Announcements

Northern 2 VCT PLC.


RNS Number:1239J
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
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