Interim Results

Northern 2 VCT PLC
11 October 2002

11 OCTOBER 2002

NORTHERN 2 VCT PLC

UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 JULY 2002



Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture
Managers.  The trust was launched in 1999 through a public share issue which
raised £22 million;  a further £22 million was raised in a second public issue
in 2001.  The trust invests mainly in unquoted venture capital situations and
aims to provide high long-term returns to shareholders through a combination of
dividend yield and capital growth.



Financial highlights (comparative figures as at 31 July 2001 in brackets):

•          Net assets                                                £40,169,000             (£41,785,000)
•          Net asset value per share                                       89.1p                   (92.5p)
•          Investment income                                            £995,000                (£903,000)
•          Net revenue before tax                                       £747,000                (£695,000)
•          Revenue return per share                                         1.2p                    (1.3p)
•          Interim dividend per share                                       1.0p                    (1.0p)





For further information, please contact:


Alastair Conn, Managing Director

Northern Venture Managers Limited                                     0191 244 6000

Website:  www.nvm.co.uk
Lucy Copeman/Marlene Scott

Polhill Communications                                                020 7655 0540





CHAIRMAN'S STATEMENT

The Chairman of Northern 2 VCT PLC, Dr Matt Ridley, included the following
points in his statement to shareholders:



Once again I have to report on a period in which the UK economy and the
financial markets have suffered from widespread uncertainty and pessimism.
There have been further sharp falls in stock market indices, but the impact on
our company's financial position has been lessened by the fact that our exposure
to quoted equities is low.  The portfolio of unlisted venture capital
investments has made reasonable progress in the circumstances and we are well
placed to benefit from any improvement in economic conditions.



Net asset value



The net asset value per share at 31 July 2002 was 89.1p per share, down by 3.7%
over the past 12 months and 1.5% over the six months since 31 January 2002.  The
following table shows the movements in the company's net asset value and share
price compared with the FTSE All-Share and Small Cap indices:


Movement to 31 July 2002 over:                                   Last 6 months         Last 12 months
Northern 2 VCT net asset value                                   -1.5%                 -3.7%
Northern 2 VCT share price                                       No change             -11.8%
FTSE All-Share index                                             -17.8%                -23.0%
FTSE Small Cap index (excluding investment trusts)               -17.9%                -23.8%



Listed fixed-interest investments represented just over half of the company's
net assets at 31 July 2002, and the effect of this can be seen in the relatively
modest fall in net asset value over the investment portfolio as a whole.  Most
of our unlisted venture capital holdings, being still fairly recent, remain
valued at their original cost, though as always the valuation of each investment
has been carefully reviewed to ensure that all relevant factors have been
properly reflected.  In some cases, where progress is behind expectations, this
has led to valuations being prudently reduced.



Investments



Four new venture capital investments were completed during the half year at a
cost of £1.3 million.  This represents a similar level of activity to the
corresponding period in 2001.  As in 2001, we have seen an upturn in new
investment levels in the second half of the year and since the end of July a
further three investments totalling £2.6 million have been completed.  Although
the prevailing conditions have not been ideal, our managers have seen a steady
flow of new opportunities and entry prices have generally remained realistic.
Progress towards meeting the Inland Revenue's requirements for maintaining
approved Venture Capital Trust status is reviewed regularly with the company's
advisers.



The venture capital portfolio at 31 July 2002 comprises 39 holdings with an
aggregate value of £15.1 million.  Opportunities for profitable exits from
investments have been hard to find in the current market, although our
investment in Ai Qualitek was sold to a North American corporation in July for
£366,000, realising a gain of £131,000.  This was more than offset by the loss
of £448,000 realised on the sale of XtraServe to a trade purchaser for a nominal
consideration after a period of poor trading.  The overall realised loss on
investment disposals in the half year was £313,000.



Eight of our investments are listed on the London Stock Exchange or the
Alternative Investment Market and most have continued to be affected by the
depressed markets.  Alizyme and BioFocus, our longest-standing listed
investments, have continued to report good commercial progress and our managers
believe that a patient approach to these and other holdings will be rewarded in
due course.  In the unlisted portfolio, we have maintained our relatively low
exposure to the IT and telecoms sectors and with the benefit of hindsight have
no reason to regret this.  We are encouraged by the quality of the new
investment flow over the past 12 months, mainly but not entirely in 'old
economy' businesses which have continued to do well despite the economic
slowdown.



The fixed-interest securities and bank deposits managed by Chiswell Associates
have held their value well and have continued to generate useful income.  Our
managers are progressively drawing funds down from this portfolio as new venture
capital investments are acquired.



Revenue and dividend



The revenue return per share in the half year was 1.2p, compared with 1.3p in
the corresponding period last year, reflecting the increase in the proportion of
the company's assets held in venture capital investments which do not always
generate income yield from the outset.  An interim dividend of 1.0p per share,
unchanged from last year, will be paid on 11 December 2002 to shareholders on
the register on 8 November 2002.  The level of the final dividend will as usual
depend on the results for the full year.



Share buy-backs



A year ago we completed the process of obtaining Court consent to a reduction in
the company's share premium account, creating a new distributable reserve in our
balance sheet which can be used to cancel shares purchased by the company in the
market.  During the half year to 31 July 2002 the company bought back 56,000
shares at a price of 70p, thus marginally enhancing the net asset value per
share attributable to the continuing shareholders.



Prospects



My interim report in 2001 was written shortly after the terrible events of 11
September, whose aftermath inevitably contributed to the atmosphere of economic
and stock market gloom which has prevailed over the past 18 months.  Many
financial experts still believe that conditions will get worse before they get
better, and in the circumstances it is clearly appropriate to maintain a broadly
defensive strategy.



Keeping in mind the deadlines for complying with the VCT qualifying conditions,
we intend to continue making new venture capital investments as good
opportunities arise.  In doing so we will maintain our focus on fundamental
issues such as profitability and cash generation, as well as looking for good
investment value and the prospect of an exit route in the longer term.  Despite
the difficult times we live in, our company is in good shape and we are in a
strong position to benefit once the economic and market outlook improves.







The unaudited interim financial statements for the six months ended 31 July 2002
are set out below.



STATEMENT OF TOTAL RETURN (INCORPORATING THE REVENUE ACCOUNT)

(unaudited) for the six months ended 31 July 2002


                                               Six months ended 31 July 2002       Six months ended 31 July 2001
                                             Revenue     Capital       Total     Revenue     Capital       Total

                                                £000        £000        £000        £000        £000        £000
Gains/(losses) on investments:
  Realised on disposal                             -        (313)       (313)          -        (330)       (330)
  Unrealised revaluation movements                 -        (114)       (114)          -      (1,430)     (1,430)
                                              ------      ------      ------      ------      ------      ------
                                                   -        (427)       (427)          -      (1,760)     (1,760)
Income                                           995           -         995         903           -         903
Investment management fee                       (150)       (450)       (600)       (113)       (340)       (453)
Other expenses                                   (98)          -         (98)        (95)          -         (95)
                                              ------      ------      ------       ------     ------      ------
Return on ordinary activities
  before tax                                     747        (877)       (130)        695      (2,100)     (1,405)
Tax on ordinary activities                      (188)        117         (71)       (190)         94         (96)
                                              ------      ------      ------      ------      ------      ------
Return on ordinary activities
  after tax                                      559        (760)       (201)        505      (2,006)     (1,501)
Interim dividend                                (451)          -        (451)       (452)          -        (452)
                                              ------      ------      ------      ------      ------      ------
Transfer to/(from) reserves                      108        (760)       (652)         53      (2,006)     (1,953)
                                              ------      ------      ------      ------      ------      ------
Return per share                                 1.2p      (1.7)p      (0.5)p        1.3p      (5.3)p      (4.0)p
Interim dividend per share                       1.0p          -         1.0p        1.0p         -          1.0p




                                                   Year ended 31 January 2002
                                                Revenue     Capital       Total

                                                   £000        £000        £000
Gains/(losses) on investments:
  Realised on disposal                                -        (310)       (310)
  Unrealised revaluation movements                    -      (2,001)     (2,001)
                                                 ------      ------      ------
                                                      -      (2,311)     (2,311)
Income                                            1,944           -       1,944
Investment management fee                          (236)       (707)       (943)
Other expenses                                     (184)          -        (184)
                                                  ------     ------      ------
Return on ordinary activities
  before tax                                      1,524      (3,018)     (1,494)
Tax on ordinary activities                         (413)        197        (216)
                                                 ------      ------      ------
Return on ordinary activities
  after tax                                       1,111      (2,821)     (1,710)
Dividend                                         (1,130)          -      (1,130)
                                                 ------      ------      ------
Transfer to/(from) reserves                         (19)     (2,821)     (2,840)
                                                 ------      ------      ------
Return per share                                    3.1p      (7.8)p      (4.7)p
Dividend per share                                  2.5p         -          2.5p



BALANCE SHEET

(unaudited) as at 31 July 2002


                               31 July    31 July       31 January 
                                 2002       2001             2002
                                                             
                                 £000       £000             £000
Fixed asset investments:
Venture capital
investments
  Unlisted                     13,482      8,357           12,213
  Listed                        1,579      1,890            1,615
                              -------    -------          -------
                               15,061     10,247           13,828
Listed fixed-interest          20,225     21,692           19,658
investments
                              -------    -------          -------
Total fixed asset              35,286     31,939           33,486
investments
Net current assets              4,883      9,846            7,375
                              -------    -------          -------
Net assets                     40,169     41,785           40,861
                              -------    -------          -------

Capital and reserves
Called-up equity share          2,255      2,259            2,258
capital
Share premium                  33,761     41,785           33,761
Capital redemption reserve          4          -                1
Special reserve                 7,948          -            7,988
Capital reserve:
  Realised                     (1,821)      (930)          (1,175)
  Unrealised                   (2,180)    (1,495)          (2,066)
Revenue reserve                   202        166               94
                              -------    -------          -------
Total equity shareholders'     40,169     41,785           40,861
funds
                              -------    -------          -------
Net asset value per share        89.1p      92.5p            90.5p



CASH FLOW STATEMENT

(unaudited) for the six months ended 31 July 2002


                                     Six months ended    Six months ended          Year ended

                                         31 July 2002        31 July 2001     31 January 2002
                                       £000      £000     £000       £000     £000       £000
Reconciliation of net revenue before
taxation to net cash
flow from operating activities

Net revenue from ordinary activities
  before tax                                      747                 695               1,524
(Increase)/decrease in debtors                      6                (310)               (238)
Increase/(decrease) in creditors                   35                 156                (216)
Management fees charged to capital               (450)               (340)               (707)
Other expenses charged to reserves                  -                   -                 (18)
                                               ------              ------              ------
Net cash inflow from
  operating activities                            338                 201                 345
                                               ------              ------              ------
Cash flow statement
Net cash inflow from
  operating activities                            338                 201                 345
Taxation:
Corporation tax paid                                -                (124)               (216)
Financial investment:
Purchase of investments              (7,734)           (13,794)            (21,428)
Sale/repayment of investments         5,493              1,786               7,187
                                     ------             ------              ------
Net cash outflow from
  financial investment                         (2,241)            (12,008)            (14,241)
Equity dividends paid                            (678)               (339)               (792)
Net cash inflow/(outflow) from
  management of liquid resources                1,500                   -              (1,500)
                                               ------              ------              ------
Net cash outflow before financing              (1,081)            (12,270)            (16,404)
Financing:
Issue of ordinary shares                  -             21,519              22,042
Share issue expenses                      -             (1,102)             (1,102)
Purchase of ordinary shares
  for cancellation                      (40)                 -                 (18)
                                     ------             ------              ------
Net cash inflow from financing                    (40)             20,417              20,922
                                               ------              ------              ------
Increase/(decrease) in cash at bank            (1,121)              8,147               4,518
                                               ------              ------              ------



Analysis of cash at bank and
short-term investments
                                        1 February 2002        Cash flows        31 July 2002
                                                   £000              £000                £000
Cash at bank                                      5,862            (1,121)              4,741
Short-term investments                            1,500            (1,500)                  -
                                                 ------            ------              ------
                                                  7,362            (2,621)              4,741
                                                 ------            ------              ------




INVESTMENT PORTFOLIO SUMMARY

as at 31 July 2002


                                                                       Valuation           % of net assets

                                                                            £000              by valuation
Fifteen largest venture capital investments:
T J Brent                                                                  1,508                       3.7
DMN Installations                                                          1,000                       2.5
Stainton Metal Company                                                     1,000                       2.5
T&D Packaging                                                                800                       2.0
Keith Prowse                                                                 790                       2.0
John Fredericks Plastics                                                     713                       1.8
TFB Group                                                                    700                       1.7
Tolwood                                                                      673                       1.7
WM Engineering                                                               640                       1.6
Belcot Tool & Die                                                            600                       1.5
DxS                                                                          517                       1.3
Alaric Systems                                                               481                       1.2
West's Engineering Design                                                    480                       1.2
Chorus Application Software                                                  455                       1.1
Fitzhardinge*                                                                446                       1.1
                                                                         -------                    ------
                                                                          10,803                      26.9
Other venture capital investments                                          4,258                      10.6
                                                                         -------                    ------
Total venture capital investments                                         15,061                      37.5
Listed fixed-interest investments                                         20,225                      50.3
                                                                         -------                    ------
Total fixed asset investments                                             35,286                      87.8
Net current assets                                                         4,883                      12.2
                                                                         -------                    ------
Net assets                                                                40,169                     100.0
                                                                         -------                    ------
*Traded on Alternative Investment Market





The above summary of results for the six months ended 31 July 2002 does not
constitute statutory financial statements within the meaning of Section 240 of
the Companies Act 1985 and has not been delivered to the Registrar of Companies.
  The figures for the year ended 31 January 2002 have been extracted from the
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 proposed interim dividend for the year ending 31 January 2003 will be paid
on 11 December 2002 to shareholders on the register at the close of business on
8 November 2002.

A copy of the interim report is expected to be posted to shareholders on 25
October 2002 and will be available to the public at the registered office of the
company at Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER.

ENDS


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