Interim Results

Northern 2 VCT PLC
19 September 2006

19 SEPTEMBER 2006

NORTHERN 2 VCT PLC

UNAUDITED INTERIM RESULTS
FOR THE SIX MONTHS ENDED 31 JULY 2006


Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture
Managers.  The trust invests mainly in unquoted venture capital holdings 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 2005 in italics)

                                                                     2006                      2005

•    Net assets*                                              £41,507,000               £38,867,000

•    Net asset value per share*                                      84.5p                     89.0p

•    Investment income                                           £955,000                  £948,000

•    Return on ordinary activities
     before tax
     Revenue                                                     £724,000                  £694,000
     Capital                                                  £(1,393,000)              £(1,038,000)
     Total                                                      £(669,000)                £(344,000)

•    Return per share
     Revenue                                                          1.2p                      1.2p
     Capital                                                        (2.7)p                    (1.9)p
     Total                                                          (1.5)p                    (0.7)p

•    Interim dividend per share
     proposed in respect of the period
     Revenue                                                          1.0p                      1.0p
     Capital                                                             -                         -
     Total                                                            1.0p                      1.0p

•    Cumulative return to
     shareholders since launch
     Dividends per share**                                           28.9p                     23.4p
     Net asset value plus dividends                                 112.4p                    111.4p

•    Share price at end of period                                    78.0p                     78.0p

* Before deducting proposed interim dividend

**Including proposed interim dividend



For further information, please contact:
Northern Venture Managers Limited
Alastair Conn, Managing Director                                  0191 244 6000
Website:  www.nvm.co.uk
Lansons Communications
Alison Boucher                                                    020 7294 3616





NORTHERN 2 VCT PLC
CHAIRMAN'S STATEMENT



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



I am pleased to report that the new issue of ordinary shares launched in March
2006 raised a total of £6.3 million before expenses, and I would like to take
this opportunity to welcome our new investors.  As a result of new investments
completed during the period the size of the venture capital portfolio has been
maintained at over 75% of total assets, and we intend to continue to invest
actively whilst seeking to achieve a higher level of realisations from existing
holdings.



Net asset value

The net asset value per share at 31 July 2006, before providing for the proposed
interim dividend of 1.0p per share, was 84.5p.  The corresponding figure at 31
January 2006 was 90.4p which, after adjusting for the 2005/06 final dividend of
4.5p per share paid in June 2006, means a reduction of 1.4p over the six month
period.  Your board has reduced the valuation of several investments to reflect
difficult trading conditions, against a background of increases in energy and
other costs and the recent upward movement in interest rates.



Investments

Six new venture capital investments totalling £3.0 million were completed during
the half year:



•   Intercytex Group (£250,000) - developer of cell therapy
    products for woundcare and aesthetic medicine, Manchester


•   Adept Telecom (£235,000) - provider of voice telephone
    services, Tunbridge Wells


•   Wear Inns (£375,000) - owner of an estate of managed public
    houses, Newcastle upon Tyne


•   Twenty (£198,000) - marketing services group, Northampton


•   Nightingales Holdings (£993,000) - mail order retailer of
    women's clothing, Craven Arms


•   Touchstone Asset Management (£900,000) - provider of property 
    management services, Bath


Several small follow-on investments totalling approximately £200,000 were made
in existing portfolio companies.



Since the end of the half year we have realised our shareholding in AFI Aerial
Platforms through a secondary management buyout.  Our investment of £347,000
produced income and capital receipts of £1,016,000 in just over two years.  Our
managers are actively engaged in seeking to exit from a number of other
companies and as the unquoted portfolio matures it is important that we achieve
a steady turnover of investments so as to generate funds for dividend payments
and re-investment in new holdings.  In the quoted venture capital portfolio,
Computer Software Group has continued to perform well and is now our largest
investment overall despite some profit-taking in the period.



Revenue and dividend

The revenue return per share for the half year was unchanged at 1.2p, with total
investment income marginally up at £955,000.  Your board has declared an
unchanged interim revenue dividend of 1.0p per share, which will be paid on 1
December 2006 to shareholders on the register on 3 November 2006.  This takes
the cumulative total of dividends declared by the company since launch to 28.9p
per share.  As in the previous year, no interim capital dividend is proposed but
we expect to be able to declare a capital dividend at the year end.



The company continues to operate its dividend investment scheme, which enables
shareholders to re-invest their dividends in new ordinary shares in the company
with the benefit of zero transaction costs plus income tax relief (now at 30%)
on the amount re-invested.



Share price

The mid-market share price fell slightly from 80p to 78p during the period.
226,023 new shares were issued in June under the company's dividend
re-investment scheme, adding £194,000 to our funds available for investment.  A
total of 786,017 shares, representing approximately 1.6% of the issued share
capital, were bought in the market for cancellation during the half year at an
average price of 79p and it remains the board's policy to buy back shares in the
market at a discount of not more than 10% to net asset value.



It is too soon to tell whether the changes to VCT tax reliefs in the 2006
Finance Act will have any impact on the secondary market for VCT shares, but
your board is conscious of the importance of market liquidity for shareholders.
Together with approximately 70 other VCTs we have recently applied for
membership of the Association of Investment Trust Companies (AITC), a step which
we believe will play an important role in helping communicate the unique
attractions and developing performance record of VCTs to the wider investment
community.



VCT qualifying status

The company has continued to satisfy the qualifying conditions laid down by HM
Revenue & Customs for approval as a VCT.  Recent legislative changes have
tightened the conditions applying to VCTs, and we will continue to work closely
with our managers and our tax advisers at PricewaterhouseCoopers LLP to ensure
that a comfortable safety margin is maintained in relation to the relevant
tests.



Prospects

After a period of two years with the benefit of 40% income tax relief on new
investments in VCTs, the sector is in the process of adapting to the new regime
introduced in the 2006 Finance Act.  The precise effect of this on future
fund-raising prospects is not yet clear but it may be presumed that the volume
of funds flowing into VCTs will be significantly lower this year than last.
However we have substantial cash resources available for investment, and our
venture capital portfolio will continue to be actively managed with the
intention of generating gains for distribution as well as funds for
re-investment.





Dr Matt Ridley
Chairman





The unaudited interim financial statements for the six months ended 31 July 2006
are set out below.



INCOME STATEMENT

(unaudited) for the six months ended 31 July 2006

                                               Six months ended 31 July 2006       Six months ended 31 July 2005
                                             Revenue     Capital       Total     Revenue     Capital       Total
                                                £000        £000        £000        £000        £000        £000
(Loss)/gain on disposal of
  investments held at fair value                   -        (107)       (107)          -         117         117
Unrealised adjustments to fair value
  of investments                                   -        (929)       (929)          -        (718)       (718)
                                              ------      ------      ------      ------      ------      ------
                                                   -      (1,036)     (1,036)          -        (601)       (601)
Income                                           955           -         955         948           -         948
Investment management fee                       (119)       (357)       (476)       (146)       (437)       (583)
Other expenses                                  (112)          -        (112)       (108)          -        (108)
                                              ------      ------      ------      ------      ------      ------
Return on ordinary activities
  before tax                                     724      (1,393)       (669)        694      (1,038)       (344)
Tax on return on ordinary activities            (181)        113         (68)       (170)        218          48
                                              ------      ------      ------      ------      ------      ------
Return on ordinary activities
  after tax                                      543      (1,280)       (737)        524        (820)       (296)
                                              ------      ------      ------      ------      ------      ------
Return per share                                 1.2p      (2.7)p      (1.5)p        1.2p      (1.9)p      (0.7)p


                                                                                     Year ended 31 January 2006

                                                                                 Revenue     Capital       Total
                                                                                    £000        £000        £000
Loss on disposal of investments
  held at fair value                                                                   -        (388)       (388)
Unrealised adjustments to fair value
  of investments                                                                       -         265         265
                                                                                  ------      ------      ------
                                                                                       -        (123)       (123)
Income                                                                             2,226           -       2,226
Investment management fee                                                           (287)       (861)     (1,148)
Other expenses                                                                      (203)          -        (203)
                                                                                  ------      ------      ------
Return on ordinary activities
  before tax                                                                       1,736        (984)        752
Tax on return on ordinary activities                                                (455)        352        (103)
                                                                                  ------      ------      ------
Return on ordinary activities
  after tax                                                                        1,281        (632)        649
                                                                                  ------      ------      ------
Return per share                                                                     2.9p      (1.4)p        1.5p





RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

(unaudited) for the six months ended 31 July 2006

                                            Six months     Six months            Year 
                                                 ended          ended           ended
                                          31 July 2006   31 July 2005 31 January 2006          
                                                 £000           £000             £000
Equity shareholders' funds at 1                38,675         40,272           40,272
February 2006
Return on ordinary activities after tax          (737)          (296)             649
Dividends recognised in the period             (1,915)          (664)          (1,092)
Net proceeds of share issues                    6,123             58               97
Shares purchased for cancellation                (624)          (503)          (1,251)
Expenses charged to capital reserve               (15)             -                -
                                              -------        -------          -------
Equity shareholders' funds at 31 July          41,507         38,867           38,675
2006
                                              -------        -------          -------





BALANCE SHEET

(unaudited) as at 31 July 2006


                                            31 July 2006  31 July 2005  31 January 2006
                                                    £000          £000             £000
Fixed asset investments held at fair value:
Venture capital investments
  Unquoted                                        26,356        26,854           25,259
  Quoted                                           5,042         4,364            4,548
                                                 -------       -------          -------
Total venture capital investments                 31,398        31,218           29,807
Quoted fixed-interest investments                  8,646         6,508            6,029
                                                 -------       -------          -------
Total fixed asset investments                     40,044        37,726           35,836
                                                 -------       -------          -------
Current assets:
  Debtors                                            736           418              409
  Cash at bank                                       852           917            2,664
                                                 -------       -------          -------
                                                   1,588         1,335            3,073
Creditors (amounts falling due within one           (125)         (194)            (234)
year)
                                                 -------       -------          -------
Net current assets                                 1,463         1,141            2,839
                                                 -------       -------          -------

Net assets                                        41,507        38,867           38,675
                                                 -------       -------          -------

Capital and reserves:
Called-up equity share capital                     2,457         2,183            2,139
Share premium                                     24,907        34,104           34,141
Capital redemption reserve                           182            96              142
Capital reserve - realised                        11,539         1,112              351
Capital reserve - unrealised                       1,592           775              977
Revenue reserve                                      830           597              925
                                                 -------       -------          -------
Total equity shareholders' funds                  41,507        38,867           38,675
                                                 -------       -------          -------
Net asset value per share                           84.5p         89.0p            90.4p





CASH FLOW STATEMENT

(unaudited) for the six months ended 31 July 2006

                                     Six months ended      Six months ended             Year ended
                                         31 July 2006          31 July 2005        31 January 2006
                                      £000       £000       £000       £000      £000         £000
Net cash inflow from
  operating activities                            267                   264                    972
Taxation:
Corporation tax paid                             (185)                    -                   (115)
Financial investment:
Purchase of investments             (8,288)               (4,196)              (6,293)
Sale/repayment of investments        2,810                 2,163                6,551
                                    ------                ------               ------
Net cash (outflow)/inflow from
  financial investment                         (5,478)               (2,033)                   258
Equity dividends paid                          (1,915)                 (664)                (1,092)
                                               ------                ------                 ------
Net cash (outflow)/inflow
  before financing                             (7,311)               (2,433)                    23
Financing:
Issue of ordinary shares             6,488                    68                  112
Share issue expenses                  (365)                  (10)                 (15)
Purchase of ordinary shares
  for cancellation                    (624)                 (503)              (1,251)
                                    ------                ------               ------
Net cash inflow/(outflow)
  from financing                                5,499                  (445)                (1,154)
                                               ------                ------                 ------
Decrease in cash at bank                       (1,812)               (2,878)                (1,131)
                                               ------                ------                 ------

Reconciliation of return before tax
to net cash flow from operating
activities

Return on ordinary activities
  before tax                                     (669)                 (344)                   752
Loss/(gain) on disposal of
  investments held at fair value                  107                  (117)                   388
Unrealised adjustments to fair value
  of investments                                  929                   718                   (265)
(Increase)/decrease in debtors                    (93)                    2                     89
(Decrease)/increase in creditors                   (7)                    5                      8
                                               ------                ------                 ------
Net cash inflow from
  operating activities                            267                   264                    972
                                               ------                ------                 ------

Analysis of movement in net funds
                                       1 February 2006           Cash flows           31 July 2006
                                                  £000                 £000                   £000
Cash at bank                                    2,664                (1,812)                   852
                                               ------                ------                 ------





INVESTMENT PORTFOLIO SUMMARY

as at 31 July 2006
                                                                         Cost    Valuation   % of net assets
                                                                         £000         £000      by valuation
Venture capital investments:
Longhirst Group                                                         1,440        1,699               4.1
Computer Software Group*                                                  611        1,575               3.8
DMN                                                                     1,145        1,471               3.5
Envirotec                                                                 975        1,467               3.5
IG Doors                                                                1,000        1,387               3.3
John Laing Partnership                                                    507        1,119               2.7
Crantock Bakery                                                         1,107        1,107               2.7
Arrow Industrial Group                                                    735        1,061               2.6
Nightingales Holdings                                                     993          993               2.4
Liquidlogic                                                               564          985               2.4
AFI Aerial Platforms                                                      347          934               2.2
Alaric Systems                                                            921          921               2.2
Touchstone Asset Management                                               900          900               2.2
Pivotal Laboratories Holdings                                             857          857               2.1
TFB Group                                                                 700          829               2.0
                                                                      -------      -------            ------
Fifteen largest venture capital investments                            12,802       17,305              41.7
Other venture capital investments                                      16,987       14,093              34.0
                                                                      -------      -------            ------
Total venture capital investments                                      29,789       31,398              75.7
Quoted fixed-interest investments                                       8,663        8,646              20.8
                                                                      -------      -------            ------
Total fixed asset investments                                          38,452       40,044              96.5
                                                                      -------
Net current assets                                                                   1,463               3.5
                                                                                   -------            ------
Net assets                                                                          41,507             100.0
                                                                                   -------            ------
*Quoted on Alternative Investment Market





The above summary of results for the six months ended 31 July 2006 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 2006 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 of 1.0p per share for the year ending 31 January
2007 will be paid on 1 December 2006 to shareholders on the register at the
close of business on 3 November 2006.



A copy of the interim report for the six months ended 31 July 2006 is expected
to be posted to shareholders on 29 September 2006 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


                      This information is provided by RNS
            The company news service from the London Stock Exchange