Interim Management Statement

Baronsmead VCT 2 plc

                         Interim Management Statement                          

For the period from 1 October 2010 to 31 December 2010.

Headlines

4.5%                   4.1p per share increase in underlying Net Asset Value   
                       (NAV)                                                   
                                                                               
3 realisations         In Credit Solutions (1.8x cost), Mount Engineering (1.2x
                       cost) and Advanced Computer Software (2.0x cost)        

 

Performance Summary

Capital return              As at        As at       Movement                  
                                                                               
                            31 Dec 2010  30 Sep 2010                           
                                                                               
Total net assets            £66.41m      £63.67m                               
                                                                               
Net asset value per share   95.91p       91.79p*     4.5%                      
                                                                               
Share price                 85.75p       81.25p      5.5%                      
                                                                               
Discount to NAV             (10.6%)      (11.5%)                               
                                                                               
Total return                3 month      3 year      10 year    Since launch   
                            (%)          (%)         (%)        (%)            
                                                                               
Net asset value(1)          4.4          6.2         59.6       117.3          
                                                                               
Share price(2)              9.2          6.6         74.3       115.6          
                                                                               
FTSE All-share(3)           7.4          4.4         43.3       63.0           
                                                                               

* Adjusted for 3.0p final dividend for comparative purposes.

Key:

(1) NAV total return = NAV + reinvested dividends; Source: ISIS EP LLP

(2) Share price total return = Mid to mid share price + reinvested dividends;
Source: AIC

(3) FTSE All-share = FTSE All-share Index + reinvested dividends; Source: AIC

These total returns are stated before the inclusion of VCT tax
reliefs which are designed to mitigate the higher risks and costs associated
with investing in smaller companies and the other constraints of the VCT
legislation. The tax reliefs given at the time of subscription have been 20%,
40% and latterly 30%, so any adjusted performance measure including this relief
will vary depending on the date of subscription. Additionally shareholders
benefit from receiving VCT dividends tax free.   

Investment Performance 

The direction of travel of the 67 investee companies was consistent with 87%
(Q3 2010: 91%) of companies now being classified as steady or up as performance
stabilises. This is reflected in value increases in both the unquoted and
AIM-traded portfolios. The unquoted portfolio increased by 3%, whilst the
AIM-traded portfolio increased by 9% in the quarter including a significant
increase in the value of Staffline Recruitment Group plc.

Top ten Investments 

Position at   Position at                                      Percentage      
                                                               of NAV          
31 Dec 2010    30 Sep 2010                                     at 31 Dec 2010  
                                                                
                              Company                                          
                                                                               
1             1               Reed & Mackay Limited                         7.2
                                                                               
2             2               Nexus Vehicle Holdings Limited                6.3
                                                                               
3             3               Crew Clothing Company Limited                 3.9
                                                                               
4             4               Cablecom Networking Holdings                  3.7
                              Limited                                          
                                                                               
5             10              Staffline Group Plc                           3.1
                                                                               
6             6               Kafevend Holdings Limited                     3.1
                                                                               
7             5               Quantix Limited                               3.0
                                                                               
8             8               Independent Living Services                   2.8
                              Limited                                          
                                                                               
9             7               Fisher Outdoor Leisure Holdings               2.7
                              Limited                                          
                                                                               
10            9               CSC (World) Limited                           2.5
                                                                               
Total                                                                      38.3

Analysis of Total Assets

                                    Percentage of total     Percentage of total
                                                 assets                  assets
                                                                               
                                         at 31 Dec 2010          at 30 Sep 2010
                                                                               
Unquoted investments                                 46                      49
                                                                    
AIM,Listed & Collective                              28                      25
Investments                                                           
                                                                               
Interest Bearing Securities               20                      23           
                                                                               
Cash                                       6                       3           
                                                                               
Total Cash Portfolio                                 26                      26
                                                                               
Total Assets                                        100                     100

Analysis of Investment Portfolio by Sector

(excluding cash and interest bearing securities)

                                          Percentage of           Percentage of
                                                                               
                                      total investments       total investments
                                                                               
                                         at 31 Dec 2010          at 30 Sep 2010
                                                                               
Business Services                                    39                      39
                                                                               
Consumer Markets                                     17                      18
                                                                               
Financial Services                                    3                       5
                                                                               
Healthcare & Education                               11                       9
                                                                               
IT & Media                                           30                      29
                                                                               
Total                                               100                     100

Investment Activity

During the quarter nine AIM traded investments, totalling £1.8m, were completed
in five existing portfolio companies and four new companies as shown below. A
further investment of £0.3m was made into the existing collective investment
vehicle, Wood Street Microcap Investment Fund.

Following the period end an unquoted investment of £6.5m (across the four
Baronsmead generalist VCTs) was completed in Valldata Services Limited, a
leading provider of outsourced donation processing and fulfilment services for
the UK not-for-profit market.

Investments made

Company                                   Date                   Cost (£'000)
                                                                             
Accumuli plc                              Nov 2010                        333
                                                                             
Brady plc                                 Dec 2010                        176
                                                                             
Electric Word plc *                       Nov 2010                        237
                                                                             
Green Compliance plc *                    Nov 2010                        375
                                                                             
Hangar 8 plc                              Nov 2010                         44
                                                                             
IS Pharma plc *                           Nov 2010                        278
                                                                             
Netcall plc *                             Oct 2010                         76
                                                                             
Tangent Communications plc *              Dec 2010                         88
                                                                             
Tristel plc                               Nov 2010                        217
                                                                             
Total Investments                                                       1,824
                                                                             

* Follow on investments

Realisations

During the quarter 2 AIM-traded investments, Advanced Computer Software and
Mount Engineering, were realised in full. Also 1 unquoted investment, Credit
Solutions, was realised in full.

Company                        Date               Cost      Proceeds  Multiple
                                                (£'000)     (£'000)   of cost†       
                                                                      
                                                                              
Advanced Computer Software plc Nov/Dec 2010         262         525       2.0x
                                                                              
Credit Solutions               Nov 2010           1,032       1,294       1.8x
                                                                              
Mount Engineering              Nov 2010             385         451       1.2x
                                                                              
Total realisations                                1,679       2,270           
                                                                              

† includes interest and dividends received in prior periods.

Fundraising

An Offer for Subscription to raise the sterling equivalent of €2.5m was made
available to the Company's existing Shareholders toward the end of November
2010. The Offer was fully subscribed and shares were allotted on 16 December
2010 at a price of 102.50p per share. The directors would like to thank all
those who subscribed to the Offer.

Annual General Meeting on 11 January 2011

The AGM was attended by over 40 Shareholders and included a number of
presentations and a shareholder workshop. The Chairman gave his view on the
current economic situation followed by comments on the investment environment
from the Manager. John Smith, Managing Director of Getting Personal presented
the growth story of that business.

Net Asset Value

The NAV per share at 31 January 2011 was 97.20p representing an increase of
1.3% since the quarter end driven largely by an increase in the value of the
AIM-traded portfolio.

Events after the period end

Other than as discussed in this statement the Board is not aware of any
significant events or transactions which have occurred between 31 December 2010
and the date of publication of this statement which would have a material
impact on the financial position of the Company.

Investment objective

Baronsmead VCT 2 plc is a tax efficient listed company which aims to achieve
long-term investment returns for private investors, including tax-free
dividends.

Further information 

Further information regarding the Company, including net asset values published
since the end of the period and quarterly factsheets, can be found at the
Company's website www.baronsmeadvct2.co.uk

Contact

For further information please contact:

Michael Probin     Investor Relations Manager 020 7506 5600
[e-mail]