Baronsmead Vt Regulatory News (BVT)

Baronsmead VCT 2 plc Half Yearly Financial Report 31 March 2013

The Directors announce the unaudited half-yearly financial report for the sixmonths to 31 March 2013 as follows:-

Copies of the half yearly report can be obtained from the following website:www.baronsmeadvct2.co.uk .

Investment Objective Baronsmead VCT 2 plc is a tax efficient listed companywhich aims to achieve long-term investment returns for private investors,including tax free dividends.

Investment policy

● To invest primarily in a diverse portfolio of UK growth businesses, whetherunquoted or traded on AIM.

● Investments are made selectively across a range of sectors in companies thathave the potential to grow and enhance their value.

Dividend policy The Board of Baronsmead VCT 2 aims to sustain a minimum annual dividend levelat an average of 6.5p per Ordinary Share, mindful of the need to maintain netasset value. The ability to meet these twin objectives depends significantly onthe level and timing of profitable realisations and it cannot be guaranteed.There will be variations in the amount of dividends paid year on year. Since launch the average annual tax free dividend paid to ordinary shareholdersincluding the 3.0p interim dividend, has been 6.4p per share (equivalent to apre-tax return of 8.5p per share for a higher rate taxpayer). For shareholderswho claimed tax reliefs on initial subscription of 20 per cent, 30 per cent or40 per cent, their returns would have been higher.

FINANCIAL HEADLINES

● +10.0% - Net asset value ("NAV") per share increased 10.0 per cent to 105.7pin the six months ended 31 March 2013 before deduction of dividends.

● 3.0p - Interim dividend of 3.0p for the six month period to 31 March 2013.

● £2.5m - Invested in three new and six follow on investments in the six monthsto 31 March 2013.

● 276.3p - NAV total return to shareholders for every 100.0p invested atlaunch.

CHAIRMAN'S STATEMENT This has been an excellent period for the Company. A 10.0 per cent increase inNet Asset Value per share for the six months to 31 March 2013 is attributableto increased valuations in both the unquoted and quoted portfolios. Theperformance of the AIM market has been particularly strong and this accountsfor 70 per cent of the growth. At the same time, our unquoted portfoliocontinues to develop well. Three profitable realisations generated £4.3 millionduring the period. In December 2012, the Company raised £4.72 million net ofexpenses from 832 shareholders.

The Board has declared an interim dividend of 3.0p per share.

Results

Before taking account of the 3.0p per share interim dividend, The Net AssetValue increased to 105.72p per share, up 10.0 per cent from 96.10p per share. Pence per ordinary share NAV as at 1 October 2012 96.10(after deducting the final dividend of 5.0p) Valuation uplift (10.0 per cent) 9.62 105.72

Less Interim dividend payable on 14 June 2013 (3.00)(to shareholders on the register on 31 May 2013)

NAV as at 31 March 2013 102.72

All areas of the portfolio have increased in value during the six months underreview.

● The gains have been led by the quoted portfolio (comprising AIM and WoodStreet Microcap Investment Fund) which increased by 24.6 per cent (8.0p pershare) benefiting from the improvement in quoted share prices generally (theFTSE All Share Total Return index increased by 14.5 per cent over the sameperiod).

● The unquoted portfolio increased in value by 5.2 per cent (2.6p per share)reflecting the continuing steady progress made by these investments.

● The most significant change in the portfolio was the 76.6 per cent increasein the value of the Company's investment in Staffline, a national recruitmentand outsourcing organisation. Baronsmead VCT 2 first invested in Staffline in2000 when it was an unquoted company. Subsequently, Staffline floated on theAIM market in 2004 at a price of 80p and was trading at £3.92 as of 31 March2013. Although not fully realised and so subject to future sale proceeds, thereturn on the Company's investment in Staffline has been 5.9 times the cost ofthe original investment taking account of previous realisations and valuing theunrealised shares at the 31 March 2013 bid price. When the interim dividend of 3.0p per shares is added to the final dividend of5.0p per share paid in January 2013, the current annual dividend yield based ona mid-market share price of 99.50p is 8.0 per cent after tax (equivalent to10.7 per cent for a higher rate taxpayer).

Long Term Performance

The Company is a generalist investor and our investment objective and theinvestment and dividend policies are aimed at producing consistent returns overthe long-term.

The NAV total return over the last ten years has been 239.3p (before taxationbenefits) for each 100p invested compared with an average of 188.4p for the VCTgeneralist sector as a whole (source AIC). Over the same period, cumulative taxfree dividends paid to shareholders, including the proposed final dividend of3.0p, amount to 76.0p per share (equivalent to 101.3p for a higher ratetaxpayer). The comparable return would be higher if the initial income taxrelief available on subscription was included in the computation. The FTSE All-Share Index grew to 275.29p using the same metrics but this indextakes no account of the restricted nature of VCT investments or the benefit oftax reliefs available to qualifying investors in VCTs. The Company's stated policy is to maintain a minimum annual dividend of around6.5p per share if possible. The average annual tax free dividend paid toshareholders (including the interim dividend of 3.0p per share) in the past tenyears has been 7.6 p (6.4p since launch), comfortably ahead of the minimumtarget.

The full 15 year performance record is set out on our website,www.baronsmeadvct2.co.uk.

Portfolio Review

At 31 March 2013, the portfolio comprised 71 companies. The Board receivesquarterly reports indicating the trading performance of those companies inorder to monitor the health of the portfolio. At 31 March 2013, 83 per cent ofcompanies in the portfolio were reporting steady or better progress.

The Company has also invested in Wood Street Microcap, a fund giving investmentexposure to a further 36 AIM-traded and fully listed companies.

The net assets of £79.4 million were invested as follows:

● 25 Unquoted companies (49 per cent)● 46 AIM-traded and other listed companies (32 per cent)● Wood Street Microcap Investment Fund (6 per cent)● Cash and fixed interest (13 per cent.)

New Investment

During the six months to 31 March 2013 a total of £2.5 million was invested inthree new companies and in some additional funding for existing AIMinvestments.

An investment was made in Create Health, an unquoted London based company whichis an internationally renowned fertility clinic specialising in Natural andMild IVF using methods that are cheaper, safer, and healthier for the motherand baby. The Natural and Mild approach to IVF is common in advanced fertilitymarkets overseas such as Scandinavia, South Korea and Japan, as well as inother parts of Europe. After the period end, a further new unquoted investment of £0.9 million wasmade in Eque2, a construction industry Enterprise Resource Planning solutionsprovider.

We made two new AIM investments in Ideagen plc (compliance software solutions)and Pinnacle Technology Group plc, a B2B telecoms and IT retailer.

Sale of Investments

During the six months to 31 March 2013 a total of £4.3 million was realisedfrom three investments.

● Unquoted - the Company's investment in Micro Librarian Systems Ltd ("MLS")was sold to Capita realising £1.1 million, a 2.8x multiple return (see below).

● AIM -

● FFastFill was sold following a recommended offer received from Pattington(part of the ION Group) realising £0.9 million, representing 2.8 times returnon the amount invested.

● IDOX was partially sold through the market realising £2.3 million,representing 5.5 times return on the amount invested.

MLS is the leading provider of library and resource management systems to theUK education sector. Since Baronsmead VCT 2's investment in 2006 the turnoverof MLS almost doubled while the values, culture and dedication to providingbest in class systems and services were maintained. Its purchase (by Capita),which represented a return of 2.8 times on the amount invested, fits withCapita's strategy of developing capability in their target markets. FFastFill had been an investment since 2007 and on sale achieved 2.8 times costresulting in a profit of £0.6 million. In addition, the firmness of the shareprice in IDOX enabled a proportion of the holding to be sold at 5.5 times costyielding a capital profit of £1.9 million. Since the period end, the Company sold its unquoted investment in IndependentLiving Services ("ILS") realising £3.43 million, representing a return of 2.5times the original cost of the investment. The realisation figure includesinterest payments over the life of the investment and the redemption premiumreceived. Part of the Company's quoted holding in Staffline Recruitment Groupplc was also sold after the period end, realising £1.58 million.

Fund Raising and Shareholder Matters

The Company issued a prospectus on 20 November 2012 to raise up to £5 millionbefore expenses. The Offer closed after 19 working days on 17 December 2012fully subscribed. On behalf of the Board of Directors, I would like to thankthe 426 existing shareholders who subscribed to the recent fundraising andextend a warm welcome to the Company's 406 new shareholders. In October 2012, around 3,000 shareholders responded to the shareholder surveythat was sent to approximately 10,000 investors in the five Baronsmead VCTs.Several of the questions repeated those asked in the previous survey carriedout in October 2006 in order to measure any changes in shareholders' views. Keyresults included:

● An indication that the investment priority of shareholders had moved slightlyfrom a modest preference for capital growth to a greater desire for incomethrough dividends.

● Confirmation that a significant majority of shareholders intend to hold theirshares for the long term.

The Board is very grateful to those shareholders who responded to the survey asit provides valuable information on which the Board can base its decisions.Following the shareholder survey, on 16 November 2012 the Directors announcedthat in an effort to minimise the discount between the share price and the NAVthe Company would endeavour, in future, to buy back shares at a 5 per centinstead of at a 10 per cent discount to NAV. This revised share price discountpolicy will, of course, be kept under continuous review and may be subject torevision. Shares will be bought back depending on market conditions at the timeand only where the Directors believe it to be in the best interests ofshareholders as a whole. We have made good progress during the period under review in reducing thedifference between the share price and the net asset value of the Company'sshares. At 31 March 2013 the discount was approximately 6.0 per cent. Duringthe period the Company bought back 1,005,000 shares representing 1.2 per centof the shares in issue at the period end. The Company buys back its shares through the market and not directly fromshareholders. This enables shareholders who wish to sell their shares to do soat a time which suits their own circumstance. It also maximises the opportunityfor other investors to buy the Company's existing shares whilst minimising thenumber of shares bought back by the Company.

Outlook

The outlook for the UK economy remains mixed with many commentators expectinganother drab year. Your Board does not indulge in economic forecasting and muchprefers to view the outlook for your Company through the prism of the companiesin which we have invested. From that perspective we have been encouraged to seea gradual improvement over the last year or so. The portfolio is widely diversified, well resourced, adequately funded and thevitality and resilience of the entrepreneurial teams in which the Company hasinvested gives confidence that, mostly, they are well placed to growprofitability. Indeed, based on the experience of our portfolio, the negativeviews of some commentators regarding the UK economy seem out of place. The progress in the portfolio is encouraging and, furthermore, there are signsof an increase in the number of investment opportunities available and we arehopeful that, over time, this will contribute further to the strength anddiversity of the portfolio. Clive ParrittChairman17 May 2013 Summary Investment PortfolioSector by value PercentageBusiness Services 37%Consumer Markets 17%Financial Services 2%Healthcare & Education 15%

Technology, Media & Telecommunications ("TMT") 29%

Total Assets by value Percentage Unquoted - loan stock 34% Unquoted - ordinary & preference 15%

AIM, listed & collective investment vehicle 38%Listed interest bearing securities

7%Net current assets principally cash 6%

Time Investments Held by value Percentage

Less than 1 year 10%Between 1 and 3 years 24%Between 3 and 5 years 1%Greater than 5 years 65%

Table of Investments and Realisations

Investments in the six month period

Book costCompany Location Sector Activity £'000 Unquotedinvestments New Create Health London Healthcare Provider of fertility 1,065Limited & Education services Follow on Impetus London Business Automotive consultancy and 230Holdings Services outsourced service providerLimited Total unquoted investments 1,295 AIM-traded & listed investments New Ideagen plc Matlock TMT* Compliance software 225 solutions Pinnacle Stirlingshire TMT* B2B telecoms and IT 169Technology resellerGroup plc Follow on Hangar8 plc Oxford Business Business jet management 344 Services Tangent London Business Digital direct marketing 215Communications Servicesplc TLA Worldwide London Business Baseball sports management 113plc Services and marketing business Accumuli plc Salford TMT* Managed IT security 95 Green Worcester Business Small business compliance 50Compliance plc Services Total AIM-traded & listedinvestments 1,211 Total investments in theperiod 2,506

* Technology, Media & Telecommunications ("TMT").

Realisations in the six month period

Realised 30 profit/ September (loss) First 2012 this Overall investment valuation period multipleCompany date £'000 £'000 return Unquoted realisations Full tradeMLS Limited sale Jul 06 1,036 44 2.8 Total unquotedrealisations 1,036 44 AIM-traded & listed realisations IDOX plc Market sale Jan 09 990 566 5.5 Full tradeFFastFill plc sale Jun 07 557 317 2.8 Total AIM-traded & listed realisations 1,547 883 Total realisations in the period 2,583 927†

† Proceeds of £2,000 were also received in respect of Adventis Group plc, whichhad been written off in the year ended 30 September 2012.

Responsibility statement of the Directors in respect of the half-yearlyfinancial report

We confirm that to the best of our knowledge:

● the condensed set of financial statements has been prepared in accordancewith the Statement 'Half-yearly financial reports' issued by the UK AccountingStandards Board;● the Chairman's Statement (constituting the interim management report)includes a fair review of the information required by DTR 4.2.7R of theDisclosure and Transparency Rules, being an indication of important events thathave occurred during the first six months of the financial year and theirimpact on the condensed set of financial statements;● the Statement of Principal Risks and Uncertainties on page 14 is a fairreview of the information required by DTR 4.2.7R; and● the financial statements include a fair review of the information required byDTR 4.2.8R of the Disclosure and Transparency Rules, being related partytransactions that have taken place in the first six months of the currentfinancial year and that have materially affected the financial position orperformance of the entity during that period; and any changes in the relatedparty transactions described in the last annual report that could do so. By Order of the Board,Clive ParrittChairman17 May 2013 Unaudited Income Statement

For the six months to 31 March 2013

Six months to Six months to Year to 31 March 2013 31 March 2012 30 September 2012* * Revenue Capital Total Revenue Capital Total Revenue Capital Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Unrealised gains on investments - 6,998 6,998 - 3,402 3,402 - 5,842 5,842

Realised gains on investments - 929 929 - 524 524 - 750 750 Income 952 - 952 362 - 362 1,101 - 1,101 Investment management fee (186) (1,469) (1,655) (164) (492) (656) (337) (1,011) (1,348) Other expenses (229) - (229) (203) - (203) (381) - (381) Profit/(loss) on ordinary 537 6,458 6,995 (5) 3,434 3,429 383 5,581 5,964activities before taxationTaxation on ordinary activities (74) 74 - - - - (16) 16 -

Profit/(loss)on ordinary activities 463 6,532 6,995 (5)

3,434 3,429 367 5,597 5,964after taxation Return per ordinary share: Basic 0.63p 8.87p 9.50p (0.01p) 4.97p 4.96p 0.52p 7.93p 8.45p

* Figures as at 30 September 2012 are audited.

Unaudited Reconciliation of Movement in Shareholders' Funds

For the six months to 31 March 2013

Six Six months to Months to Year to 31 March 31 March 30 September 2013 2012 2012* £'000 £'000 £'000 Opening shareholders' funds 72,433 64,999 64,999 Profit for the period 6,995 3,429 5,964 Gross proceeds of share issues 5,000 4,135 4.135 Purchase of shares for treasury (964) (191) (652)

Expenses of share issue and buybacks (280) (197) (199)

Other costs charged to capital - (10) (10) Dividends paid (3,772) - (1,804) Closing shareholders' funds 79,412 72,165 72,433

* Figures as at 30 September 2012 are audited.

Notes

1. The unaudited interim results which cover the six months to 31 March 2013have been prepared in accordance with applicable accounting standards andadopted the accounting policies set out in the statutory accounts of theCompany for the year to 30 September 2012.

2. Return per share is based on a weighted average of 73,664,418 ordinaryshares in issue (30 September 2012 - 70,544,594 ordinary shares, 31 March 2012-69,096,100 ordinary shares).

3. Earnings for the six months to 31 March 2013 should not be taken as a guideto the results of the full financial year to 30 September 2013.

4. During the six months to 31 March 2013 the Company purchased 1,005,000ordinary shares to be held in treasury at a cost of £964,000. At 31 March 2013the Company holds 10,223,819 ordinary shares in treasury. These shares may bere-issued below Net Asset Value as long as the discount at issue is narrowerthan the average discount at which the shares were bought back.

Excluding treasury shares, there were 75,114,950 ordinary shares in issue at 31March 2013 (30 September 2012 - 71,647,952 ordinary shares, 31 March 2012 -72,167,952 ordinary shares).

5. The interim dividend of 3.0p per share (0.6p revenue and 2.4p capital) willbe paid on 14 June 2013 to shareholders on the register on 31 May 2013. Theex-dividend date is 29 May 2013.

6. The financial information contained in this half-yearly financial reportdoes not constitute statutory accounts as defined in section 434 of theCompanies Act 2006. The information for the year to 30 September 2012 has beenextracted from the latest published audited financial statements. The auditedfinancial statements for the year to 30 September 2012, which were unqualified,have been filed with the Registrar of Companies. No statutory accounts inrespect of any period after 30 September 2012 have been reported on by theCompany's auditors or delivered to the Registrar of Companies.

7. Copies of the half-yearly financial report have been made available toshareholders and are available from the Registered Office of the Company at 100Wood Street, London EC2V 7AN.

Unaudited Balance Sheet As at to 31 March 2013 As at As at As at 31 31 30 March March September 2013 2012 2012 £'000 £'000 £'000* Fixed assets Unquoted investments 38,859 30,224 36,720 Traded on AIM 23,756 19,349 20,750 Listed on LSE 1,603 1,164 1,526 Collective investment vehicle - Wood Street Microcap 5,092 3,095 4,183Investment Fund Listed interest bearing securities 5,619 26,635 5,939 74,929 80,467 69,118 Current assets Debtors 1,820 227 310 Cash at bank 6,908 1,232 465 Cash on deposit 2,500 - 3,000 11,228 1,459 3,775 Creditors (amounts falling due within one year) (6,745) (9,761) (460) Net current assets/(liabilities) 4,483 (8,302) 3,315 Net assets 79,412 72,165 72,433 Capital and reserves Called-up share capital 8,534 8,087 8,087 Share premium account 7,809 3,531 3,531 Capital reserve 44,947 51,198 47,452 Revaluation reserve 17,415 9,100 12,742 Revenue reserve 707 249 621 Equity shareholders' funds 79,412 72,165 72,433

* Figures as at 30 September 2012 are audited.

As at As at As at 31 March 31 March 30 September 2013 2012 2012* Net asset value per share 105.72p 100.00p 101.10p Number of shares in circulation 75,114,950 72,167,952

71,647,952

Treasury net asset value per share 104.98p 98.64p

99.83p

Number of ordinary shares in circulation 75,114,950 72,167,952 71,647,952

Number of ordinary shares held in 10,223,819 8,698,819 9,218,819treasury

Number of listed ordinary shares in issue 85,338,769 80,866,771 80,866,771

* Figures as at 30 September 2012 are audited.

Unaudited Statement of Cash Flow Statement

For the six months to 31 March 2013

Six Six months months Year to to to 31 March 31 March 30 September 2013 2012 2012* £'000 £'000 £'000 Net cash outflow from operating activities (2) (90)

(337)

Capital expenditure and financial investment 6,488 (2,914) 1,833 Equity dividends paid (3,772) - (1,804)

Net cash inflow/(outflow) before financing 2,714 (3,004) (308)

Net cash inflow from financing 3,229 3,694 3,231 Increase in cash 5,943 690 2,923 Reconciliation of net cash flow to movement in net cash Increase in cash 5,943 690 2,923 Opening cash position 3,465 542 542 Closing cash position 9,408 1,232 3,465 Reconciliation of profit on ordinary activities before taxation to net cashoutflow from operating activities Profit on operating activities before taxation 6,995 3,429 5,964 Gains on investments (7,927) (3,926) (6,592) Changes in working capital and other non-cash 930 407 291items Net cash outflow from operating activities (2) (90)

(337)

* Figures as at 30 September 2012 are audited.

Principal Risks and Uncertainties

The Company's assets consist of equity and fixed interest investments, cash andliquid resources. Its principal risks are therefore market risk, credit riskand liquidity risk. Other risks faced by the Company include economic, loss ofapproval as a Venture Capital Trust, investment and strategic, regulatory,reputational, operational and financial risks. These risks, and the way inwhich they are managed, are described in more detail under the headingPrincipal risks, risk management and regulatory environment within the BusinessReview in the Company's Annual Report and Accounts for the year to 30 September2012. The Company's principal risks and uncertainties have not changedmaterially since the date of that report.

Related Parties

ISIS EP LLP ('the Manager') manages the investments of the Company. The Manageralso provides or procures the provision of secretarial, administrative andcustodian services to the Company. Under the management agreement, the Managerreceives a fee of 2.0 per cent per annum of the net assets of the Company. Thisis described in more detail under the heading Management within the Report ofthe Directors in the Company's Annual Report and Accounts for the year to 30September 2012. During the period the Company has incurred management fees of £744,000 and secretarial fees of £68,000 payable to the Manager. A performancefee of £911,000 has been accrued at 31 March 2013 to reflect the potential feethat would be payable to the Manager at 30 September 2013 should the currentinvestment performance continue to the end of the current financial year.

Going Concern

After making enquires, and bearing in mind the nature of the Company's businessand assets, the Directors consider that the Company has adequate resources tocontinue in operational existence for the foreseeable future. In arriving atthis conclusion the Directors have considered the liquidity of the Company andits ability to meet obligations as they fall due for a period of at leasttwelve months from the date that these financial statements were approved. Asat 31 March 2013 the Company held cash balances, investments in UK Gilts andMoney Market Funds with a combined value of £15,027,000. Cash flow projectionshave been reviewed and show that the Company has sufficient funds to meet bothits contracted expenditure and its discretionary cash outflows in the form ofthe share buyback programme and dividend policy. The Company has no externalloan finance in place and therefore is not exposed to any gearing covenants. Corporate Information Directors Registrar and Transfer OfficeClive Parritt (Chairman) Computershare Investor Services PLCHoward Goldring* PO Box 82Gillian Nott OBE‡ The PavilionsChristina McComb Bridgwater Road Bristol BS99 6ZZ Secretary Tel: 0870 889 3249ISIS EP LLP AuditorsRegistered Office KPMG Audit Plc100 Wood Street Saltire CourtLondon EC2V 7AN 20 Castle Terrace Edinburgh EH1 2EG Investment ManagerISIS EP LLP Solicitors100 Wood Street MartineauLondon EC2V 7AN No 1 Colmore Square020 7506 5717 Birmingham B4 6AA FPPE LLP (listed interest bearing securities only) VCT Status Adviser 100 Wood Street PricewaterhouseCoopers LLPLondon EC2V 7AN 1 Embankment Place London WC2N 6RH Registered Number03504214 Website www.baronsmeadvct2.co.uk * Chairman of the Audit Committee ‡ Chairman of the Management Engagement andRemuneration Committee, Chairman of the NominationCommittee and Senior Independent Director.

Copies of the half-yearly financial report will shortly be available from the following website: www.baronsmeadvct2.co.uk.

National Storage Mechanism

A copy of the Half-Yearly Report will be submitted shortly to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at: www.hemscott.com/nsm.do .

Neither the contents of the Company's website nor the contents of any websiteaccessible from hyperlinks on this announcement (or any other website) isincorporated into, or forms part of, this announcement.