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Mobeus Income & Growth 2 VCT is an Investment Trust

To provide investors with a regular income stream, arising both from the income generated by companies selected for the portfolio and from realising any growth in capital, while continuing at all times to qualify as a VCT.

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Annual Financial Report

1 Jul 2020 07:00

RNS Number : 6161R

Mobeus Income & Growth 2 VCT PLC

01 July 2020

mobeus Income & Growth 2 VCT plc

Annual Financial Results of the Company for the Year ended 31 march 2020

Mobeus Income & Growth 2 VCT plc (the "Company") today announces the final results for the year ended 31 March 2020. These results were approved by the Board of Directors on 30 June 2020.

You may, in due course, view the Annual Report & Financial Statements, comprising the statutory accounts of the Company by visiting www.mig2vct.co.uk.

Financial Highlights

As at 31 March 2020:

Net assets: £43.57 million

Net Asset Value ("NAV") per share: 72.99 pence

-	Net Asset Value ("NAV") total return per share was (0.6)% and Share Price total return per share was 12.9%.
-	Shareholders received dividends in the year totalling 26.00 pence per share.
-	The Company invested £5.19 million into six new growth capital investments and one follow-on investment.
-	The Company realised investments for total consideration of £11.38 million, representing a net gain of £3.77 million for the year.
-	An interim dividend for the year ending 31 March 2021 of 7.00 pence per share was paid on 19 June 2020.

Cumulative total return per share (NAV basis)

The table below shows the recent past performance of the 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 at the end of the Annual Report.

Reporting date as at 31 March	Netassets	NAVpershare	Cumulative dividends paid pershare	Cumulative total return per share to shareholders (NAV basis)2
	(£m)	(p)	(p)	(p)
2020	43.57	72.99	109.00	181.99
2019	48.73	99.60	83.00	182.60
2018	47.60	96.54	78.00	174.54
2017	38.06	106.70	62.00	168.70
2016	43.14	119.61	47.00	166.61

2 Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (share price basis) plus cumulative dividends paid to date on the current share class, launched in 2005.

CHAIRMAN'S STATEMENT I am pleased to present the annual results of Mobeus Income & Growth 2 VCT plc for the year ended 31 March 2020. Overview The year under review saw strong progress prior to a very challenging final month for the portfolio as a result of the UK Government's lockdown and social distancing measures, in response to the outbreak of COVID-19. These measures had an immediate adverse impact on UK businesses with many companies experiencing a significant reduction in demand for their products and services, compounded by restrictions on their ability to operate. The Board has liaised closely with Mobeus Equity Partners LLP ("the Investment Adviser") who has been actively engaged with portfolio companies. The focus has been to ensure that all practical steps are taken to enable each company to trade through the crisis and to seek to grow value thereafter. The full impact of the COVID-19 crisis will only emerge as time passes but there has been an immediate adverse impact on the portfolio valuation largely due to the general market and comparable public valuations. Whilst there has been a negative impact on the majority of the portfolio, conversely, some companies are trading strongly as a result. This is set out in detail in the Investment Adviser's Review and summarised in my Statement overleaf. Further information is contained under the Outlook heading below and the Investment Adviser's Review of this Annual Report. Overall, the Company made good progress in all areas, although the final month of the year proved challenging, resulting in a small net reduction in NAV total return per share for the year. During the year, the Company invested in six new companies and provided follow-on funding to one existing portfolio company. The year was exceptional for realisations. The Company sold its holdings in five portfolio companies, including the first profitable exit of a younger growth capital investment, as well as achieving the most successful exit in the history of the Company, Auction Technology Group. Further details of this investment activity can be found under the 'Investment Portfolio' section of my Statement below and in the Investment Adviser's Review. Following the onset of the COVID-19 crisis, the Investment Adviser's focus has been to prioritise the funding requirements of the existing portfolio. A number of companies are continuing to experience significant growth and further investment is being made to capitalise on these opportunities with two investments made after the year end. Other portfolio companies continue to experience adverse trading because of the crisis and may require further investment funding. The Company is well capitalised and able to support the portfolio considering each case on merit should the need arise. In the immediate term, the Investment Adviser is adopting a cautious approach when considering and recommending new investment opportunities. Adequate depth of investment appraisal and due diligence is challenging during the current lockdown, business performance is highly volatile and achievement of forecasts uncertain. However, looking further forward, the Board and Investment Adviser believe the investment landscape will become clearer to judge and a number of attractive opportunities may be brought forward. We are delighted with the strong support from investors for our recent fundraising, which was launched on 25 October 2019 and became fully subscribed within two months. Performance This NAV total return, expressed on a pence per share basis, was derived as follows:
			2020		2019
			2020		2019
				(pence	(pence
				per	per
		Year ended 31 March		share)	share)
		Year ended 31 March		share)	share)

	Net realised and
	unrealised (losses)/
	gains on the investment
	portfolio			(3.12)	6.41
	Income from the
	investment portfolio and
	liquid assets			4.11	4.48
	Share buybacks and
	adjustments			1.12	0.07

	Gross return			2.11	10.96
	Less: Investment
	Adviser's fees and other
	expenses			(2.72)	(2.90)


	Net return			(0.61)	8.06

	NAV total return per
	share			(0.6)%	8.4%

Despite the profitable realisations and a profitable revenue return, the impact of COVID-19 on portfolio valuations at the year-end has caused the Company's NAV total return per share in the year to fall by 0.6% (2019: 8.4% increase). This net return of (0.61) pence is derived by comparing the NAV per share at the year-end of 72.99 pence with the start of the financial year of 99.60 pence, after accounting for interim dividends totalling 26.00 pence per share paid during the year (discussed under Dividends below and as set out in the chart under Performance and Key Performance Indicators).

Whilst the aggregate portfolio valuation decreased due to reductions in the valuations of specific portfolio companies, reflecting the impact of COVID-19, this adverse impact was partly offset by a number of other factors. Firstly, the uplift achieved from the five profitable realisations in the year. Secondly, several of the Company's investment structures incorporate a preference, such that any reduction in enterprise value does not feed directly into the same reduction in the value of the Company's investment. Finally, the Company has significant liquidity which, in accordance with its policy, has been invested in lower risk liquidity funds and bank deposit accounts that have not fallen in value.

Given these specific factors, the Board therefore believes that the Company's performance has demonstrated a degree of resilience compared to other Generalist VCTs. At the financial year-end, your Company was ranked 15th out of 41 Generalist VCTs over five years and 1st out of 31 over 10 years, in the Association of Investment Companies' analysis of NAV Cumulative Total Return.

The Share Price total return for the year, after accounting for dividends paid, was 12.9% (2019: 4.6%). This figure has been enhanced by a reduction in the discount at which the shares trade (see Share Buybacks section).

For further details on the performance of the Company, please refer to the Performance section of the Strategic Report and the Performance Data at the end of the Annual Report.

Target Return

Since the start of the financial year ended 31 March 2018, the Board reintroduced its target of achieving an average NAV total return of 8.0% per annum, following the target suspension in 2017 after the introduction of the new VCT rules. For the year under review this was (0.6)% (2019: 8.4%), while the average over three years is 4.4% per annum.

The Board reminds Shareholders that the impact of an exceptional event such as COVID-19 has adversely affected this year's returns but their investment returns should be viewed over the longer term.

Dividends

The Board paid two interim dividends of 15.00 and 11.00 pence per share (2019: 5.00 pence) in respect of the year ended 31 March 2020, which were paid to Shareholders on 20 September 2019 and 27 March 2020 respectively.

Additionally, a 7.00 pence per share interim dividend was declared for the year ending 31 March 2021 and paid on 19 June 2020. Cumulative dividends paid since inception amount to 116.00 pence (2019: 83.00 pence) per share.

The Board were able to declare these significant dividends following five successful realisations by the Company in the year under review, the adequacy of distributable reserves, and after taking into consideration the cash flow forecasts and transition to the new VCT regulations. The Board regularly monitors cash flow and qualifying ratio projections to ensure that it is able to maintain compliance with VCT regulations whilst performing optimally.

The Board's target of paying a regular dividend, at a current level of not less than 5.00 pence per share in respect of each financial year has been achieved or exceeded in each of the last ten years. Whilst the Board still believes this dividend target is attainable, it should be noted that the move of the portfolio to an increased proportion of younger growth capital investments may lead to increased volatility, which could offset the return in any one year.

Shareholders should also note that there may continue to be circumstances where the Company is required to pay dividends in order to maintain its regulatory status as a VCT, for example, to stay above the minimum percentage of assets required to be held in qualifying investments, which increased to 80% on 1 April 2020. Shareholders should also note that, to the extent this is necessary, it will correspondingly reduce the Company's NAV per share.

A chart showing the dividends paid in respect of each of the last five years and cumulative dividends on the same basis is included in the Strategic Report.

A full dividend history is contained in the Performance Overview on the Company's website: www.mig2vct.co.uk

Investment portfolio

The portfolio valuation movements for the year were as follows:

		£m
	Portfolio value at 31 March 2019	30.04
	Portfolio value at 31 March 2019	30.04
	New and further investments	5.19
	Disposal proceeds	(11.38)
	Net realised gains	3.77
	Valuation movements	(5.63)

	Portfolio value at 31 March 2020	21.99

Following a detailed review by the Investment Adviser, and as agreed by the Board, the portfolio has been valued 6.2% lower (2019: 11.7% increase) compared to the value at the start of the year on a like-for-like basis. The reduction mainly occurred in the last quarter after the outbreak of COVID-19. The value of the investments still held decreased by £5.63 million, partially offset by the gain of £3.77 million from realised investments.

During the year under review, the Company invested a total of £5.19 million (2019: £2.90 million) into six (2019: two) new and one (2019: five) existing investments:

New - £4.83 million:

- Parsley Box - home delivered, ambient ready meals for the elderly;

- Arkk Solutions - a regulatory and reporting requirement service provider;

- Active Navigation - A data analysis software provider;

- IPV - A media asset software provider;

- Bleach London - A hair care brand;

- Bella & Duke - A premium frozen raw dog food provider.

Existing - £0.36 million:

- MPB Group - an online marketplace for used camera and video equipment.

After the year-end, £0.22 million was invested in Andersen EV, being an electric vehicle (EV) charging product business. This is the first new investment made since the onset of COVID-19. A total of £0.90 million was also invested to support the further expansion of another two existing portfolio companies:

- MyTutor - A digital marketplace for school tutoring;

- Rotageek -A workforce management software provider.

Details of this investment activity and the performance of the portfolio are contained in the Investment Adviser's Review and explained within Note 8 to the Financial Statements.

At the year-end, 68.9% by value of the investment portfolio was held in newer growth capital investments and 31.1% was held in more mature MBO type investments.

Cash proceeds totalling £11.38 million were received in the year from portfolio companies that were either sold, repaid loans or settled other capital proceeds. Of this total, £10.93 million was received as cash proceeds from the sales of The Plastic Surgeon, ASL Technology, Redline Worldwide, Biosite and Auction Technology Group.

The sales generated a net gain of £3.77 million on realised investments. The principal gains over opening valuation were from The Plastic Surgeon (£0.30 million), ASL (£0.49 million), Redline (£0.59 million), and Auction Technology Group (£2.41 million). Redline was the first profitable growth capital investment to be realised.

Further gains of £0.17 million were achieved by the receipt of proceeds, most notably relating to Entanet, an investment sold in a previous year and the partial exit from Master Removers Group. The Company's holding in Super Carers was deemed to be realised following the appointment of administrators after the year-end, resulting in a realised loss of £0.19 million.

Portfolio investments still held experienced a net decrease in unrealised valuations of £5.63 million for the year. The most significant falls were from Wetsuit Outlet, CGI Creative Graphics and Media Business Insight, offset by moderate increases at Proactive and Access IS.

These transactions and valuation movements are explained further in the Investment Adviser's Review.

Liquidity

At 31 March 2020, the Company had net assets of £43.57 million (2019: £48.73 million), including £21.99 million in investments (2019: £30.04 million) and liquid assets of £21.81 million (2019: £18.66 million). Liquid assets thus represented 50.1% (2019: 38.3%) of net assets at the year-end. This figure increased by £10.26 million due to the further allotment of shares after the year-end, and was then partly reduced by the dividend payment of £5.15 million (7.00 pence per share) in June 2020. The Company therefore remains in a very strong cash position.

Fundraising

On 25 October 2019, the Company launched an offer for subscription (the Offer") of £15 million with an over-allotment facility of an additional £5 million, alongside offers from the other Mobeus advised VCTs.

I am pleased to report that the Offer experienced such strong demand that the Company received subscriptions amounting to more than the full amount sought in early January 2020. In response to a further £2.10 million of applications received, the Company increased its Offer size in order to satisfy this additional demand.

In accordance with the Offer's prospectus, the first allotment took place on 8 January 2020, which included all applications received up to 20 December 2019 totalling £11.06 million. The balance of subscriptions of £10.76 million were allotted before the end of the tax year, on 2 April 2020.

Share buybacks

During the year under review, the Company bought back a total of 1,128,609 shares for cancellation. The buybacks represented 2.3% (2019: 0.8%) of the issued share capital of the Company at the beginning of the year. Further details of the Company's Share Buyback Policy are included in the Strategic Report of the Annual Report.

Shareholder Communications

This year's Shareholder event was held on Tuesday, 4 February 2020 at the National Gallery in central London. Separate daytime and evening sessions included presentations on the Mobeus advised VCTs' investment activity and performance. We have received positive feedback from many of the circa 400 people who attended the event and were pleased to hear that overall they found the day informative and worthwhile.

Fraud Warning

Boiler Room fraud and unsolicited communications to Shareholders.

We have been made aware of an increase in the number of Shareholders being contacted in connection with sophisticated but fraudulent financial scams which purport to come from the Company or to be authorised by it. This is often by a phone call or an email usually originating from outside of the UK, often claiming or appearing to be from a corporate finance firm offering to buy your VCT shares at an inflated price.

Further information and fraud advice plus details of who to contact, can be found in the Information for Shareholders section at the end of the Annual Report.

Shareholders are also encouraged to ensure their personal data is always held securely and that data held by the Registrars of the Company is up to date, to avoid cases of identity fraud.

Board Succession

Whilst the Board are cognizant of the tenure of the Board members, the succession plan and planning have currently been suspended due to COVID-19 and will resume during the next year.

Annual General Meeting

The next Annual General Meeting of the Company will be held at 11:00 am on Wednesday, 9 September 2020 at the office of the Investment Adviser, Mobeus Equity Partners LLP, 30 Haymarket, London, SW1Y 4EX.

The manner in which the AGM can be held is subject to the UK Government's guidelines associated with the COVID-19 pandemic. At the time of writing, it is not clear what restrictions might be in force in September. It may be the case that it becomes necessary to adjust the way in which this year's AGM is conducted.

Any updates on the AGM will be announced to the London Stock Exchange and on the Company's website: www.mig2vct.co.uk which Shareholders intending to attend should consult.

The Board encourages Shareholders to submit their vote by proxy form either by completing and returning the form enclosed with the Annual Report or submitting your proxy votes electronically via the Link Shareholder Portal www.signalshares.com. Shareholders are also advised to appoint the Chairman of the Meeting as their proxy as another nominated proxy may not be able to attend the meeting.

Before you lodge your proxy votes, any questions you may have about the resolutions to be passed at the AGM can be sent to the agm@mobeus.co.uk email address and a timely response will be provided.

If permitted by then, both the Board and the Investment Adviser look forward to welcoming Shareholders to the meeting which will include a presentation from the Investment Adviser on the investment portfolio. Shareholders are encouraged to attend (if allowed) and to ask questions of the Board and the Investment Adviser. The Notice of the meeting is included in the Annual Report and an explanation of the resolutions proposed can be found in the Directors' Report within the Annual Report.

Outlook

The impact of COVID-19 has been immediate and wide reaching. The eventual effects of the pandemic, many of which remain unclear at present, are likely to be felt over the course of months and years to come. Nevertheless, your Board considers that your Company is well positioned and should be able to respond to most likely scenarios. Last year's successful realisations and the recent fundraising have given the Company good cash reserves with which to support the existing portfolio and to capitalise on opportunities arising, inside and outside the portfolio. The portfolio comprises a foundation of mature investments providing a healthy income return, as well as a younger, diversified growth capital portfolio seeking to achieve scale, to drive value. The Investment Adviser and the Board believe that as the economic environment stabilises, attractive new investment opportunities will emerge. The Board notes that the Investment Adviser, in its review at the end of the COVID-19 section, reports that the portfolio displayed encouraging signs of revenue/operational recovery since the year-end low point.

Further details can be found in the Investment Adviser's Review within the Annual Report.

Finally, I would like to take this opportunity to thank all Shareholders for their continued support and, in particular, to extend a very warm welcome to our new Shareholders.

Ian Blackburn

Chairman

INVESTMENT POLICY

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 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.

In 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.

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

COVID-19

In March 2020, in response to the COVID-19 pandemic, the UK Government introduced lockdown and social distancing measures. These measures had an immediate adverse impact on UK business with many companies experiencing significant reduction in demand. Businesses' ability to trade was further impacted by restrictions on their employees' working practices and disruption to their supply chains.

The travel, hospitality, leisure, consumer and physical retail sectors have seen the most significant adverse impact. In contrast, there have been beneficiaries, including businesses in software and IT, online direct to consumer and those with in-contract business customers.

Many of the VCT's portfolio companies are encountering very challenging trading conditions, although the full extent and impact of COVID-19 will only emerge over time. The Investment Adviser has reviewed and evaluated the impact of COVID-19 on each company and upon the value of the portfolio as a whole. The Investment Adviser is fully engaged with the portfolio companies to ensure that all steps are being taken to assist each to trade through this crisis, restore and grow value thereafter. As part of this, Mobeus is reviewing the implications for new and follow-on investments with the recent fundraising and relatively high liquidity levels providing a solid foundation for such assessments.

Quoted markets have staged a meaningful recovery since the 31 March 2020 valuations. Trading in many portfolio companies has also proven more resilient in practice than could have been foreseen at the time of maximum uncertainty just after UK lockdown had been imposed on 23 March 2020. Whilst considerable uncertainty remains regarding the medium-term impact of COVID-19 on the wider economy, your portfolio is robust and the near term outlook appears to be improving from its March low.

Portfolio review

The year to 31 March 2020 had seen very positive progress within the portfolio prior to the COVID-19 lockdown in late March. The Company invested a total of £5.19 million into six new growth capital investments and one existing portfolio company, and received net cash proceeds of £11.38 million, primarily from five profitable realisations.

The review of the impact of COVID-19 was a major factor in determining the year-end valuations of each investee company, leading to an overall net valuation reduction of £5.63 million.

The portfolio's activity in the year is summarised as follows:

	2020	2019
	£m	£m
Opening portfolio	30.04	26.89
value
New and follow-on	5.19	2.90
investments
Disposal proceeds	(11.38)	(2.88)
Net realised gains	3.77	0.60
Valuation movements	(5.63)	2.53
Portfolio value at	21.99	30.04
31 March

The investment and divestment activity during the year has increased the proportion of the portfolio of growth capital investments to 68.9% (2019: 50.0%) by value at the year-end.

After the year-end, the first new investment was made since the onset of COVID-19. £0.22 million was invested in Andersen EV, an electric vehicle (EV) charging product business. The Company also provided further investment totalling £0.90 million into two existing portfolio companies, Rotageek and MyTutor. This brings the total invested in growth capital investments (by value) made since the introduction of the new VCT regulations in 2015 to £13.77 million.

Detail of these movements for each investee company are provided in the Investment Portfolio Summary at the end of this Investment Review.

The portfolio's contribution to the overall results of the Company is as follows:

Investment Portfolio	2020	2019
Capital Movement	£m	£m

Increase in the	1.25	4.74
value of unrealised
investments	(6.88)	(2.21)
Decrease in the
value of unrealised
Investments
Net (decrease) in the value of	(5.63)	2.53
unrealised
investments
Realised gains	3.96	0.84
Realised losses	(0.19)	(0.24)

Net realised gains/	3.77	0.60
in the year

Net (decrease)/ increase in value of investment	(1.86)	3.13

portfolio in the
year

Valuation changes of portfolio investments still held

The valuation reductions of £6.88 million are principally the result of an assessment of the impact of COVID-19 on each portfolio company.

At a summary level, there have been some clear beneficiaries of the COVID-19 crisis that are currently trading strongly. Although some of the fillip will subside, there can be a reasonable expectation that some of the behavioural change will prove structural. Other businesses are raising capital to ensure that they are ready to capitalise on demand when it returns. The majority of the portfolio has experienced a material impact but not sufficient to threaten their viability and/or require rescue financing. They have scaled back operations in response and are making full use of UK government assistance schemes where appropriate. Finally, there are a few businesses whose viability is now under threat. In the main, these are businesses that were already struggling and hence the Company's value had already been written down significantly. The value risk to the Company from this subset is therefore modest.

Within total valuation decreases, the main reductions were Wetsuit Outlet £0.85 million, CGI Creative Graphics £0.78 million and Media Business Insight £0.73 million. These three companies saw some of the most significant impact of sudden decline in demand for their product and services. By contrast some investee companies' trading has benefited from the lockdown, including Virgin Wines, Parsley Box, Bella & Duke, Bleach London and MyTutor.

Within total valuation increases, the principal contributors were Proactive £0.29 million, Access IS £0.27 million and Active Navigation £0.27 million. Access IS's valuation reflects the long-term nature of many of its projects, while the other two are underpinned by the Company's preferred investment structure.

Details of the valuation movements for each investee company are provided at the end of this Investment Adviser's Review.

Realised gains and losses from sales of investments

Cash proceeds totalling £11.38 million have been received, principally from five realisations during the year.

In the first half of the financial year, the Company received proceeds from ASL Technology (£3.68 million) and The Plastic Surgeon (£1.18 million), generating gains of £0.49 million and £0.30 million respectively. Total proceeds received over the life of each investment resulted in a multiple over their original cost of 2.2x for the sale of ASL Technology and 5.6x for The Plastic Surgeon.

In December, the Company realised £0.93 million from its first growth capital investment made under the new VCT rules, Redline Worldwide, generating a gain of £0.59 million in the year. Over the time that this investment was held, a multiple of 1.7x cost has been achieved to date with further proceeds potentially receivable in due course.

In February, the Company exited investments held in Pattern Analytics (trading as Biosite) and Turner TopCo (trading as Auction Technology Group), generating a total realised gain in the year of £2.41 million. Biosite was realised for proceeds of £1.53 million which contributed to £1.60 million received over the life of the investment and a gain over original cost of 1.5x. Auction Technology Group generated proceeds of £3.61 million, contributing to a figure over the life of the investment of £7.80 million. Compared to an original cost of £1.73 million, this resulted in a multiple on cost of 4.5x over the 11 ½ years this investment was held - an exceptional return for Shareholders and the largest ever for the Fund.

The Company achieved a further gain of £0.17 million arising from the disposal of Entanet in 2017, increasing the final return on cost to 2.8x. The partial realisation of Master Removers Group during the year generated proceeds of £0.28 million and a nominal gain. A token amount was also received from the liquidation proceeds from H Realisations (2018) Limited (formerly Hemmels). Finally, following the sale of its trade and assets after the year-end the Company recognised a realised loss of £0.19 million in respect of Super Carers. After the year-end, the Company received a loan repayment of £0.05 million from BookingTek.

Investment portfolio yield

During the year under review, the Company received the following amounts in interest and dividend income:

Investment Portfolio	2020	2019
Yield	£m	£m

Interest received in	2.05	1.55
the year
	0.28	0.51
Dividends received in
the year	2.33	2.06
Total portfolio income
in the year1	21.99	30.04

Portfolio value at
31 March

Portfolio Income Yield	10.6%	6.9%
(Income as a % of
Portfolio value at
31 March)

1 Total portfolio income for the year is generated solely from investee companies within the portfolio. See Note 3 of the Financial Statements for all income receivable by the Company.

The increase in income was due to interest of £0.94 million upon the loan instruments in Auction Technology Group being paid, as part of the sale transaction, which had not previously been recognised.

New investments in the year

A total of £4.83 million was invested into six new investments during the year as detailed below:

Company

Business

Date of investment

Amount of new investment (£m)

Parsley Box

Home delivered, ambient ready meals for the elderly

May 2019

0.55

Parsley Box is a UK direct to consumer supplier of home delivered, ambient ready meals for the elderly. Founded in 2017, Parsley Box has grown rapidly and has developed a unique meal delivery solution for its customers. The company supplies a diverse range of ambient meals via next day delivery which are easy to store and aim to contribute to a more independent and healthier lifestyle. The investment will scale the company's marketing strategy, enable it to process larger order volumes and continue to build out its team. Parsley Box's revenues grew by 270% between 2018 and 2019.

Arkk Consulting

Regulatory and reporting requirement service provider

May 2019

0.91

Arkk Consulting (trading as Arkk Solutions) provides services and software to enable organisations to remain compliant with regulatory reporting requirements. Arkk was established in 2009 and currently has over 800 clients across 20 countries. These include more than 80 of the FTSE 350, and half of the largest 20 accountancy firms in the UK. The investment will build on Arkk's reputation and customer base, to target the cloud-based period end reporting market by building the sales and marketing team. The company has shown good revenue growth of over 15% per annum between 2016 and 2018.

Active Navigation

Data analysis software

November 2019

0.94

Data Discovery Solutions (trading as Active Navigation) is a data analysis software solution which makes it easier for companies to clean up network drives, respond to new data protection laws and dispose of redundant and out dated documents. Active Navigation's solution is used by significant blue chip customers, particularly those in highly regulated industries such as energy and professional services, as well as government entities in the USA, Canada, Australia and the UK. Active Navigation will seek to drive continued growth from its file analysis platform with the recruitment of experienced sales and professional services staff. Since 2014 revenues have grown from £1.50 million to £5.00 million in its financial year to 30 June 2018.

IPV

Media asset software

November 2019

0.54

IPV has developed a media asset management software product called 'Curator'. This enables enterprise level customers to receive and search hours of video footage, edit into multiple short clips and broadcast to online video platforms (such as YouTube) and company intranets, in a very short time. This enables IPV's impressive list of blue-chip clients, such as Turner Sports, NASA and Sky, to improve efficiency in managing their video content. The company has built an impressive senior management team of proven operators and is targeting a media asset management market in the US and UK, worth an estimated £1 billion per annum. The investment will be used to build out a sales and marketing team and to fund lead generation for new direct and partner channels as well as supporting the existing partner network. From 2016 to 2018 recurring revenues grew over 50% annually and represented approximately 70% of total revenues in 2018.

Bleach

Direct to consumer hair care brand

December 2019

0.44

Bleach London Holdings (trading as Bleach London) is an established branded, fast growing business which manufactures a range of haircare and colouring products. Bleach London is regarded as a leading authority in the hair colourant market having opened one of the world's first salons focused on colouring and subsequently launched its first range of products in 2013. The investment was part of a wider £5.60 million investment round alongside trade and angel investors. The funds will be used to drive continued growth in sales through retailers as well as capitalise on its strong social media presence whilst accelerating its growing direct to consumer channel. Bleach London delivered an impressive three times revenue growth between 2017 and 2018.

Bella & Duke

Premium frozen raw dog food provider

February 2020

1.45

Bella & Duke is a direct to consumer subscription service, providing premium frozen raw dog food to pet owners in the UK. Founded in 2016, the business provides an alternative to standard meal options for dogs by focusing on the well documented health benefits of a raw food diet. This area is a growing niche in the large and established pet food market and is being driven by the premiumisation of dog food. The investment will seek to optimise its production and supply facilities, expand and enhance its team and develop alternative products (such as cat food). The company has grown revenues over 300% between 2018 and 2019.

New Investment after the year-end.

£0.22 million was invested into a new company after the year-end as detailed below:

Company	Business	Date of investment	Amount of new investment (£m)
Andersen EV	Electric vehicle (EV) chargers	June 2020	0.22

Muller EV Limited (trading as Andersen EV) is a design led manufacturer of premium electric vehicle (EV) chargers. Incorporated in 2016, this business has secured high profile partnerships with Porsche and Jaguar Land Rover, establishing an attractive niche position in charging points for the high end EV market. The Company's funds will be used to scale the business through investment in further products and software, sales and marketing and electric vehicle manufacturer partnerships. Andersen is well positioned in a nascent sector experiencing significant growth and has achieved sales ahead of budget in its latest year to February 2020, a trend which has continued in the year-to-date.

Further investments in existing portfolio companies in the year

£0.36 million was invested into one existing portfolio company during the year as detailed below:

Company	Business	Date of investment	Amount of new investment (£m)
MPB	Online marketplace for used camera and video equipment	July 2019	0.36
MPB is Europe's leading online marketplace for used camera and video equipment. Based in Brighton, its custom-designed pricing technology enables MPB to offer both buy and sell services through the same platform and offers a one-stop shop for all its customers. Having expanded into the US (opening a New York office) and German markets as part of the initial VCT investment round, this follow-on investment, alongside funds also provided by other investors, is to support its continued growth plan. Having more than doubled its sales over the last two years, this investment will help drive the company's objective to create a £100m+ turnover internationally diverse and profitable re-commerce business.

Further investments in existing portfolio companies after the year-end

Company

Business

Date of investment

Amount of new investment (£m)

MyTutor

Digital marketplace connecting school pupils seeking one-to-one online tutoring

May 2020

0.53

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 grown strongly over the last six months with average year on year growth of 70% and over 210,000 tutorials delivered in 2019. The COVID- 19 impact on the education sector has significantly heightened the awareness of online learning and tutoring

Rotageek

Workforce management software

May 2020

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, 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 moving into 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 have grown over 45% on the prior year.

Realisations during the year

The Company realised its investments in The Plastic Surgeon, ASL Technology, Redline Worldwide, Pattern Analytics (trading as Biosite) and Turner TopCo (trading as Auction Technology Group) during the year, generating an aggregate realised gain of £3.79 million. Net cash proceeds received from the sale of these investments totalled £10.93 million, as detailed below.

Company	Business	Period of investment	Total cash proceeds over the life of the investment/Multiple over cost
Plastic Surgeon	Supplier of snagging and finishing services to the property sector	April 2008 to May 2019	£2.19 million 5.6 x cost
The Company sold its remaining investment in The Plastic Surgeon to Polygon Group for £1.18 million (realised gain in the year: £0.30 million). Over the eleven years this investment was held, it generated proceeds of £2.19 million compared to an original investment cost of £0.39 million which is a multiple on cost of 5.6x and an IRR of 20.5%.
ASL Technology	Printer and photocopier services	December 2010 to June 2019	£4.57 million 2.2 x cost
The Company sold its investment in ASL Technology for £3.68 million (realised gain in the year: £0.49 million). Over the eight and a half years this investment was held, it generated proceeds of £4.57 million compared to an original investment cost of £2.09 million, which is a multiple on cost of 2.2x and an IRR of 12.6%.
Redline	Provider of security services to the aviation industry and other sectors	February 2016 to December 2019	£1.18 million 1.7x cost
The Company sold its investment in Redline Worldwide for £0.93 million (realised gain in the year: £0.59 million)(including proceeds received after completion). Since investment in 2016, the investment has generated proceeds to date of £1.18 million compared to an original investment cost of £0.68 million, which is a multiple on cost to date of 1.7x. The investment generated an IRR at completion of 16.0%. Further proceeds may be payable in due course.
Biosite	Workforce management and security services	November 2016 to February 2020	£1.60 million 1.5x cost
The Company sold its investment in Pattern Analytics Limited (trading as Biosite) to ASSA ABLOY for £1.53 million. Since investment in 2016, the investment has generated proceeds of £1.60 million compared to an original investment cost of £1.04 million, which is a multiple on cost of 1.5x and an IRR of 21.0%.
Auction Technology Group	SaaS based online auction marketplace platform	October 2008 to February 2020	£7.80 million 4.5 x cost
The Company sold its investment in Turner Topco Limited (trading as Auction Technology Group) to TA Associates for £4.55 million (including £0.94 million loan interest due on completion; realised gain in the year of £2.41 million). This investment generated proceeds over the life of the investment (including proceeds received following a partial realisation from a sale to ECI Partners in June 2014) of £7.80 million. These returns generated a multiple on cost of 4.5x and an IRR of 28.9%.

There was also a partial realisation of Master Removers Group ("MRG") during the year which generated proceeds receivable of £0.28 million and a nominal realised gain. This occurred following a reorganisation of MRG's share capital resulting in the Company increasing its equity share in MRG from 3.4% to 5.2%.

Following the year-end, and continued under performance, the trade and assets of Super Carers were sold to Home Instead for a nominal sum. A realised loss of £0.19 million was recognised during the year in respect of Super Carers.

Loan stock repayments and other receipts

In addition to net realised gains for the year on the five disposals of £3.79 million, there were also realised gains of £0.17 million comprising consideration received from Entanet, an investment realised in a prior year, liquidation proceeds from H Realisations (2018) Limited (formerly Hemmels Limited) and MRG's partial realisation. Including a £0.19 million realised loss in respect of Super Carers, the total realised gains for the year were £3.77 million, as shown in both tables of this review. After the year end, the Company received a loan repayment of £0.05 million from BookingTek.

Mobeus Equity Partners LLP

Investment Adviser

INVESTMENT PORTFOLIO SUMMARY

						Total Book			Valuation										Valuation

			Date of first			cost at			at				Disposals		Change in				at	% of net
			investment			31 March			31 March		Additions		at opening		valuation				31 March	assets by
			and Sector			2020			2019		at cost		valuation		for year				2020	value
	Qualifying investments					£			£		£		£		£				£



	Unquoted investments

	Tovey Management Limited (trading		October 2015			1,733,500			2,314,753		-		-		273,972				2,588,725	5.9%
	as Access IS)		Electronic
	Provider of data capture and		and electrical
	scanning hardware		equipment

	MPB Group Limited		June 2016			1,176,231			1,180,748		356,458		-		195,455				1,732,661	4.0%
	Online marketplace for photographic		General retailers
	and video equipment

	Preservica Limited		December 2015			1,133,464			1,620,741		-		-		(139,369)				1,481,372	3.4%
	Seller of proprietary digital archiving		Software and
	software		computer services

	Bella & Duke Limited		February 2020			1,451,101			-		1,451,101		-		-				1,451,101	3.3%
	A premium frozen raw dog food		General retailers
	provider

	Virgin Wines Holding Company		November 2013			1,284,333			1,556,726		-		-		(130,642)				1,426,084	3.3%
	Limited		General retailers
	Online wine retailer

	EOTH Limited (trading as Rab and		October 2011			817,185			1,970,986		-		-		(566,961)				1,404,025	3.2%
	Lowe Alpine)		General retailers
	Branded outdoor equipment and
	clothing

	Data Discovery Solutions Limited		November 2019			943,000			-		943,000		-		267,232				1,210,232	2.8%
	(trading as Active Navigation)		Software and
	Provider of global market leading		computer services
	file analysis software for information
	governance, security and compliance

	Proactive Group Holdings Inc		January 2018			635,346			883,102		-		-		288,844				1,171,946	2.7%
	Provider of media services and		General financial
	investor conferences for companies
	primarily listed on secondary public
	markets

	MyTutorWeb Limited (trading as		May 2017			979,834			979,834		-		-		-				979,834	2.2%
	MyTutor)		Support services
	Digital marketplace connecting
	school pupils seeking one-to-one
	online tutoring

	Vectair Holdings Limited		January 2006			60,293			972,093		-		-		(44,180)				927,913	2.1%
	Designer and distributor of		Support services
	washroom products

	Arkk Consulting Limited		May 2019			908,995			-		908,995		-		(149,762)				759,233	1.7%
	(trading as Arkk Solutions)		Software and
	Provider of services and software		computer services
	to enable organisations to remain
	compliant with regulatory reporting
	requirements

	Vian Marketing Limited (trading as		July 2015			717,038			1,180,612		-		-		(441,678)				738,934	1.7%
	Red Paddle Co)		Leisure goods
	Design, manufacture and sale
	of stand-up paddleboards and
	windsurfing sails

	Parsley Box Limited		May 2019			551,400			-		551,400		-		105,370				656,770	1.6%
	Supplier of home delivered, ambient		General retailers
	ready meals for the elderly

	Tharstern Group Limited		July 2014			789,815			842,506		-		-		(235,196)				607,310	1.4%
	Software based management		Software and
	information systems to the print		computer services
	sector

	Buster and Punch Holdings Limited		March 2017			436,391			608,509		-		-		(20,992)				587,517	1.3%
	Industrial inspired lighting and		General retailers
	interiors retailer

	Bleach London Holdings Limited		December 2019			445,332			-		445,332		-		116,029				561,361	1.3%
	Hair colourants brand		General retailers

	IPV Limited		November 2019			535,459			-		535,459		-		-				535,459	1.2%
	Provider of media asset software		Software and
			computer services

Rota Geek Limited		August 2018					366,600			619,101		-		-		(107,490)		511,611			1.2%

Workforce management software		Support services

Ibericos Etc. Limited (trading as		January 2017					812,248			811,028		-		-		(426,205)		384,823			0.9%
Tapas Revolution)		Travel & Leisure
Spanish restaurant chain

Bourn Bioscience Limited		January 2014					757,101			383,189		-		-		(133,346)		249,843			0.6%
Management of In-vitro fertilisation		Healthcare
clinics		equipment &
		services

Kudos Innovations Limited		November 2018					277,950			277,950		-		-		-		277,950			0.6%
Online platform that provides and		Support services
promotes academic research
dissemination

CGI Creative Graphics International		June 2014					999,568			964,132		-		-		(779,501)		184,631			0.5%
Limited		General industrials
Vinyl graphics to global automotive,
recreation vehicle and aerospace
markets

Blaze Signs Holdings Limited		April 2006					437,030			807,949		-		-		(650,292)		157,657			0.4%
Manufacturing and installation of		Support services
signs

Master Removers Group 2019		December 2014					251,763			1,113,167		-		(278,292)		(708,406)		126,469			0.3%
Limited (trading as Anthony Ward		Support services
Thomas, Bishopsgate and Aussie
Man & Van)
A specialist logistics, storage and
removals business

Media Business Insight Holdings		January 2015					1,447,188			770,532		-		-		(726,297)		44,235			0.1%
Limited		Media
A publishing and events business
focused on the creative production
industries

Manufacturing Services Investment		July 2017					1,412,992			893,985		-		-		(854,587)		39,398			0.1%
Limited (trading as Wetsuit Outlet)		General retailers
Online retailer in the water sports
market

RDL Corporation Limited		October 2010					1,000,000			494,929		-		-		(494,929)		-			0.0%
Recruitment consultants for		Support services
the pharmaceutical, business
intelligence and IT industries

Super Carers Limited1		March 2018					384,720			192,360		-		(192,360)		-		-			0.0%
Online platform that connects		Support services
people seeking home care from
experienced independent carers

BookingTek Limited		October 2016					504,336			126,084		-		-		(126,084)		-			0.0%
Software for hotel groups		Software and
		computer services

Jablite Holdings Limited		April 2015					281,398			91,600		-		-		(91,600)		-			0.0%
Manufacturer of expanded		Construction and
polystyrene products		materials

Veritek Global Holdings Limited		July 2013					967,780			49,432		-		-		(49,432)		-			0.0%
Maintenance of imaging equipment		Support services

Racoon International Group Limited		December 2006					906,935			-		-		-		-		-			0.0%
Supplier of hair extensions, hair care		Personal goods
products and training

Realised in year

ASL Technology Holdings Limited		December 2010					-			3,190,292		-		(3,190,292)		-		-			0.0%
Printer and photocopier services		Support services

Pattern Analytics Limited (trading		November 2016					-			1,531,481		-		(1,531,481)		-		-			0.0%
as Biosite)		Software and
Workforce management and security		computer services
services for the construction industry

	Turner Topco Limited (trading as			October 2008	-			1,198,168			-		(1,198,168)		-		-			0.0%

	Auction Technology Group)			Media
	SaaS based online auction market
	place platform

	The Plastic Surgeon Holdings			April 2008	-			875,502			-		(875,502)		-		-			0.0%
	Limited			Support services
	Snagging and finishing of domestic
	and commercial properties

	Redline Worldwide Limited			February 2016	-			341,107			-		(341,107)		-		-			0.0%
	Provider of security services to the			Support services
	aviation industry

	Total qualifying investments				25,406,326			28,842,598			5,191,745		(7,607,202)		(5,630,047)		20,797,094			47.8%2
	Non-qualifying investments

	Media Business Insight Limited			January 2015	561,884			672,742			-		-		-		672,742			1.5%
	A publishing and events business			Media
	focused on the creative production
	industries

	Manufacturing Services Investment			July 2017	304,000			304,000			-		-		-		304,000			0.7%
	Limited (trading as Wetsuit Outlet)			General retailers
	Online retailer in the water sports
	market

	Tovey Management Limited (trading			October 2015	219,873			219,873			-		-		-		219,873			0.5%
	as Access IS)			Electronic
	Provider of data capture and			and electrical
	scanning hardware			equipment

	365 Agile Group plc (formerly			March 2001	254,586			-			-		-		-		-			0.0%
	Iafyds plc)			Electronic
	Development of energy saving			and electrical
	devices for domestic use			equipment

	Racoon International Group Limited			December 2006	139,050			-			-		-		-		-			0.0%
	Supplier of hair extensions, hair care			Personal goods
	products and training

	H Realisations (2018) Limited			March 2018	17,932			-			-		-		-		-			0.0%
	(formerly Hemmels Limited)			Automobiles and
	Company specialising in the			parts
	sourcing, restoration, selling and
	servicing of high price, classic cars

	Total non-qualifying investments				1,497,325			1,196,615			-		-		-		1,196,615			2.7%


	Total investment portfolio per note				26,903,651			30,039,213			5,191,745		(7,607,202)		(5,630,047)		21,993,709			50.5%
	8

	Cash and current asset investments3							18,662,785									21,806,051			50.1%
	Total investments including cash				26,903,651			48,701,998			5,191,745		(7,607,202)		(5,630,047)		43,799,760			100.6%
	and current asset investments

	Other current assets							229,113									150,699			0.3%

	Current liabilities							(201,154)									(385,165)			(0.9)%

	Totals				26,903,651						5,191,745		(7,607,202)

	Net assets at the year-end							48,729,957									43,565,294			100.0%

	Total Investment Portfolio split by
	type

	Growth focused portfolio				15,820,418			15,017,984			5,191,745		(2,343,240)		(2,701,950)		15,164,539			68.9%

	MBO focused portfolio				11,083,233			15,021,229			-		(5,263,962)		(2,928,097)		6,829,170			31.1%

	Investment Adviser's Total				26,903,651			30,039,213			5,191,745		(7,607,202)		(5,630,047)		21,993,709			100.0%

1 The closing valuation of this investment is nil as the remaining cost and valuation still held were permanently impaired during the year.

2 As at 31 March 2020, the Company held more than 70% 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.

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

Principal risks, management and regulatory environment

The Directors acknowledge the Board's responsibilities for the Company's internal control systems and have instigated systems and procedures for identifying, evaluating and managing the significant risks faced by the Company. This includes a key risk management review which takes place at each quarterly board meeting. Further details of these are contained in the corporate governance section of the Directors' Report in the Annual Report. The principal risks identified by the Board are set out below:

Risk	Possible consequence	How the Board manages risk
Political and Economic	Events such as an economic recession, Brexit negotiations, a protracted period of political uncertainty, COVID-19, movements in interest rates, could affect trading conditions for smaller companies and consequently the value of the Company's qualifying investments.	●●The Board monitors (1) the portfolio as a whole to ensure that the Company invests in a diversified portfolio of companies and (2) developments in the macro-economic environment such as interest rates. ●● The Board and Investment Adviser have carried out an analysis of the portfolio, latterly with particular focus upon the impact of COVID-19 which will be kept under review.

Investment and strategic	Investment in small unquoted small companies can involve a higher degree of risk than investment in larger, and/or fully listed companies and will likely have more variable returns. Smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals.	●● The Board regularly reviews the Company's investment strategy. ●● Investee companies are carefully selected by the Investment Adviser for recommendation to the Board. ●● The investment portfolio is reviewed by the Board on a regular basis. ●● The Investment Adviser generally appoints a director to the Board of each investee company
Loss of approval as a Venture Capital Trust	The Company must comply with section 274 of the Income Tax Act 2007 ("ITA") which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to the Company losing its approval as a VCT, qualifying Shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and that future dividends paid by the Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains	●● The Board receives regular reports from Philip Hare & Associates LLP ("PHA") who have been retained to undertake an independent VCT status monitoring role. ●● The Company's VCT qualifying status is continually reviewed by PHA and the Investment Adviser on a regular basis.

VCT Regulatory Changes	The Company is required to comply with frequent changes to the VCT specific regulations relating to European State Aid regulations as enacted by the UK Government which still apply. Non-compliance would result in a loss of VCT status.	●● The Board receives advice from PHA in respect of these requirements, including those that may arise from the withdrawal from the EU, and conducts its affairs in order to comply with these requirements.

Regulatory	The Company is required to comply with the Companies Act, the Listing Rules of the UK Listing Authority and United Kingdom Accounting Standards. Changes to and breach of any of these might lead to suspension of the Company's Stock Exchange listing, financial penalties, a qualified audit report.	●● Regulatory and legislative developments are kept under review by the Company's solicitors and the Board.

Financial and operating	Failure of the systems at any of the third-party service providers that the Company has contracted with, could lead to inaccurate reporting or monitoring. Inadequate controls could lead to the misappropriation or insecurity of assets.		●● The Board carries out an annual review of the internal controls in place and reviews the risks facing the Company at each quarterly Board meeting. ●● It reviews the performance of the service providers annually.







Market	Movements in the valuations of the Company's investments will, inter alia, be connected to movements in UK Stock Market indices.		●● The Board receives quarterly valuation reports from the Investment Adviser and remains focused on the investments being at fair value, after considering many factors, including the impact of market movements. ●● The Investment Adviser alerts the Board about any adverse movements.





Asset		The Company's investments may be difficult to realise.	●● The Board receives reports from the Investment Adviser and reviews the portfolio at each quarterly Board meeting. It carefully monitors investments where a particular risk has been identified.
liquidity




Market liquidity		Shareholders may find it difficult to sell their shares at a price which is close to the net asset value at a price which is close to the net asset value given the limited secondary market in VCT shares.	●● The Board has a share buyback policy which seeks to mitigate market liquidity risk.
Cyber and Data Security		The Company and its Shareholders may suffer losses in the event of the IT systems at principal suppliers being compromised by cyber attack.	●● The Board monitors and seeks assurance from the VCT's principal suppliers in respect of the systems and processes they have adopted to counter these risks.

The risk profile of the Company has changed as a result of the changes to the VCT Rules. As the Company's investment focus is on growth capital investments in younger companies it is anticipated that investment returns will be more volatile and will have a higher risk profile. The Board is confident that the Investment Adviser will continue to adapt to changes in investment requirements.

The occurrence of the COVID-19 pandemic has created heightened uncertainty, but has not changed the nature of the principal risks. The Board considers that the present processes for mitigating those risks remain appropriate.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Financial Statements for each financial year and the Directors have elected to prepare the Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss for the Company for that period.

In preparing these financial statements, the Directors are required to:

●	select suitable accounting policies and then apply them consistently;
●	make judgements and accounting estimates that are reasonable and prudent;
●	state whether the Financial Statements have been prepared in accordance with the United Kingdom accounting standards, subject to any material departures disclosed and explained in the Financial Statements;
●	prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;
●	prepare a Strategic Report, a Directors' Report and Directors' Remuneration Report which comply with the requirements of the Companies Act 2006.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Website publication

The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company's website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company's website is the responsibility of the Directors. The Directors' responsibility also extends to the ongoing integrity of the Financial Statements contained therein.

Directors' responsibilities pursuant to Disclosure and Transparency Rule 4 of the UK Listing Authority

The Directors confirm to the best of their knowledge that:

(a) The Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and the profit of the Company.

(b) The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

Having taken advice from the Audit Committee, the Board considers the Annual Report and Financial Statements, taken as a whole, as fair, balanced and understandable and that it provides the information necessary for Shareholders to assess the Company's performance, business model and strategy.

Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000.

The names and functions of the Directors are stated in the Annual Report.

For and on behalf of the Board:

Ian Blackburn

Chairman

FINANCIAL STATEMENTS

Income Statement

for the year ended 31 March 2020

			Year ended 31 March 2020			Year ended 31 March 2019
			Year ended 31 March 2020			Year ended 31 March 2019
		Notes	Revenue	Capital	Total	Revenue	Capital	Total
			£	£	£	£	£	£


Net investment portfolio (losses)/gains		8	-	(1,860,406)	(1,860,406)	-	3,137,000	3,137,000
Income		3	2,454,166	-	2,454,166	2,189,574	-	2,189,574
Investment Adviser's fees		4a	(275,715)	(827,145)	(1,102,860)	(259,026)	(777,077)	(1,036,103)
Other expenses		4c	(383,905)	-	(383,905)	(320,722)	-	(320,722)

Profit/(loss) on ordinary
activities before taxation			1,794,546	(2,687,551)	(893,005)	1,609,826	2,359,923	3,969,749
Taxation on profit/(loss)	on ordinary activities	5	(292,105)	157,158	(134,947)	(208,983)	147,645	(61,338)

Profit/(loss) for the year	and total
comprehensive income			1,502,441	(2,530,393)	(1,027,952)	1,400,843	2,507,568	3,908,411

Basic and diluted earnings per ordinary share:		7	2.94p	(4.95)p	(2.01)p	2.84p	5.09p	7.93p

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the net investment portfolio (losses)/gains (unrealised 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 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 year.

Balance Sheet

as at 31 March 2020

		31 March 2020	31 March 2019
Fixed assets	Notes	£	£
	Notes	£	£

Investments at fair value	8	21,993,709	30,039,213
Current assets
Debtors and prepayments		150,699	229,113
Current asset investments	9	19,419,301	16,117,301
Cash at bank	9	2,386,750	2,545,484

		21,956,750	18,891,898
Creditors: amounts falling due within one year		(385,165)	(201,154)

Net current assets		21,571,585	18,690,744

Net assets		43,565,294	48,729,957

Capital and reserves
Called up share capital		596,893	489,251
Share premium reserve		10,673,405	30,498,349
Capital redemption reserve		5,157	98,089
Revaluation reserve		(3,206,720)	4,357,307
Special distributable reserve		24,090,692	4,391,645
Realised capital reserve		9,809,815	7,600,987
Revenue reserve		1,596,052	1,294,329

Equity Shareholders' funds		43,565,294	48,729,957

Basic and diluted net asset value per ordinary share		72.99p	99.60p

The Financial Statements were approved and authorised for issue by the Board of Directors and are signed on its behalf by:

Ian Blackburn

Chairman

Statement of Changes in Equity

for the year ended 31 March 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)
	Notes	£	£	£	£	£	£	£	£
	Notes	£	£	£	£	£	£	£	£
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 year
(Loss)/profit for the year		-	-	-	(5,630,047)	-	3,099,654	1,502,441	(1,027,952)

Total comprehensive
income for the year		-	-	- (5,630,047)		-	3,099,654	1,502,441	(1,027,952)

Contributions by and
distributions to owners
Shares issued via Offer
for Subscription (Note c)		118,928	10,944,747	-	-	(106,495)	-	-	10,957,180
Issue costs		-	(271,342)	-	-	-	-	-	(271,342)
Shares bought
back (Note d)		(11,286)	-	11,286	-	(944,508)	-	-	(944,508)
Dividends paid	6	-	-	-	-	(8,797,809)	(3,879,514)	(1,200,718)	(13,878,041)

Total contributions
by and distributions
to owners		107,642	10,673,405	11,286	-	(9,848,812)	(3,879,514)	(1,200,718)	(4,136,711)

Other movements
Cancellation of share
premium reserve (Note e)		- (30,498,349)		(104,218)	-	30,602,567	-	-	-
Realised losses
transferred to special
reserve (Note a)		-	-	-	-	(1,054,708)	1,054,708	-	-
Realisation of previously
unrealised gains		-	-	-	(1,933,980)	-	1,933,980	-	-

Total other movements		- (30,498,349)		(104,218)	(1,933,980)	29,547,859	2,988,688	-	-

At 31 March 2020		596,893	10,673,405	5,157	(3,206,720)	24,090,692	9,809,815	1,596,052	43,565,294

a): The Company's special reserve is available to fund buybacks of shares as and when it is considered by the Board to be in the interests of Shareholders, and to absorb any existing and future realised losses and for other corporate purposes. At 31 March 2020, the Company has a special reserve of £24,090,692, £9,493,840 of which relates to shares issued on or before 5 April 2014, or that arise from 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 £1,054,708 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the year. 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, 11,892,778 ordinary shares were allotted on 8 January 2020, raising net funds of £10,685,838 for the Company. This figure is net of issue costs of £271,342. d): During the year, the Company purchased 1,128,609 of its own shares at the prevailing market price for a total cost of £944,508, which were subsequently cancelled. This figure is higher than that shown in the Statement of Cashflows of £883,588 by £60,920. This is due to £60,920 included in creditors at the year-end. e): The cancellation of £30,498,349 from the Share Premium Reserve and £104,218 from the Capital Redemption Reserve (as approved at the Annual General Meeting on 11 September 2019 and by the court order dated 25 October 2019) has increased the Company's special reserve out of which it can fund buybacks of shares as and when it is considered by the Board to be in the interests of the Shareholders, and to absorb any existing and future realised losses, or for other corporate purposes.

Statement of Changes in Equity

for the year ended 31 March 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
Notes	£	£	£	£	£	£	£	£
Notes	£	£	£	£	£	£	£	£
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 year
Profit/(loss) for the year	-	-	-	2,531,926	-	(24,358)	1,400,843	3,908,411

Total comprehensive
income for the year	-	-	-	2,531,926	-	(24,358)	1,400,843	3,908,411

Contributions by and
distributions to owners								-
Shares bought back	(3,791)	-	3,791	-	(327,702)	-	-	(327,702)
Dividends paid	-	-	-	-	-	(1,229,623)	(1,229,623)	(2,459,246)
Dividends refunded	-	-	-	-	-	5,040	5,257	10,297

Total contributions
by and distributions
to owners	(3,791)	-	3,791	-	(327,702)	(1,224,583)	(1,224,366)	(2,776,651)

Other movements
Realised losses
transferred to
special reserve	-	-	-	-	(1,333,178)	1,333,178	-	-
Realisation of previously
unrealised losses	-	-	-	426,725	-	(426,725)	-	-

Total other movements	-	-	-	426,725	(1,333,178)	906,453	-	-

At 31 March 2019	489,251 30,498,349		98,089	4,357,307	4,391,645	7,600,987	1,294,329	48,729,957

Notes:

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 year-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 8), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year.

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; and

●● 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 as well as 25% of the Investment Adviser fee together with the related tax effect, as well as income dividends paid that are classified as revenue in nature.

Statement of Cash Flows

for the year ended 31 March 2020

			Year ended	Year ended
			Year ended	Year ended
		Notes	31 March 2020	31 March 2019
			£	£


Cash flows from operating		activities
(Loss)/profit for the financial		year	(1,027,952)	3,908,411
Adjustments for:
Net investment portfolio losses/(gains)			1,860,406	(3,137,000)
Tax charge for the current year			134,947	61,338
Decrease in debtors			17,494	56,764
Increase in creditors and accruals			83,422	4,341

Net cash inflow from	operations		1,068,317	893,854
Corporation tax paid			(61,351)	(50,401)

Net cash inflow from	operating activities		1,006,966	843,453
Cash flows from investing		activities
Purchase of investments		8	(5,191,745)	(2,898,440)
Disposal of investments		8	11,403,836	2,934,649

Net cash inflow from investing activities			6,212,091	36,209
Cash flows from financing		activities
Shares issued as part of Offer for subscription			10,957,180	-
Issue costs			(271,342)	-
Equity dividends paid		6	(13,878,041)	(2,459,246)
Dividends refunded			-	10,297
Purchase of own shares			(883,588)	(327,702)

Net cash outflow from financing activities			(4,075,791)	(2,776,651)

Net increase/(decrease) in cash and cash equivalents			3,143,266	(1,896,989)
Cash and cash equivalents at start of year			18,662,785	20,559,774

Cash and cash equivalents at end of the year			21,806,051	18,662,785
Cash and cash equivalents comprise:
Cash equivalents			19,419,301	16,117,301
Cash at bank and in hand			2,386,750	2,545,484

Notes to the Financial Statements for the year ended 31 March 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

A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out at the start of the related disclosure throughout the Notes to the Financial Statements. The Financial Statements have been prepared on a going concern basis which is deemed appropriate by the Board in light of the ongoing COVID-19 pandemic due to the strong liquidity of the Company following the recent fundraising and successful realisations, in addition to the Company's ability to control the outflow of funds.

These Financial Statements have also been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS102"), 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.

(3) Income

Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company's right to receive payment is established and there is no reasonable doubt that payment will be received.

Interest income on loan stock is accrued on a daily basis. Provision is made against this income where recovery is doubtful or where it will not be received in the foreseeable future. Where the loan stocks only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income or capital as appropriate once redemption is reasonably certain. When a redemption premium is designed to protect the value of the instrument holder's investment rather than reflect a commercial rate of revenue return, the redemption premium is recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. Accordingly, the redemption premium recognised in the year ended 31 March 2020 has been classified as capital and has been included within gains on investments.

	2020		2019
	2020		2019
		£		£
		£		£

Income from bank deposits		18,525		13,644

Income from investments
- from equities		275,221		512,578
- from overseas based OEICs		74,318		74,234
- from UK based OEICs		35,975		34,525
- from loan stock		2,049,810		1,521,722
- from interest on preference share dividend arrears		317		31,481

		2,435,641		2,174,540
Other income		-		1,390

Total income		2,454,166		2,189,574

Total income comprises
Dividends		385,514		621,337
Interest		2,068,652		1,566,847
Other		-		1,390

		2,454,166		2,189,574

Total loan stock interest due but not recognised in the year was £231,708 (2019: £421,336). The decrease in the year is due to the realisation of one investee company whose interest was only recognised upon exit, offset by a number of investee company interest provisions in light of COVID-19.

(4) Investment Adviser's fees and Other expenses

All expenses are accounted for on an accruals basis.

a) 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.

			2020			2019
			2020			2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£	£	£	£	£	£
	£	£	£	£	£	£

Mobeus Equity Partners LLP
Investment Adviser's fees	275,715	827,145	1,102,860	259,026	777,077	1,036,103

	275,715	827,145	1,102,860	259,026	777,077	1,036,103

Under the terms of a revised investment management agreement dated 10 September 2010, (as amended and restated on 15 September 2016) Mobeus Equity Partners LLP provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fee of £113,589 per annum, the latter being subject to changes in the retail prices index each year. In 2013, Mobeus has agreed to waive such further increases due to indexation, until otherwise agreed with the Board. In accordance with the policy statement published under "Management and Administration" in the Company's prospectus dated 10 May 2000, the Directors have charged 75% of the investment management expenses to the capital account. This is in line with the Board's expectation of the long-term split of returns from the investment portfolio of the Company. For 2019, the Investment Adviser's fee upon the net funds raised from use of the over-allotment facility of £5 million under the 2017/18 Offer was reduced from 2.0% to 1.0% per annum. From 1 July 2020, the Investment Adviser's fee upon the net funds raised under the 2019/2020 Offer for Subscription from the use of the over-allotment facility of £5 million will be reduced from 2.0% to 1.0% per annum for one year. In addition, under the 2019/20 Offer for Subscription, for net funds raised from gross applications in excess of £20 million, the fee will be reduced from 2.0% to 0%, also for one year.

Under the terms of the management agreement the total Investment Adviser and administration expenses of the Company excluding any irrecoverable VAT, exceptional costs and any performance incentive fee, are linked to a maximum of 3.6% of the value of the Company's closing net assets. For the year ended 31 March 2020, the expense cap has not been breached (2019: £nil).

The Company is responsible for external costs, such as legal and accounting fees, incurred on transactions that do not proceed to completion ("abort expenses") subject to the cap on total annual expenses referred to above.

In accordance with general market practice, the Investment Adviser earned arrangement fees and fees for supplying Directors and/or monitoring services from investee companies. The share of such fees attributable to the investments made by the Company were £129,795 (2019: £74,339) and £175,528 (2019: £170,217) respectively. The fees for supplying directors and/or monitoring services were from 35 (2019: 33) investee companies during the year.

(b) Performance fees

Performance incentive agreement

The following performance incentive fee arrangement dated 20 September 2005 continues to be in place, and operated as detailed below:

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.

Clarifications to the agreement

During the year ended 31 March 2016, the Board and the Investment Adviser agreed to confirm and clarify in more detail a number of principles and interpretations applied to the agreement. The principal ones are reflected in the paragraphs above and explained below:-

First, the incentive fee is paid upon dividends paid in a year, not declared and paid in a year, as the original agreement stated. Secondly, the average NAV referred to above is calculated on a daily weighted average basis throughout the year. In turn, this average NAV is compared to a Base NAV that is also calculated on a daily weighted average basis throughout the year. Thirdly, the methodologies to account for new shares issued and buybacks of shares, their inclusion in the incentive fee calculations and to identify the proportion of all shares upon which an incentive fee is payable have been clarified.

Finally, it has been agreed that any excess of cumulative dividends paid over the cumulative annual dividend target is not carried forward, whether a fee is paid for that year or not.

These clarifications have been incorporated in to the performance incentive agreement. The Board has been advised that, as these and a number of more minor clarifications, are clarifications of the Incentive Agreement, rather than changes to it, there was no need to seek Shareholder approval for them.

Position at 31 March 2020

The cumulative dividends paid exceeded the annual cumulative dividend target at 31 March 2020 by 13.13 pence per share (£3,496,083 in aggregate being 44.6% of the total shortfall) at the year-end, (where 44.6% is the proportion of Incentive Fee Shares to the total number of shares in issue at the year-end date) and taking into account the target rate of dividends and the dividends paid to Shareholders.

The 6.00 pence annual dividend hurdle was 8.13 pence per share at the year-end after adjustment for RPI. The Base NAV was 103.20 per share at the year end and an average of 105.46 pence for the year, compared to an average NAV for the year of 96.07 pence.

There is no present obligation arising as the hurdles are not met, as the average NAV per share for the year was less than the Base NAV per share for the year, therefore, no incentive fee is payable for the year (2019: £Nil).

Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate.

	2020		2019
	2020		2019
		£		£
		£		£

Directors' remuneration (including NIC of £6,674 (2019: £5,380)) (Note a)		102,674		99,802
IFA trail commission		51,669		49,262
Broker's fees		12,000		12,000
Auditor's fees - Audit of Company (excluding VAT)		29,213		23,575
- tax compliance services (Note b) (excluding VAT)		-		1,922
- audit related assurance services (Note b) (excluding VAT)		6,663		4,613
Registrar's fees		45,052		28,622
Printing		49,776		38,993
Legal & professional fees		34,104		9,836
VCT monitoring fees		8,400		8,400
Directors' insurance		8,269		7,428
Listing and regulatory fees		26,939		25,702
Sundry		9,146		10,567

Other expenses		383,905		320,722

a): See analysis in Directors' emoluments table within the Annual Report, which excludes the NIC above. The key management personnel are the three non-executive Directors. The Company has no employees.

b): The Directors consider the Auditor was best placed to provide the other services disclosed above. The audit related assurance services are in relation to the audit of the Financial Statements within the Company's Half-Year Report. The Audit Committee reviews the nature and extent of these services to ensure that auditor independence is maintained. In this regard, compliance tax services (excluding iXBRL services for 2019 only) are carried out by another firm, so are included within legal and professional fees. iXBRL services will be supplied by an alternative provider to BDO for the year ended 31 March 2020 and in future years.

(5) Taxation on ordinary activities

The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date.

Any tax relief obtained in respect of Investment Adviser fees allocated to capital is reflected in the realised capital reserve and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company's taxable profits and its results as stated in the Financial Statements that arise from the inclusion of gains and losses in the tax assessments in periods different from those in which they are recognised in the Financial Statements.

Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis.

A deferred tax asset would be recognised only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilised.

			2020			2019
			2020			2019
	Revenue	Capital	Total	Revenue	Capital	Total
	£	£	£	£	£	£
	£	£	£	£	£	£

a) Analysis of tax charge:
UK Corporation tax on profits/
(losses) for the year	292,105	(157,158)	134,947	208,983	(147,645)	61,338

Total current tax charge	292,105	(157,158)	134,947	208,983	(147,645)	61,338

Corporation tax is based on a rate
of 19% (2019: 19%)
b) Profits/(losses) on ordinary
activities before tax	1,794,546	(2,687,551)	(893,005)	1,609,826	2,359,923	3,969,749
Profits/(losses) on ordinary
activities multiplied by main rate
of corporation tax in the UK of 19%
(2019: 19%)	340,964	(510,635)	(169,671)	305,867	448,385	754,252
Effect of:
UK dividends	(52,292)	-	(52,292)	(97,390)	-	(97,390)
Net investment portfolio losses/
(gains) not deductible/taxable	-	353,477	353,477	-	(596,030)	(596,030)
Unrelieved expenditure	3,433	-	3,433	518	-	518
Over provision in prior year	-	-	-	(12)	-	(12)

Actual tax charge	292,105	(157,158)	134,947	208,983	(147,645)	61,338

Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised.

No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust.

There is no potential liability to deferred tax (2019: £nil). There is no unrecognised deferred tax asset in 2020 (2019: £nil).

(6) Dividends paid and payable

Dividends payable are recognised as distributions in the Financial Statements when the Company's liability to pay them has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by the Shareholders, usually at the Company's Annual General Meeting.

A key judgement in applying the above accounting policy is in determining the amount of minimum income dividend to be paid in respect of a year. The Company's status as a VCT means it has to comply with Section 259 of the Income Tax Act 2007, which requires that no more than 15% of the income from shares and securities in a year can be retained from the revenue available for distribution for the year.

Amounts recognised as distributions to equity Shareholders in the year:
		For year ended	Pence		2020	2019
Dividend	Type	31 March	per share	Date Paid	£		£
Dividend	Type	31 March	per share	Date Paid	£		£
Interim	Income	2019	2.50p	22/03/2019	-		1,229,623
Interim	Capital	2019	2.50p	22/03/2019	-		1,229,623
Interim	Capital	2020	8.00p	20/09/2019	3,879,514		-
Interim	Capital*	2020	7.00p	20/09/2019	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		-
Dividends paid in previous years not claimed within the statutory period					-		(10,297)

					13,878,041		2,448,949

* These dividends were paid out of the Company's special distributable reserve.

Any proposed final dividend is subject to approval by Shareholders at the Annual General Meeting and has not been included as a liability in these Financial Statements.

Set out below are the total income dividends payable in respect of the financial year, which is the basis on which the requirements of section 274 of the Income Tax Act 2007 are considered.

Recognised income distributions in the Financial Statements for the year

		For year ended	Pence		2020	2019
Dividend	Type	31 March	per share	Date Paid	£		£
Dividend	Type	31 March	per share	Date Paid	£		£
Revenue available for distribution by way of dividends for the year					1,502,441		1,400,843

Interim	Income	2019	2.50p	22/03/2019	-		1,229,623
Interim	Income	2020	2.00p	27/03/2020	1,200,718

Total income dividends for the year					1,200,718		1,229,623

(7) Basic and diluted earnings and return per share

	2020		2019
	2020		2019
		£		£
		£		£

Total earnings after taxation:		(1,027,952)		3,908,411
Basic and diluted earnings per share (Note a)		(2.01)p		7.93p

Net revenue earnings from ordinary activities after taxation		1,502,441		1,400,843
Basic and diluted revenue earnings per share (Note b)		2.94p		2.84p

Net investment portfolio (losses)/gains		(1,860,406)		3,137,000
Capital Investment Adviser's fees (net of taxation)		(669,987)		(629,432)

Total capital earnings		(2,530,393)		2,507,568
Basic and diluted capital earnings per share (Note c)		(4.95)p		5.09p

Weighted average number of shares in issue in the year		51,134,517		49,247,849

Notes:

a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.

b) Basic revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue.

c) Basic capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue.

d) There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted returns.

(8) 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 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 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 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 every subsequent measurement date are reconsidered for any changes in light of more recent events or 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 enterprise value of the investment may be determined 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, 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, scale and liquidity).

or:-

- where a company's underperformance against plan indicates a diminution in the value of the investment, provision against cost 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, 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 year are summarised as follows:

		Unquoted
	Unquoted	preference	Unquoted
	equity shares	shares	Loan Stock	Total
	£	£	£	£
Cost at 31 March 2019	13,750,498	22,095	14,941,143	28,713,736
Permanent impairment at 31 March 2019	(2,117,304)	(739)	(913,787)	(3,031,830)
Unrealised gains at 31 March 2019	2,885,394	229,632	1,242,281	4,357,307

Valuation at 31 March 2019	14,518,588	250,988	15,269,637	30,039,213
Purchases at cost	5,191,745	-	-	5,191,745
Sale proceeds (Notes a and b)	(6,557,993)	(231,945)	(4,586,905)	(11,376,843)
Net realised gains on investments (Note a)	3,360,351	-	409,290	3,769,641
Net unrealised losses on investments (Note c)	(2,599,686)	(14)	(3,030,347)	(5,630,047)

Valuation at 31 March 2020	13,913,005	19,029	8,061,675	21,993,709

Cost at 31 March 2020	15,983,143	21,710	10,898,798	26,903,651
Permanent impairment at 31 March 2020 (Note d)	(1,546,240)	-	(156,982)	(1,703,222)
Unrealised gains at 31 March 2020	(523,898)	(2,681)	(2,680,141)	(3,206,720)

Valuation at 31 March 2020	13,913,005	19,029	8,061,675	21,993,709

Net realised gains on investments of £3,769,641 together with net unrealised losses on investments of £(5,630,047) equal net investment portfolio losses of £(1,860,406) shown on the Income Statement.

A breakdown of the increases and the decreases in unrealised valuations of the portfolio is shown in the Investment Portfolio Summary.

Major movements in investments

Note a) Disposals of investment portfolio companies during the year were:

					Realised
		Investment	Disposal	Opening	gain/(loss)
Company	Type	Cost	Proceeds	Valuation	in year
		£	£	£	£
Turner Topco Limited (trading as	Realisation	1,320,963	3,610,968	1,198,168	2,412,800
Auction Technology Group)
Redline Worldwide Limited	Realisation	682,222	926,803	341,107	585,696
ASL Technology Holdings Limited	Realisation	2,092,009	3,681,961	3,190,292	491,669
The Plastic Surgeon Holdings Limited	Realisation	39,444	1,177,723	875,502	302,221
Entanet Holdings Limited	Contingent	-	167,210	-	167,210
	consideration
H Realisations (2018) Limited (formerly	Realisation	1,728	1,728	-	1,728
Hemmels Limited)
Master Removers Group 2019 Limited	Partial realisation	117,862	278,969	278,292	677
Pattern Analytics Limited (trading as	Realisation	1,036,002	1,531,481	1,531,481	-
Biosite)
Super Carers Limited	Permanent impairment	384,720	-	192,360	(192,360)
Backhouse Management Limited	Realisation	339,400	-	-	-
Barham Consulting Limited	Realisation	339,400	-	-	-
Creasy Marketing Services Limited	Realisation	339,400	-	-	-
Hollydale Management Limited	Realisation	354,000	-	-	-
McGrigor Management Limited	Realisation	339,400	-	-	-

		7,386,550	11,376,843	7,607,202	3,769,641

Note b) The sale proceeds shown above of £11,376,843 is £26,993 less than that shown on the Statement of Cash Flows due to additional proceeds received in respect of Redline. This amount is recognised as a creditor at 31 March 2020.

Note c) Within net unrealised losses of £5,630,047 for the year, the significant losses in value compared to last year were as follows: £854,587 in Manufacturing Services Investment Limited (trading as Wetsuit Outlet), £779,501 in CGI Creative Graphics International Limited, £726,297 in Media Business Insight Holdings Limited, £708,406 in Master Removers Group 2019 Limited, and £650,292 in Blaze Signs Holding Limited. These losses were partially offset by unrealised gains in valuation compared to last year, including: £288,844 in Proactive Group Holdings Inc, £273,972 in Tovey Management Limited (trading as Access IS), £267,232 in Data Discovery Solutions Limited (trading as Active Navigation), £195,455 in MPB Group Limited and £116,029 in Bleach London Holdings Limited.

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

Note d) During the year, permanent impairments of the cost of investments have decreased from £3,031,830 to £1,703,222. The net decrease of £1,328,608 is due to the permanent impairment of one investee company and the removal of five investee companies which had been liquidated during the year and which had been permanently impaired previously.

(9) Current asset investments and Cash at bank

Cash equivalents, for the purposes of the Statement of Cash Flows, comprises bank deposits repayable on up to three months' notice and funds held in OEIC money-market funds. Current asset investments are the same but also include bank deposits that mature after three months. Current asset investments are disposable without curtailing or disrupting the business and are readily convertible into know amounts of cash at their carrying values at immediate of up to one year's notice. Cash, for the purposes of the Statement of Cash Flows is cash held with banks in accounts subject to immediate access. Cash at bank in the Balance Sheet is the same.

	2020		2019
	2020		2019
		£		£
		£		£

OEIC Money market funds (Cash equivalents per Statement of Cash Flows)		19,419,301		16,117,301

Current asset investments		19,419,301		16,117,301

Cash at bank		2,386,750		2,545,484

(10) Post balance sheet events

On 2 April 2020, a further 13,929,073 new Ordinary Shares were allotted under the Company's Offer for Subscription raising further net funds of £10.26 million. Following this allotment, the Offer for Subscription was closed. In total, net funds raised from the offer are £20.95 million.

On 5 May 2020, a further £0.37 million was invested into Rotageek and a further £0.53 million was invested on 26 May 2020 into MyTutor, both existing portfolio companies.

On 14 May 2020, the Board declared an interim dividend of 7.00 pence per share for the year ending 31 March 2021, paid to Shareholders on the register on 22 May 2020, on 19 June 2020.

On 19 May 2020, the Company received £0.05 million as a loan repayment from BookingTek Limited.

On 29 June 2020, £0.22 million was invested in a new portfolio company, Andersen EV, an electric vehicle (EV) charging product business.

(11) Statutory information

The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 31 March 2020 but is derived from those accounts. Statutory accounts will be delivered to the Registrar of Companies after the Annual General Meeting. The auditors have reported on these accounts and their report was unqualified and did not contain a statement under section 498(2) of the Companies Act 2006.

(12) Annual Report

The Annual Report will be published on the Company's website at www.mig2vct.co.uk shortly and shareholders who have not requested a hard copy of the report will shortly receive notification from the Company on how to download a pdf of the Report from the website. Shareholders and members of the public who wish to receive a hard copy of the Annual Report, may request a copy by writing to the Company Secretary, Mobeus Equity Partners LLP, 30 Haymarket (4th floor), London SW1Y 4EX or by email: vcts@mobeus.co.uk.

(13) Annual General Meeting

The Company's next Annual General Meeting will be held at 11.00 am on Wednesday, 9 September 2020, at the office of the Investment Adviser, Mobeus Equity Partners LLP, 30 Haymarket, London, SW1Y 4EX. Shareholders should note that the impact of COVID-19 could mean that Government guidance prevents physical attendance at the AGM. If this is the case, the Company will make an RNS announcement advising of any changes, which will also be added to the Company's website: www.mig2vct.co.uk to which Shareholders should refer. A copy of the Notice of the meeting can be found within the Annual Report. A proxy form for the meeting is included with Shareholders' copies of this Annual Report or is available electronically at www.signalshares.com. Shareholders may send any questions on the resolutions proposed to the following email address: agm@mobeus.co.uk. A response will be provided prior to lodging your proxy vote.

Contact details for further enquiries:

Robert Brittain or Trish Standaloft of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by email to info@mobeus.co.uk.

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, of forms part of, this announcement.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

FR URAWRRWUNOAR

Date		Source	Headline
2nd Apr 2024	9:30 am	RNS	Total Voting Rights and Capital
28th Mar 2024	7:00 am	RNS	Transaction in Own Shares and Total Voting Rights
4th Mar 2024	10:00 am	RNS	Transaction in Own Shares and Total Voting Rights
1st Mar 2024	11:00 am	RNS	Total Voting Rights and Capital
28th Feb 2024	3:30 pm	RNS	Merger Discussions
27th Feb 2024	2:00 pm	RNS	Realisation of Investment: Master Removers Group
21st Feb 2024	7:00 am	RNS	Interim Management Statement
20th Feb 2024	3:00 pm	RNS	Dividend Declaration
1st Feb 2024	11:42 am	RNS	Voting Rights and Capital
23rd Jan 2024	12:45 pm	RNS	Director Declaration - Non-Executive Appointment
22nd Jan 2024	2:00 pm	RNS	Transaction in Own Shares and Total Voting Rights
2nd Jan 2024	1:00 pm	RNS	Voting Rights and Capital
21st Dec 2023	10:00 am	RNS	Transaction in Own Shares
1st Dec 2023	7:00 am	RNS	Total Voting Rights
30th Nov 2023	7:00 am	RNS	INTERIM RESULTS TO 30 SEPTEMBER 2023
1st Nov 2023	7:00 am	RNS	Total Voting Rights
12th Oct 2023	7:00 am	RNS	Statement re Change of Registrar
2nd Oct 2023	7:00 am	RNS	Total Voting Rights
27th Sep 2023	1:00 pm	RNS	Transaction in Own Shares
13th Sep 2023	12:15 pm	RNS	Result of AGM
13th Sep 2023	11:46 am	RNS	Dividend Declaration - Replacement
13th Sep 2023	10:00 am	RNS	Dividend Declaration
12th Sep 2023	10:30 am	RNS	Interim Management Statement
1st Sep 2023	7:00 am	RNS	Total Voting Rights
1st Aug 2023	7:00 am	RNS	Total Voting Rights
26th Jul 2023	2:30 pm	RNS	Investment Adviser Co-investment Incentive Scheme
19th Jul 2023	3:00 pm	RNS	Transaction in Own Shares
13th Jul 2023	7:00 am	RNS	Annual Financial Report
3rd Jul 2023	7:00 am	RNS	Total Voting Rights
1st Jun 2023	7:00 am	RNS	Total Voting Rights
2nd May 2023	10:00 am	RNS	Total Voting Rights
3rd Apr 2023	7:00 am	RNS	Total Voting Rights
29th Mar 2023	10:00 am	RNS	Transaction in Own Shares
27th Mar 2023	1:00 pm	RNS	Realisation of investment: Tharstern Group Limited
7th Mar 2023	7:30 am	RNS	Transaction in Own Shares
1st Mar 2023	7:00 am	RNS	Total Voting Rights
22nd Feb 2023	3:32 pm	RNS	Dividend Declaration
7th Feb 2023	5:00 pm	RNS	Interim Management Statement
6th Feb 2023	5:25 pm	RNS	Issue of Equity and Total Voting Rights
1st Feb 2023	7:00 am	RNS	Total Voting Rights
31st Jan 2023	11:07 am	RNS	Issue of Supplementary Prospectus
27th Jan 2023	2:00 pm	RNS	Net Asset Value(s)
16th Jan 2023	7:00 am	RNS	CHANGE OF ALLOTMENT DATE
11th Jan 2023	5:35 pm	RNS	Transaction in Own Shares
15th Dec 2022	9:36 am	RNS	INTERIM RESULTS TO 30 SEPTEMBER 2022
5th Dec 2022	4:00 pm	RNS	Partial realisation of investment - EOTH Limited
16th Nov 2022	5:52 pm	RNS	Issue of Equity and Total Voting Rights
8th Nov 2022	5:42 pm	RNS	THE OFFER FOR SUBSCRIPTION IS NOW FULLY SUBSCRIBED
4th Nov 2022	9:50 am	RNS	Directorate Change
3rd Nov 2022	7:00 am	RNS	Net Asset Value(s)

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