Interim Results

British SmallerTechCompaniesVCT2PLC
18 August 2005


18 August 2005

                  BRITISH SMALLER TECHNOLOGY COMPANIES VCT 2 PLC

            Unaudited interim results for the 6 months to 30 June 2005

British Smaller Technology Companies VCT 2 plc ("the Company"), the venture
capital trust specialising in growing smaller technology companies across a
range of industrial sectors, today announces its unaudited interim results for
the six months to 30 June 2005.


Chairman's Statement

The general performance of the investment portfolio in the first half of the
year has been satisfactory. However, the reduction in value of two investments
in particular has resulted in a 10% like-for-like fall in net asset value over
that period. Although disappointing, this is not unexpected for a relatively
young portfolio that is still developing and where the encouraging performances
of some of the newer investments has yet to feed through into the valuations.

Operations

As previously stated, the Board's investment strategy is to reserve sufficient
funding to support the current portfolio where it is merited and selectively
target later stage innovative companies for new investment opportunities. 
During the period under review, a total of £466,000 was invested in three 
businesses, one of which is new to the portfolio.

Vibration Technology Limited continues to show signs of progress having 
recently completed a trial of its Infinite Telemetry System with NASA in 
Arizona, USA. Your Company invested a further £150,000 in the first closing of a 
£5 million funding round.

Earlier this year, your Company invested a further £16,000 in Oxonica Limited 
as its share of a £2.5 million rights issue. Oxonica is involved in the 
development of innovative commercial solutions for international markets using 
its expertise in the design and application of nanomaterials. I am pleased to 
report that following the period end, on 14 July 2005, Oxonica was successfully 
admitted to AIM, raising £7.1 million at a placing price of 95.8 pence per 
share. The share price has increased significantly since that date.

The new investment was £300,000 in Digital Healthcare Limited just before the
end of the period. This company is well known to your Board and its Investment
Adviser through an existing investment by British Smaller Technology Companies
VCT plc, which also added to its earlier investment. Digital Healthcare has
developed software for the management of digital images in the diabetic
screening, ophthalmology and optometric sectors of the healthcare market. The
investment was part of a £3 million funding round supported by a number of new
investors.

During the period, your Board took the opportunity to realise approximately 10%
of your Company's holding in Cozart plc. The disposals were realised at an
average value of 42.8 pence per share compared to the acquisition cost of 30
pence per share.

Following the period end, your Company's investment in Tamesis Limited was
realised through the acquisition of that company by Patsystems plc, an AIM
quoted company whose business is the global supply of electronic trading
technology. Consideration is by way of a small initial cash payment, with
further consideration in the form of Patsystems' shares based on profit
performance over the next two years. Mr Last, a director of this Company and
your Board's representative non-executive director on the board of Tamesis, is
also a director of Patsystems plc. Mr Last played no part in any Board
discussions about the transaction and had no involvement in the due diligence
process.

Within the unquoted portfolio, the main valuation movements were in Broadreach
Networks Limited and ExpressOn Biosystems Limited. The fall in the value of
Broadreach reflects the price of a recent transaction in this company's shares.
The full impairment against ExpressOn Biosystems is necessary following the
failure of the company to complete its funding round when one of the syndicate
members withdrew at the final moment, thus causing the company to be placed 
into receivership.

Financial Results

The introduction of new Financial Reporting Standards (FRS), and particularly
FRS 26 which concerns the measurement of financial assets, has had an effect on
these interim results. The main difference is that all valuation movements,
including unrealised gains above cost that were previously taken to the
revaluation reserve, are now taken through the profit and loss account. The
revaluation reserve no longer exists. These changes have no effect on the
Company's distributable reserves and its ability to pay dividends in the future.

FRS 21, which concerns the accounting treatment of events after the balance
sheet date, means that dividends proposed are recognised in the period in which
the obligation arises. Therefore, the prior year period has now been restated
with the 2004 dividend now accounted for in the current year. The restated 2004
net asset value is 97.1 pence per share. There is no net effect on the current
year net asset value.

The result for the period was a loss of £652,000 equivalent to 8.41 pence per
share. Net asset value fell to 83.8 pence per share from the equivalent 92.1
pence per share at 31 December 2004.

Cash and liquid investments, in the form of UK Government gilts, totalled £2.7
million at the period end. Your Board considers this is satisfactory to support
the current portfolio, make selective new investments and meet the foreseeable
operating costs of the Company.

General

The dividend reinvestment scheme was introduced earlier this year and the
directors were authorised at the Extraordinary General Meeting on 27 May 2005
to implement the scheme. This scheme enables shareholders to reinvest their
dividend entitlement to take advantage of the tax relief available to investors
in VCTs, currently at a rate of 40%. I can report that, of the dividend
distribution approved in respect of the year to 31 December 2004, a total of
77,311 shares were subscribed for at a price of 76.8 pence per share.

A total of 8,000 Ordinary shares of 10p each were allotted on 23 May 2005 at a
subscription price of £1 per share following the exercise of warrants. This was
the last date by which warrants could be exercised and any outstanding warrant
rights have now lapsed.

A total of 200,000 shares were purchased by the Company in the market for
cancellation during the six month period at an average cost of 78.8 pence per
share.

Outlook

The businesses within the current portfolio continue to perform, on the whole,
satisfactorily. The first half result has been disproportionately affected by
the failure of ExpressOn Biosystems and the write down on Broadreach Networks.
However, the successful flotation of Oxonica shows that there is still market
appetite for growing innovative businesses and the development of a number of
companies in the portfolio continues to support the Board's optimism for value
growth in the medium term.

Sir Andrew Hugh Smith
18 August 2005


Profit and Loss Account

                                           Unaudited    Restated      Restated
                                            6 months   Unaudited          Year
                                               ended    6 months         ended
                                             30 June       ended   31 December
                                                2005        2004          2004
                                                           
                                                £000        £000          £000

                                   Notes

Income                                            37          35            77
                                              ------      ------        ------
Administrative expenses:
Investment advisory fee                          (88)       (138)         (197)
Other expenses                                   (95)        (85)         (178)
                                              ------      ------        ------
                                                (183)       (223)         (375)
                                              ------      ------        ------
Gain on realisation of investments                 7         159         1,398
Impairment of investments                       (513)         60           (20)
                                              ------      ------        ------
(Loss) profit on ordinary activities
before taxation                                 (652)         31         1,080
Tax on (loss) profit on ordinary       2                                   
activities                                         -           -             -  
                                              ------      ------        ------
(Loss) profit for the financial period          (652)         31         1,080
Dividends                              1        (392)          -             -
                                              ------      ------        ------
(Deficit) retained profit for the period      (1,044)         31         1,080
                                               =====       =====         =====
Basic and diluted (loss) earnings
per Ordinary share                     3       (8.41)p      0.40p        13.79p
                                               =====       =====         =====


Statement of Total Recognised Gains and Losses

                                           Unaudited    Restated       Audited
                                            6 months   Unaudited          Year
                                               ended    6 months         ended
                                             30 June       ended   31 December
                                                2005     30 June          2004
                                                            2004                                            
                
                                                £000        £000          £000

                                   
(Loss) profit for the financial period          (652)         31         1,080
Unrealised gain (loss) on valuation of
investments                                        -         429          (100)
Realisation of Warrant reserve on
lapse of unexercised warrants                      2           -             -
                                              ------      ------        ------
Total recognised (losses) gains
for the period                                  (650)        460           980
                                               =====       =====         =====


Note of Historical Cost Profits and Losses

                                           Unaudited    Restated      Restated
                                            6 months   Unaudited          Year
                                               ended    6 months         ended
                                             30 June       ended   31 December
                                                2005     30 June          2004
 
                                                £000        £000          £000

(Loss) profit on ordinary activities
before taxation                                 (652)         31         1,080
Realisation of investment gains of
previous periods                                  12           7            31
                                              ------      ------        ------
Historical cost (loss) profit on ordinary
activities before taxation                      (640)         38         1,111
                                               =====       =====         =====
Historical cost (loss) profit on ordinary
activities after taxation and dividends       (1,032)         38         1,111
                                               =====       =====         =====


Notes

All activity has arisen from continuing operations.



Balance Sheet

                                         Unaudited      Restated      Restated
                                           30 June     Unaudited   31 December
                                              2005       30 June          2004
                                                            2004         

                                              £000          £000          £000
                              Notes

Fixed assets
Investment portfolio                         3,664         3,639         3,775
                                            ------        ------        ------
Current assets
Debtors                                        215           134           112
Investments                                  1,541         1,037         1,280
Cash                                         1,158         2,386         2,544
                                            ------        ------        ------
                                             2,914         3,557         3,936
Creditors: amounts payable
within one year                               (108)         (109)         (105)
                                            ------        ------        ------
Net current assets                           2,806         3,448         3,831
                                            ------        ------        ------
Total net assets                             6,470         7,087         7,606
                                             =====         =====         =====
Capital and reserves
Called-up share capital                        772           782           783
Share premium account                           60            10             9
Capital redemption reserve                      21             1             1
Revaluation reserve                              -           776           223
Warrant reserve                                  -             2             3
Special reserve                              5,213         6,595         5,364
Other reserve                                    2             1             2
Profit and loss account                        402        (1,080)        1,221
                                            ------        ------        ------
Equity shareholders' funds                   6,470         7,087         7,606
                                             =====         =====         =====
Net asset value per Ordinary
share                              4          83.8p         90.5p         97.1p



Summarised Cash Flow Statement

                                           Unaudited   Unaudited       Audited
                                            6 months    6 months          Year
                                               ended       ended         ended
                                             30 June     30 June   31 December
                                                2005        2004          2004

                                                £000        £000          £000

Net cash outflow from operating activities      (188)       (215)         (307)

Financial investment                            (466)       (452)           20

Equity dividend paid to shareholders            (332)          -             -
                                              ------      ------        ------
Net cash outflow before management of
liquid resources and financing                  (986)       (667)         (287)

Management of liquid resources                  (250)        (12)         (236)
                                              ------      ------        ------
Net cash outflow before financing             (1,236)       (679)         (523)

Financing                                       (150)          8            10
                                              ------      ------        ------
Decrease in cash in the period                (1,386)       (671)         (513)
                                               =====       =====         =====



Notes to the Financial Statements

1.  The Company has adopted a number of new Financial Reporting Standards in 
these interim results. The Company has taken advantage of the exemption 
available to it under paragraph 108D of FRS 26 'Financial Instruments:
Measurement' not to restate the prior year comparative figures on adoption of 
FRS 26. FRS 26 requires the Company to recognise and measure its investments at 
fair value. The Company has measured its investments at fair value applying the 
International Private Equity and Venture Capital Valuation Guidelines with 
effect from 1 January 2005 to the extent that those requirements do not 
conflict with FRS 26, the main difference being in respect of the 
non-application of marketability discounts. Where a conflict exists, the 
requirements of FRS 26 are followed. The new valuation guidelines superseded 
the  British Venture Capital Association Valuation Guidelines which have 
historically been applied by the Company.

FRS 21 'Events after the Balance Sheet Date' has been adopted in these interim 
results. The main change is that dividends are only recorded where an 
obligation exists at the period end date. Consequently dividends which the 
Company proposes after the balance sheet date are no longer accrued but are 
required to be disclosed in the notes to the financial statements. The prior 
year comparative figures have been restated to reflect adoption of FRS 21. The 
prior year adjustment solely relates to the adoption of FRS 21.

The adoption of both FRS 22 'Earnings per share' and FRS 23 'The Effects of
Changes in Foreign Exchange Rates' has resulted in no changes in the accounting 
policies of the Company. Consequently, the prior year comparative figures have 
not been revised.

The requirements of the disclosure standard FRS 25 'Financial Instruments:
Disclosure and Presentation' whilst being applicable for the year ending 31
December 2005, do not impact the interim results. The requirements of FRS 25 
will be reflected in the Company's annual report and accounts expected to be
published in March 2006.

The interim financial statements, which have been approved by the directors, 
are unaudited and do not constitute full financial statements as defined in 
section 240 of the Companies Act 1985. The comparative figures for the year 
ended 31 December 2004 do not constitute full financial statements and, with 
the exception of the effects of the prior year adjustment arising on adoption 
of FRS 21 referred to above, have been extracted from the Company's financial 
statements for the year ended 31 December 2004. Those accounts were reported 
upon without qualification by the auditors and have been delivered to the 
Registrar of Companies.

On 12 November 2004, the Company revoked its investment company status and,
consequently, now prepares its financial statements in compliance with Schedule
4 of the Companies Act 1985. The unaudited interim results to 30 June 2004,
which were originally prepared in accordance with the provisions of the
Statement of Recommended Practice, Financial Statements of Investment Trust
Companies, have been restated for comparative purposes.


2. Taxation charge

                                           Unaudited    Restated       Audited
                                            6 months   Unaudited          Year
                                               ended    6 months         Ended
                                             30 June       ended   31 December
                                                2005     30 June          2004
                                                            2004     

                                                £000        £000          £000

(Loss) profit on ordinary activities
multiplied by standard small company rate of
corporation tax in the UK of 19% (2004: 19%)    (124)          6           205
Effect of:
Non taxable losses (profits) on investments (i)   96         (42)         (262)
Excess management expenses (ii)                   28          36            57
                                              ------      ------        ------
Current tax charge for period                      -           -             -
                                               =====       =====         =====

(i)Venture Capital Trusts are not subject to corporation tax on these items
(ii)The Company has no deferred tax liability

Deferred tax assets in respect of losses have not been recognised as management
do not currently believe that it is more likely than not sufficient taxable
profits will be available against which the assets can be recovered.

Due to the Company's status as a venture capital trust, and the continued
intention to meet the conditions required to comply with Section 842AA of the
Income and Corporation Taxes Act 1988, the Company has not provided deferred 
tax on any capital gains and losses on the revaluation or disposal of 
investments.


3. The basic (loss) earnings per share is based on the net loss from ordinary
activities after tax attributable to shareholders of £652,000 (30 June 2004: 
net profit £31,000 and 31 December 2004: net profit £1,080,000) and on 
7,757,000 shares (30 June 2004: 7,826,000 and 31 December 2004: 7,830,000), 
being the weighted average number of shares in issue during the period. The 
Company has no securities that would have a dilutive effect and hence basic and 
diluted return per share are the same.


4. The net asset value per Ordinary share is calculated on attributable assets
of £6,470,000 and 7,718,777 shares in issue at the period end (30 June 2004:
assets of £7,087,000 and 7,833,466 shares, 31 December 2004: assets of
£7,606,000 (as restated) and 7,833,466 shares).


5. Copies of the interim report can be obtained from the Company's registered
office: Saint Martins House, 210-212 Chapeltown Road, Leeds, LS7 4HZ.


For further information, please contact:

Alan Davies, YFM Private Equity Limited Tel: [phone]
David Hall, YFM Private Equity Limited Tel: [phone]
Jonathan Becher, Teather & Greenwood Limited Tel: [phone]
Michael Bellamy, Teather & Greenwood Limited Tel: [phone]



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