Final Results

Northern 2 VCT PLC 18 April 2008 18 APRIL 2008 NORTHERN 2 VCT PLC RESULTS FOR THE YEAR ENDED 31 JANUARY 2008 Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by NVM Private Equity. 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 growth. It was launched in 1999 and has recently closed a £9 million top-up share issue, taking its net assets to over £50 million. Financial highlights - year ended 31 January 2008: (comparative figures as at 31 January 2007 in italics): 2008 2007 • Net assets £43.8m £42.9m • Net asset value per share 89.1p 88.9p • Return per share: Revenue 2.5p 2.5p Capital 3.9p 1.2p Total 6.4p 3.7p • Dividend per share declared in respect of the year: Revenue 2.5p 2.5p Capital 3.5p 3.0p Total 6.0p 5.5p • Cumulative return to shareholders since launch: Net asset value per share 89.1p 88.9p Dividends paid per share* 35.4p 28.9p Net asset value plus dividends paid per share 124.5p 117.8p • Mid-market share price at year end 80.5p 75.0p *Excluding proposed final dividend For further information, please contact: NVM Private Equity Limited Alastair Conn, Managing Director 0191 244 6000 Website: www.nvm.co.uk Lansons Communications Karen Mignon 020 7294 3685 NORTHERN 2 VCT PLC CHAIRMAN'S STATEMENT I would like to take this opportunity to welcome for the first time those who have become shareholders in Northern 2 VCT through the recent public share offer, as well as thanking existing shareholders for their continuing support. The company is in good shape, having achieved a total return of 6.4p per share which is equivalent to 7.2% of the opening net asset value. Over the same period the FTSE All-Share index produced a negative total return of 3.6%. Net assets at 31 January 2008 were £43.8 million, and I am pleased to report that this figure has subsequently increased to over £50 million as a result of the issue of new shares. Investment portfolio The venture capital portfolio at 31 January 2008 comprised 48 holdings with a total value of £31.7 million. During the year eight new venture capital investments were completed at a cost of £4.6 million. Our managers were also able to take a number of exit opportunities with the result that sale proceeds from venture capital investments reached a record level of £9.2 million. Revenue and dividends In October 2007 shareholders received a letter from the board in which, amongst other things, we reported on our review of policy in relation to dividends. It is worth repeating the key points of that statement here. We said that we intended to maintain the company's annual dividend at not less than 5.5p per share, subject to the availability of sufficient distributable profits, with a view to reinforcing the attraction not only of holding the shares but also of acquiring them by secondary market purchase. The indicated figure of 5.5p per share is not intended to be a maximum and the board may declare a higher dividend when circumstances permit. Dividends paid by VCTs are of course free of tax in the hands of UK shareholders. By way of illustration, an annual dividend of 5.5p is equivalent to an 8.6% gross yield to a higher-rate taxpayer subscribing for shares in the recent public offer at 95p, and 12.3% if the 30% initial income tax relief on subscriptions is taken into account. In the year ended 31 January 2008 the company's revenue return per share was unchanged at 2.5p, enabling us to maintain the revenue dividend at 2.5p per share for the seventh year in succession. In addition we propose to distribute realised gains from the venture capital portfolio, increasing the capital dividend from 3.0p to 3.5p per share. The total dividend for the year is therefore 6.0p per share, exceeding our stated objective. An interim dividend of 2.0p per share was paid in December 2007 and the proposed final dividend of 4.0p per share will, if approved by shareholders at the annual general meeting, be paid on 6 June 2008. Subscribers in the recent share issue do not rank for this final dividend, but will be entitled to receive the interim dividend for the year ending 31 January 2009 (expected to be paid in December 2008) and all subsequent dividends. The cumulative total of dividends declared by the company has reached 39.4p per share. Shareholder issues In November 2007 we launched a public offer of new ordinary shares for subscription in the 2007/08 and 2008/09 tax years. The offer closed on 17 April 2008, having raised a total of £9.5 million before expenses. I consider this a satisfactory outcome given the conditions prevailing in the economy and the financial markets. During the year the company bought back for cancellation 1,444,364 shares, equivalent to approximately 3% of the issued capital at the start of the year, at an average price of 80p per share. A resolution will be proposed at the annual general meeting to renew the board's authority to make market purchases of shares and it remains our policy, subject to periodic review, to buy back shares at a discount of 10% to net asset value, as a means of assisting shareholders who need to dispose of their shares. Following a review of the provision of corporate broking services, we appointed Landsbanki Securities (UK) Limited as brokers to the company in October 2007. It is our long-term objective to stimulate a greater level of secondary market demand for the company's shares, and our new dividend policy should help us towards this goal. VAT on management fees The Government's Budget proposals in March 2008 included the exemption of VCTs from paying VAT on management fees with effect from 1 October 2008. This follows a European Court judgment against the Government in a case relating to VAT payable by investment trusts. Exemption from VAT will be a useful benefit to your company: we incurred £182,000 in VAT on management fees in the year ended 31 January 2008, equivalent (before tax relief) to approximately 0.4p per share. Our advisers are currently looking into the possibility of obtaining a repayment of VAT paid in respect of previous years, but the process is still at an early stage. VCT qualifying status The company has continued to meet the qualifying conditions laid down by HM Revenue & Customs for approval as a VCT. With a large and actively managed portfolio it is important that our compliance is closely monitored, and in addition to continuous review by our managers we retain PricewaterhouseCoopers LLP to advise the board on VCT status. Board of directors In April 2008 Michael Denny retired as chairman of NVM Private Equity after a distinguished career in venture capital, including a term of office as chairman of the British Venture Capital Association. I am delighted to say that Michael will remain a non-executive director of Northern 2 VCT so we will continue to have the benefit of his knowledge and experience. As I reported at the half year stage, David Gravells joined the board in July 2007. David has wide and deep experience in venture capital and he has already made an outstanding contribution to the board. After serving nine years as chairman, I have indicated that I will be retiring from the board on 30 April 2008. I am delighted to report that David Gravells has accepted the directors' invitation to take over as chairman on my retirement and I wish him, the board and the company every success in the future. Prospects The period since 31 January 2008 has seen encouraging progress, with the completion of two substantial new investments and three profitable exits - plus the closing of our public share offer. Widespread pessimism about the short-term prospects for the world economy cannot be ignored, and we expect to see the defensive qualities of the company's portfolio put to the test, but it is our belief that our company has established a firm foundation for future progress. Dr Matt Ridley Chairman The audited financial statements for the year ended 31 January 2008 are set out below. INCOME STATEMENT for the year ended 31 January 2008 Year ended 31 January 2008 Year ended 31 January 2007 Revenue Capital Total Revenue Capital Total £000 £000 £000 £000 £000 £000 Gain on disposal of investments - 1,759 1,759 - 168 168 Changes in fair value of investments - 802 802 - 957 957 ----- ----- ----- ----- ----- ----- - 2,561 2,561 - 1,125 1,125 Income 2,111 - 2,111 2,036 - 2,036 Investment management fee (253) (968) (1,221) (247) (784) (1,031) Other expenses (266) - (266) (224) - (224) ----- ----- ----- ----- ----- ----- Return on ordinary activities before tax 1,592 1,593 3,185 1,565 341 1,906 Tax on return on ordinary activities (416) 303 (113) (343) 243 (100) ----- ----- ----- ----- ----- ----- Return on ordinary activities after tax 1,176 1,896 3,072 1,222 584 1,806 ----- ----- ----- ----- ----- ----- Return per share 2.5p 3.9p 6.4p 2.5p 1.2p 3.7p RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS for the year ended 31 January 2008 Year ended Year ended 31 January 2008 31 January 2007 £000 £000 Equity shareholders' funds at 1 February 2007 42,909 38,675 Return on ordinary activities after tax 3,072 1,806 Dividends recognised in the year (3,109) (2,403) Net proceeds of share issues 2,038 6,168 Shares purchased for cancellation (1,157) (1,322) Expenses charged to capital reserve - (15) ------ ------ Equity shareholders' funds at 31 January 2008 43,753 42,909 ------ ------ BALANCE SHEET as at 31 January 2008 31 January 31 January 2008 2007 £000 £000 Venture capital investments Unquoted 29,326 28,406 Quoted 2,349 4,706 ------ ------ Total venture capital investments 31,675 33,112 Listed fixed-interest investments 5,066 7,161 ------ ------ Total fixed asset investments 36,741 40,273 ------ ------ Current assets: Debtors 355 471 Cash at bank 7,452 2,410 ------ ------ 7,807 2,881 Creditors (amounts falling due within one year) (795) (245) ------ ------ Net current assets 7,012 2,636 ------ ------ Net assets 43,753 42,909 ------ ------ Capital and reserves: Called-up equity share capital 2,456 2,414 Share premium 26,872 24,949 Capital redemption reserve 300 227 Capital reserve - realised 8,727 10,779 Capital reserve - unrealised 4,396 3,519 Revenue reserve 1,002 1,021 ------ ------ Total equity shareholders' funds 43,753 42,909 ------ ------ Net asset value per share 89.1p 88.9p CASH FLOW STATEMENT for the year ended 31 January 2008 Year ended Year ended 31 January 2008 31 January 2007 £000 £000 £000 £000 Cash flow statement Net cash inflow from operating activities 1,283 799 Taxation: Corporation tax paid (106) (184) Financial investment: Purchase of investments (8,066) (10,365) Sale/repayment of investments 14,159 7,053 ----- ----- Net cash inflow/(outflow) from financial investment 6,093 (3,312) Equity dividends paid (3,109) (2,403) ----- ----- Net cash inflow/(outflow) before financing 4,161 (5,100) Financing: Issue of shares 2,146 6,525 Share issue expenses (108) (357) Purchase of shares for cancellation (1,157) (1,322) ----- ----- Net cash inflow from financing 881 4,846 ----- ----- Increase/(decrease) in cash at bank 5,042 (254) ----- ----- Reconciliation of return before tax to net cash flow from operating activities Return on ordinary activities before tax 3,185 1,906 Gain on disposal of investments (1,759) (168) Changes in fair value of investments (802) (957) Decrease/(increase) in debtors 116 (62) Increase in creditors 543 95 Expenses charged to capital - (15) ----- ----- Net cash inflow from operating activities 1,283 799 ----- ----- Reconciliation of movement in net funds 1 February 2007 Cash flows 31 January 2008 £000 £000 £000 Cash at bank 2,410 5,042 7,452 ----- ----- ----- INVESTMENT PORTFOLIO SUMMARY as at 31 January 2008 Valuation % of net assets £000 by value Fifteen largest venture capital investments Crantock Bakery 1,939 4.4 Envirotec 1,692 3.9 Liquidlogic 1,556 3.6 TFB Group 1,543 3.5 Britspace Holdings 1,507 3.4 Paladin Group 1,500 3.4 Product Support (Holdings) 1,412 3.2 Longhirst Venues 1,296 3.0 Stainton Metal Company 1,257 2.9 Pivotal Laboratories Holdings 1,187 2.7 IG Doors 1,186 2.7 Arrow Industrial Group 1,092 2.5 Astbury Marsden Holdings 1,000 2.3 Foreman Roberts Group 1,000 2.3 Promanex Group Holdings 1,000 2.3 ------ ----- 20,167 46.1 Other venture capital investments 11,508 26.3 ------ ----- Total venture capital investments 31,675 72.4 Listed fixed-interest investments 5,066 11.6 ------ ----- Total fixed asset investments 36,741 84.0 Net current assets 7,012 16.0 ------ ----- Net assets 43,753 100.0 ------ ----- The above summary of results for the year ended 31 January 2008 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 4.0p per share for the year ended 31 January 2008 will, if approved by shareholders, be paid on 6 June 2008 to shareholders on the register at the close of business on 2 May 2008. The full annual report including financial statements for the year ended 31 January 2008 is expected to be posted to shareholders on 24 April 2008 and will be available to the public at the registered office of the company at Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER and on the NVM Private Equity Limited website, www.nvm.co.uk. ENDS This information is provided by RNS The company news service from the London Stock Exchange

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