NORTHERN 2 VCT PLC — Proxy Solicitation & Information Statement 2011

Sep 23, 2011

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the action you should take, you should consult an appropriate independent financial adviser authorised under the Financial Services and Markets Act 2000 immediately. If you have sold or transferred all your Shares in the Company, please forward this Circular together with the Form of Proxy to the purchaser, transferee, stockbroker or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee.

Notice of a General Meeting of the Company to be held at the offices of SJ Berwin LLP at 10 Queen Street Place, London EC4R 1BE at 11.00am on Thursday 20 October 2011 is set out on pages 5 and 6 of the Circular. A Form of Proxy for use at the meeting is enclosed. To be valid, Forms of Proxy should be completed and returned in accordance with the notes to the notice of the General Meeting and the Form of Proxy itself.

Northern 2 VCT PLC

Registered in England no 3695071 Northumberland House

Princess Square Newcastle upon Tyne NE1 8ER

Telephone: Facsimile: E-mail: Website:

0191 244 6000 0191 244 6001 n2vct@nvm.co.uk www.nvm.co.uk

Directors: 23 September 2011 David Gravells, Chairman Alastair Conn Michael Denny Christopher Fletcher Frank Neale

Dear Shareholder

Proposed tender offer, share issue and extension of the life of the Company

Introduction

The purpose of this Circular is to set out your Board's proposals for a tender offer and a new issue of Shares. The proposed tender offer will permit those Shareholders who wish to do so to realise part of their investment at a narrow discount to NAV, whilst the proposed share issue represents an opportunity to bring about a material increase in the Company's size. Your Board believes this is beneficial because it provides an additional reserve of funds, giving the Company greater scope to take advantage of the flow of attractively valued investment opportunities which are currently available. In order to protect the income tax relief obtained by subscribers in the share issue for the requisite five year period, it is also proposed to amend the Articles so as to extend the life of the Company until 2017.

The proposals announced by your Board today require Shareholders to authorise the Company to purchase existing Shares under the proposed tender offer and to authorise the Company to issue new Shares under the proposed share issue. Details of the action to be taken by Shareholders are set out below.

Tender offer

Your Board intends that, subject to obtaining Shareholder approval at the General Meeting, a tender offer will be made to purchase in aggregate 10% of the issued share capital of the Company on the Record Date at a price representing a discount of 3% to the unaudited NAV as at 30 September 2011, after deduction of the interim dividend for the year ending 31 March 2012, which is expected to be paid in January 2012. It is expected that the tender offer will be opened for acceptance in early November 2011. Under the terms of the tender offer, each Shareholder will be entitled to apply for up to 10% of his or her qualifying shareholding to be purchased by the Company at the tender price. Shareholders will be able to make applications under the tender offer in respect of more than 10% of their total shareholding on the basis that some other Shareholders may not wish to participate, in which case any such entitlements not taken up will be allocated on a pro rata basis to Shareholders making applications in respect of more than 10% of their shareholding. The tender offer will close on 6 January 2012 and cash arising on the sale of Shares in the tender offer will be paid to Shareholders by 13 January 2012.

Shareholders are reminded that if they subscribed for Shares on or after 6 April 2006, they must hold such Shares for five years from the date of issue in order to retain the initial income tax relief granted in respect of their subscription. Shareholders who successfully tender any Shares which were allotted to them on or after 6 January 2007 would therefore lose the initial income tax relief granted in respect of their subscription.

Shareholders should note that Shares acquired first will be treated for capital gains tax purposes as being disposed of first. Where Shareholders have deferred capital gains by subscribing for Shares prior to 6 April 2004, the deferred gains will become taxable at the prevailing capital gains tax rate if the Shares are bought back by the Company.

Where shares are purchased by a VCT direct from a shareholder, as is currently proposed by the Company, and the buyback price is higher than the issue price of the shares concerned, the difference is treated by HM Revenue & Customs as a taxable distribution and will be subject to income tax through the shareholder's self-assessment.

Share issue to raise up to £15 million

Your Board believes that there is investor demand for new Shares in the Company. Your Board therefore proposes that there should be an issue of Shares to raise up to £15 million (before expenses) and, subject to obtaining Shareholder approval at the General Meeting, expects that a prospectus will be issued in November 2011.

Applications for the new Shares will be considered on a first come first served basis, subject to your Board's discretion. Investors will be allowed to make applications for Shares in either or both of the 2011/12 and 2012/13 tax years. It is anticipated that the share issue will remain open until 5 April 2012 in respect of the 2011/12 tax year and until late April 2012 in respect of the 2012/13 tax year, subject to your Board's right to close the share issue at any time.

To encourage early applications an "early bird" incentive of additional Shares equivalent in value at the issue price to 2% of the amount subscribed will be given to applicants who apply before 6 February 2012 and who satisfy the Company that they, or their spouses, were Shareholders of the Company on the Record Date or are shareholders of Northern Venture Trust PLC or Northern 3 VCT PLC.

The new Shares will be issued at a premium of 5.5% to the last published NAV prior to the relevant allotment date to allow for issue costs (which will include the cost of the "early bird" incentive) and to avoid any dilution in the NAV attributable to each existing Share when the new Shares are issued.

Any new Shares will rank pari passu in all respects with the existing Shares and will rank for all dividends which are both declared and paid following Admission. Application will be made for Admission of any new Shares allotted and it is proposed that Admission will be effected at the earliest practicable opportunity for each tranche of Shares so allotted.

Under the current tax legislation, 30% income tax relief should be available to UK investors on the amount subscribed for new Shares in the Company provided the Shares are held for at least five years and the total value of VCT shares acquired by the investor in the relevant tax year does not exceed £200,000. Dividends and gains from VCTs are usually tax free. It should be noted that the tax reliefs are subject to change and withdrawal and the value to investors will depend on personal circumstances.

It remains your Board's objective to pay dividends of at least 5.5p per Share for each financial year. For the year ending 31 March 2012, it is expected that an interim dividend will be declared in October 2011 and will be paid in January 2012 to Shareholders on the register on 4 November 2011 and that, subject to approval by Shareholders at the annual general meeting to be held in July 2012, a final dividend will be paid in July 2012. Shareholders participating in the proposed tender offer would receive the interim dividend for the year ending 31 March 2012 in respect of the whole of their registered shareholdings as at 4 November 2011, but would not receive the final dividend payable in July 2012 in respect of those Shares successfully tendered in the tender offer.

Extension of the life of the Company

The Articles presently require that a resolution for the continuation of the Company be put to the annual general meeting of the Company held in 2013 and, unless defeated, at five-yearly intervals thereafter. The proposed amendment to Article 147 requires the continuation resolution to be considered at the annual general meeting of the Company expected to be held in July 2017 and every five years thereafter. This amendment will have the effect of postponing the continuation resolution until a period of five years has elapsed from the allotment of Shares under the proposed offer, five years being the minimum holding period to ensure that investors retain the initial income tax relief on their subscription.

Article 147 of the Articles in its current form is set out below:

• 147 At the annual general meeting of the Company held in 2013 and, if the Company has not then been liquidated, unitised or reconstructed, at each fifth subsequent annual general meeting of the Company convened by the Directors thereafter, the Directors shall propose a resolution that the Company should continue as a venture capital trust for a further five year period, on which resolution the vote shall be decided on a show of hands unless on declaration of the result of the show of hands a poll is duly demanded. A poll may be demanded only by those persons set out in Article 63. For the purpose of this Article only, the resolution that the Company should continue as a venture capital trust shall not be passed only where the vote is held on a poll and the votes against the resolution:
• (a) constitute a majority of the votes cast in respect of the resolution (votes withheld shall be ignored); and
• (b) represent not less than 25 per cent of the total number of votes then exercisable in respect of that resolution by the holders of the issued share capital of the Company. If such resolution is not passed, the Directors shall draw up proposals for the voluntary liquidation, unitisation or other reorganisation of the Company for submission to the members of the Company at an extraordinary general meeting to be convened by the Directors for a date not more than nine months after the date of the meeting at which such ordinary resolution was not passed. The Directors shall use all reasonable endeavours to ensure that such proposals for the liquidation, unitisation or reorganisation of the Company as are approved by special

resolution are implemented as soon as is reasonably practicable after the passing of such resolution.

Action to be taken by Shareholders

Pages 5 and 6 of this Circular contain a notice convening a General Meeting of the Company to be held at 11.00am on Thursday 20 October 2011 at the offices of SJ Berwin LLP at 10 Queen Street Place, London EC4R 1BE where the following resolutions will be proposed:

• 1 to authorise the Company to purchase Shares from Shareholders so as to facilitate the tender offer;
• 2 to authorise your Board to allot up to 20,000,000 Shares pursuant to Section 551 of the Act;
• 3 to authorise your Board to allot up to 20,000,000 Shares for cash as if Section 561 of the Act did not apply; and
• 4 to amend the Articles to extend the life of the Company.

Each of these resolutions, other than resolution 2, will be proposed as a special resolution.

It is important that you complete the Form of Proxy and return it to the Company's registrars, Equiniti Limited, at Aspect House, Spencer Road, Lancing BN99 6ZR by no later than 11.00am on Tuesday 18 October 2011. Completion and return of the Form of Proxy will not preclude you from attending the General Meeting and voting in person should you so wish.

Recommendation

Your Board considers that the Proposals are in the best interests of the Company and its Shareholders as a whole and unanimously recommends Shareholders to vote in favour of all the resolutions to be proposed at the General Meeting, as your Directors intend to do in respect of their own beneficial holdings which, in aggregate, amount to 534,719 Shares representing approximately 0.93% of the issued share capital of the Company.

Yours sincerely

DAVID GRAVELLS Chairman

Definitions

In this Circular, unless the context otherwise requires, the following expressions bear the following meanings:

Act	the Companies Act 2006 as amended
Admission	admission of Shares to the premium segment of the Official List of the UK Listing Authority and to trading on the London Stock Exchange's main market for listed securities
Articles	the articles of association of the Company as amended from time to time
Circular	this document dated 23 September 2011, addressed to the Shareholders
Company	Northern 2 VCT PLC
CREST	relevant system (as defined in the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755)) for the paperless settlement of transfers and the holding of shares in uncertificated form which is administered by Euroclear UK & Ireland Limited
Directors or Board	the directors of the Company, whose names are set out on page 1 of this Circular
Form of Proxy	the form of proxy for use at the General Meeting
General Meeting	the general meeting of the Company to be held at the offices of SJ Berwin LLP at 10 Queen Street Place, London EC4R 1BE at 11.00am on Thursday 20 October 2011
London Stock Exchange	London Stock Exchange plc
NAV	net asset value in pence per Share
Proposals	collectively the purchase of Shares under the tender offer, the proposed authority to issue Shares and to disapply pre-emption rights for such issue and the proposed amendment of the Articles to extend the life of the Company
Record Date	4 November 2011
Shareholders	holders of Shares
Shares	ordinary shares of 5p each in the capital of the Company
UK Listing Authority	the Financial Services Authority acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000
VCT	a venture capital trust as defined in section 259 of the Income Tax Act 2007 (as amended)

Northern 2 VCT PLC

Notice of General Meeting

Notice is hereby given that a general meeting of the company will be held at the offices of SJ Berwin LLP at 10 Queen Street Place, London EC4R 1BE at 11.00am on Thursday 20 October 2011 to consider and, if thought fit, to pass each of the following resolutions, in the case of resolutions 1 and 3 and 4 as a special resolution and in the case of resolution 2 as an ordinary resolution:

RESOLUTIONS

• 1 That, in addition to the authority given to the company at the annual general meeting held on 19 July 2011 to make market purchases, the company be authorised in accordance with Section 701 of the Companies Act 2006 (the "Act") to make market purchases (within the meaning of Section 693(4) of the Act) of ordinary shares of 5p each in the company in connection with a tender offer (full details of which will be provided to shareholders at a later date) provided that:
• (a) the maximum number of ordinary shares hereby authorised to be purchased is 5,746,834 ordinary shares;
• (b) the minimum price which may be paid for an ordinary share shall be 5p; and
• (c) the maximum price (exclusive of expenses) which may be paid for an ordinary share shall be an amount representing a 3% discount to the unaudited net asset value per share as at 30 September 2011 adjusted for any declared but unpaid dividends.

The authority conferred by this resolution shall expire on 28 February 2012 save that the company may, before the expiry of the authority granted by this resolution, enter into a contract to purchase ordinary shares which will or may be executed wholly or partly after the expiry of such authority.

• 2 That in substitution for and to the exclusion of any power previously conferred upon the directors in this regard (save to the extent relied upon prior to the passing of this resolution), the directors be generally and unconditionally authorised pursuant to Section 551 of the Companies Act 2006 to allot shares in the company and to grant rights to subscribe for or to convert any security into shares in the company up to a maximum nominal amount of £1,000,000 for a period expiring (unless previously renewed, varied or revoked by the company in general meeting) on 31 May 2012, save that the company may before expiry of this authority make an offer or agreement which would or might require shares to be allotted, or rights to subscribe for or to convert any security into shares to be granted, after expiry of this authority and the directors may allot shares, or grant rights to subscribe for or convert any security into shares, in pursuance of that offer or agreement as if this authority had not expired.
• 3 That, subject to the passing of Resolution 2 above and in substitution for and to the exclusion of any power previously conferred upon the directors in this regard (save to the extent relied upon prior to the passing of this resolution), the directors may:
• (a) allot equity securities (as defined in Section 560 of the Companies Act 2006 (the "Act")) pursuant to the authorisation for the purposes of Section 551 of the Act conferred by Resolution 2 above; and
• (b) sell equity securities which immediately before the sale are held by the company as treasury shares,

in each case as if Section 561(1) of the Act (existing shareholders' right of pre-emption) did not apply to the allotment or sale, provided that the power conferred by this resolution shall be limited to the allotment or sale of equity securities up to an aggregate nominal value of £1,000,000 and shall expire on 31 May 2012, save that the company may before this power expires make an offer or agreement which would or might require equity securities to be allotted or treasury shares to be sold after the power expires.

4 That the articles of association of the company be amended in the first sentence of Article 147 by deleting the date '2013' and substituting the date '2017'.

By order of the Board

C D MELLOR

Secretary Northumberland House Princess Square Newcastle upon Tyne NE1 8ER 23 September 2011

NOTES

• 1 A member entitled to attend and vote at this meeting is entitled to appoint another person as his or her proxy to exercise all or any of his or her rights to attend, to speak and, both on a show of hands and on a poll, to vote in his or her stead at the meeting. A proxy need not be a member of the company. The appointment of a proxy does not preclude a member from attending and voting in person at the meeting should he or she subsequently decide to do so. A form of proxy which may be used is set out on page 7.
• 2 A member may appoint more than one proxy in relation to a meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him or her.
• 3 To be valid, a form of proxy together with, if applicable, the power of attorney or other authority under which it is signed, or a certified copy thereof, must be received by Equiniti Limited at Aspect House, Spencer Road, Lancing BN99 6ZR not later than 11.00am on Tuesday 18 October 2011.
• 4 The company, pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, specifies that only those shareholders registered in the register of members of the company as at 6.00pm on 18 October 2011 shall be entitled to attend or vote (whether on a show of hands or on a poll) at the meeting in respect of the number of shares registered in their name at the time. Changes to entries on the register after 6.00pm on 18 October 2011 (or after 6.00pm on the day which is two days before any adjourned meeting) shall be disregarded in determining the rights of any person to attend or vote at the meeting.
• 5 As at 22 September 2011 (being the last business day prior to the date of this notice) the company's issued share capital consisted of 57,468,342 ordinary shares each carrying one vote per share. Accordingly the total number of voting rights in the company as at 22 September 2011 was 57,468,342.
• 6 CREST members who wish to appoint a proxy or proxies for the meeting or any adjournment thereof by utilising the CREST electronic proxy appointment service may do so by following the procedures described in the CREST Manual (www.euroclear.com/CREST). CREST personal members or other CREST sponsored members and those CREST members who have appointed a voting service provider(s) should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.

In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's (EUI) specifications and must contain the information required for such instructions, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy, must, in order to be valid, be transmitted so as to be received by the issuer's agent (ID RA19) by the latest time(s) for receipt of proxy appointments specified in this notice. For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the issuer's agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

CREST members and, where applicable, their CREST sponsors or voting service providers should note that EUI does not make available special procedures in CREST for any particular message. Normal system timings and limitations will therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member or sponsored member or has appointed (a) voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting service provider(s) are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.

The company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

• 7 The above statement as to proxy rights does not apply to a person who receives this notice of general meeting as a person nominated to enjoy "information rights" under Section 146 of the Companies Act 2006. If you have been sent this notice of meeting because you are such a nominated person, the following statements apply: (a) you may have a right under an agreement between you and the member of the company by whom you were nominated to be appointed or to have someone else appointed as a proxy for this general meeting; and (b) if you have no such right or do not wish to exercise it, you may have a right under such an agreement to give instructions to that member as to the exercise of voting rights.
• 8 A copy of this notice, and the other information required by Section 311A of the Companies Act 2006, can be found at www.nvm.co.uk/n2vctgm2011.
• 9 Any member attending the meeting has the right to ask questions.
• 10 You may not use any electronic address provided either in this notice or any related documents (including the form of proxy) to communicate with the company for any purposes other than those expressly stated.

Northern 2 VCT PLC

Form of Proxy for the General Meeting on 20 October 2011

I/We …………………………………………………………………………………………………………………………………………………………………

of …………………………………………………………………………………………………………………………………………………………………….

(block capitals please)

being a member of Northern 2 VCT PLC, hereby appoint (see notes 1 and 2)

……………………………………………………………………………………………………………………………………………………………………….

or failing him/her the chairman of the meeting to be my/our proxy and exercise all or any of my/our rights to attend, speak and vote for me/us in respect of my/our voting entitlement on my/our behalf at the general meeting of the company to be held on 20 October 2011, notice of which was sent to shareholders on 23 September 2011, and at any adjournment thereof. The proxy will vote as indicated below in respect of the resolutions set out in the notice of meeting:

Resolution number		For	Against	Vote withheld
1	To authorise the company to make an offer to purchase ordinary shares	†	†	†
2	To authorise the directors to allot shares pursuant to Section 551 of the Companies Act 2006	†	†	†
3	To disapply Section 561 of the Companies Act 2006 in relation to certain allotments of equity securities and the sale of treasury shares	†	†	†
4	To amend the articles of association of the company	†	†	†

Please indicate by placing an X in this box if this proxy appointment is one of multiple appointments being made (see note 2 below)

Signed: ……………………………………………………………………………….. Date: ………………………………………………..2011

NOTES

• 1 Every member has the right to appoint some other person(s) of his/her choice, who need not be a member, as his/her proxy to exercise all or any of his/her rights to attend, speak or vote on his/her behalf at the meeting. A member wishing to appoint a person other than the chairman of the meeting as proxy should insert the name of such person in the space provided. If the proxy is being appointed in relation to less than your full voting entitlement, please enter alongside the proxy holder's name the number of shares in relation to which they are authorised to act as your proxy. If left blank your proxy will be deemed to be authorised in respect of your full voting entitlement (or if this proxy form has been issued in respect of a designated account for a shareholder, the full voting entitlement for that designated account). Any alteration or deletion must be signed or initialled.
• 2 A member may appoint more than one proxy in relation to a meeting, provided that the proxy is appointed to exercise the rights attached to a different share or shares held by him/her. To appoint more than one proxy, please contact Equiniti Limited at Aspect House, Spencer Road, Lancing BN99 6ZR for (an) additional form(s), or you may photocopy this form. Please indicate alongside the proxy holder's name the number of shares in relation to which the proxy holder is authorised to act as your proxy. Please also indicate by placing an X in the box provided if the proxy instruction is one of multiple instructions being given. All forms must be signed and returned together in the same envelope.
• 3 Use of the form of proxy does not preclude a member from attending and voting in person.
• 4 Where the form of proxy is executed by an individual it must be signed by that individual or his or her attorney.
• 5 Where the form of proxy is executed by joint shareholders it may be signed by any of the members, but the vote of the member whose name stands first in the register of members of the company will be accepted to the exclusion of the votes of the other joint holders.
• 6 Where the form of proxy is executed by a corporation it must be either under its seal or under the hand of an officer or attorney duly authorised.
• 7 If the form of proxy is signed and returned without any indication as to how the proxy shall vote, the proxy will exercise his/her discretion as to whether and how he/she votes, as he/she will on any other matters to arise at the meeting.
• 8 To be valid, the form of proxy, together with, if applicable, the power of attorney or other authority under which it is signed, or a certified copy thereof, must be received by Equiniti Limited at Aspect House, Spencer Road, Lancing BN99 6ZR not later than 11.00am on 18 October 2011.
• 9 The "vote withheld" option is provided to enable a member to abstain from voting on the resolution; however, it should be noted that a "vote withheld" is not a vote in law and will not be counted in the calculation of the proportion of the votes "for" and "against" the resolution.

Attendance indication

Shareholders who intend to attend the general meeting are requested to place a tick in the box below in order to assist with administrative arrangements.

I/we intend to attend the general meeting at 11.00am on 20 October 2011 at the offices of SJ Berwin LLP,	†
10 Queen Street Place, London EC4R 1BE

Signed: ……………………………………………………………………………….. Date: ………………………………………………..2011