Interim Results

Baronsmead VCT 2 PLC
07 November 2002


To:   RNS

From: Baronsmead VCT 2 plc

Date: 7 November 2002



Investment Objective


Baronsmead VCT 2 is a tax efficient listed company which aims to achieve
long-term capital growth and generate tax free dividends for private investors.


Interim Results - For the six months ended 30 September 2002

• NAV fell by 6.8 per cent

• Dividend of 1.00p declared (2001 - 1.30p)

• Investments in period increased to 43 companies

• Total return since launch 13.1 per cent.


The last six months has been a period of sharply falling stock market prices.
Baronsmead VCT2 has held and continues to hold significant funds in cash or
fixed interest securities. This and the Company's portfolio diversity
(particularly in unquoted investments) has provided some protection against
market volatility resulting in relative out performance against the FTSE
All-Share and its peer group of generalist VCTs.

Achieved Results

During the six months to 30 September 2002 the net asset value per share has
decreased by 6.8 per cent from 100.5p to 93.7p per share after the proposed
interim dividend of 1.0p per share. While not directly comparable because 50.7p
of the Company's assets are in cash or fixed interest securities, the result can
still be judged favourably with the FTSE All-Share, which fell 29.6 per cent
over the same period.


Since launch Baronsmead VCT 2 has generated a positive total return (dividends
paid plus change in NAV) of 13.1 per cent which compares to a 28.6 per cent
reduction in the FTSE All-Share over the same period. This out performance
differential is further increased if the VCT tax reliefs are taken into account.


The Board has declared an interim dividend of 1.0p per share (1.3p in 2001)
which will be paid on 13 December 2002 to shareholders on the register at close
of business on 15 November 2002. Total dividends of 14.4p per share have been
paid since launch.

Investment Environment

The Annual Results released in May 2002 showed the Board was optimistic that the
UK economy was showing signs of stabilisation. However the lack of current
investor confidence has eroded stock market prices still further, which in turn
has had an impact on the Company's portfolio valuations. Additionally the level
of merger and acquisition activity has reduced which has been reflected in the
recent level of new investments.


The number of investment proposals received and considered by the Investment
Manager is constantly monitored. Whilst there has been a sharp decrease in '
early stage' investment opportunities, the number of mature business proposals
seriously considered is comparable to the levels of previous years. The Manager
has opened an office in Manchester and strengthened the investment team to
increase market share in this regard. However one trend of the current economic
environment is that investments are taking longer to complete. All stakeholders
and potential investors want to be certain that an increasing number of issues
have been resolved before funds are committed.

Portfolio performance

Five new investments and one further investment were made in the six-month
period to 30 September 2002 totalling £2.4 million.

  • Fretwell Downing Informatics - international supplier of library
    management solutions

    Based in Sheffield FDI provides software solutions to public, research and
    corporate libraries across the UK, the USA and Australia. Baronsmead VCT 2
    provided £565,000 of the £3.2 million development capital.

  • Rarrigini & Rosso - provider of insurance products and developer of
    brokering IT solutions

    Based in Peterborough, R&R provide a range of insurance products (motor
    fleet, property and haulage) to an extensive network of insurance brokers.
    Through these broker relationships it has launched a new outsourced service
    providing all the IT needs of running full front and back office support to
    the broker. £526,900 was invested as part of the £5 million raised to
    develop this new IT service.

  • i-documentsystems - provider of document management systems to local
    authorities

    i-documentsystems is based in London and raised £1.2 million as a placing on
    AiM both to acquire The Planning Exchange and also to provide working
    capital to fund the rollout of its document and management solutions
    throughout Local Government. Baronsmead VCT 2 invested £400,000.

  • MEM Entertainment - building an audio-visual publishing group

    MEM raised £10.3 million to make two acquisitions; Leisureview, a niche
    video publishing business and Fountain, the UK's largest independent
    television studio. Baronsmead VCT 2 invested £360,000 as part of the £3.4
    million raising on AiM.

  • VI Group - supplier of CAD/CAD software to the mould and die industry

    Baronsmead VCT 2 invested £500,000 of a £3.2 million placing on AiM. The
    financing round is being used to widen their software offering and
    strengthen their distribution channel internationally.


A further investment of £80,800 was made in kidsunlimited.


The Business Service and Consumer market sectors continue to provide the
majority of the investments in the portfolio, representing 35% and 36% by value
respectively.


The nature of Baronsmead VCT2's business involves the taking of risk and,
despite thorough due diligence, it is inevitable that some of the Company's
investments will not succeed. Indeed problems tend to become evident before the
successes are recorded and in the last six months there have been a number of
disappointments. Both Demica and 4:2:2 have found conditions tough in their
respective markets with clients freezing spending plans. Almost full provisions
have been made against these investments. In addition Gilbert has subsequently
been sold at a total loss following a continued period of poor trading.

On the positive side it is possible that a number of profitable realisations
will occur in the second half of this year. The policy of Baronsmead VCT 2 is to
primarily invest in growing established and profitable businesses. As described
at the AGM on 21 June 2002 the top five investees had achieved average sales and
operating growth for each of the last two years at rates of more than 20% per
annum. These businesses continue to make good progress.


Outlook

The plan remains unchanged. The Board and the Managers intend to build a
portfolio of around 50 primarily established and profitable companies and are
making good progress towards this target. The increased level of dealflow in
recent times should translate itself into a significant number of completed
deals in the next few quarters. The Managers intend to invest in quality
business propositions and the portfolio should benefit from the lower prices,
which are resulting from the current economic conditions. Certainly the Board
and the Managers believe that there are opportunities in a tough market and the
Managers constantly try to identify investments with above average potential.




Enquiries: David Thorp 0207 506 1100, ISIS Equity Partners plc

Gary Fraser 0131 465 1000, ISIS Asset Management plc



Unaudited Statement of Total Return (Incorporating the Revenue Account)
                                                                               Six months to
                                                                             30 September 2002
                                                                    Revenue         Capital            Total
                                                                      £'000           £'000            £'000

Gains/(losses) on investments                                             -         (2,685)          (2,685)
Income                                                                  878               -              878
Investment management fee                                              (99)           (298)            (397)
Other expenses                                                        (150)               -            (150)

Return on ordinary activities
before tax                                                              629         (2,983)          (2,354)

Tax on ordinary activities                                            (146)              92             (54)

Return attributable to
equity shareholders                                                     483         (2,891)          (2,408)

Dividends in respect of equity shares                                 (408)               -            (408)

Transfer to/(from) reserves                                              75         (2,891)          (2,816)

Return per ordinary 10p share:
Basic                                                                 1.18p         (7.06p)          (5.88p)








Unaudited Statement of Total Return (Incorporating the Revenue Account)
                                                                               Six months to
                                                                             30 September 2001
                                                                    Revenue         Capital            Total
                                                                      £'000           £'000            £'000

Gains/(losses) on investments                                             -         (3,937)          (3,937)
Income                                                                1,147               -            1,147
Investment management fee                                             (118)           (354)            (472)
Other expenses                                                        (180)               -            (180)

Return on ordinary activities
before tax                                                              849         (4,291)          (3,442)

Tax on ordinary activities                                            (190)              85            (105)

Return attributable to
equity shareholders                                                     659         (4,206)          (3,547)

Dividends in respect of equity shares                                 (529)               -            (529)

Transfer to/(from) reserves                                             130         (4,206)          (4,076)

Return per ordinary 10p share:
Basic                                                                 1.63p        (10.41p)          (8.78p)






Unaudited Statement of Total Return (Incorporating the Revenue Account)

                                                                           Year to 31 March 2002
                                                                       Revenue       Capital           Total
                                                                         £'000         £'000           £'000

Gains/(losses) on investments                                                -       (4,410)         (4,410)
Income                                                                   2,135             -           2,135
Investment management fee                                                (210)         (630)           (840)
Other expenses                                                           (335)             -           (335)

Return on ordinary activities                                            1,590       (5,040)         (3,450)
before tax

Tax on ordinary activities                                               (434)           200           (234)

Return attributable to                                                   1,156       (4,840)         (3,684)
equity shareholders

Dividends in respect of equity shares                                  (1,142)             -         (1,142)

Transfer to reserves                                                        14       (4,840)         (4,826)

Return per ordinary 10p share:                                           2.84p      (11.91p)         (9.07p)
Basic




Unaudited Balance Sheet
                                                                          As at                As at               As at
                                                                   30 September         30 September            31 March
                                                                           2002                 2001                2002
                                                                          £'000                £'000               £'000
Fixed Assets
Listed investments                                                          364                  651                 673
Unquoted investments                                                     11,308               10,503              11,950
Quoted on the Alternative Investment Market                               5,785                3,945               5,301
Quoted on OFEX                                                              147                  419                 266
Listed fixed interest investments                                        20,557               22,730              21,477
                                                                         ______               ______              ______
                                                                         38,161               38,248              39,667
Net current assets                                                          233                3,373               1,527
                                                                         ______               ______              ______
Net assets                                                               38,394               41,621              41,194
                                                                         ______               ______              ______
Financed by
Equity shareholders' funds                                               38,394               41,621              41,194
                                                                         ______               ______              ______

Net asset value per Ordinary share                                       93.69p              102.30p             100.54p






Summarised Unaudited Group Statement of Cash Flows
                                                                Six months to         Six months to              Year to
                                                                 30 September          30 September             31 March
                                                                         2002                  2001                 2002
                                                                        £'000                 £'000                £'000

Net cash inflow/(outflow) from operating activities                       371                  (97)                  816
Taxation                                                                    -                     -                (203)
Capital expenditure and financial investment                          (2,374)                 3,270                2,106
Equity dividends paid                                                   (614)                 (882)              (1,409)

Net cash (outflow)/inflow before financing                            (2,617)                 2,291                1,310
Financing                                                                (54)                   672                1,003

(Decrease)/increase in cash                                           (2,671)                 2,963                2,313


Reconciliation of net cash flow to movement in net cash

(Decrease)/increase) in cash                                          (2,671)                 2,963                2,313
Net cash at 1 April                                                     2,752                   439                  439

Net cash at 30 September/31 March                                          81                 3,402                2,752


Reconciliation of operating profit to net cash flow from operating activities

Net return before finance costs and taxation                              629                   849                1,590
Investment management fee charged to capital                            (298)                     4                (630)
Changes in working capital and other non-cash items                        40                 (950)                (144)

Net cash flow from operating activities                                   371                  (97)                  816





Notes

        1. The unaudited interim results have been prepared on the basis of
        the accounting policies set out in the statutory accounts of the Company
        for the year ended 31 March 2002.

        2. Earnings for the period should not be taken as a guide to the results 
        of the full year.

        3. Return per ordinary share is based on a weighted average of
        40,959,970 ordinary shares in issue.

        4. During the six months ended 30 September 2002 the Company issued
        145,389 ordinary shares and bought for cancellation 135,000 ordinary
        shares at a cost of £123,450. There were 40,981,575 ordinary shares in
        issue at 30 September 2002 (31 March 2002 - 40,971,186).

        5. The interim dividend of 1.00p per ordinary share will be paid on
        13 December 2002 to shareholders on the register on 15 November 2002.

        6. These are not statutory accounts in terms of Section 240 of the
        Companies Act 1985 and are unaudited. The full audited accounts for the
        year ended 31 March 2002, which were unqualified, have been lodged with
        the Registrar of Companies. No statutory accounts in respect of any
        period after 31 March 2002 have been reported on by the Company's
        auditors or delivered to the Registrar of Companies.

        7. Copies of the Interim Report, which have been reviewed by the
        Company's auditors, will be mailed to shareholders and will be available
        from the Registered Office of the Company at 100 Wood Street, London
        EC2V 7AN.



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