Half-year Report

RNS Number : 0804I

Mobeus Income & Growth 2 VCT PLC

21 November 2018

 

MOBEUS INCOME & GROWTH 2 VCT PLC HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018 Mobeus Income & Growth 2 VCT plc ("the Company") today announces its half-year results for the six months ended 30 September 2018.

As at 30 September 2018: Net assets: £48.96 million Net asset value ("NAV"): 99.10 pence Financial Highlights For the six months ended 30 September 2018 -     Net asset value ("NAV") Total Return1 per share increased by 2.7% while Share Price Total Return2 per share increased by 1.7%. -     Investments were sold for £1.58 million cash proceeds which generated realised gains over cost of £0.44 million. -     £1.70 million invested into one new and three existing portfolio companies. -     Total liquidity at the Half-Year is £21.89 million3. 1Calculated as closing NAV per share (99.10p) as a percentage increase of opening NAV per share (96.54p). 2Calculated as closing share price (mid-price) (88.00p) as a percentage increase of opening share price (mid-price) (86.50p). 3Calculated as the total of Current asset investments and Cash at bank and in hand, as well as £1.03m invested in companies preparing to trade.

Performance Summary Cumulative total shareholder return per share (NAV basis)4: The longer-term trend of performance on this measure is shown in the chart below:

Net asset value (NAV) per share Cumulative dividends paid per share Cumulative total shareholder return per share (NAV basis)4 (p) (p) (p) As at 30 September 2018 99.10 78.00 177.10 As at 31 March 2018 96.54 78.00 174.54 As at 31 March 2017 106.70 62.00 168.70 As at 31 March 2016 119.61 47.00 166.61 As at 31 March 2015 115.45 42.00 157.45 As at 31 March 2014 120.73 23.00 143.73 As at 30 April 2013 106.75 18.00 124.75 As at 30 April 2012 98.71 14.00 112.71 As at 30 April 2011 96.16 10.00 106.16 As at 30 April 2010 87.47 5.00 92.47 4 Cumulative total shareholder return (NAV basis) is net asset value plus cumulative dividends paid to date on the current share class launched in 2005. Note: the above data does not reflect the benefit of income tax relief upon initial subscription for the Company's shares.

Chairman's Statement I am pleased to present the Half-Year Report for Mobeus Income & Growth 2 VCT plc ("MIG2") covering the six months ended 30 September 2018. Overview There were positive returns totalling £0.92 million (£0.44 million realised and £0.48 million unrealised) from the investment portfolio, which contributed to a 2.7% increase in net asset value per share to 99.10p in the six-month period.  The realisation of the Company's investments in Fullfield (trading as Motorclean), Hemmels and Lightworks generated combined net cash proceeds of £1.32 million, contributing 0.79 pence to this increase per share.  The balance of the increase in net assets arose from income generated from portfolio investments and cash less expenses.  The level of new investment in the period has been satisfactory with one new growth capital investment and further investments in three existing portfolio companies being completed.    Additional investments in three existing portfolio companies were completed shortly after the end of the period.  Details of these investments are included under the "Investment Portfolio" section of my Statement below and in the Investment Review within the Half-Year Report.  Since the changes to the VCT Rules in November 2015, a total of £9.99 million has been invested by this VCT in growth capital investments.  Whilst the VCT industry can no longer support management buyout investments, these continue to be an important part of the portfolio, representing 54% of the portfolio by value at the period end. Performance for the six months ended 30 September 2018 The principal contributions to the increase in Net Asset Value ("NAV") per share were as follows: Six months to 30 September 2018 (pence per share) 30 September 2017 (pence per share) Net realised / unrealised gains on the investment portfolio 1.87 2.63 Income from investment portfolio and cash 2.12 2.44 Share buybacks and adjustments - 0.25 Gross return 3.99 5.32 Less: Investment Adviser's fees and other expenses (1.43) (1.77) Net return 2.56 3.55 The NAV per share at 30 September 2018 was 99.10 pence per share, compared to 96.54 pence per share at 31 March 2018, an increase of 2.56 pence (2.7% as above (2017: 3.3%)) over the period.  Your Board regards these returns as satisfactory, in the context of the significant changes in the VCT Rules since 2015, driving more recent investments into smaller, higher risk, but potentially higher reward companies. Investment Portfolio The main portfolio movements for the period are summarised below: £m Portfolio value at 31 March 2018 26.88 New and further investments 1.70 Disposal proceeds (1.58) Net realised gains 0.44 Valuation movements 0.48 Portfolio value at 30 September 2018 27.92 The like-for-like change in valuations, after adding back disposal proceeds and excluding new investments, showed an overall increase in the underlying value of the portfolio of 3.4%. During the period the Company made one new growth capital investment of £0.37 million into Rotageek, a provider of workforce management software.  The investment will be used to further the development of technology and grow sales.  The Company also made three follow-on investments during the period totalling £1.33 million, comprising a £0.63 million investment into MyTutor, a provider of online tutoring, a £0.64 million investment into Preservica, a seller of proprietary digital archiving software, and a £0.06 million investment into Proactive Investors, a provider of investor media services. Shortly after the period end, the Company completed three further follow-on investments totalling £0.87 million, comprising a £0.54 million investment into Biosite, a provider of workforce management and security services, £0.29 million into Proactive Investors, and £0.04 million into MPB Group, an online marketplace for used camera and video equipment. The Company received cash proceeds of £1.58 million during the period, including £1.32 million of realisation proceeds, £0.16 million of loan stock repayments, £0.05 million of deferred and liquidation proceeds and £0.05 million from the repurchase of preference shares. Sales of portfolio companies in the period generated net realised gains of £0.44 million.  The principal gain was from the sale of Lightworks, realising a gain in the period of £0.48 million. However, disappointingly, the sale of Hemmels incurred a loss of £0.24 million, as explained further in the Investment Review. The main unrealised valuation changes were from Auction Technology Group, Plastic Surgeon and Access IS, while the main decreases were from Wetsuit Outlet and BookingTek.  Further details of these movements are explained in the Investment Review. We remind shareholders that an inherent element of investing in such smaller companies is understanding that not all ventures and companies will succeed. This risk has been heightened by the legislative changes to the VCT scheme which came into effect in March 2018.  These changes, were designed firstly to exclude tax-motivated investments where capital is not at risk and secondly, place further restrictions on the way investments are able to be structured.   Interim Dividend The Board will consider the payment of an interim dividend later in the financial year. Liquidity The Company's liquid assets of £21.89 million remain high following the successful fundraising which completed in March 2018.  This amount corresponds to 44.8% of net assets (31 March 2018: £21.59 million (45.4%)) and includes both £1.03 million (31 March 2018: £1.03 million) invested in CPTs and £14.64 million from the recent fundraising.  Share buybacks During the period under review there were no share buybacks. The Board continues to believe that the policy of maintaining the share price at an average discount of 10% to the prevailing NAV is appropriate in current market conditions.  Continuing shareholders benefit from the difference between NAV per share and the price per share at which the shares are bought back. Shareholder communications The Investment Adviser holds an annual VCT event for shareholders in central London.  Each event includes a presentation on the Mobeus Advised VCTs' investment activity and performance.  The next event will be held on Tuesday, 5 February 2019 at the Royal Institute of British Architects.  There will be a daytime and a separate evening session.  Shareholders have been sent an invitation to this event with further details.  If you have not replied to the invitation, but would like to attend, please send an email to [e-mail] to register.  The Board looks forward to meeting all shareholders able to attend. Board Changes As mentioned in the Company's Annual Report for the year ended 31 March 2018, Nigel Melville retired as Chairman of the Board following the conclusion of the Annual General Meeting on 12 September 2018.  I would like to take this opportunity to thank Nigel for his outstanding contribution to the Company. Outlook The portfolio has a solid foundation of investments made under the previous MBO strategy, the majority of which are mature and profitable companies providing attractive income returns.  Meanwhile, your Board believes that your Company continues to be well positioned to take advantage of the opportunity to provide growth capital. However, it should be noted that our Investment Adviser, Mobeus, perceive current entry valuations to be relatively expensive for the most interesting opportunities. While the new growth capital element of the portfolio is still young, both your Board and the Investment Adviser will seek to assess, balance and diversify the risks within the growing proportion of the overall portfolio that these investments will represent.  Your Board cautions that investing in such earlier stage companies involves increased risk, as those that succeed often take longer to achieve scale.  Returns may take longer to emerge and may be more volatile. The least successful investments are likely to emerge before the most successful, causing a slower rate of financial progress to be anticipated in the earlier years, offset by more significant gains in the longer-term. The recent successful fundraising will provide the Company with sufficient funds to continue the current investment rate in the short to medium-term.  However, until these funds are fully invested, there is likely to be some short-term dilution of returns to shareholders in the current low interest rate environment.  We expect the current trend for follow-on investments into new and existing growth capital portfolio companies to continue in the foreseeable future. The Board and Investment Adviser have carried out an analysis of the possible impact of Brexit on the underlying portfolio to identify the principal areas of risk.  We continue to monitor Brexit negotiations and take mitigating action where feasible. Finally, I would like to take this opportunity to thank shareholders for their continued support. Ian Blackburn Chairman 21 November 2018

Investment Policy The Investment Policy is designed to meet the Company's objective. Investments The Company invests primarily in a diverse portfolio of UK unquoted companies. Investments are made selectively across a number of sectors, principally in established companies.  Investments are usually structured as part loan stock and part equity in order to produce a regular income stream and to generate capital gains from realisations. There are a number of conditions within the VCT legislation which need to be met by the Company and which may change from time to time.  The Company will seek to make investments in accordance with the requirements of prevailing VCT legislation. Asset allocation and risk diversification policies, including the size and type of investments the Company makes, are determined in part by the requirements of prevailing VCT legislation.  No single investment may represent more than 15% (by VCT tax value) of the Company's total investments at the date of investment. Liquidity The Company's cash and liquid funds are held in a portfolio of readily realisable interest bearing investments, deposit and current accounts, of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised. Borrowing The Company's articles of association permit borrowings of amounts up to 10% of the adjusted capital and reserves (as defined therein). However, the Company has never borrowed and the Board would only consider doing so in exceptional circumstances.

Investment Adviser's Review Demand for growth capital investment remains strong and there is a large pipeline of investment opportunities.  It is expected that the current pace and quantum of new and follow-on investments will continue in the short to medium-term. Portfolio review (£m) Portfolio value at 31 March 2018 26.88 New and further investments 1.70 Disposal proceeds (1.58) Net realised gains 0.44 Valuation movements 0.48 Portfolio value at 30 September 2018 27.92 The six months under review has seen one investment into a new growth business of £0.37 million, three existing growth portfolio companies receiving follow-on funding totalling £1.33 million and net cash proceeds received of £1.58 million, primarily from three realisations.  After the period end, the Company invested a further £0.87 million into three existing portfolio companies. Six months to Investment Portfolio Capital Movement 30 September 2018 £m 30 September 2017 £m Increase in the value of unrealised investments 1.85 1.23 Decrease in the value of unrealised investments (1.37) (1.95) Net increase/(decrease) in the value of unrealised investments 0.48 (0.72) Realised gains 0.68 1.71 Realised losses (0.24) - Net realised gains 0.44 1.71 Net investment portfolio movement 0.92 0.99 Unrealised movements in the value of the portfolio The value of the existing portfolio increased by £0.48 million during the first half of the year. This net increase in the value of the portfolio of investments was due to increases in individual valuations of £1.85 million outweighing reductions in individual valuations of £1.37 million. The principal increases in value were seen at Auction Technology Group (£0.24 million), Plastic Surgeon (£0.19 million) and Access IS (£0.18 million). Auction Technology Group is growing in line with its investment plan and has delivered improved gross profit. Plastic Surgeon is trading well on the back of a buoyant house-building market, but also showing improved sales in its other markets. Access IS is trading well and expected to deliver improved turnover and earnings. The main decreases were seen at Wetsuit Outlet (£0.47 million) and BookingTek (£0.46 million). Wetsuit Outlet has had a disappointing year post investment, with growth in profitability not being achieved as envisaged. Management has since implemented several measures to restore margins. BookingTek has experienced challenging market conditions and delays in securing key contracts. Realised gains from sales of investments The net realised gain from sales of investments was £0.44 million during the period under review. This net gain was due to realised gains of £0.68 million being partially offset by a realised loss of £0.24 million. The largest gain of £0.48 million arose from the sale of Lightworks to Siemens PLM Software, a business of Siemens AG. The sale of Fullfield (trading as Motorclean) back to management resulted in a realised gain of £0.15 million compared to its value at 31 March 2018. The realised loss of £0.24 million resulted from the sale of Hemmels to its largest customer. Although the Hemmels loss was modest in the context of the whole portfolio, it was unexpected, arising shortly after the initial investment, and illustrates the inherent higher risk of investing in early stage growth companies. The company also realised a gain in the period from deferred consideration receipts of £0.05 million arising from past realisations, during the year. Investment portfolio yield and capital repayments During the period under review, the Company received the following amounts in loan interest and dividend income: Investment Portfolio Yield Six months to 30 September 2018 £m Six months to 30 September 2017 £m Loan interest received in the period 0.71 0.82 Dividends received in the period 0.26 0.08 Total portfolio income in the period 0.971 0.90 Portfolio value at 30 September 27.92 26.17 Portfolio Income Yield (Income as a % of Portfolio value at 30 September) 3.5% 3.4% 1Total portfolio income in the period is generated from investee companies within the portfolio.  See note 4 for details of all income receivable by the Company. The Company also received loan stock repayments of £0.16 million and preference share repurchases of £0.05 million, both at cost.

New investment in the period On 13 August 2018, the Company invested £0.37 million into Rotageek, a provider of workforce management software.

Company Business Date of Investment Amount of new investment (£m) Rotageek Workforce management software August 2018 0.37 Rotageek is a provider of cloud-based enterprise software to help larger retail and leisure organisations predict and meet demand to schedule staff effectively.  This investment will be used for further technology development and to grow sales from enterprise clients.  The company's unaudited accounts for the year ended 31 December 2017 show revenues of £0.90 million and a loss before interest, tax and amortisation of goodwill of £1.57 million. Further investments in existing portfolio companies in the period The Company made further investments totalling £1.33 million into three existing portfolio companies during the period under review, as detailed below: Company Business Date of Investment Amount of new investment (£m) MyTutor Online tutoring May 2018 0.63 MyTutor is a digital marketplace that connects school pupils who are seeking private one-to-one tutoring with university students. The business is satisfying a growing demand from both schools and parents to improve pupils' exam results to enhance their academic and career prospects. This investment supports an opportunity to consolidate the sizeable £2bn UK tutoring market, grow MyTutor's market presence and drive technological development within the company.  The company's latest unaudited accounts for the year ended 31 December 2017 show turnover of £0.56 million and a loss before interest, tax and amortisation of goodwill of £1.40 million. Preservica Seller of proprietary digital archiving software September 2018 0.64 Preservica has developed the world's leading software for the long-term preservation of digital records ensuring that such digital content can remain accessible, irrespective of future changes in technology. Previously a subsidiary of the Company's former portfolio company Tessella, Preservica was demerged prior to the sale of Tessella in December 2015. The new investment provided additional growth capital to finance the development of the business. The Company's latest audited accounts for the year ended 31 March 2018 show turnover of £2.85 million and a loss before interest, tax and amortisation of goodwill of £1.93 million. A small follow-on investment of £0.06 million was also made into Proactive Investors during the period.  A further, more substantial, follow on investment occurred after the period end which is detailed below. Further investments in existing portfolio companies after the period end A total of £0.87 million was invested into three existing portfolio companies shortly after the period end as detailed below: Company Business Date of investment Amount of new investment (£m) Biosite Workforce management software and security services October 2018 0.54 Based in the Midlands, Biosite is a provider of biometric access control and software-based workforce management solutions for the construction sector.  The business is growing significantly and this investment will support the further development of software and hardware products.  The Company's latest unaudited accounts for the year ended 31 July 2017 show turnover of £6.38 million and a loss before interest, tax and amortisation of goodwill of £0.45 million. Proactive Investors Investor media services October 2018 0.29 Proactive Investors specialises in timely multi-media news provision, events organisation, digital services and investor research. This follow-on investment was agreed at the time of the original investment in January 2018 and these further funds will be used to develop its brand and enable the company to continue its global expansion.           In October 2018, a further £0.04 million was invested into MPB Group, an existing portfolio company. This investment was part of a planned drawdown having previously been approved by the Board as part of a larger funding round completed in February 2018. Realisations during the period The Company realised its investments in Fullfield (trading as Motorclean), Hemmels and Lightworks during the half-year, generating a net realised gain of £0.39 million for the period. Net cash proceeds received from the sale of these investments totalled £1.32 million, as detailed below. Company Business Period of investment Total cash proceeds over the life of the investment/ Multiple over cost Fullfield (Motorclean) Vehicle cleaning and valet services July 2011 to August 2018 £2.13 million 1.2 x cost The Company sold its investment in Fullfield (trading as Motorclean) back to management in August 2018 receiving cash proceeds of £0.58 million (realised gain in the period: £0.15 million).  This realisation contributed to a return of 1.2 times the original investment cost and an IRR of 5.0% in the seven years that this investment was held. Hemmels Classic car restorer March 2018 to September 2018 £0.21 million 0.48 x cost The Company sold its investment in Hemmels to the business's largest customer for £0.20 million in September 2018, generating a realised loss of £0.24 million on the original investment cost over the six months that this investment was held.  After a short period following the completion of the investment it became clear that the company's financial situation and prospects were significantly at variance to expectations.  The investment was subsequently realised six months after the original investment. Lightworks Provider of software for CAD and CAM vendors March 2011 to September 2018 £0.56 million 21.7 x cost The Company sold its investment in Lightworks to Siemens PLM Software for £0.54 million in September 2018 (realised gain in the period: £0.48 million), generating a realised gain over the life of the investment of £0.54 million.  This equates to a multiple of 21.7 times the investment cost of £0.02 million and an IRR of 57%. Other realised gains in the period amounted to £0.05 million arising from deferred consideration from companies realised in a previous year. Together with the realised gains upon the three disposals of £0.39 million, the total for the year was £0.44 million. Capital repayments The Company received loan stock repayments of £0.16 million and preference share repurchases of £0.05 million, both at cost. Mobeus Equity Partners LLP Investment Adviser 21 November 2018 Investment Portfolio Summary as at 30 September 2018 Date of Investment Market sector Total book cost at 30 September 2018 Valuation at 31 March 2018 Additions at cost Disposals at opening valuation Change in valuation for the period Valuation at 30 September 2018 % value of net assets by value Qualifying Investments ASL Technology Holdings Limited Printer and photocopier services December 2010 Support services 2,092,009 2,126,379 - - 105,696 2,232,075 4.6% Tovey Management Limited (trading as Access IS) Provider of data capture and scanning hardware October 2015 Software and Computer Services 1,733,500 2,027,582 - - 175,268 2,202,850 4.5% EOTH Limited (trading as Rab and Lowe Alpine) Branded outdoor equipment and clothing October 2011 General Retailers 817,185 1,521,873 - - 137,632 1,659,505 3.4% Preservica Limited Seller of proprietary digital archiving software December 2015 Software and Computer Services 1,133,464 865,666 647,694 - 33,567 1,546,927 3.2% Virgin Wines Holding Company Limited Online wine retailer November 2013 General retailers 1,284,333 1,371,490 - - 138,259 1,509,749 3.1% Vian Marketing Limited (trading as Red Paddle Co) Design, manufacture and sale of stand-up paddleboards and windsurfing sails July 2015 Leisure Goods 717,038 987,179 - - 123,650 1,110,829 2.3% MPB Group Limited Online marketplace for photographic and video equipment June 2016 General retailers 730,667 1,254,114 - 89,106 (79,437) 1,085,571 2.2% My Tutorweb Limited Digital marketplace connecting school pupils seeking one to one online tutoring May 2017 Support Services 979,834 349,661 630,173 - 98,932 1,078,766 2.2% Master Removers Group Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) A specialist logistics, storage and removals business December 2014 Support Services 369,625 874,317 - - 169,702 1,044,019 2.2% Turner Topco Limited (trading as Auction Technology Group) SaaS based online auction market place platform October 2008 Media 1,317,100 777,645 - - 239,934 1,017,579 2.1% CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreation vehicle and aerospace markets June 2014 General Industrials 999,568 1,030,727 - - (21,707) 1,009,020 2.1% Ibericos Etc. Limited (trading as Tapas Revolution) Spanish restaurant chain January 2017 General retailers 812,248 854,224 - - 93,399 947,623 1.9% Manufacturing Services Investment Limited (trading as Wetsuit Outlet Limited) Online retailer in the watersports market July 2017 General retailers 1,412,992 1,412,992 - - (470,553) 942,439 1.9% Tharstern Group Limited Software-based management information systems to the print sector July 2014 Software and Computer Services 789,815 887,870 - - (35,583) 852,287 1.7% The Plastic Surgeon Holdings Limited Snagging and finishing of domestic and commercial properties April 2008 Support Services 39,487 731,523 - 123,953 194,138 801,708 1.6% Pattern Analytics Limited (trading as Biosite) Workforce management and security services for the construction industry November 2016 Support Services 495,479 743,219 - - 57,337 800,556 1.6% Vectair Holdings Limited Designer and distributor of washroom products January 2006 Support Services 60,293 740,670 - - 31,727 772,397 1.6% Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries January 2015 Media 1,447,188 651,225 - - 71,229 722,454 1.5% Blaze Signs Holdings Limited Manufacturing and installation of signs April 2006 Support Services 437,030 639,342 - - 2,504 641,846 1.3% RDL Corporation Limited Recruitment consultants for the pharmaceutical, business intelligence and IT industries October 2010 Support Services 1,000,000 515,476 - - 111,389 626,865 1.3% Redline Worldwide Limited Provider of security services to the aviation industry February 2016 Support Services 682,222 689,047 - - (110,892) 578,155 1.2% Bourn Bioscience Limited Management of In-vitro fertilisation clinics January 2014 Healthcare Equipment & Services 757,101 558,620 - - (16,105) 542,515 1.1% Buster and Punch Holdings Limited Industrial inspired lighting and interiors retailer March 2017 General retailers 436,391 553,896 - - (39,211) 514,685 1.1% Super Carers Limited Online platform that connects people seeking home care from experienced independent carers March 2018 Support Services 384,720 384,720 - - - 384,720 0.8% Rota Geek Limited Provider of cloud-based enterprise software that uses data-driven technologies to help retail and leisure organisations schedule staff August 2018 Support Services 366,600 - 366,600 - - 366,600 0.8% Proactive Group Holdings Inc Provider of media services and investor conferences for companies primarily listed on secondary public markets January 2018 General Financial 346,612 288,952 57,660 - - 346,612 0.7% BookingTek Limited Software for hotel groups October 2016 Software and Computer Services 504,336 714,211 - - (462,043) 252,168 0.5% Jablite Holdings Limited Manufacture of expanded polystyrene products April 2015 Construction and Materials 281,398 171,931 - - (80,331) 91,600 0.2% Veritek Global Holdings Limited Maintenance of imaging equipment July 2013 Support Services 967,780 102,972 - - (48,396) 54,576 0.1% Racoon International Group Limited Supplier of hair extensions, hair care products and training December 2006 Personal Goods 906,935 - - - - - 0.0% Newquay Helicopters (2013) Limited (in members' voluntary liquidation) Helicopter service operators June 2006 Support Services 18,491 - - - - - 0.0% Fullfield Limited (trading as Motorclean) Vehicle cleaning and valet services July 2011 Support Services - 433,939 - 433,939 - - 0.0% Lightworks Software Limited Provider of software for CAD and CAM vendors April 2006 Software and Computer Services - 61,163 - 61,163 - - 0.0% Total Qualifying Investments 24,321,441 24,322,625 1,702,127 708,161 420,105 25,736,696 52.8% Date of Investment Market sector Total book cost at 30 September 2018 Valuation at 31 March 2018 Additions at cost Disposals at opening valuation Change in valuation for the period Valuation at 30 September 2018 % value of net assets by value Non-Qualifying Investments Media Business Insight Limited A publishing and events business focused on the creative production industries January 2015 Media 561,884 568,576 - - 62,190 630,766 1.3% Hollydale Management Limited Company seeking to carry on a business in the food sector March 2015 Support Services 566,400 354,000 - - - 354,000 0.7% Manufacturing Services Investment Limited (trading as Wetsuit Outlet) Online retailer in the watersports market July 2017 General Retailers 304,000 304,000 - - - 304,000 0.7% Tovey Management Limited (trading as Access IS) Provider of data capture and scanning hardware October 2015 Software and Computer Services 219,873 219,873 - - - 219,873 0.5% Backhouse Management Limited Company seeking to carry on a business in the motor sector April 2015 Support Services 441,220 169,700 - - - 169,700 0.3% Barham Consulting Limited Company seeking to carry on a business in the catering sector April 2015 Support Services 441,220 169,700 - - - 169,700 0.3% Creasy Marketing Services Limited Company seeking to carry on a business in the textile sector April 2015 Support Services 441,220 169,700 - - - 169,700 0.3% McGrigor Management Limited Company seeking to carry on a business in the pharmaceutical sector April 2015 Support Services 441,220 169,700 - - - 169,700 0.3% Hemmels Limited Sourcing, restoration, selling and servicing of high price, classic cars March 2018 Automobiles and Parts 19,660 437,238 - 437,238 - - 0.0% Prefcap Limited (formerly 365 Agile Group plc) Development of energy saving devices for domestic use March 2001 Electronics and Electronic Equipment 254,586 - - - - - 0.0% Racoon International Group Limited Supplier of hair extensions, hair care products and training December 2006 Personal Goods 139,050 - - - - - 0.0% Turner Topco Limited (trading as Auction Technology Group) SaaS based online auction marketplace platform October 2008 Media 3,863 - - - - - 0.0% Total non-qualifying investments 3,834,196 2,562,487 - 437,238 62,190 2,187,439 4.4% Total investment portfolio 28,155,637 26,885,112 1,702,127 1,145,399 482,295 27,924,135 57.2% Cash and current asset investments - 20,559,774 - - - 20,859,620 42.7% Total investments (including cash and current asset investments) 28,155,637 47,444,886 1,702,127 1,145,399 482,295 48,783,755 99.9% Other current assets - 339,187 - - - 292,295 0.6% Current liabilities - (185,876) - - - (216,485) (0.5%) Totals 28,155,637 - 1,702,127 1,145,399 - - - Net assets at the period end - 47,598,197 - - - 48,859,565 100.0%

Statement of the Directors' Responsibilities  Responsibility Statement In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Ian Blackburn (Chairman), Adam Kingdon (Chairman of the Audit Committee), and Sally Duckworth (Chairman of the Investment Committee), being the Directors of the Company, confirm that, to the best of their knowledge: a)         the unaudited condensed set of financial statements, which has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit of the Company, as required by DTR 4.2.10; b)         the Half-Year Management Report which comprises the Chairman's Statement, Investment Policy, Investment Review and Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; c)          a description of the principal risks and uncertainties facing the Company for the remaining six months is set out below, in accordance with DTR 4.2.7; and d)         there were no related party transactions in the first six months of the current financial year that are required to be disclosed in accordance with DTR 4.2.8. Principal Risks and Uncertainties In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Financial Statements for the year ended 31 March 2018 ("the Annual Report"). The principal risks faced by the Company are: •           economic; •           investment and strategic; •           loss of approval as a VCT; •           VCT regulatory changes; •           regulatory; •           financial and operating; •           market; •           asset liquidity; •           market liquidity; •           counterparty; and •           cyber and data security. A more detailed explanation of these risks can be found in the Strategic Report in the Annual Report and Financial Statements for the year ended 31 March 2018, copies of which are available on the Investment Adviser's website, www.mobeusequity.co.uk or by going directly to the VCT's website, www.mig2vct.co.uk. Going Concern The Board has assessed the Company's operation as a going concern.  The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Half-Year management report which comprises the Chairman's Statement, Investment Policy, Investment Review and Investment Portfolio Summary. The Directors have satisfied themselves that the Company continues to maintain a significant cash position. The majority of companies in the portfolio continue to trade profitably and the portfolio taken as a whole remains resilient and well-diversified.  The major cash outflows of the Company (namely investments, buybacks and dividends) are within the Company's control. The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in the Annual Report and Financial Statements for the year ended 31 March 2018.  Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the Half-Year report and financial statements. Cautionary Statement This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast. For and on behalf of the Board: Ian Blackburn Chairman

Unaudited Condensed Income Statement for the six months ended 30 September 2018 Six months ended 30 September 2018 (unaudited) Year ended 31 March 2018  (audited) Notes Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Unrealised gains / (losses) on investments 9 - 482,295 482,295 - (755,510) (755,510) Realised gains on investments 9 - 437,864 437,864 - 2,766,722 2,766,722 Income 4 1,043,868 - 1,043,868 1,715,664 - 1,715,664 Investment Adviser's fees 5 (128,269) (384,807) (513,076) (247,177) (741,530) (988,707) Other expenses (171,084) - (171,084) (348,568) - (348,568) Profit on ordinary activities before taxation 744,515 535,352 1,279,867 1,119,919 1,269,682 2,389,601 Tax on profit on ordinary activities 6 (91,612) 73,113 (18,499) (191,512) 140,891 (50,621) Profit and total comprehensive income 652,903 608,465 1,261,368 928,407 1,410,573 2,338,980 Basic and diluted earnings per ordinary share 7 1.32p 1.24p 2.56p 2.25p 3.43p 5.68p Six months ended 30 September 2017 (unaudited) Notes Revenue Capital Total £ £ £ Unrealised losses on investments 9 - (719,145) (719,145) Realised gains on investments 9 - 1,709,101 1,709,101 Income 4 916,695 - 916,695 Investment Adviser's fees 5 (111,214) (333,641) (444,855) Other expenses (183,118) - (183,118) Profit on ordinary activities before taxation 622,363 656,315 1,278,678 Tax on profit on ordinary activities 6 (102,619) 63,392 (39,227) Profit and total comprehensive income 519,744 719,707 1,239,451 Basic and diluted earnings per ordinary share 7 1.43p 1.99p 3.42p The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised gains/(losses) and realised gains on investments and the proportion of the Investment Adviser's fee and performance fee charged to capital. The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS").  In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement.  The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007. All the items in the above statement derive from continuing operations of the Company.  No operations were acquired or discontinued in the period.

Unaudited Condensed Balance Sheet as at 30 September 2018 30 September 2018 31 March 2018 30 September 2017  (unaudited) (audited) (unaudited) Notes £ £ £ Fixed assets Investments at fair value 9 27,924,135 26,885,112 26,168,685 Current assets Debtors and prepayments 292,295 339,187 2,512,800 Current asset investments 10  17,657,301 18,287,301 7,947,301 Cash at bank and in hand 10  3,202,319 2,272,473 2,632,660 21,151,915 20,898,961 13,092,761 Creditors: amounts falling due within one year (216,485) (185,876) (429,540) Net current assets 20,935,430 20,713,085 12,663,221 Net assets 48,859,565 47,598,197 38,831,906 Capital and reserves Called up share capital 493,042 493,042 376,099 Capital redemption reserve 94,298 94,298 90,375 Share premium reserve 30,498,349 30,498,349 18,167,334 Revaluation reserve 2,405,699 1,398,656 1,311,778 Special distributable reserve 5,037,085 6,052,525 6,843,441 Realised capital reserve 8,560,337 7,943,475 10,492,795 Revenue reserve 1,770,755 1,117,852 1,550,084 Equity shareholders' funds 48,859,565 47,598,197 38,831,906 Basic and diluted net asset value per ordinary share 11  99.10p 96.54p 103.25p

Unaudited Condensed Statement of Changes in Equity for the six months ended 30 September 2018 Non-distributable reserves Distributable reserves Called up share capital Share premium reserve Capital redemption reserve Revaluation reserve Special distributable reserve (Note a) Realised capital reserve (Note b) Revenue reserve (Note b) Total £ £ £ £ £ £ £ £ At 1 April 2018 493,042 30,498,349 94,298 1,398,656 6,052,525 7,943,475 1,117,852 47,598,197 Comprehensive income for the period Profit for the period - - - 482,295 - 126,170 652,903 1,261,368 Total comprehensive income for the period - - - 482,295 - 126,170 652,903 1,261,368 Contributions by and distributions to owners Shares bought back - - - - - - - - Dividends paid - - - - - - - - Total contributions by and distributions to owners - - - - - - - - Other movements Realised losses transferred to special reserve (Note a) - - - - (1,015,440) 1,015,440 - - Realisation of previously unrealised depreciation - - - 524,748 - (524,748) - - Total other movements - - - 524,748 (1,015,440) 490,692 - - At 30 September 2018 493,042 30,498,349 94,298 2,405,699 5,037,085 8,560,337 1,770,755 48,859,565 Note a): The cancellation of the formerly named C Share Fund's share premium reserve (as approved at the Extraordinary General Meeting held on 10 September 2008 and by the order of the Court dated 28 October 2009), together with the previous cancellation of the share premium reserve attributable to the former Ordinary Share Fund and C Shares, has provided the Company with a special distribution reserve.  The purpose of this fund is to fund market purchases of the Company's own shares as and when it is considered by the Board to be in the best interests of the shareholders, and to write-off existing and future losses as the Company must take into account capital losses in determining distributable reserves. The total transfer of £1,015,440 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the period. Note b): The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company.

Unaudited Condensed Statement of Changes in Equity for the six months ended 30 September 2017 Non-distributable reserves Distributable reserves Called up share capital Share premium reserve Capital redemption reserve Revaluation reserve Special distributable reserve Realised capital reserve Revenue reserve Total £ £ £ £ £ £ £ £ At 1 April 2017 356,724 15,901,497 87,583 2,001,764 7,540,615 11,142,462 1,030,340 38,060,985 Comprehensive income for the period (Loss)/profit for the period - - - (719,145) - 1,438,852 519,744 1,239,451 Total comprehensive income for the period - - - (719,145) - 1,438,852 519,744 1,239,451 Contributions by and distributions to owners Shares issued under Offer for Subscription 22,167 2,299,457 - - (796) - - 2,320,828 Expenses of share offer - (33,620) - - - - - (33,620) Shares bought back (2,792) - 2,792 - (258,671) - - (258,671) Dividends paid - - - - - (2,497,067) - (2,497,067) Total contributions by and distributions to owners 19,375 2,265,837 2,792 - (259,467) (2,497,067) - (468,530) Other movements Realised losses transferred to special reserve - - - - (437,707) 437,707 - - Realisation of previously unrealised depreciation - - - 29,159 - (29,159) - - Total other movements - - - 29,159 (437,707) 408,548 - - At 30 September 2017 376,099 18,167,334 90,375 1,311,778 6,843,441 10,492,795 1,550,084 38,831,906

The composition of each of these reserves is explained below: Called up share capital The nominal value of shares originally issued, increased for subsequent share issues either via an Offer for Subscription or reduced due to shares bought back by the Company. Capital redemption reserve The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained. Share premium reserve This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under Offers for Subscription. Revaluation reserve Increases and decreases in the valuation of investments held at the period end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in note 9), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the period. Special distributable reserve The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser's fee and 100% of any performance fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve.  The cost of any IFA facilitation fee payable as part of the Offer for Subscription is also charged to this reserve. Realised capital reserve The following are accounted for in this reserve: • Gains and losses on realisation of investments; • Permanent diminution in value of investments; • Transaction costs incurred in the acquisition of investments; • 75% of the Investment Adviser's fee (subsequently transferred to the Special distributable reserve along with the related tax effect) and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies; and • Capital dividends paid. Revenue reserve Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as income dividends paid that are classified as revenue in nature.

Unaudited Condensed Statement of Cash Flows For the six months ended 30 September 2018 Six months ended 30 September 2018 (unaudited) Year ended 31 March 2018 (audited) Six months ended 30 September 2017 (unaudited) Notes £ £ £ Cash flows from operating activities Profit for the financial period 1,261,368 2,338,980 1,239,451 Adjustments for: Unrealised (gains)/losses on investments (482,295) 755,510 719,145 Realised gains on investments (437,864) (2,766,722) (1,709,101) Tax charge for current period 6 18,499 50,621 39,227 Decrease/(increase) in debtors 38,135 (100,281) (39,996) Increase in creditors and accruals 12,110 20,273 5,544 Net cash inflow from operations 409,953 298,381 254,270 Corporation tax paid - (29,118) - Net cash inflow from operating activities 409,953 269,263 254,270 Cash flows from investing activities Purchase of investments 9 (1,746,680) (2,733,686) (851,459) Disposal of investments 9 1,636,573 5,890,052 3,756,306 Net cash (outflow)/inflow from investing activities (110,107) 3,156,366 2,904,847 Cash flows from financing activities Shares issued as part of Offer for subscription - 14,636,013 - Equity dividends paid 8 - (6,821,660) (2,497,067) Purchase of own shares - (616,121) (18,002) Net cash inflow/(outflow) from financing activities - 7,198,232 (2,515,069) Net increase in cash and cash equivalents 299,846 10,623,861 644,048 Cash and cash equivalents at start of period 20,559,774 9,935,913 9,935,913 Cash and cash equivalents at end of period 20,859,620 20,559,774 10,579,961 Cash and cash equivalents comprise: Cash at bank and in hand 10 3,202,319 2,272,473 2,632,660 Cash equivalents 10 17,657,301 18,287,301 7,947,301

Notes to the Unaudited Condensed Financial Statements for the six months ended 30 September 2018 1.    Company information Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in England, registration number 03946235.  The registered office is 30 Haymarket, London, SW1Y 4EX. 2.    Basis of preparation These Financial Statements are prepared in accordance with accounting policies consistent with Financial Reporting Standard 102 ("FRS 102"), Financial Reporting Standard 104 ("FRS 104") - Interim Financial Reporting, with the Companies Act 2006 and the 2014 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies ("AIC"). The Financial Statements have been prepared on the historical cost basis except for the modification to a fair value basis for certain financial instruments as specified in note 9. The Half-Year Report has not been audited, nor has it been reviewed by the auditor pursuant to the Financial Reporting Council's (FRC) guidance on Review of Interim Financial Information. 3.    Principal accounting policies The accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report, while the policy in respect of investments is included within an outlined box at the top of note 9 on investments. 4.    Income Six months ended 30 September 2018             (unaudited) Year ended 31 March 2018             (audited) Six months ended 30 September 2017             (unaudited) Income from investments £ £ £ Dividends 264,940 114,698 82,264 OEIC dividends 46,871 33,137 6,899 Loan stock interest 712,798 1,551,995 823,112 Bank deposit interest 6,473 11,161 4,420 Interest on preference dividends 12,786 218 - Other income - 4,455 - Total Income 1,043,868 1,715,664 916,695 5.    Investment Adviser's fees and performance fee        Investment Adviser's fees 25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company. 100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement. This is because although the incentive fee is linked to an annual dividend target, it is ultimately based upon the achievement of capital growth. Performance fees Performance incentive agreement New Ordinary and former C share fund shares Basis of calculation The performance incentive fee payable is calculated as an amount equivalent to 20 per cent of the excess of a "Target rate" comprising: i)          an annual dividend target (indexed each year for RPI); and ii)          a requirement that any cumulative shortfalls below the annual dividend target must be made up in later years. Any excess is not carried forward, whether a fee is payable for that year or not. Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding the average "Base NAV" per share for the same year. Base NAV commenced at £1 per share when C fund shares were first issued in 2005, which is adjusted for subsequent shares issued and bought back. Any performance fee will be payable annually. It will be reduced to the proportion which the number of "Incentive Fee Shares" represent of the total number of shares in issue at any calculation date. Incentive Fees Shares are the only shares upon which an incentive fee is payable. They will be the number of C fund shares in issue just before the Merger of the two former share classes on 10 September 2010, (which subsequently became Ordinary shares) plus Ordinary shares issued under new fundraisings since the Merger. This total is then reduced by an estimated proportion of the shares bought back by the Company since the Merger, that are attributable to the Incentive Fee Shares. There has been no performance incentive fee accrued for the current period. Six months ended 30 September 2018 (unaudited) Year ended 31 March 2018 (audited) Six months ended 30 September 2017 (unaudited) Mobeus Equity Partners LLP £ £ £ Investment Adviser's fees 513,076 988,707 444,855 Total 513,076 988,707 444,855 6.    Taxation There is a tax charge for the period as the Company has taxable income in excess of deductible expenses. Six months ended 30 September 2018 (unaudited) Year ended 31 March 2018 (audited) Six months ended 30 September 2017 (unaudited) Revenue Capital Total Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ £ £ £ a) Analysis of tax change: UK Corporation tax on profits for the period 91,612 (73,113) 18,499 191,512 (140,891) 50,621 102,619 (63,392) 39,227 Total current tax charge 91,612 (73,113) 18,499 191,512 (140,891) 50,621 102,619 (63,392) 39,227 Corporation tax is based on a rate of 19% (2017: 19%) b) Profit on ordinary activities before tax 744,515 535,352 1,279,867 1,119,919 1,269,682 2,389,601 622,363 656,315 1,278,678 Profit on ordinary activities multiplied by small company rate of corporation tax in the UK of 19% (2017: 19%) 141,458 101,717 243,175 212,785 241,239 454,024 118,249 124,699 242,948 Effect of: UK dividends (50,338) - (50,338) (21,792) - (21,792) (15,630) - (15,630) Unrealised (gains)/losses not taxable/allowable - (91,636) (91,636) - 143,547 143,547 - 136,638 136,638 Realised gains not taxable - (83,194) (83,194) - (525,677) (525,677) - (324,729) (324,729) Unrelieved expenditure 492 - 492 310 - 310 - - - Under provision in prior period - - - 209 - 209 - - - Actual tax charge 91,612 (73,113) 18,499 191,512 (140,891) 50,621 102,619 (63,392) 39,227 7.    Basic and diluted earnings per share Six months ended 30 September 2018 (unaudited) Year ended 31 March 2018 (audited) Six months ended 30 September 2017 (unaudited) £ £ £ Total earnings after taxation: 1,261,368 2,338,980 1,239,451 Basic and diluted earnings per share (note a) 2.56p 5.68p 3.42p Net revenue from ordinary activities after taxation 652,903 928,407 519,744 Basic and diluted revenue earnings per share (note b) 1.32p 2.25p 1.43p Net unrealised capital gains/(losses) 482,295 (755,510) (719,145) Net realised capital gains 437,864 2,766,722 1,709,101 Capital expenses (net of taxation) (311,694) (600,639) (270,249) Total capital return 608,465 1,410,573 719,707 Basic and diluted capital earnings per share (note c) 1.24p 3.43p 1.99p Weighted average number of shares in issue in the period 49,304,159 41,190,198 36,279,026 Notes a)    Basic and diluted earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b)    Basic and diluted revenue earnings per share is revenue earnings after taxation divided by the weighted average number of shares in issue. c)     Basic and diluted capital earnings per share is total capital earnings divided by the weighted average number of shares in issue. 8.    Dividends paid Dividend Type For year ended 31 March Pence per share Date Paid Six months ended 30 September 2018 (unaudited) £ Year ended 31 March 2018 (audited) £ Six months ended 30 September 2017 (unaudited) £ Interim Capital 2018 7.00p 27/07/2017 - 2,497,067 2,497,067 Second Interim Income 2018 1.75p 22/01/2018 - 840,894 - Second Interim Capital 2018 7.25p 22/01/2018 - 3,483,699 - - 6,821,660 2,497,067 9.    Investments at fair value The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL).  All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines, as updated in December 2015.  This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. Where the terms of a disposal state that consideration may be received at some future date and, subject to the conditionality and materiality of the amount of deferred consideration, an estimate of the fair value, discounted for the time value of money may be recognised through the Income Statement. In other cases, the proceeds will only be recognised once the right to receive payment is established and there is no reasonable doubt that payment will be received. Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEV guidelines: All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a 'unit of account' basis, alongside the following factors: (i)         Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used. (ii)         In the absence of i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either: a)   a multiple basis. The shares may be valued by applying a suitable price-earnings ratio, revenue or gross profit multiple to that company's historic, current or forecast post-tax earnings before interest and amortisation of goodwill, revenue or gross profit (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability). or: b)   where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost is made, as appropriate. (iii)        Premiums, to the extent that they are considered capital in nature, and that will be received upon repayment of loan stock investments, are accrued at fair value when the Company receives the right to the premium and when considered recoverable. (iv)        Where a multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied. Capital gains and losses on investments, whether realised or unrealised, are dealt with in the profit and loss and revaluation reserves and movements in the period are shown in the Income Statement. All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement. A key judgement made in applying the above accounting policy relates to investments that are permanently impaired. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent to which an investment loss has become realised and treated as a realised loss in the Income Statement. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value. The methods of fair value measurement are classified in to hierarchy based on the reliability of the information used to determine the valuation. - Level 1 - Fair value is measured based on quoted prices in an active market. - Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices. - Level 3 - Fair value is measured using valuation techniques using inputs that are not based on observable market data. Unquoted Ordinary shares Level 3 Unquoted Preference shares Level 3 Unquoted Loan Stock Level 3             Total £ £ £ £ Cost at 31 March 2018 12,398,820 22,159 15,664,527 28,085,506 Unrealised gains at 31 March 2018 36,292 377,635 984,729 1,398,656 Permanent impairment at 31 March 2018 (1,704,184) (739) (894,127) (2,599,050) Valuation at 31 March 2018 10,730,928 399,055 15,755,129 26,885,112 Purchases at cost 1,320,620 - 381,507 1,702,127 Sale proceeds (593,069) (49,033) (941,161) (1,583,263) Increase in unrealised gains on investments 97,533 - 384,762 482,295 Realised gains/(losses) on investments 478,235 - (40,371) 437,864 Valuation at 30 September 2018 12,034,247 350,022 15,539,866 27,924,135 Book cost at 30 September 2018 13,209,299 22,138 14,924,200 28,155,637 Unrealised gains at 30 September 2018 547,623 328,623 1,529,453 2,405,699 Permanent impairment at 30 September 2018 (1,722,675) (739) (913,787) (2,637,201) Valuation at 30 September 2018 12,034,247 350,022 15,539,866 27,924,135 Net unrealised (losses)/gains at 1 April 2018 (1,667,892) 376,896 90,602 (1,200,394) Net movement in unrealised appreciation in the period 97,533 - 384,762 482,295 Permanent impairments in the period (18,491) - (19,660) (38,151) Realisation of previously unrealised losses/(gains) 413,798 (49,012) 159,962 524,748 (Losses)/gains on investments at 30 September 2018 (1,175,052) 327,884 615,666 (231,502) Reconciliation to Condensed Statement of Cash Flows Purchases above of £1,702,127 are less than that shown in the Condensed Statement of Cash Flows of £1,746,680 by £44,553. This amount was held in a solicitor's client account included as part of debtors at the period-end for the follow-on investment into MPB Group, which completed on 19 October 2018. Sales proceeds above of £1,583,263 are less than that shown in the Condensed Statement of Cash Flows of £1,636,573 by £53,310. This amount is deferred consideration arising from the realisation of Gro-Group in December 2017 which was held within debtors at the last year end. There has been no significant change in the risk analysis as disclosed in note 15 of the Financial Statements in the Company's Annual Report. The decrease in unrealised valuations of the loan stock investments above reflects the changes in the entitlement to loan premiums, and/or in the underlying enterprise value of the investee company. The decrease does not arise from assessments of credit or market risk upon these instruments. Level 3 unquoted equity and loan investments are valued in accordance with IPEV guidelines as follows: As at 30 September 2018 (unaudited) £ As at 31 March 2018 (audited) £ As at 30 September 2017 (unaudited) £ Investment methodology Cost (reviewed for impairment) 252,168 - - Recent investment price 5,541,508 5,464,477 5,418,783 Multiple of earnings, revenues or gross margin, as appropriate 22,038,859 21,248,704 20,577,971 Net asset value 91,600 171,931 171,931 27,924,135 26,885,112 26,168,685 10.   Current asset investments and cash at bank and in hand As at 30 September 2018 (unaudited) £ As at 31 March 2018 (audited) £ As at 30 September 2017 (unaudited) £ OEIC Money market funds 17,657,301 18,287,301 7,947,301 Current asset investments and cash equivalents per Condensed Statement of Cashflows 17,657,301 18,287,301 7,947,301 Cash at bank and in hand 3,202,319 2,272,473 2,632,660 11.   Net asset value per share As at 30 September 2018 (unaudited) As at 31 March 2018 (audited) As at 30 September 2017 (unaudited) Net assets £48,859,565 £47,598,197 £38,831,906 Number of shares in issue 49,304,159 49,304,159 37,609,938 Net asset value per share (pence) 99.10p 96.54p 103.25p 12.   Post Balance Sheet Events On 9 October 2018, a follow-on investment of £0.54 million was made into Pattern Analytics Limited (trading as Biosite). On 10 October 2018, a follow-on investment of £0.29 million was made into Proactive Group Holdings Inc. On 19 October 2018, a follow-on investment of £0.04 million was made into MPB Group Limited. On 31 October 2018, The Plastic Surgeon Holdings Limited repurchased A preference shares, realising £0.05 million of proceeds for the Company. 13.   Financial statements for the six months ended 30 September 2018 The financial information set out in this Half-Year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  The information for the year ended 31 March 2018 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies.  The auditors have reported on these financial statements and that report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. 14.   Half-Year Report Copies of this report are being sent to all shareholders.  Further copies are available free of charge from the Company's registered office, 30 Haymarket, London, SW1Y 4EX, or can be downloaded via the Company's website at www.mig2vct.co.uk. Contact details for further enquiries: Rob Brittain or Robert King at Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail on [e-mail]. DISCLAIMER Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

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