Final Results

Northern 2 VCT PLC
07 April 2004

7 APRIL 2004

NORTHERN 2 VCT PLC

PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 JANUARY 2004

Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture
Managers.  The trust was launched in 1999 through a public share issue which
raised £22 million;  a further £22 million was raised in a second public issue
in 2001.  The trust invests mainly in unquoted venture capital situations 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 January 2003):
                                                                       2004                      2003
•    Net assets                                                 £43,233,000               £42,622,000
•    Net asset value per share                                        96.5p                     94.5p
•    Share price                                                        82p                       80p
•    Investment income                                           £2,015,000                £1,983,000
•    Return on ordinary activities
     before tax:
     Revenue                                                     £1,506,000                £1,493,000
     Capital                                                     £1,183,000                £1,591,000
•    Return per share:
     Revenue                                                           2.5p                      2.3p
     Capital                                                           3.3p                      4.2p
•    Dividend per share:
     Revenue                                                           2.5p                      2.5p
     Capital                                                           1.5p                       Nil


For further information, please contact:

Northern Venture Managers Limited
Alastair Conn, Managing Director                                  0191 244 6000
Website:  www.nvm.co.uk
Polhill Communications
Lucy Copeman/Marlene Scott                                        020 7655 0540



CHAIRMAN'S STATEMENT


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


During the past year Northern 2 VCT has made further progress despite an
economic environment in the UK that has continued to be challenging for small
companies, particularly those in the manufacturing sector.  Although there has
been a limited recovery in the financial markets, many observers doubt whether
this can be sustained.  It is therefore pleasing to be able to report a modest
increase in net asset value over the past year as well as the company's first
capital gain distribution to shareholders, keeping Northern 2 VCT at the head of
its peer group of generalist VCTs launched in the 1998/99 tax year.



Performance

The net asset value per share at 31 January 2004, after taking account of
dividends totalling 4.0p declared for the year, was 96.5p per share, 2.1% up on
the corresponding figure of 94.5p at 31 January 2003.  The company's portfolio
of VCT qualifying investments and listed fixed-interest securities has been more
resilient than the equity index, even after taking account of the stock market
recovery over the past year.



Investment portfolio

During the year eight new venture capital investments were completed, and we now
have a portfolio comprising 47 holdings with a total value of £27.7 million.
The first half of 2003 saw a general slowdown in the rate of transactions in the
UK venture capital industry;  in addition there was a marked tendency for deals
to take longer than usual to complete.  Our managers rightly took the view that
it would not be appropriate to sacrifice quality in the interests of maintaining
short-term deal volume, and as a result the level of VCT qualifying investments
achieved by 31 January 2004 was lower than had originally been expected.  The
overall performance of the portfolio is encouraging, with a number of companies
beginning to emerge as strong performers, although we have suffered some
disappointments as well.  The progress of our investments is discussed in more
detail in the Investment Manager's Review in the annual report.



Revenue and dividends

The revenue surplus before tax for the year was £1,506,000, a slight increase
from the previous year's figure of £1,493,000.  The revenue return per share
rose from 2.3p to 2.5p, reflecting a lower effective tax rate, and this has
enabled us to maintain the revenue dividend at 2.5p per share, the same as in
the two preceding years.  We also propose for the first time to make a
distribution, of 1.5p per share, out of capital gains realised from investment
sales during the year.



The total dividend of 4.0p is equivalent to a 6.7% gross yield to a higher-rate
taxpayer subscribing for shares at 100p, and 8.3% if the 20% income tax relief
on subscriptions is taken into account.  The cumulative total of dividends
declared by the company over five years is 13.6p per share.



Share price and market liquidity

The company's mid-market share price increased from 80p to 82p over the 12
months to 31 January 2004.  During the year the company bought back for
cancellation 273,900 shares, equivalent to approximately 0.6% of the issued
capital, at an average price of 72p per share.  A resolution will be proposed at
the annual general meeting to renew the board's authority to make market
purchases of shares.  There have been some signs recently of improved liquidity
in the secondary market for VCT shares generally, although ironically the
enhancement to income tax relief on VCT subscriptions which was announced in the
March 2004 Budget may in the short term reduce the relative attractions of
second-hand shares.



VCT qualifying status

PricewaterhouseCoopers LLP have continued to monitor and report to the board on
the company's compliance with the qualifying investment requirements laid down
in the VCT legislation.  The slowdown in new investment completions during the
year meant that we were on course to miss our target of meeting, by 31 January
2004, the Inland Revenue's requirement that 70% of the company's investments
should comprise qualifying holdings.  In order to make absolutely sure of
staying within the Inland Revenue's parameters, the directors were advised to
take the approach already adopted by a number of other VCTs in placing funds
temporarily on non-interest bearing deposit, which falls outside the definition
of an investment for VCT purposes, pending investment in qualifying holdings.
Although this entails some loss of interest income in the short term, ensuring
the preservation of VCT qualifying status is paramount.



Investment managers

I reported at the interim stage that Edinburgh Fund Managers Group, the parent
company of our manager Northern Venture Managers, was the subject of a takeover
bid from Aberdeen Asset Management.  Aberdeen's offer was accepted by the
Edinburgh shareholders in October 2003, following which the NVM directors
entered into negotiations with a view to a management buyout of NVM.  This
transaction was completed on 23 December 2003 and NVM is now 100% owned by its
directors and staff.  Your board regards this outcome as highly satisfactory.



Future prospects

The company's balance sheet is strong, with liquid assets available for future
investment and a maturing venture capital portfolio which has already begun to
generate useful cash returns through income yield and capital realisations.
Conditions remain difficult for many smaller unquoted companies but the UK's
relative economic stability, with modest inflation and low interest rates,
should have a positive impact in the medium term.  This is a good foundation for
further progress in the coming year.







The financial statements for the year ended 31 January 2004 will show the
results set out below.



STATEMENT OF TOTAL RETURN (INCORPORATING THE REVENUE ACCOUNT)

for the year ended 31 January 2004


                                                      Year ended                          Year ended
                                                    31 January 2004                     31 January 2003
                                             Revenue     Capital       Total     Revenue     Capital       Total
                                                £000        £000        £000        £000        £000        £000
Gains/(losses) on investments:
  Realised on disposals                            -         177         177           -        (494)       (494)
  Unrealised revaluation movements                 -       1,948       1,948           -       2,978       2,978
                                              ------      ------      ------      ------      ------      ------
                                                   -       2,125       2,125           -       2,484       2,484
Income                                         2,015           -       2,015       1,983           -       1,983
Investment management fee                       (314)       (942)     (1,256)       (297)       (893)     (1,190)
Other expenses                                  (195)          -        (195)       (193)          -        (193)
                                              ------      ------      ------      ------      ------      ------
Return on ordinary activities
  before tax                                   1,506       1,183       2,689       1,493       1,591       3,084
Tax on ordinary activities                      (385)        298         (87)       (428)        289        (139)
                                              ------      ------      ------      ------      ------      ------
Return on ordinary activities
  after tax                                    1,121       1,481       2,602       1,065       1,880       2,945
Dividends                                     (1,121)       (672)     (1,793)     (1,128)          -      (1,128)
                                              ------      ------      ------      ------      ------      ------
Transfer to/(from) reserves                        -         809         809         (63)      1,880       1,817
                                              ------      ------      ------      ------      ------      ------
Return per share                                 2.5p        3.3p        5.8p        2.3p        4.2p        6.5p
Dividend per share                               2.5p        1.5p        4.0p        2.5p         -          2.5p



BALANCE SHEET

as at 31 January 2004


                                           31 January 2004     31 January 2003
                                                      £000                £000
Venture capital investments:
  Unlisted                                          25,018              21,656
  Listed                                             2,684               1,205
                                                   -------             -------
                                                    27,702              22,861
Listed fixed-interest investments                    7,238              17,285
                                                   -------             -------
Total fixed asset investments                       34,940              40,146
                                                   -------             -------
Current assets:
  Debtors                                              350                 731
  Cash at bank                                       9,500               2,614
                                                   -------             -------
                                                     9,850               3,345
Creditors (amounts falling due
  within one year)                                  (1,557)               (869)
                                                   -------             -------
Net current assets                                   8,293               2,476
                                                   -------             -------

Net assets                                          43,233              42,622
                                                   -------             -------

Capital and reserves:
Called-up equity share capital                       2,241               2,254
Share premium                                       33,761              33,761
Capital redemption reserve                              18                   5
Special reserve                                      7,734               7,932
Capital reserve:
  Realised                                          (3,412)             (2,273)
  Unrealised                                         2,860                 912
Revenue reserve                                         31                  31
                                                   -------             -------
Total equity shareholders' funds                    43,233              42,622
                                                   -------             -------
Net asset value per share                             96.5p               94.5p





CASH FLOW STATEMENT

for the year ended 31 January 2004
                                             Year ended                Year ended
                                          31 January 2004           31 January 2003
                                             £000        £000          £000         £000
Cash flow statement
Net cash inflow from
  operating activities                                    934                        738
Taxation:
Corporation tax paid                                      (58)                      (125)
Financial investment:
Purchase of investments                    (9,081)                  (14,365)
Sale of investments                        16,412                    10,189
                                          -------                   -------
Net cash inflow/(outflow) from
  financial investment                                  7,331                     (4,176)
Equity dividends paid                                  (1,123)                    (1,129)
                                                      -------                    -------
Cash inflow/(outflow) before use of
  liquid resources and financing                        7,084                     (4,692)
Net cash flow from
  management of liquid resources                            -                      1,500
Financing:
Shares purchased for cancellation                        (198)                       (56)
                                                      -------                    -------
Increase/(decrease) in cash at bank                     6,886                     (3,248)
                                                      -------                    -------
Reconciliation of net revenue before
taxation to net cash flow from
operating activities
Net revenue from ordinary activities                    1,506                      1,493
before tax
Decrease in debtors                                       381                        146
Decrease in creditors                                     (11)                        (8)
Management fees charged to capital                       (942)                      (893)
                                                      -------                    -------
Net cash inflow from operating                            934                        738
activities
                                                      -------                    -------
Analysis of cash at bank


                                     1 February 2003        Cash flows    31 January 2004
                                                £000              £000              £000
Cash at bank                                   2,614             6,886             9,500
                                             -------           -------           -------



INVESTMENT PORTFOLIO SUMMARY

as at 31 January 2004


                                                                       Valuation           % of net assets
                                                                            £000              by valuation
15 largest venture capital investments
DMN Installations                                                          3,281                       7.6
T J Brent                                                                  2,137                       4.9
Stainton Metal Company                                                     1,840                       4.3
TFB Group                                                                  1,831                       4.2
John Fredericks Plastics                                                   1,709                       4.0
Keith Prowse                                                               1,261                       2.9
Crantock Bakery                                                            1,205                       2.8
IG Doors                                                                   1,000                       2.3
Longhirst Group                                                              900                       2.1
Omnico Plastics                                                              846                       2.0
Alizyme*                                                                     834                       1.9
Warmseal Windows (Newcastle)                                                 818                       1.9
Arrow Industrial Group                                                       735                       1.7
RBF Industries                                                               650                       1.5
Crabtree of Gateshead                                                        641                       1.5
                                                                         -------                    ------
Fifteen largest venture capital investments                               19,688                      45.6
Other venture capital investments                                          8,014                      18.5
                                                                         -------                    ------
Total venture capital investments                                         27,702                      64.1
Listed fixed-interest investments                                          7,238                      16.7
                                                                         -------                    ------
Total fixed asset investments                                             34,940                      80.8
Net current assets                                                         8,293                      19.2
                                                                         -------                    ------
Net assets                                                                43,233                     100.0
                                                                         -------                    ------
* Listed on London Stock Exchange


The above summary of results for the year ended 31 January 2004 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 auditors' report on those financial statements under S235 of
the Companies Act 1985 is unqualified and does not contain a statement under
S237(2) or (3) of the Companies Act 1985.

The proposed final dividend for the year ended 31 January 2004 will, if approved
by shareholders, be paid on 3 June 2004 to shareholders on the register at the
close of business on 7 May 2004.

Copies of the full annual report and financial statements for the year ended 31
January 2004 are expected to be posted to shareholders on 22 April 2004 and will
be available to the public at the registered office of the company at
Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER.

END


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