Final Results

Northern 2 VCT PLC
01 April 2005

1 APRIL 2005

NORTHERN 2 VCT PLC

PRELIMINARY RESULTS
FOR THE YEAR ENDED 31 JANUARY 2005

Northern 2 VCT PLC is a Venture Capital Trust (VCT) managed by Northern Venture
Managers.  The trust was launched in 1999 and has to date raised a total of £46
million from private investors.  The trust invests mainly in unquoted venture
capital holdings and aims to provide high long-term returns to shareholders
through a combination of dividend yield and capital growth.



Financial highlights - year ended 31 January 2005:
(comparative figures as at 31 January 2004 in italics)
                                                                              2005                  2004
•         Net assets                                                   £39,693,000           £43,233,000
•         Net asset value per share                                          89.7p                 96.5p
•         Investment income                                             £2,074,000            £2,015,000
•         Profit/(loss) on ordinary activities
Before tax:
  Revenue                                                               £1,558,000            £1,506,000
  Capital                                                                 £221,000             £(240,000)
  Total                                                                 £1,779,000            £1,266,000
•         Earnings per share:
  Revenue                                                                     2.5p                  2.5p
  Capital                                                                     1.2p                  0.1p
  Total                                                                       3.7p                  2.6p
•         Dividend per share:
  Revenue                                                                     2.5p                  2.5p
  Capital                                                                     6.3p                  1.5p
  Total                                                                       8.8p                  4.0p
•         Cumulative return to shareholders
since launch:
  Dividends per share                                                        22.4p                  13.6p
  Net asset value plus dividends
   per share                                                                112.1p                 110.1p
•         Share price                                                          80p                    82p



For further information, please contact:
Alastair Conn, Managing Director

Northern Venture Managers Limited                                     0191 244 6000

Website:  www.nvm.co.uk
Charles Ansdell/Marlene Scott

Polhill Communications                                                020 7655 0540





NORTHERN 2 VCT PLC

CHAIRMAN'S STATEMENT



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



The past year has seen a greater level of new investment activity and
substantial dividend payments to shareholders.  Earnings per share for the year
were 3.7p compared with 2.6p in the preceding year, and this along with the
successful realisation of some of the revaluation gains that had been recorded
in previous years enabled us to declare dividends totalling 8.8p per share.
After taking into account the dividend distribution, investment valuation
movements and the effect of share buy-backs, the underlying net asset value per
share fell from 96.5p to 89.7p over the year.



The five year performance graph in the annual report shows that on a total
return basis the company's net asset value and share price continue to
out-perform the FTSE All-share index.  Northern 2 VCT remains the clear leader
of its peer group of generalist VCTs launched in the 1998/99 tax year.



Investment portfolio



During the year ten new venture capital investments were completed and the
portfolio now comprises 52 holdings with a total value of £29.4 million.
Significant exits were achieved from the unquoted investments in T J Brent and
Keith Prowse, whilst BBI Holdings and Vectura Group both floated successfully on
the Alternative Investment Market.  Progress made by other portfolio companies
has been mixed, with several of our larger investments showing a reduction in
valuation after reporting trading results behind expectations.  Our managers are
actively involved in working with these companies to achieve improved
performance.  Developments in the portfolio are 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 £1,558,000, a slight increase
from the previous year's figure of £1,506,000.  The revenue return per share was
unchanged at 2.5p, enabling us to maintain the revenue dividend at 2.5p per
share for the fourth year in succession.  Significant capital gains were
realised from the venture capital portfolio, with the result that capital
dividends totalling 6.3p per share were declared in respect of the year (last
year 1.5p).



The total dividend of 8.8p is equivalent to a 14.7% gross yield to a higher-rate
taxpayer subscribing for shares at 100p, and 18.3% if the 20% income tax relief
on subscriptions is taken into account.  The cumulative total of dividends
declared by the company over six years is 22.4p per share.



Investment company status



In April 2004 Northern 2 VCT revoked its status as an investment company under
the Companies Act 1985 so that dividends can be paid out of realised capital
gains.  This means that in order for our audited accounts to show a true and
fair view we are required by law to publish a profit and loss account and a
statement of total recognised gains and losses in place of the previous
statement of total return.  We have however included a separate statement of
total return in the annual report, in the same format as was presented last
year, to aid shareholders' understanding of the company's financial performance.
  There will be further changes in accounting presentation in the near future
with the scheduled introduction of International Accounting Standards for listed
companies.



Dividend investment scheme



During the year we introduced a dividend investment scheme, giving shareholders
the opportunity to re-invest their dividends in new ordinary shares in the
company at net asset value with the benefit of the 40% income tax relief
currently available on new VCT subscriptions.  Shareholders representing
approximately 10% of the issued share capital have joined the scheme and a total
of £305,000 was re-invested up to 31 January 2005.



Share buy-backs and market liquidity



During the year the company bought back for cancellation 895,900 shares,
equivalent to approximately 2.0% of the issued capital, at an average price of
78p per share.  A resolution will as usual be proposed at the annual general
meeting to renew the board's authority to make market purchases of shares.  As I
predicted last year , the increase to 40% in the income tax relief on VCT
subscriptions which was announced in the March 2004 Budget has depressed the
secondary market in VCT shares and it is difficult to foresee any improvement in
the short term.  It is therefore likely that the company will continue to
purchase its own shares for cancellation.



VCT qualifying status



PricewaterhouseCoopers LLP have continued to monitor and report to the board on
the company's compliance with the Inland Revenue's requirements relating to VCT
qualifying status.  A year ago, as a result of a general market slowdown in new
investment completions, we had to place £9.5 million temporarily on non-interest
bearing deposit in order to ensure that qualifying investments continued to
exceed 70% of the total.  The rate of new investment has subsequently been good
and I am pleased to report that the balance of non-interest bearing funds had
reduced to less than £1 million by 31 January 2005, and to zero by 31 March
2005.  The deposit interest income forgone has been more than replaced by the
strong generation of income from the venture capital portfolio, with the result
that total income for the year was actually slightly higher than in the
preceding year.



The future



A resolution for the continuation of the company will be proposed at the annual
general meeting to be held next year, in May 2006, as the articles of
association provide that shareholders must vote on the continuation of the
company at its seventh annual general meeting and every five years thereafter.
Your board will be giving careful consideration to the company's future strategy
over the next 12 months, but at this stage I can say that in the absence of
unforeseen developments we expect to recommend continuation for a further five
years.  The company's pool of funds is now substantially invested, our maturing
venture capital portfolio has begun to produce a good flow of dividend income
for shareholders and we believe that further progress will be made over the
medium term.



Matt Ridley

Chairman





The audited financial statements for the year ended 31 January 2005 will show
the results set out below.





PROFIT AND LOSS ACCOUNT

for the year ended 31 January 2005


                                                   Year ended 31 January 2005         Year ended 31 January 2004
                                             Revenue     Capital       Total     Revenue     Capital       Total
                                                £000        £000        £000        £000        £000        £000
Profits recognised in the year
  on realisation of investments                    -       1,164       1,164           -         702         702
Income                                         2,074           -       2,074       2,015           -       2,015
Investment management fee                       (315)       (943)     (1,258)       (314)       (942)     (1,256)
Other expenses                                  (201)          -        (201)       (195)          -        (195)
                                              ------      ------      ------      ------      ------      ------
Profit/(loss) on ordinary activities
  before tax                                   1,558         221       1,779       1,506        (240)      1,266
Tax on ordinary activities                      (422)        301        (121)       (385)        298         (87)
                                              ------      ------      ------      ------      ------      ------
Profit on ordinary activities
  after tax                                    1,136         522       1,658       1,121          58       1,179
Dividends                                     (1,094)     (2,786)     (3,880)     (1,121)       (672)     (1,793)
                                              ------      ------      ------      ------      ------      ------
Retained profit/(loss) for the year               42      (2,264)     (2,222)          -        (614)       (614)
                                              ------      ------      ------      ------      ------      ------
Earnings per share                               2.5p        1.2p        3.7p        2.5p        0.1p        2.6p
Dividend per share                               2.5p        6.3p        8.8p        2.5p        1.5p        4.0p





STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

for the year ended 31 January 2005


                                                   Year ended 31 January 2005         Year ended 31 January 2004
                                             Revenue     Capital       Total     Revenue     Capital       Total
                                                £000        £000        £000        £000        £000        £000
Profit on ordinary activities
  after tax                                    1,136         522       1,658       1,121          58       1,179
Unrealised (losses)/gains on
  revaluation of investments                       -        (924)       (924)          -       1,423       1,423
                                              ------      ------      ------      ------      ------      ------
Total recognised gains and losses
  during the year                              1,136        (402)        734       1,121       1,481       2,602
                                              ------      ------      ------      ------      ------      ------





NOTE OF HISTORICAL COST PROFITS AND LOSSES
for the year ended 31 January 2005


                                                   Year ended 31 January 2005         Year ended 31 January 2004
                                             Revenue     Capital       Total     Revenue     Capital       Total
                                                £000        £000        £000        £000        £000        £000
Reported profit/(loss) on ordinary
  activities before tax                        1,558         221       1,779       1,506        (240)      1,266
Realisation of investment revaluation
  gains/(losses) of prior years                    -         904         904           -        (525)       (525)
                                              ------      ------      ------      ------      ------      ------
Historical cost profit/(loss) for the
  year before tax                              1,558       1,125       2,683       1,506        (765)        741
                                              ------      ------      ------      ------      ------      ------
Historical cost profit/(loss) for the
  year after taxation and dividends               42      (1,360)     (1,318)          -      (1,139)     (1,139)
                                              ------      ------      ------      ------      ------      ------





BALANCE SHEET
as at 31 January 2005


                                         31 January    31 January
                                               2005          2004

                                               £000          £000
Venture capital investments:
  Unquoted                                   25,391        25,018
  Quoted                                      4,023         2,684
                                            -------       -------
                                             29,414        27,702
Other listed investments                      6,965         7,238
                                            -------       -------
Total fixed asset investments                36,379        34,940
                                            -------       -------
Current assets:
  Debtors                                       420           350
  Cash at bank                                3,795         9,500
                                            -------       -------
                                              4,215         9,850
Creditors (amounts falling due
  within one year)                             (901)       (1,557)
                                            -------       -------
Net current assets                            3,314         8,293
                                            -------       -------

Net assets                                   39,693        43,233
                                            -------       -------

Capital and reserves:
Called-up equity share capital                2,212         2,241
Share premium                                34,050        33,761
Capital redemption reserve                       63            18
Revaluation reserve                           1,032         2,860
Profit and loss account                       2,336         4,353
                                            -------       -------
Total equity shareholders' funds             39,693        43,233
                                            -------       -------
Net asset value per share                      89.7p         96.5p





CASH FLOW STATEMENT
for the year ended 31 January 2005
                                                       Year ended                  Year ended
                                                  31 January 2005             31 January 2004
                                               £000          £000          £000          £000
Cash flow statement
Net cash inflow from
  operating activities                                        539                         934
Taxation:
Corporation tax paid                                          (88)                        (58)
Financial investment:
Purchase of investments                     (10,341)                     (9,081)
Sale/repayment of                             9,142                      16,412
investments
                                             ------                      ------
Net cash inflow/(outflow)
from
  financial investment                                     (1,199)                      7,331
Equity dividends paid                                      (4,563)                     (1,123)
                                                           ------                      ------
Net cash inflow/(outflow)
  before financing                                         (5,311)                      7,084
Financing:
Issue of ordinary shares                        305                           -
Purchase of ordinary
shares
  for cancellation                             (699)                       (198)
                                             ------                      ------
Net cash outflow from
  financing                                                  (394)                       (198)
                                                           ------                      ------
Increase/(decrease) in                                     (5,705)                      6,886
cash at bank
                                                           ------                      ------
Reconciliation of profit
before tax to net cash flow from
operating activities

Profit on ordinary
activities
  before tax                                                1,779                       1,266
(Increase)/decrease in                                        (70)                        381
debtors
Decrease in creditors                                          (6)                        (11)
Profit recognised on
  realisation of                                           (1,164)                       (702)
investments
                                                           ------                      ------
Net cash inflow from
  operating activities                                        539                         934
                                                           ------                      ------
Reconciliation of movement
In net funds
                            1 February                 Cash flows                   31 January
                                 2004                                                    2005
                                 £000                        £000                        £000
Cash at bank                    9,500                      (5,705)                      3,795
                               ------                      ------                      ------





INVESTMENT PORTFOLIO SUMMARY

as at 31 January 2005
                                                                      Valuation           % of net assets
                                                                           £000              by valuation
Fifteen largest venture capital investments:
DMN Installations                                                          2,140                       5.4
Stainton Metal Company                                                     1,825                       4.6
Longhirst Group                                                            1,484                       3.7
Omnico Plastics                                                            1,450                       3.7
Arrow Industrial Group                                                     1,292                       3.3
Crantock Bakery                                                            1,107                       2.8
SMS Agencies                                                               1,000                       2.5
IG Doors                                                                   1,000                       2.5
Envirotec                                                                    975                       2.5
Tolwood                                                                      942                       2.4
Direct Valeting                                                              915                       2.3
RBF Industries                                                               896                       2.2
Crabtree of Gateshead                                                        841                       2.1
Computer Software Group*                                                     839                       2.1
LEDA Holdings                                                                825                       2.1
                                                                         -------                    ------
                                                                          17,531                      44.2
Other venture capital investments                                         11,883                      30.0
                                                                         -------                    ------
Total venture capital investments                                         29,414                      74.2
Listed fixed-interest investments                                          6,965                      17.5
                                                                         -------                    ------
Total fixed asset investments                                             36,379                      91.7
Net current assets                                                         3,314                       8.3
                                                                         -------                    ------
Net assets                                                                39,693                     100.0
                                                                         -------                    ------
*Traded on the Alternative Investment Market



The above summary of results for the year ended 31 January 2005 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 1.5p per share for the year ended 31 January 2005
will, if approved by shareholders, be paid on 3 June 2005 to shareholders on the
register at the close of business on 6 May 2005.

The full annual report including financial statements for the year ended 31
January 2005 is expected to be posted to shareholders on 15 April 2005 and will
be available to the public at the registered office of the company at
Northumberland House, Princess Square, Newcastle upon Tyne NE1 8ER.

ENDS


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