a  description   of   the  principal   risks   and
uncertainties for the remaining six months  of the year, and (b)  DTR
4.2.8R of the Disclosure and Transparency Rules, being related  party
transactions that have  taken place in  the first six  months of  the
current  financial  year  and  that  have  materially  affected   the
financial position or performance of  the entity during that  period,
and any changes in  the related party  transactions described in  the
last annual report that could do so.

The calculation of the revenue and capital return per share is  based
on the return on ordinary activities after tax for the period and  on
56,924,548 (2008  54,434,646)  ordinary shares,  being  the  weighted
average number of shares in issue during the period.

The proposed interim dividend of 2.0p  per share for the year  ending
31 January 2010 will  be paid on 4  December 2009 to shareholders  on
the register at the close of business on 6 November 2009.

A copy of the half-yearly financial  report for the six months  ended
31 July 2009 is  expected to be posted  to shareholders on 2  October
2009 and will be available to the public at the registered office  of
the company at Northumberland House, Princess Square, Newcastle  upon
Tyne  NE1  8ER  and  on  the  NVM  Private  Equity  Limited  website,
www.nvm.co.uk.

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