Interim Report

RNS Number : 3275H

Mobeus Income & Growth 2 VCT PLC

02 December 2020

 

MOBEUS INCOME & GROWTH 2 VCT PLC

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2020

Mobeus Income & Growth 2 VCT plc ("the Company") today announces its interim results for the six months ended 30 September 2020.

As at 30 September 2020:

Net assets: £58.22 million

Net asset value ("NAV") per share: 79.25 pence

Financial Highlights

Results for the six months ended 30 September 2020

· Net asset value ("NAV") total return¹ per share was 18.2% for the six months. 

· Share price total return¹ per share was 7.1%.

· Shareholders received an interim dividend of 7.00 pence per share in respect of the year ending 31 March 2021, which was paid on 19 June 2020.

· The Company made one new investment and four follow-on investments totalling £2.45 million.

· The Company realised investments for a total of £5.18 million, a gain of £2.09 million for the six months.

1   Alternative Performance measure (APM). See Glossary of Terms on page 29 of the Interim Report.

Performance summary

The table below shows the recent past performance of the Company's current share class, first raised in 2005/06 at an original subscription price of 100 pence per share before the benefit of income tax relief. Performance data for all fundraising rounds are shown in tables on pages 30 and 31 of the Interim Report.

	Reporting Date    Net a ssets (£m) As at		Net Asset value NAV) per share (p)	Share price 1 (p)		Cumulative dividends paidper share (p)		Cumulative total return persharesincelaunch 2 (Share (NAV    price basis)   basis) (p)   (p)			Dividends paidand proposed persharein respectof eachyear (p)
30 September 2020		58.22	79.25		68.50		116.00		195.25	184.50	7.00
31 March 2020		43.57	72.99		70.50		109.00		181.99	179.50	26.00
30 September 2019		43.41	89.85		85.50		98.00		187.85	183.50	15.00

1    Source: Panmure Gordon & Co (mid-market price).

2   C umulativ e   total   r eturn per share comprises either the NAV per share (NAV basis) or the mid-market price per share (share price   b asis), plus cumulative dividends paid since launch of the current share class.

 

Chairman's Statement

I am pleased to present the Company's Interim Report for the six months ended 30 September 2020.

Overview

This half-year has been very positive for Shareholders with the Company's NAV total return per share increasing by 18.2%, recovering all of the value lost in the preceding quarter due to the significant and exceptional challenges caused by the outbreak of COVID-19.  Your Company's portfolio of investments has traded above initial expectations during this challenging period and there have been two successful exits. Furthermore, the Company's strong financial position has enabled it to make one new investment and to provide additional funding to four of our existing growth investments, as detailed below. The completion of our recent fundraise further strengthens our balance sheet and increases the funds available to take advantage of good investment opportunities as they arise.

Undoubtedly this year will be dominated by the impact of COVID-19 and the UK Government's lockdown measures. This caused an immediate significant decline in consumer and business confidence with the uncertainty reflected in volatile public markets. The reductions in portfolio values reported at the end of March 2020 were based on our best knowledge at that uncertain time and reflected in the NAV of the Company. The reduced valuations were mainly in response to the Investment Adviser's assessment of COVID-19's potential impact on the market in general and trading activity of specific investee companies.

As the summer progressed, greater clarity emerged of the impact of the crisis upon the portfolio, with investee companies experiencing a less volatile and uncertain trading environment than initially assumed at the March year-end. The more favourable and robust trading conditions have been reflected in the portfolio's strong valuation recovery in the six months between 31 March and 30 September 2020. Overall, your Board is very pleased that most portfolio companies adapted quickly and effectively to manage the down-side risks to their businesses and in some cases have been able to capitalise on opportunities presented to accelerate their growth.

COVID-19 imposed considerable restrictions on the ability to process transactions efficiently. However, the Investment Adviser introduced processes and protocols to enable it to continue to operate effectively. As a result in the period under review the Company made two profitable disposals.  Following the period end, one further realisation occurred, follow-on investments to support further growth in four investee companies and made one new investment. Further details of the portfolio valuation and investment movements are provided in the Investment Portfolio section below and in the Investment Adviser's Review.

Performance

The Company's NAV total return per share was 18.2% in the six months ended 30 September 2020 (2019: 5.3%). This represents a material recovery in NAV per share compared to that announced at the beginning of the pandemic and at the Company's year-end as at 31 March 2020. This is due primarily to substantial net gains in portfolio valuations and significant realised gains on two disposals in the period. The share price total return for the period of 7.1% lags the NAV total return of 18.2% due principally to the timing of NAV announcements.

The net asset value increased by £14.65 million to £58.22 million at 30 September 2020 resulting in the increase in Net Asset Value ("NAV") per share as shown below:

	2020 (pence per share)	2019 (pence per share)
Net realised and unrealised gains on the investment portfolio	12.84	5.08
Income from the investment portfolio and liquid assets	1.31	1.58
Share buybacks and adjustments	0.13	0.11
Gross return	14.28	6.77
Less:  Investment Adviser's fees and other expenses	(1.02)	(1.52)
Net return	13.26	5.25
NAV total return per share	18.2%	5.3%

The net return of 13.26 pence per share above represents a return of 18.2% upon the opening NAV per share at the start of the financial year of 72.99 pence.  Deducting the payment of the dividend of 7.00 pence from this net return leaves 6.26 pence per share, being the net increase in NAV per share from the opening 72.99 pence per share to the period-end NAV per share of 79.25 pence.

The Board believes that the Company's performance has demonstrated the resilience of its diversified portfolio in what has been a most challenging and volatile six months. It believes that the valuations at 30 September reflect the trading performance of  investee companies following their initiatives in response to the pandemic and government lockdown restrictions and their potential to continue making progress, whilst mindful to be cautious in view of the continued uncertainty in respect of the pandemic's duration.

Investment portfolio

In the context of a very challenging business environment, the portfolio has performed very strongly during the six month period with its value increasing by £9.44 million (2019: £2.45 million), or

42.9% (2019: 8.2%) on a like-for-like basis. This comprises an increase in net unrealised values of £7.35 million and £2.09 million gains realised primarily from the two investment disposals in the six-month period. A total of £5.18 million proceeds was received from realisations or other capital repayments. At 30 September 2020 the portfolio was valued at £28.70 million (31 March 2020: £21.99 million).  During this period, the Company also invested a total of £2.45 million (2019: £1.82 million) into one new (2019: two) and four existing (2019: one) investments.

Clearly, COVID-19's impact and the recovery therefrom, have been the dominant influences on the portfolio and its valuations over the period under review. During this unprecedented time, the Board has liaised closely with the Investment Adviser, to ensure that all practical steps were taken, where

possible, to enable each portfolio company to trade through the crisis and return to value growth. All investee companies were alerted to, and some utilised, the available government support packages. The Company has also provided loan interest payment holidays to some portfolio companies which generated vital cash headroom.

The sudden imposition of lockdown on UK business created immediate volatility and uncertainty. However, once the immediate impact subsided, its continuing influence on business generally and portfolio companies specifically was able to be far better understood. It is pleasing that the impact

was less negative than initially feared and combined with better than expected trading levels achieved by some companies, has enabled many valuations to achieve a substantial recovery and in some cases higher valuations. The latter portfolio companies have benefited from structural changes in activity, behaviour and consumer purchasing habits and consequently are trading at or above

their pre COVID-19 levels. We also note that the portfolio's relatively limited exposure to the travel and hospitality sectors, which have been worst hit by the strict lockdown restrictions, has undoubtedly helped as has the fact that the majority of our retail sector investments have online sales and distribution business models.

Although quoted market multiples have also rallied since March, we Note that the principal driver of valuation increases in the half-year is the strong earnings growth at many investee companies.

However, a minority of companies have clearly struggled but, as they are in the minority, have only had a modest impact on overall shareholder returns.

The new investment in the period was:

●● Andersen EV - An electric vehicle charge point business   £0.22 million

and the existing investments were:

●● MyTutor- A digital marketplace for school tutoring 0.54 million

●● Rotageek - A workforce management software provider  £0.37 million

●● Buster and Punch - A lighting and interiors brand  £0.92 million

●● Preservica - A seller of proprietary digital archiving software  £0.40 million

During the period the two realisations were:

●● Access IS - £4.94 million cash proceeds received over the life of the investment equating to a 2.5x

multiple of cost and an IRR of 23.4%;

and

●● Blaze - £3.60 million cash proceeds received over the life of the investment: a 2.6x multiple of cost

and an IRR of 13.2%.

After the period-end, the sale of Vectair realised cash receipts of £1.25 million which over the nearly 15 year life of the investment contributed to a multiple on cost of 8.3x and an IRR of 22.2%. In isolation, this would result in an uplift of 0.13 pence per share over the 30 September 2020 NAV of 79.25 pence per share. Further proceeds may be receivable in due course.

Further details of the investment activity and the performance of the portfolio are contained in the Investment Adviser's Report on pages 5 to 9.

Dividends

The Board continues to monitor the Company's financial performance and cash flow closely, whilst also taking account of qualifying ratio projections to ensure compliance with the regulatory requirements, when determining dividend payments. 

An interim dividend of 7.00 pence per share was paid to Shareholders on 19 June 2020 in respect of the current financial year. The Board will consider the payment of further dividends later in the financial year, depending upon performance, investment activity and the need to meet regulatory ratios.

Fundraising

On 2 April 2020, the Company completed its second and final allotment of shares under the  Company's 2019/20 Offer for Subscription, allotting 13,928,447 ordinary shares at an effective offer price of 77.26 pence per share. This generated further net funds of £10.26 million for the Company, placing it in a strong position to support the portfolio as appropriate and undertake new investment in accordance with its measured investment approach.

Share buy-backs

During the six months under review, the Company bought back and cancelled 148,299 of its own shares, representing 0.3% (2019: 1.3%) of the shares in issue at the beginning of the period, at a total

cost of £0.10 million (2019: £0.53 million) inclusive of expenses. It is the Company's policy to cancel all share buy-backs. The Board regularly reviews its buyback policy and currently seeks to maintain the discount at which the Company's shares trade at no more than 5% below the latest published NAV.

Liquidity

Following the Company's successful fundraising in 2019/2020 it had cash or cash equivalents of £29.67 million, representing 51.0% of net assets as at 30 September 2020.

At the date of this report pro forma cash and liquid assets amount to £31.04 million or 53.2% of net assets, following post period-end disposals. The Board considers the Company to be in a strong cash position.

Shareholder communications

May I remind you that the Company has its own website which contains useful information for Shareholders. The Investment Adviser held the annual Shareholder event on 4 February 2020 and is planning to hold a virtual event later in 2021. Details will be notified to Shareholders once finalised and will be shown on the Company's website: www.mig2vct.co.uk.

Outlook

The impact of COVID-19 was and will continue to have immediate and wide reaching consequences for society, economies and business for the foreseeable future. Nevertheless, your Board considers that your Company is well positioned to cope with most likely scenarios in so far as they can presently

be foreseen. The successful realisations and earlier fundraising have given the Company a strong balance sheet and liquidity with which to support its existing portfolio and also to capitalise on opportunities which may arise for new investment. The portfolio still retains a foundation of mature

investments that provide an income return, but also an increasing proportion of dynamic younger, growth capital investments and we are encouraged that we have already achieved two successful realisations from this part of the portfolio.

The Board remains cautious and vigilant as the degree and frequency of future UK Covid-19 lockdowns and other restrictions is unclear. Furthermore, as Brexit negotiations continue unresolved they cause global market economies to be nervous and volatile. UK and European businesses in particular will therefore continue to operate in an uncertain trading environment for the foreseeable future. However, our investee companies have prepared as well as possible for post BREXIT scenarios and their relatively small scale will enable them to react and adapt quickly once the new trading environment becomes clearer. The Investment Adviser is seeing a good pipeline of interesting investment opportunities and overall the Board believes that, despite the challenging environment, the Company has many reasons to be cautiously optimistic.

I would like to take this opportunity to thank all Shareholders for their continued support and also hope you and your families remain safe and healthy.

Ian Blackburn

Chairman

2 December 2020

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 Review

COVID-19 Pandemic

In March, the UK Government introduced lockdown and social distancing measures in response to the COVID-19 pandemic. These measures had an immediate adverse impact on UK businesses, with many companies experiencing a significant reduction in consumer and business demand, restrictions on employees' working practices and disruption to their supply chains. Global markets fell significantly

as a result. Following the low point in March, there has been a significant recovery in portfolio trading levels as well as global markets, but the latter remain volatile. There are still uncertainties ahead, particularly the second wave of the COVID-19 pandemic and BREXIT but countered now by the prospect of effective vaccines. The portfolio is in a robust shape, following the experience gained and the opportunities taken over the period under review, to withstand and respond to these as yet uncertain developments in future.

Throughout the pandemic, the Investment Adviser reviewed and evaluated the impact of COVID-19 on each sector exposure and on the value of the portfolio, and appropriate action was taken. Mobeus continues to review the opportunities for new and follow-on investments and is in a position to

capitalise as and when needed via the Company's relatively high liquidity levels. Over the most recent months, investment in new opportunities has been relatively low but a healthy pipeline of suitable opportunities is currently being evaluated.

The portfolio follow-on investments in the period indicate that there are opportunities to back proven portfolio companies achieving strong relative performance. The realisation activity outlook continues to be positive with approaches received from trade and financial investors to several investee companies.

Overall, the portfolio is robust although the Investment Adviser remains alert to the risks associated with a continuation of the impact of COVID-19 despite the improved prospects from the recent announcements in respect of successful vaccine trials. The Investment Adviser remains optimistic on the basis of recent evidence of trading performance and potential growth within the portfolio.

Portfolio review

At the Company's year-end in March 2020, and at the height of the pandemic uncertainty, many  valuation reductions were applied to the portfolio which reflected the initial drop in revenues and

included COVID-19 specific adjustments given the uncertain outlook. In the half-year, the portfolio experienced a significant bounce-back and the value of the portfolio increased by £9.44 million,

comprising an increase of £7.35 million in the unrealised portfolio and gains of £2.09 million through realisations.

	2020 £m	2019 £m
Portfolio value at 31 March	21.99	30.04
Newandfurther investments	2.45	1.82
Disposalproceeds	(5.18)	(5.31)
Netrealisedgains in the period	2.09	0.96
Valuationmovements of unrealised investments	7.35	1.49
Portfoliovalueat30September	28.70	29.00

It is important to note that the usual approach to portfolio valuation by the Investment Adviser continued to be applied throughout this uncertain period. The half-year recovery is attributable to trading improvement achieved by many portfolio companies, against a backdrop of improved market sentiment. The removal of COVID-19 related adjustments that were put in place during March, and improved cash generation are also contributing factors. Some portfolio companies, often with online business models, have traded strongly throughout this half-year. Whilst it is still too early to be certain, there is evidence that a structural change to consumer purchasing habits has occurred, which should underpin strong performance in future.

The portfolio's activity for the half-year to 30 September 2020 is summarised as follows:

InvestmentPortfolioCapitalMovement	Six months ended 30 Sep 2020 £m	Six months ended 30 Sep 2019 £m
Increaseinthevalueofunrealisedinvestments	7.91	3.15
Decreaseinthevalueofunrealisedinvestments	(0.56)	(1.66)
Net  increaseinthevalueofunrealisedinvestments	7.35	1.49
Realisedgains	2.09	0.96
Realisedlosses	-	-
Netrealisedgainsintheperiod	2.09	0.96
Netinvestmentportfolio gains	9.44	2.45

Unrealised movements in the value of the portfolio

The portfolio's net valuation increase of £7.35 million principally arises from the following portfolio valuation movements.

Total value increases of £7.91 million principally comprise:

Virgin Wines £1.60 million - Like many online retailers, Virgin has fared extremely well during the COVID-19 lockdown periods with little or no operational impact. It achieved record earnings for its year-end to 30 June and current trading suggests that the recent strong performance should be

sustainable.

MPB Group £0.97 million - After experiencing an initial drop in revenues at the start of lockdown, there has been a material recovery. Its hobbyist and amateur photographer market has proved very resilient and demand for its services has continued to grow in excess of prior year levels.

Wetsuit Outlet £0.93 million - Although, initially written down at the previous year-end, the company has seen strong trading throughout the COVID-19 period as a result of its online presence and rationalisation of channels to market by the brand owners. It has continued to improve its sales and margins, being higher than forecast and the prior year, whilst at the same time reducing its cost

base.

Active Navigation £0.68 million - This data security and management software company is  demonstrating it has an increasingly valuable recurring revenue stream.

Parsley Box £0.63 million - After a surge in demand during the first lockdown period, its sales remain very strong with a good percentage of new customers translating into repeat customers.

A number of the companies within the portfolio have online retail (D2C) business models and time will tell the extent to which this increased demand will continue in the medium-term. The Investment Adviser's valuation is based on its assessment of such sustainability.

Total value reductions of £(0.56) million principally comprise:

Tapas Revolution £(0.28) million - Forced to close during both lockdowns, it achieved a degree of  recovery when some sites reopened whilst respecting COVID-19 practices. Whilst confident in the medium to long term business model it may take time for value to recover fully.

Rotageek £(0.19) million - Although the business transitioned to remote working very effectively and has strong recurring revenues, its focus on the retail sector means its customers will be under pressure for the foreseeable future.  Opportunities in new markets will be available as the sector recovers.

Kudos Innovations £(0.08) million - Has been impacted as academic institutions are experiencing significant disruption as they deal with COVID-19 issues around student welfare and fees. However, it

has begun to focus on new opportunities to supplement its recurring revenues.

Shareholders should note that some of the most significantly impacted companies have already had valuation reductions applied at the previous year-end. 

Realised gains from sales of Investments

In the period Access IS and Blaze Signs were sold, receiving a total of £5.00 million in cash proceeds and generating £2.03 million of realised gains in the half-year. Further details are on page 8 of the Interim Report.

Investment portfolio yield

In the period under review, the Company received the following amounts in interest and dividend income:

	Six months ended 30 Sep 2020 £m	Six months ended 30 Sep 2019 £m
Interestreceivable	0.45	0.68
Dividendsreceivable	0.49	0.01
Totalportfolioincomeintheperiod1	0.94	0.69
Portfoliovalueat30 September	28.70	29.00
PortfolioIncomeYield2(Incomeasa%of Portfoliovalueat30September)	3.3%	2.4%

1 Total portfolio income in the period is generated solely from investee companies within the portfolio. See Note 4 of the unaudited condensed financial statements for details of all income receivable by the Company.

2 Total portfolio income in the period and Portfolio Income Yield are alternative performance measures ("APM").

New investments during the period

A new investment of £0.22 million was made during the six-month period, as detailed below:

Company	Business	Date of Investment	Amount of new investment (£m)
AndersenEV	Electric vehicle(EV)chargers	June2020	0.22
MullerEVLimited(tradingasAndersenEV)isadesign-ledmanufacturerofpremiumelectricvehicle(EV)chargers.Incorporatedin2016,thisbusinesshassecuredhighprofilepartnershipswithPorscheandJaguarLandRover,establishingan attractivenichepositioninchargingpointsforthehighendEVmarket.  TheCompany'sfundswillbeusedtoscalethebusinessthroughinvestmentinfurtherproductsandsoftware,salesandmarketingandelectricvehiclemanufacturerpartnerships.Anderseniswellpositionedinanascentsectorexperiencingsignificantgrowthandhasincreasedsalesbyover 350%foritsmostrecentfinancialyear.

Further investments in existing portfolio companies during the period

The Company made further investments totalling £2.23 million into four existing portfolio companies during the six-month period under review, as detailed below:

Company	Business	Date of Investment	Amount of new investment (£m)
Rotageek	Workforce management software	May2020	0.37
Rotageek is a provider of cloud-based enterprise software to help larger retail, leisure and healthcare organisations predict and meet demand to schedule staff effectively. This investment, alongside funds from a new VCT investor and existing shareholders, will be used to capitalise on opportunities that will emerge as the retail sector recovers from lockdown restrictions. Rotageek will also be expanding its presence in healthcare to help address the workforce management issues of a sector that is chronically overburdened at present. For the year ended 31 December 2019, revenues grew over 45% on the prior year.
MyTutor	Digital marketplace connecting school pupils seeking one-to- one online tutoring	May2020	0.54
MyTutorweb (trading as 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 further investment, alongside other existing shareholders, seeks to build and reinforce its position as a UK category leader in the online education market as well as to begin to develop a broader, personalised learning product offering. MyTutor has performed strongly over the last 18 months with 70% growth in 2019 and in excess of 100% in the last six months. The company has been chosen as Tutoring Partner for the National Tuition Programme where they will directly support 30,000 students in catching up on lost learning as a result of the COVID-19 pandemic.
Buster + Punch	Lighting and interiors brand	September 2020	0.92
Buster and Punch is a well-established, premium branded, fast growing business which designs and manufactures a complete range of high-quality functional fittings (lighting, electrical and hardware and other accessories) for the home. The VCT first invested in 2017 and since then, the business delivered consistent high growth across its ranges, with revenues growing in excess of 65%, and reaching nearly £10 million in 2020. Buster and Punch's products are now sold in 99 countries via both its highly invested ecommerce platform and direct services to consumers, trade and retailers across the world. Buster and Punch also operates flagship showrooms in London, Stockholm and Los Angeles. The new funding will be used to drive the global business plans of this fast-growing luxury interior fashion label with further international expansion into the US and Asia Pacific markets.
Preservica	Seller of proprietary digital archiving software	September 2020	0.40
Preservica is a SaaS software business with blue chip customers providing strong recurring revenues and has developed market leading software for the long-term preservation of digital records, ensuring that digital content can remain accessible, irrespective of future changes in technology. This latest investment is to provide additional growth capital to finance the further development of the business. The year to 31 March 2020 saw record bookings growth of 68.0% and many key customer wins.

Realisations in the period

The Company realised its investments in Access IS and Blaze Signs during the period, generating proceeds of £5.00 million, as detailed below:

Company	Business	Period of investment	Totalcashproceedsoverthelifeofthe investment/ Multipleovercost
AccessIS	Datacaptureandscanninghardware	October2015to August 2020	£4.94million 2.5 x cost
The Company sold its investment in Tovey Management Limited (trading as Access IS) to ASSA ABLOY AB for cash proceeds of £4.23 million (realised gain in period: £1.40 million). Since investment in 2015, the investment has generated cash proceeds of £4.94 million compared to an original investment cost of £1.95 million, which is a multiple on cost of 2.5x and an IRR of 23.4%.
Blaze Signs	Manufacturer and installer of signs	April 2006 to September 2020	£3.60million 2.6 xcost
The Company sold its investment in Blaze Signs Holdings Limited in a secondary buy out backed by Elaghmore Advisor LLP and has received cash proceeds (including dividends) of £1.29 million (realised gain in period: £0.63 million). Over the 14 years this investment was held, cash proceeds of £3.60 million have been received compared to an original cost of £1.40 million, which is a multiple of cost of 2.6x and an IRR of 13.2%.

Realisations after the period-end

Company	Business	Period of investment	Totalcashproceedsoverthelifeofthe investment/ Multipleovercost
Vectair	Designer and distributor of washroom products	January 2006 to November 2020	£2.02million 8.3 x cost
The Company sold its investment in Vectair Holdings Limited to a consortium of US investment funds, including Oxbow Industries and Arcspring, and has received cash proceeds (including dividends) of £1.25 million. Over the nearly 15 years this investment was held, cash proceeds of £2.02 million have been received compared to original cost of £0.24 million, which is a multiple of cost of 8.3x and an IRR of 22.2%. Further proceeds may be receivable in due course.

After the period-end, the Company received a loan repayment of £0.13 million (including £0.04 million premium) from Vian Marketing Limited (trading as Red Paddle).

Loan stock repayments and other receipts

Loan stock repayments totalling £0.18 million were received during the period, from Buster & Punch and BookingTek. 

Net realised gains for the half-year on the two disposals above were £2.03 million, increased by £0.05 million in respect of loan proceeds received upon a loan that had previously been valued at nil on the grounds of prudence and £0.01 million from proceeds received in respect of an investment realised in the previous year. This equals the total realised gain for the half-year of £2.09 million.

Mobeus Equity Partners LLP

Investment Adviser

2 December 2020

Investment Portfolio Summary

At 30 September 2020

Qualifying investments	Investment/sector	Cost at 30 September 2020	Valuation at 31 March 2020	Additions	Disposals at opening valuation	Change in valuation for the period	Valuation at 30 September 2020
								% of net assets
		£	£	£	£	£	£
Unquoted  investments
VirginWinesHoldingCompany	November2013	1,284,333	1,426,084	-	-	1,595,133	3,021,217	5.2%
Limited	Generalretailers
Onlinewineretailer
MPBGroupLimited	June2016	1,176,231	1,732,661	-	-	972,405	2,705,066	4.6%
Onlinemarketplaceforphotographic	Generalretailers
andvideoequipment
PreservicaLimited	December2015	1,538,226	1,481,372	404,762	-	349,645	2,235,779	3.8%
Sellerofproprietarydigitalarchiving	Softwareand
software	computerservices
DataDiscoverySolutionsLimited	November2019	943,000	1,210,232	-	-	675,768	1,886,000	3.2%
(tradingasActiveNavigation)	Softwareand
Providerofglobalmarketleading	computerservices
fileanalysissoftwareforinformation
governance,securityandcompliance
EOTHLimited(tradingasRaband	October2011	817,185	1,404,025	-	-	359,940	1,763,965	3.0%
LoweAlpine)	Generalretailers
Brandedoutdoorequipmentand
clothing
BusterandPunchHoldingsLimited	March2017	1,231,510	587,517	924,557	(129,438)	266,524	1,649,160	2.8%
Industrialinspiredlightingandinteriors	Generalretailers
retailer
MyTutorwebLimited(tradingas	May2017	1,515,891	979,834	536,057	-	117,182	1,633,073	2.8%
MyTutor)	Supportservices
Digitalmarketplaceconnectingschool
pupilsseekingone-to-oneonline
tutoring
ProactiveGroupHoldingsInc	January2018	635,346	1,171,946	-	-	426,572	1,598,518	2.7%
Providerofmediaservicesandinvestor	Generalfinancial
conferencesforcompaniesprimarily
listedonsecondarypublicmarkets
Bella&DukeLimited	February2020	1,451,101	1,451,101	-	-	-	1,451,101	2.5%
Apremiumfrozenrawdogfood	Generalretailers
provider
Parsley BoxLimited	May2019	551,400	656,770	-	-	634,557	1,291,327	2.2%
Supplierofhomedeliveredambient	Generalretailers
readymealsfortheelderly
VectairHoldingsLimited	January2006	60,293	927,913	-	-	224,162	1,152,075	2.0%
Designeranddistributorofwashroom	Supportservices
products
VianMarketingLimited(tradingas	July2015	717,038	738,934	-	-	378,623	1,117,557	1.9%
RedPaddleCo)	Leisuregoods
Design,manufactureandsaleofstand-
uppaddleboardsandwindsurfingsails
ManufacturingServicesInvestment	July 2017	1,412,992	39,398	-	-	926,929	966,327	1.7%
Limited(tradingasWetsuitOutlet)	Generalretailers
Onlineretailerinthewatersports
market
ArkkConsultingLimited(tradingas	May2019	908,995	759,233	-	-	44,301	803,534	1.4%
ArkkSolutions)	Softwareand
Providerofservicesandsoftware	computerservices
toenableorganisationstoremain
compliantwithregulatoryreporting
requirements
BleachLondonHoldingsLimited	December2019	445,332	561,361	-	-	199,372	760,733	1.3%
Haircolourantsbrand	Generalretailers
RotaGeekLimited	August2018	733,200	511,611	366,600	-	(192,034)	686,177	1.2%
Providerofcloudbasedenterprise	Supportservices
softwarethatusesdata-driven
technologiestohelpretailandleisure
organisationsschedulestaff

¹ As at 30 September 2020, the Company held more than 80% of its total investments in qualifying holdings, and therefore complied with the VCT Qualifying Investment test. For the purposes of the VCT qualifying test, the Company is permitted to disregard disposals of investments for twelve months from the date of disposal. It also has up to three years to bring in new funds raised, before these need to be included in the qualifying investment test.

² Disclosed as Current asset investments and Cash at bank within Current assets in the Balance Sheet.

	Qualifying investments		Investment/ sector		Cost at 30 September 2020	Valuation at 31 March 2020	Additions				Disposal  at opening valuation	Change in valuation for the period	Valuation at 30 September 2020
															% of net assets
					£	£	£				£	£	£
	MasterRemoversGroup2019Limited(tradingasAnthonyWardThomas,BishopsgateandAussieMan&Van)Aspecialistlogistics,storageandremovalsbusiness		December2014 Supportservices		251,763	126,469	-				-	510,706	637,175		1.1%
	TharsternGroupLimited Softwarebasedmanagementinformationsystemstotheprintsector		July2014 Softwareandcomputerservices		789,815	607,310	-				-	10,272	617,582		1.1%
	IPVLimited Providerofmediaassetsoftware		November2019 Softwareandcomputerservices		535,459	535,459	-				-	-	535,459		0.9%
	MediaBusinessInsightHoldingsLimited Apublishingandeventsbusinessfocusedonthecreativeproductionindustries		January2015 Media		1,447,188	44,235	-				-	367,400	411,635		0.7%
	BournBioscience Limited ManagementofIn-vitrofertilisationclinics		January2014 HealthcareEquipment& Services		757,101	249,843	-				-	9,734	259,577		0.4%
	MullerEVLimited(tradingas AndersenEV) Providerofpremiumelectricvehicle (EV)chargers		June2020 Electronic & electrical equipment		218,000	-	218,000				-	24,395	242,395		0.4%
	KudosInnovationsLimitedOnlineplatformthatprovidesandpromotesacademicresearchdissemination		November2018 Support services		277,950	277,950					-	(84,206)	193,744		0.3%
	CGICreativeGraphicsInternationalLimited Vinylgraphicstoglobalautomotive,recreationvehicleandaerospacemarkets		June2014 Generalindustrials		999,568	184,631	-				-	(11,044)	173,587		0.3%
	SpanishRestaurantGroupLimited(formerlyIbericosEtc.Limited)(tradingasTapasRevolution) Spanishrestaurantchain		January2017 Travel & leisure		812,248	384,823	-				-	(276,523)	108,300		0.2%
	RDLCorporation Limited Recruitmentconsultantsforthepharmaceutical,businessintelligenceandITindustries		October2010 Supportservices		1,000,000	-	-				-	95,652	95,652		0.2%
	JabliteHoldingsLimited(Inmembers'voluntaryliquidation) Manufacturerofexpandedpolystyreneproducts		April2015 Constructionand materials		281,398	-	-				-	37,110	37,110		0.1%
	VeritekGlobalHoldingsLimited Maintenanceofimagingequipment		July2013 Support services		967,780	-	-				-	-	-		0.0%
	RacoonInternationalGroupLimitedSupplierofhairextensions,haircareproductsandtraining		December2006 Personalgoods		906,935	-	-				-	-	-		0.0%
	BookingTekLimited Softwareforhotelgroups		October2016 Softwareandcomputer services		450,283	-	-				-	-	-		0.0%
	Oakheath Limited (formerly SuperCarersLimited)(inmembers'voluntaryliquidation) Onlineplatformthatconnectspeopleseekinghomecarefromexperienced independentcarers		March2018 Supportservices		384,720	-	-				-	-	-		0.0%
Total qualifying investments				25,502,281		18,050,712		2,449,976		(129,438)		7,662,575		28,033,825		48.0%1

1 As at 30 September 2020, the Company held more than 80% of its total investments in qualifying holdings, and therefore complied with the VCT Qualifying Investment test. For the purposes of the VCT qualifying test, the Company is permitted to disregard disposals of investments for twelve months from the date of disposal. It also has up to three years before new funds raised need to be included in the qualifying investment test.

2 Disclosed as Current asset investments and Cash at bank within Current assets in the Balance Sheet.

	Date of first investment   Sector	Total Book cost at 30 September 2020	Valuation at 31 March 2020	Additions at cost		Disposals at valuation	Change in valuation for period	Valuation at 30 September 2020	% of net assets
Non-qualifying investments
Media Business Insight Limited	January 2015	561,884	672,742	-		-	(313,348)	359,394	0.6%
A publishing and events business focused on the creative production industries	Media
Manufacturing Services Investment Limited (trading as Wetsuit Outlet)	July 2017	304,000	304,000	-		-	-	304,000	0.6%
Online retailer in the water sports market	General retailers
Prefcap Limited (formerly 365 Agile Group plc)	March 2001	254,586	-	-		-	-	-	0.0%
Development of energy saving devices for domestic use	Electronic & electrical equipment
Racoon International Group Limited	December 2006	139,050	-	-		-	-	-	0.0%
Supplier of hair extensions, hair care products and training	Personal goods
Total non-qualifying investments		1,259,520	976,742	-		-	(313,348)	663,394	1.2%
Realised in period
Tovey Management Limited (trading as Access IS)	October 2015	-	2,808,598	-		(2,808,598)	-	-	0.0%
Provider of data capture and scanning hardware	Electronic & electrical equipment
Blaze Signs Holdings Limited	April 2006	-	157,657	-		(157,657)	-	-	0.0%
Manufacturing and installation of signs	Support services
Total investment portfolio per Note 9		26,761,801	21,993,709	2,449,976		(3,095,693)	7,349,227	28,697,219	49.2%
Cash and current asset investments2			21,806,051	-		-		29,671,824	51.0%
Total investments including cash and current asset investments		26,761,801	43,799,760	2,449,976		(3,095,693)	7,349,227	58,369,043	100.2%
Current assets			150,699					222,622	0.4%
Current liabilities			(385,165)					(370,121)	(0.6)%
Net assets at the period-end			43,565,294					58,221,544	100.0%
Growth focused portfolio			15,164,539					22,828,967	79.6%
MBO focused portfolio			6,829,170					5,868,252	20.4%
Total Investment Portfolio			21,993,709					28,697,219	100.0%
2 Disclosed as Current asset investments and Cash at bank within Current assets in the Balance Sheet.

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 Nomination and Remuneration Committee), 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 Interim 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 303 ("the Annual Report") other than the risks arising from the COVID-19 pandemic, referred to in the Chairman's Statement and the Investment Adviser's Report, the impact of which has been reflected in the valuation of the Company's investment portfolio.

The principal risks faced by the Company are:

· Political and economic;

· Investment and strategic;

· Loss of approval as a VCT;

· VCT regulatory changes;

· Regulatory

· Financial and operating;

· Market;

· Asset liquidity;

· Market liquidity; and

· Cyber and data security

A detailed explanation of the principal risks can be found in the Annual Report on pages 29 to 30, and in Note 15 on pages 63 to 73 of the Annual Report and Financial Statements for the year ended 31 March 2020, copies of which are available on the Company'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 Interim 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 an adequate cash position.  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 Note 15 on pages 66 to 73 of the Annual Report and Financial Statements for the year ended 31 March 2020. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the Interim 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

2 December 2020

Unaudited Condensed Income Statement for the six months ended 30 September 2020
		Six months ended 30 September 2020
				(unaudited)
	Notes	Revenue	Capital	Total
		£	£	£
Net investment portfolio gains/(losses)	9	-	9,436,434	9,436,434
Income	4	964,240	-	964,240
Investment Adviser's fees	5	(143,161)	(429,481)	(572,642)
Other expenses		(178,660)	-	(178,660)
Profit/(loss) on ordinary activities before taxation		642,419	9,006,953	9,649,372
Tax on profit/(loss) on ordinary activities	6	(29,393)	29,393	-
Profit/(loss) and total comprehensive income		613,026	9,036,346	9,649,372
Basic and diluted earnings per share
Ordinary Shares	7	0.83p	12.31p	13.14p
		Year ended 31 March 2020
				(audited)
	Notes	Revenue	Capital	Total
		£	£	£
Net investment portfolio gains/(losses)	9	-	( 1,860,406)	( 1,860,406)
Income	4	2,454,166	-	2,454,166
Investment Adviser's fees	5	( 275,715)	( 827,145)	( 1,102,860)
Other expenses		( 383,905)	-	( 383,905)
Profit/(loss) on ordinary activities before taxation		1,794,546	( 2,687,551)	( 893,005)
Tax on profit/(loss) on ordinary activities	6	( 292,105)	157,158	( 134,947)
Profit/(loss) and total comprehensive income		1,502,441	( 2,530,393)	( 1,027,952)
Basic and diluted earnings per share
Ordinary Shares	7	2.94p	(4.95)p	(2.01)p
		Six months ended 30 September 2019
				(unaudited)
	Notes	Revenue	Capital	Total
		£	£	£
Net investment portfolio gains/(losses)		-	2,455,341	2,455,341
Income	4	763,195	-	763,195
Investment Adviser's fees	5	( 139,243)	( 417,731)	( 556,974)
Other expenses		( 172,700)	-	( 172,700)
Profit/(loss) on ordinary activities before taxation		451,252	2,037,610	2,488,862
Tax on profit/(loss) on ordinary activities	6	( 83,669)	79,369	( 4,300)
Profit/(loss) and total comprehensive income		367,583	2,116,979	2,484,562
Basic and diluted earnings per share
Ordinary Shares	7	0.75p	4.35p	5.10p

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the net investment gains and net 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 October 2019) 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 2020
			30 September 2020		31 March 2020		30 September 2019
			(unaudited)		(audited)		(unaudited)
	Notes		£		£		£
Fixed assets
Investments at fair value	9		28,697,219		21,993,709		29,005,544
Current assets
Debtors and prepayments			222,622		150,699		136,327
Current asset investments	10		26,293,496		19,419,301		11,908,301
Cash at bank and in hand	10		3,378,328		2,386,750		2,738,290
			29,894,446		21,956,750		14,782,918
Creditors: amounts falling due within one year			(370,121)		(385,165)		(379,883)
Net current assets			29,524,325		21,571,585		14,403,035
Net assets			58,221,544		43,565,294		43,408,579
Capital and reserves
Called up share capital			734,694		596,893		483,122
Share premium reserve			21,025,160		10,673,405		30,498,349
Capital redemption reserve			6,640		5,157		104,218
Revaluation reserve			3,864,996		(3,206,720)		3,756,100
Special distributable reserve			20,170,687		24,090,692		126,857
Realised capital reserve			10,210,289		9,809,815		6,778,021
Revenue reserve			2,209,078		1,596,052		1,661,912
Equity shareholders' funds			58,221,544		43,565,294		43,408,579
Basic and diluted net asset value per share	11		79.25p		72.99p		89.85p
The Notes to the unaudited Financial Statements form part of these Half-Year Financial Statements.
The financial information for the six months ended 30 September 2020 and 30 September 2019 has not been audited.

Unaudited Condensed Statement of Changes in Equity
for the six months ended 30 September 2020
	Non-distributable reserves					Distributable reserves
	Called up	Share	Capital			Special	Realised	Revenue
	share	premium	redemption	Revaluation		distributable	capital	reserve
	capital	reserve	reserve	reserve		reserve	reserve		Total
						(Note a)	(Note b)	(Note b)
For the six months ended 30 September 2020	£	£	£	£		£	£	£	£
At 1 April 2020	596,893	10,673,405	5,157	(3,206,720)		24,090,692	9,809,815	1,596,052	43,565,294
Comprehensive income for the period
Profit for the period	-	-	-	7,349,227		-	1,687,119	613,026	9,649,372
Total comprehensive income for the period	-	-	-	7,349,227		-	1,687,119	613,026	9,649,372
Contributions by and distributions to owners
Shares issued under Offers for Subscription (Note c)	139,284	10,622,489	-	-			-	-	10,761,773
Issue costs (Note c)		(270,734)	-	-		(230,746)	-	-	(501,480)
Shares bought back (Note d)	(1,483)	-	1,483	-		(100,174)	-	-	(100,174)
Dividends paid	-	-	-	-		(2,944,709)	(2,208,532)	-	(5,153,241)
Total contributions by and distributions to owners	137,801	10,351,755	1,483	-		(3,275,629)	(2,208,532)	-	5,006,878
Other movements
Realised losses transferred to special reserve (Note a)	-	-	-	-		(644,376)	644,376	-	-
Realisation of previously unrealised gains	-	-	-	(277,511)		-	277,511	-	-
Total other movements	-	-	-	(277,511)		(644,376)	921,887	-	-
At 30 September 2020	734,694	21,025,160	6,640	3,864,996		20,170,687	10,210,289	2,209,078	58,221,544
for the six months ended 30 September 2019
	Non-distributable reserves					Distributable reserves
	Called up	Share	Capital			Special	Realised	Revenue
	share	premium	redemption		Revaluation	distributable	capital	reserve
	capital	reserve	reserve		reserve	reserve	reserve		Total
For the six months ended 30 September 2019	£	£	£		£	£	£	£	£
At 1 April 2019	489,251	30,498,349	98,089		4,357,307	4,391,645	7,600,987	1,294,329	48,729,957
Comprehensive income for the period
Profit for the period	-	-	-		1,493,564	-	623,415	367,583	2,484,562
Total comprehensive income for the period	-	-	-		1,493,564	-	623,415	367,583	2,484,562
Contributions by and distributions to owners
Shares bought back	(6,129)	-	6,129		-	(531,851)	-	-	(531,851)
Dividends paid	-	-	-		-	(3,394,575)	(3,879,514)	-	(7,274,089)
Total contributions by and distributions to owners	(6,129)	-	6,129		-	(3,926,426)	(3,879,514)	-	(7,805,940)
Other movements
Realised losses transferred to special reserve	-	-	-		-	(338,362)	338,362	-	-
Realisation of previously unrealised gains	-	-	-		(2,094,771)	-	2,094,771	-	-
Total other movements	-	-	-		(2,094,771)	(338,362)	2,433,133	-	-
At 30 September 2019	483,122	30,498,349	104,218		3,756,100	126,857	6,778,021	1,661,912	43,408,579

Notes:

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 distributable reserve. The purpose of this reserve is to fund market purchases of the Company's own shares as and when it is considered by the Board to be in the 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. At 30 September 2020, the Company has a special reserve of £20,170,687, £5,573,835 of which relates to shares issued more than three years ago. Reserves originating from share issues are not distributable under VCT rules if they are within three years of the end of an

accounting period in which the shares were issued. The total transfer of £644,376 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the period.

b): The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company.

c): Under an Offer for Subscription launched on 25 October 2019, 13,928,447 ordinary shares were allotted on 2 April 2020, raising net funds of £10,260,293 for the Company. This figure is net of issue costs of £270,734 and facilitation fees of £230,746.

d): During the period, the Company purchased 148,299 of its own shares at the prevailing market price for a total cost (including expenses) of £100,174, which were subsequently cancelled. The difference between the figure above of £100,174 and that per the unaudited Condensed Statement of Cash Flows of £128,341 is £28,167, being an opening share buyback creditor of £60,920 offset by a share buyback creditor of £32,753 at the period-end.

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 recent 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 - This reserve is created from cancellations of the balances upon the Share premium reserve, which are transferred to this reserve from time to time. The cost of share buybacks and any realised losses on the sale or impairment of investments (excluding transaction costs) are charged to this reserve. 75% of the Investment Adviser fee expense, and the related tax effect, that are charged to the realised capital reserve are transferred to this reserve. This reserve will also be charged any facilitation payments to financial advisers, which arose as part of the Offer for Subscription.

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 and disposal 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 incentive 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 2020
			Six months ended		Year ended		Six months ended
			30 September 2020		31 March 2020		30 September 2019
	Notes		(unaudited)		(audited)		(unaudited)
			£		£		£
Cash flows from operating activities
Profit for the financial period			9,649,372		(1,027,952)		2,484,562
Adjustments for:
Net investment portfolio (gains)/losses			(9,436,434)		1,860,406		(2,455,341)
Tax charge for the current period			-		134,947		4,300
Decrease in debtors			(71,923)		17,494		92,786
Increase in creditors and accruals			13,123		83,422		20,063
Net cash inflow from operations			154,138		1,068,317		146,370
Corporation tax paid			-		(61,351)		-
Net cash inflow from operating activities			154,138		1,006,966		146,370
Cash flows from investing activities
Purchase of investments	9		(2,449,976)		(5,191,745)		(1,816,853)
Disposal of investments	9		5,182,900		11,403,836		5,305,863
Net cash inflow from investing activities			2,732,924		6,212,091		3,489,010
Cash flows from financing activities
Net proceeds as part of Offer for subscription			10,531,027		10,957,180		-
Issue costs			(270,734)		(271,342)		-
Equity dividends paid	8		(5,153,241)		(13,878,041)		(7,274,089)
Purchase of own shares			(128,341)		(883,588)		(377,485)
Net cash inflow/(outflow) no change from financing activities			4,978,711		(4,075,791)		(7,651,574)
Net increase in cash and cash equivalents			7,865,773		3,143,266		(4,016,194)
Cash and cash equivalents at start of period			21,806,051		18,662,785		18,662,785
Cash and cash equivalents at end of period			29,671,824		21,806,051		14,646,591
Cash and cash equivalents comprise:
Cash at bank and in hand	10		3,378,328		2,386,750		2,738,290
Cash equivalents	10		26,293,496		19,419,301		11,908,301
The Notes to the unaudited financial statements form part of these unaudited Interim Financial Statements.

Notes to the Unaudited Condensed Financial Statements

for the six months ended 30 September 2020

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 of the Financial Statements

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 October 2019) 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 Interim 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	Year ended	Six months ended
		30 September 2020	31 March 2020	30 September 2019
		(unaudited)	(audited)	(unaudited)
Income from investments		£	£	£
Dividends		487,718	275,221	11,247
Money-market funds		20,366	110,293	59,442
Loan stock interest		412,151	2,049,810	682,959
Bank deposit interest		639	18,525	9,547
Interest on preference share dividend arrears		41,533	317	-
Other income		1,833	-	-
Total Income		964,240	2,454,166	763,195

5. 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 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 Fee 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.

		Six months ended 30 September 2020	Year ended 31 March 2020	Six months ended 30 September 2019
		(unaudited)	(audited)	(unaudited)
		£	£	£
Mobeus Equity Partners LLP
Investment Adviser's fees		572,642	1,102,860	556,974
Total		572,642	1,102,860	556,974

6.  Taxation

There is no tax charge for the period as the Company has deductible expenses in excess of taxable income. Six months ended 30 September 2020 Year ended 31 March 2020 Six months ended 30 September 2019 (unaudited) (audited) (unaudited) Revenue Capital Total Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ £ £ £ a)  Analysis of tax charge: UK Corporation tax on profits for the period 29,393 (29,393) - 292,105 (157,158) 134,947 83,669 (79,369) 4,300 Total current tax charge 29,393 (29,393) - 292,105 (157,158) 134,947 83,669 (79,369) 4,300 Corporation tax is based on a rate of 19% (2019: 19%) b) Profit on ordinary activities before tax 642,419 9,006,953 9,649,372 1,794,546 (2,687,551) (893,005) 451,252 2,037,610 2,488,862 Profit on ordinary activities multiplied by small company rate of corporation tax in the UK of 19% (2019: 19%) 122,060 1,711,321 1,833,381 340,964 (510,635) (169,671) 85,738 387,146 472,884 Effect of: UK dividends (92,667) - (92,667) (52,292) - (52,292) (2,137) - (2,137) Net investment portfolio gains not taxable/allowable - (1,792,922) (1,792,922) - 353,477 353,477 - (466,515) (466,515) Unrelieved expenditure - 52,208 52,208 3,433 - 3,433 68 - 68 Actual tax charge 29,393 (29,393) - 292,105 (157,158) 134,947 83,669 (79,369) 4,300

7.  Basic and diluted earnings per share

Six months ended 30 September 2020 Year ended 31 March 2020 Six months ended 30 September 2019 (unaudited) (audited) (unaudited) £ £ £ Total earnings after taxation: 9,649,372 (1,027,952) 2,484,562 Basic and diluted earnings per share (Note a) 13.14p (2.01)p 5.10p Net revenue from ordinary activities after taxation 613,026 1,502,441 367,583 Basic and diluted revenue earnings per share (Note b) 0.83p 2.94p 0.75p Net investment portfolio gains/(losses) 9,436,434 (1,860,406) 2,455,341 Capital expenses (net of taxation) (400,088) (669,987) (338,362) Total capital return 9,036,346 (2,530,393) 2,116,979 Basic and diluted capital earnings per share (Note c) 12.31p (4.95)p 4.35p Weighted average number of shares in issue in the period   73,448,240   51,134,517   48,686,770

Notes a) Basicanddilutedearningspershareistotalearningsaftertaxationdividedbytheweightedaveragenumberofsharesinissue. b) Basicanddilutedrevenueearningspershareisrevenueearningsaftertaxationdividedbytheweightedaveragenumberofsharesinissue. c) Basicanddilutedcapitalearningspershareistotalcapitalearningsdividedbytheweightedaveragenumberofsharesin issue. 8.  Dividends paid Dividend Type For year ended 31 March Pence per share Date Paid Six months ended 30 September 2020 (unaudited) £  Year ended 31 March 2020 (audited)  £ Six months ended 30 September 2019 (unaudited)  £ Interim Capital 2020 8.00p 20/09/2019   -    3,879,514   3,879,514 Interim Capital* 2020 7.00p 20/09/2019   -    3,394,575   3,394,575 Interim Income 2020 2.00p 27/03/2020   -    1,200,718   -  Interim Capital* 2020 9.00p 27/03/2020   -    5,403,234   -  Interim Capital 2021 3.00p 19/06/2020   2,208,532   -    -  Interim Capital* 2021 4.00p 19/06/2020   2,944,709   -    -    5,153,241   13,878,041   7,274,089 *Paid out of the Company's special distributable reserve.

9.  Summary of movement on investments during the period

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 2018 (as updated by Special Valuation guidance issued in March 2020). 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.

Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. 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. Where the terms of the 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 true 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 at each measurement date in accordance with appropriate valuation techniques, which are consistent with the IPEV guidelines:-

(i) Each investment is considered as a whole on a 'unit of account' basis, i.e. that the value of each portfolio company is considered as a whole, alongside consideration of:-

The price of new investments made, if deemed to be made as part of an orderly transaction, are considered to be at fair value at the date of the transaction. The inputs that derived the investment price are calibrated within individual valuation models and at subsequent measurement dates, are reconsidered for any changes in light of more recent events or changes in the market performance of the investee company. The valuation bases used are the following:

- 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 pre-tax earnings before interest and amortisation, or 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:-

- where a company's underperformance against plan indicates a diminution in the value of the investment, provision against the price of a new investment is made, as appropriate.

(ii) Premiums, to the extent that they are considered capital in nature, and that they 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.

(iii) Where a multiple or the price of recent investment less impairment basis is not appropriate and overriding factors apply, a discounted cash flow, net asset valuation or realisation proceeds basis or a weighted combination of any of the above 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 the price of recent investment, 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. 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.

Accounting standards classify methods of fair value measurement as Levels 1, 2 and 3. This hierarchy is based upon the reliability of information used to determine the valuation. All of the unquoted investments are Level 3, i.e. fair value is measured using techniques using inputs that are not based on observable market data.

Movements in investments during the period are summarised as follows:

		Unquoted	Unquoted	Unquoted	Total
		Ordinary	Preference	Loan
		shares	shares	stock
		£	£	£	£
		Level 3	Level 3	Level 3
Cost at 31 March 2020		15,983,143	21,710	10,898,798	26,903,651
Unrealised losses at 31 March 2020		(523,898)	(2,681)	(2,680,141)	(3,206,720)
Permanent impairment at 31 March 2020		(1,546,240)	-	(156,982)	(1,703,222)
Valuation at 31 March 2020		13,913,005	19,029	8,061,675	21,993,709
Purchases at cost		1,849,014	323,800	277,162	2,449,976
Sale proceeds		(3,049,521)	(17,815)	(2,115,564)	(5,182,900)
Reclassification at cost/valuation		(390,264)	390,264	-	-
Net investment portfolio gains		8,933,379	14,651	488,404	9,436,434
Valuation at 30 September 2020		21,255,613	729,929	6,711,677	28,697,219
Cost at 30 September 2020		16,355,786	691,451	9,714,564	26,761,801
Unrealised gains/(losses) at 30 September 2020		6,690,185	38,648	(2,863,837)	3,864,996
Permanent impairment at 30 September 2020		(1,790,358)	(170)	(139,050)	(1,929,578)
Valuation at 30 September 2020		21,255,613	729,929	6,711,677	28,697,219
Net unrealised losses at 1 April 2020		(2,070,138)	(2,681)	(2,837,123)	(4,909,942)
Reclassification at cost/valuation		(26,664)	26,664	-	-
Net movement in unrealised appreciation in the period		6,900,225	14,651	434,351	7,349,227
Net (permanent impairments)/write-backs in the period		(244,118)	(170)	17,932	(226,356)
Realisation of previously unrealised losses/(gains)		340,522	14	(618,047)	(277,511)
Gains/(losses) on investments at 30 September 2020		4,899,827	38,478	(3,002,887)	1,935,418

Note  Net realised gains on investments of £9,436,434 reported in the Income Statement comprise net unrealised gains on investments of £7,349,227 and net realised gains on investments of £2,087,207.

  The increase in unrealised valuations of the loan stock investments above reflect the changes in the entitlement to loan premiums, and/or in the underlying enterprise value of the investee company. The increase does not arise from assessments of credit or market risk upon these instruments.

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.

Level 3 unquoted equity and loan investments are valued in accordance with IPEV guidelines as follows:

		as at		as at		as at
		30 September 2020 (unaudited)		31 March 2020 (audited)		30 September 2019 (unaudited)
		£		£		£
Investment methodology
Multiple of earnings, revenues or gross margin, as appropriate		28,040,116		21,101,219		28,530,939
Estimated realisation proceeds		37,110		-		383,005
Net asset value		619,993		892,490		91,600
		28,697,219		21,993,709		29,005,544

10.  Current asset investments and cash at bank

		as at		as at		as at
		30 September 2020		31 March 2020		30 September 2019
		(unaudited)		(audited)		(unaudited)
		£		£		£
OEIC Money market funds		26,293,496		19,419,301		11,908,301
Current asset investments and cash equivalents per Condensed Statements of Cashflows		26,293,496		19,419,301		11,908,301
Cash at bank		3,378,328		2,386,750		2,738,290

11.  Net Asset Value per share 

Net asset value per share		As at  30 September 2020		As at  31 March 2020		As at  30 September 2019
		(unaudited)		(audited)		(unaudited)
Net assets		£58,221,544		£43,565,294		£43,408,579
Number of shares in issue		73,469,447		59,689,299		48,312,254
Net asset value per share (pence)		79.25 p		72.99 p		89.85 p

12.  Post balance sheet events

On 16 October 2020, the Company received £0.13 million as a loan repayment from Vian Marketing Limited (trading as Red Paddle).

On 27 November 2020, the Company sold its investment in Vectair Holdings Limited and received cash proceeds (including dividends) of £1.25 million.

13.  Financial statements for the six months ended 30 September 2020

The financial information set out in this Interim financial report does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The information for the year ended 31 March 2020 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The auditor has 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.  Interim Report

Copies of this statement 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:

For enquiries concerning the investment portfolio of the Company in general, please contact the Investment Adviser, Mobeus Equity Partners LLP. To contact the Chairman or any member of the Board, in the first instance please contact the Company Secretary, also at Mobeus Equity Partners LLP, at: [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.

LEI:  213800LY62XLI1B4VX35

 

END

 

 

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