Northern 2 VCT PLC.

RNS Number:0571U
Northern 2 VCT PLC
30 March 2007

30 MARCH 2007



Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by NVM Private
Equity (formerly known as Northern Venture Managers). The trust 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

Financial highlights - year ended 31 January 2007:
(comparative figures as at 31 January 2006 in italics)

2007 2006
* Net assets #42.9m #38.7m

* Net asset value per share 88.9p 90.4p

* Return per share:
Revenue 2.5p 2.9p
Capital 1.2p (1.4)p
Total 3.7p 1.5p

* Dividend per share declared in respect of the year:
Revenue 2.5p 2.5p
Capital 3.0p 3.0p
Total 5.5p 5.5p

* Cumulative return to shareholders since launch:

Net asset value per share 88.9p 90.4p
Dividends paid per share* 28.9p 23.4p
Net asset value plus dividends paid per share 117.8p 113.8p

* Share price at end of year 75.0p 80.0p

*Excluding proposed final dividend

For further information, please contact:

NVM Private Equity Limited

Alastair Conn, Managing Director 0191 244 6000


Lansons Communications

Alison Boucher 020 7294 3616


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

In the year to 31 January 2007 the company achieved a total return of 4.0p per
share, with the net asset value before taking account of dividends recognised in
the year increasing from 90.4p to 94.4p. After deducting dividends totalling
5.5p charged to reserves during the year, the net asset value per share as shown
in the year-end balance sheet was 88.9p per share. Total net assets, including
the proceeds of the share issue completed in April 2006, rose from #38.7 million
to #42.9 million.

Investment portfolio

The venture capital portfolio at 31 January 2007 comprised 52 holdings with a
total value of #33.1 million. During the year seven new venture capital
investments were completed at a cost of #4.1 million. Disposal proceeds were
relatively low at #2.7 million, but there has been an upturn in exit activity
since the year end with four disposals totalling #2.6 million agreed and
currently in progress.

Revenue and dividends

Although the revenue return per share fell to 2.5p, compared with 2.9p in the
preceding year, we have been able to maintain the revenue dividend at 2.5p per
share for the sixth year in succession. Realised gains from the venture capital
portfolio are sufficient to maintain the capital dividend at last year's figure
of 3.0p per share. The total dividend for the year is therefore unchanged at
5.5p per share, comprising the interim dividend of 1.0p per share which was paid
in December 2006 and a proposed final dividend of 4.5p per share which will, if
approved by shareholders at the annual general meeting, be paid on 8 June 2007.

The tax-free total dividend of 5.5p is equivalent to a 9.2% gross yield to a
higher-rate taxpayer subscribing for shares at 100p, and 11.5% if the 20% income
tax relief on subscriptions obtained by subscribers in 1999 is taken into
account. The cumulative total of dividends declared by the company over eight
years is 33.4p per share, an average of 4.2p per year.

Our dividend investment scheme has continued to operate, and shareholders
interested in joining the scheme should contact the company secretary for
further information.

Management arrangements

I reported last year that with effect from 1 February 2006 our managers, NVM,
had agreed to reduce their annual management fee from 2.5% to 2.0% of net
assets, but with the ability to earn an additional fee based on the extent to
which an agreed performance target was exceeded. The target is expressed in
terms of the total return (net asset value growth plus dividend distributions)
achieved in each financial year. In the year to 31 January 2007 the total
return of 4.0p was equivalent to 4.4% of opening net assets, exceeding the
stipulated minimum of 3.5%, and an additional fee of #37,000 became payable.
The total management fee (excluding VAT) for the year was #877,000, compared
with the #1,050,000 which would have been payable under the previous

A year ago your board agreed, following consultation with the boards of other
funds managed by NVM, to the introduction of a new co-investment scheme under
which NVM executives are required to invest personally in the ordinary shares of
companies in which Northern 2 VCT invests. We intend to keep this arrangement
under regular review to ensure that it meets our objective of enabling NVM to
recruit and retain high-calibre investment executives in a competitive market
environment, whilst ensuring that the interests of both NVM and Northern 2 VCT
shareholders remain fairly aligned.

Shareholder issues

Our limited public offer of new ordinary shares launched in March 2006, which
closed on 5 April, raised a total of #6.3 million before expenses. The 2005/06
tax year saw a record level of fund-raising in the VCT market, with over #750
million subscribed. With effect from 6 April 2006 the rate of income tax relief
on new VCT investments was cut from 40% to 30%, and there has been a marked
reduction in subscriptions in the 2006/07 tax year. Your directors considered
raising further funds this year but decided not to do so in view of the likely
scarcity of investors and the company's strong cash position.

During the year the company bought back for cancellation 1,700,647 shares,
equivalent to approximately 4.0% of the issued capital at the start of the year,
at an average cost of 78p per share. A resolution will as usual be proposed at
the annual general meeting to renew the board's authority to make market
purchases of shares.

The level of secondary market trading in most VCTs' shares remains low and, with
the intention of helping improve VCTs' communication with government and the
investing public, your company and approximately 70 other VCTs joined the
Association of Investment Companies in October 2006.

VCT qualifying status

The company has continued to retain PricewaterhouseCoopers LLP as advisers on
VCT taxation matters, and has throughout the year met the qualifying conditions
laid down by HM Revenue & Customs for approval as a VCT.

The future

The new financial year has started well, with exit discussions in progress about
several portfolio companies in addition to those mentioned above. We have a
sound balance sheet, with over #9 million of liquid assets available for future
investment, and a healthy trend of dividend distributions is emerging. The
short-term prospects for the UK economy are mixed, with a recent background of
rising inflation and interest rates, but forecasters seem to be in general
agreement that modest economic growth should continue at least into 2008 and we
expect most of our investments to make further progress in this environment.

Dr Matt Ridley

The audited financial statements for the year ended 31 January 2007 will show
the results set out below.

for the year ended 31 January 2007

Year ended 31 January 2007 Year ended 31 January 2006
Revenue Capital Total Revenue Capital Total

#000 #000 #000 #000 #000 #000

Gain/(loss) on disposal of
investments - 168 168 - (388) (388)
Unrealised adjustments to fair value
of investments - 957 957 - 265 265
---------- ---------- ---------- ---------- ---------- ----------
- 1,125 1,125 - (123) (123)
Income 2,036 - 2,036 2,226 - 2,226
Investment management fee (247) (784) (1,031) (287) (861) (1,148)
Other expenses (224) - (224) (203) - (203)
---------- ---------- ---------- ---------- ---------- ----------
Return on ordinary activities
before tax 1,565 341 1,906 1,736 (984) 752
Tax on return on ordinary activities (343) 243 (100) (455) 352 (103)
---------- ---------- ---------- ---------- ---------- ----------
Return on ordinary activities
after tax 1,222 584 1,806 1,281 (632) 649
---------- ---------- ---------- ---------- ---------- ----------
Return per share 2.5p 1.2p 3.7p 2.9p (1.4)p 1.5p

for the year ended 31 January 2007

Year ended 31 January Year ended 31 January

2007 2006
#000 #000
Equity shareholders' funds
at 1 February 2006 38,675 40,272
Return on ordinary activities after tax 1,806 649
Dividends recognised in the year (2,403) (1,092)
Net proceeds of share issues 6,168 97
Shares purchased for cancellation (1,322) (1,251)
Expenses charged to capital reserve (15) -
---------- ----------
Equity shareholders' funds
at 31 January 2007 42,909 38,675
---------- ----------

as at 31 January 2007
31 January 2007 31 January 2006

Venture capital investments:
Unquoted 28,406 25,259
Quoted 4,706 4,548
---------- ----------
33,112 29,807
Listed fixed-interest investments 7,161 6,029
---------- ----------
Total fixed asset investments 40,273 35,836
---------- ----------
Current assets:
Debtors 471 409
Cash at bank 2,410 2,664
---------- ----------
2,881 3,073
Creditors (amounts falling due
within one year) (245) (234)
---------- ----------
Net current assets 2,636 2,839
---------- ----------

Net assets 42,909 38,675
---------- ----------

Capital and reserves:
Called-up equity share capital 2,414 2,139
Share premium 24,949 34,141
Capital redemption reserve 227 142
Capital reserve:
Realised 10,779 351
Unrealised 3,519 977
Revenue reserve 1,021 925
---------- ----------
Total equity shareholders' funds 42,909 38,675
---------- ----------
Net asset value per share 88.9p 90.4p

for the year ended 31 January 2007

Year ended Year ended
31 January 2007 31 January 2006
#000 #000 #000 #000
Net cash inflow from
operating activities 799 972
Corporation tax paid (184) (115)
Financial investment:
Purchase of investments (10,365) (6,293)
Sale/repayment of investments 7,053 6,551
---------- ----------
Net cash (outflow)/inflow from
financial investment (3,312) 258
Equity dividends paid (2,403) (1,092)
---------- ----------
Net cash (outflow)/inflow before
financing (5,100) 23
Issue of ordinary shares 6,525 112
Share issue expenses (357) (15)
Purchase of ordinary shares
for cancellation (1,322) (1,251)
---------- ----------
Net cash inflow/(outflow)
from financing 4,846 (1,154)
---------- ----------
Decrease in cash at bank (254) (1,131)
---------- ----------
Reconciliation of return before
tax to net cash flow from
operating activities
Return on ordinary activities
before tax 1,906 752
(Gain)/loss on disposal of
investments (168) 388
Unrealised adjustments to
fair value of investments (957) (265)
(Increase)/decrease in debtors (62) 89
Increase in creditors 95 8
Expenses charged to capital (15) -
---------- ----------
Net cash inflow from
operating activities 799 972
---------- ----------
Analysis of movement in net funds
1 February Cash flows 31 January 2007
#000 #000 #000
Cash at bank 2,664 (254) 2,410
---------- ---------- ----------

as at 31 January 2007

Valuation % of net assets
#000 by valuation
Fifteen largest venture capital investments:
Longhirst Group 2,290 5.3
John Laing Partnership 2,146 5.0
Envirotec 1,750 4.1
Crantock Bakery 1,438 3.4
Computer Software Group* 1,400 3.3
IG Doors 1,274 3.0
TFB Group 1,171 2.7
Arrow Industrial Group 1,127 2.6
KCS Global Holdings 1,065 2.5
Liquidlogic 1,002 2.3
Product Support (Holdings) 1,000 2.3
Ithaca Holdings 995 2.3
Direct Valeting 915 2.1
Touchstone Asset Management 900 2.1
Pivotal Laboratories Holdings 895 2.1
---------- ----------
19,368 45.1
Other venture capital investments 13,744 32.1
---------- ----------
Total venture capital investments 33,112 77.2
Listed fixed-interest investments 7,161 16.7
---------- ----------
Total fixed asset investments 40,273 93.9

Net current assets 2,636 6.1
---------- ----------
Net assets 42,909 100.0
---------- ----------
*Quoted on Alternative Investment Market

The above summary of results for the year ended 31 January 2007 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.
Statutory financial statements will be filed with the Registrar of Companies
in due course; the independent auditors' report on those financial statements
under Section 235 of the Companies Act 1985 is unqualified and does not contain
a statement under Section 237(2) or (3) of the Companies Act 1985.

The proposed final dividend of 4.5p per share for the year ended 31 January 2007
will, if approved by shareholders, be paid on 8 June 2007 to shareholders on the
register at the close of business on 20 April 2007.

The full annual report including financial statements for the year ended 31
January 2007 is expected to be posted to shareholders on 13 April 2007 and will
be available to the public at the registered office of the company at
Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER.


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