Last checked at 
12 Dec 2017 14:21
Mobeus Income & Growth 2 VCT plc
Half-Year Report for the six months ended 30 September 2017
Mobeus Income & Growth 2 VCT plc ("MIG2", the "Company", "VCT" or the "Fund") is a Venture Capital Trust ("VCT") advised by Mobeus Equity Partners LLP ("Mobeus"), investing primarily in established, unquoted companies.
Company Objective
The Objective of the Company is 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.
Financial Highlights
Results for the six months ended 30 September 2017
As at 30 September 2017
Net assets: £38.83 million
Net asset value ("NAV") per share: 103.25 pence
· Net Asset Value ("NAV") Total Return1 per share was 3.3% while Share Price Total Return2 per share was 5.8% for the Half-Year.
· Shareholders received an interim dividend of 7.00 pence per share in respect of the current year ending 31 March 2018 on 27 July 2017. A further interim dividend of 9.00 pence per share has been declared, payable on 22 January 2018.
· A total of £3.26 million was received following the successful realisation of Entanet in the Half-Year.
· The Company made two new investments totalling £2.07 million and one follow-on investment of £0.09 million during the Half-Year.
· Total liquidity at the Half-Year is £13.90 million.
1 Calculated as closing NAV per share (103.25p) plus dividends paid in the year (7.00p) as a percentage increase of opening NAV (106.70p).
2 Calculated as closing share price (mid-price) (93.00p) plus dividends paid in the year (7.00p) as a percentage increase of opening share price (mid-price) (94.50p).
Performance Summary
Cumulative total shareholder return per share (NAV basis)*:
The longer term trend of performance on this measure is shown in the chart below:-
Period | Net asset value (NAV) per share | Cumulative dividends paid per share | Cumulative total shareholder return per share |
|
|
| (NAV basis) |
| (p) | (p) | (p) |
As at 30 September 2017 | 103.25 | 69.00 | 172.25 |
As at 31 March 2017 | 106.70 | 62.00 | 168.70 |
As at 31 March 2016 | 119.61 | 47.00 | 166.61 |
As at 31 March 2015 | 115.45 | 42.00 | 157.45 |
As at 31 March 2014 | 120.73 | 23.00 | 143.73 |
As at 30 April 2013 | 106.75 | 18.00 | 124.75 |
As at 30 April 2012 | 98.71 | 14.00 | 112.71 |
As at 30 April 2011 | 96.16 | 10.00 | 106.16 |
As at 30 April 2010 | 87.47 | 5.00 | 92.47 |
As at 30 April 2009 | 86.02 | 4.00 | 90.02 |
As at 30 April 2008 | 98.48 | 1.50 | 99.98 |
*Cumulative NAV total shareholder return is net asset value plus cumulative dividends paid to date on the current share class, launched in 2005.
Note: The above data does not reflect the benefit of income tax relief upon initial subscription for the Company's shares.
Chairman's Statement
I am pleased to present the Half-Year Report for Mobeus Income & Growth 2 VCT plc for the six months ended 30 September 2017.
Overview
The six-month period has provided a satisfactory return for shareholders, arising from income and solid portfolio performance. The successful realisation of the Company's investment in Entanet Holdings Limited for proceeds of £3.26 million made a significant contribution to performance.
The level of new investment has been in line with the Investment Adviser's plans for the period with two new growth capital investments and one follow-on investment. Further details of these investments are included under "Investment Portfolio" below. These new investments reflect the change in the VCT Rules focussing on the provision of growth capital to younger and smaller companies. Since the change to the VCT Rules in November 2015 a total of £5.53 million has been invested by this VCT in nine such companies. Whilst the VCT industry can no longer support management buyout investments these continue to be important, representing 77% of the portfolio by value. Overall the portfolio continues to perform satisfactorily.
Fundraising
In order to take advantage of a growing pipeline of investment opportunities, you will be aware that the Company launched an Offer for Subscription to raise up to £10 million, with an over-allotment facility to raise up to an additional £5 million, on 6 September 2017. I am pleased to report that demand for the Offer has been strong with the Board announcing on 13 October 2017 its decision to utilise the over-allotment facility. Applications amounting to £14.23 million have been received at the date of this Half-Year Report leaving a further £0.77 million to raise before the Offer is closed.
12,937,145 shares have so far been allotted to shareholders in several allotments at effective Offer prices ranging between 103.17p and 110.99p.
Performance for the six months ended 30 September 2017
The Net Asset Value ("NAV") Total Return was 3.3% for the Half-Year compared with a marginal rise for the comparative period in 2016. The share price total return for the Half-Year was 5.8%, compared with 2.9% for the equivalent period in 2016.
Half-Year ended 30 September | 2017 | 2016 |
| (pence per share) | (pence per share) |
Realised and net unrealised gains/(losses) on the investment portfolio | 2.63 | (0.32) |
Income on the investment portfolio and on liquidity | 2.44 | 2.10 |
Share buybacks and adjustments | 0.25 | 0.08 |
Gross return | 5.32 | 1.86 |
Less: Investment Adviser's fees and other expenses | (1.77) | (1.83) |
Net return | 3.55 | 0.03 |
|
|
|
After accounting for the interim dividend of 7.00 pence per share paid on 27 July 2017, and this net return of 3.55 pence, the NAV per share at 30 September 2017 was 103.25 pence per share, compared to 106.70 pence per share at 31 March 2017.
Investment Portfolio
The value of the investment portfolio reduced by £0.72 million during the first half of the year (2.6% lower than the 31 March 2017 value) and was valued at £26.17 million (including £1.03 million held in companies preparing to trade ("CPTs")) at the period-end. However, the like for like change in valuation showed an overall increase in the value of the portfolio by 3.5%.
The 3.5% increase was mainly due to the Company having completed the sale of its investment in Entanet Holdings Limited during the period, realising proceeds of £3.26 million. This investment has achieved a return on original investment cost of 2.5 times to date, over the three and a half years that the investment was held. Up to a further £0.33 million of deferred consideration may be received over the next two years, which would increase this return further.
During the period the Company made two new investments. An investment of £0.35 million was made into MyTutorweb, a digital marketplace connecting school pupils seeking private one-to-one tutoring with university student tutors, and £1.72 million (including £1.30 million previously held in a company preparing to trade) was invested into Wetsuit Outlet, a leading online retailer in the water sports market. A further investment of £0.09 million was also made into MPB Group Limited.
The Company received cash proceeds of £3.76 million during the period, including £1.70 million of loan stock repayments. This loan stock repayment figure includes £1.51 million from the realisation of Entanet with the balance part of planned repayments.
The portfolio movements for the period are summarised below:
| £m |
Portfolio value at 31 March 2017 | 28.08 |
New and further investments (excluding use of CPTs) | 0.86 |
Disposal proceeds | (3.76) |
Realised gains | 1.71 |
Valuation movements | (0.72) |
Portfolio value at 30 September 2017 | 26.17 |
Interim Dividend
The Board has declared a second interim dividend of 9.00 pence per share (2016: 5.00 pence), payable on 22 January 2018 to shareholders on the register on 22 December 2017 in line with the Company's dividend target. This will bring the total dividends paid in the current year to 16.00 pence per share. The Board does not expect to pay any further dividends during the current financial year, but regards 5.00p of this dividend as fulfilling its current annual dividend target of paying a dividend in respect of each financial year of not less than 5.00 pence per share. After paying this second interim dividend, cumulative dividends paid per share since the launch of the current share class will increase to 78.00 pence per share.
Liquidity
Liquidity of £13.90 million corresponds to 35.8% of net assets (31 March 2017: £12.58 million / 33.1%) and includes both £1.03 million (31 March 2017: £2.64 million) invested in CPTs and £2.29 million due from the first allotment of shares under the Offer. After including cash received from allotments made after the period-end and the payment of the second interim dividend of 9.00 pence per share referred to above, liquidity will become an estimated £16.81 million (36.9%).
Share buybacks
During the period under review, the Company bought back and cancelled 279,220 of its own shares, representing 0.8% of the issued share capital at the beginning of the period. The average price was 93 pence per share and cost a total £0.26 million, including expenses.
The Board continues to believe that the policy of maintaining the share price at an average discount of 10% to the prevailing NAV is appropriate in current market conditions. Continuing shareholders benefit from the difference between NAV per share and the price per share at which the shares are bought back.
Shareholder communications
The Investment Adviser holds an annual VCT event for shareholders in central London. Each event includes a presentation on the Mobeus Advised VCTs' investment activity and performance. The next event will be held on Tuesday 30 January 2018 at the Royal Institute of British Architects in central London. There will be a daytime and a separate evening session. Shareholders have been sent an invitation to this event with further details. If you have not replied to the invitation, but would like to attend, please apply to Mobeus (vcts@mobeusequity.co.uk) by email to register. The Board looks forward to meeting all shareholders able to attend.
Board Appointment
As mentioned in my Annual Report Statement, Ian Blackburn has joined the Board and Ken Vere Nicoll has retired. In accordance with the Articles of Association, Ian was elected as a Director at the Annual General Meeting held on 14 September 2017 and has been appointed as Chairman of the Nomination and Remuneration Committee. I am pleased to welcome Ian to the Board.
VCT legislation
As you may be aware, the UK Government recently conducted a Patient Capital Review aimed at expanding the provision of long-term capital for growing, innovative firms. Launched in November 2016, the closing date for responses to the consultation phase was 22 September 2017. Strong representations were made on behalf of the industry by the Investment Adviser, the Venture Capital Trust Association and The AIC. These submissions emphasised the benefits of the VCT scheme and argued that the structure of VCTs makes them a suitable vehicle to meet the Government's ambitions to provide such capital.
The measures proposed in the Autumn Budget of 22 November 2017 outlined the key findings from the review including a number of legislative changes to the VCT scheme the earliest of which are due to come into effect from 6 April 2018. We understand that these changes are designed to exclude tax-motivated investments where capital is not at risk (that is, principally seeking to preserve an investor's capital).
Your Board noted the intentions behind these changes. While some of these changes place further restrictions on the way investments may be structured, the Board currently has no reason to believe that they will materially affect the Company's existing investment policy or strategic objectives.
A summary of the current VCT regulations and those proposed in the Autumn Budget are stated below.
Outlook
Your Board remains of the opinion that your Company is well positioned to take advantage of the strong demand for growth capital investment despite the uncertainties faced by the UK economy. The fundraising is anticipated to be fully subscribed before the closing date and this will provide the Company with sufficient funds to continue the current investment rate in the short to medium term.
While the changes proposed in the recent Autumn Budget are likely to have an impact on the VCT industry, your Board believes that the existing and future investment portfolio should continue to deliver attractive returns and the Company is well positioned to adapt to the changes.
Your Board will shortly be issuing further guidance (in a joint announcement with the Boards of the other Mobeus advised VCTs) on the impact of the Budget changes, in a supplementary prospectus to the Offer. This document will be available on the Mobeus website at: www.obeusequity.co.uk/investor-area/fundraising and the National Storage Mechanism.
Finally, I would like to take this opportunity to thank shareholders for their continued support.
Nigel Melville
Chairman
12 December 2017
Investment Policy
The investment policy is designed to meet the Company's objective.
Investments
The Company invests primarily in a diverse portfolio of UK unquoted companies. Investments are made selectively across a number of sectors, principally in established companies. Investments are usually structured as part loan stock and part equity in order to produce a regular income stream and to generate capital gains from realisations.
There are a number of conditions within the VCT legislation which need to be met by the Company and which may change from time to time. The Company will seek to make investments in accordance with the requirements of prevailing VCT legislation.
Asset allocation and risk diversification policies, including the size and type of investments the Company makes, are determined in part by the requirements of prevailing VCT legislation. No single investment may represent more than 15% (by VCT tax value) of the Company's total investments at the date of investment.
Liquidity
The Company's cash and liquid funds are held in a portfolio of readily realisable interest bearing investments, deposit and current accounts, of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.
Borrowing
The Company's articles of association permit borrowings of amounts up to 10% of the adjusted capital and reserves (as defined therein). However, the Company has never borrowed and the Board would only consider doing so in exceptional circumstances.
Summary of VCT Regulation
To assist shareholders, the following table contains a summary of the most important rules that determine VCT approval.
To achieve continuing status as a VCT, the Company must meet a number of conditions, the most important of which are that:-
· The Company must hold at least 70%2, by VCT tax value1, of its total investments (shares, securities and liquidity) in VCT qualifying holdings, within approximately three years of a fundraising;
· Of these qualifying holdings, an overall minimum of 30% by VCT tax value1 (70% for funds raised on or after 6 April 2011) must be in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules)3;
· No investment in a single company or group of companies may represent more than 15% (by VCT tax value1) of the Company's total investments at the date of investment;
· The Company must pay sufficient levels of income dividend from its revenue available for distribution so as not to retain more than 15% of its income from shares and securities in a year;
· The Company's shares must be listed on a regulated European stock market; and
· Non-qualifying investments can no longer be made, except for certain exemptions in managing the Company's short-term liquidity.
To be a VCT qualifying holding, new investments must be in companies:-
· which carry on a qualifying trade;
· which have no more than £15 million of gross assets at the time of investment and £16 million immediately following investment from VCTs;
· whose maximum age is generally seven years (ten years for knowledge intensive businesses);
· that receive no more than an annual limit of £5 million and a lifetime limit of £12 million (£20 million for knowledge intensive companies), from VCTs and similar sources of State Aid funding; and
· that use the funds received from VCTs for growth and development purposes.
The conditions below take into account legislation up to the Finance Act 2017 which was enacted with effect from 6 April 2017. 1 VCT tax value means as valued in accordance with prevailing VCT legislation. The calculation of VCT tax value is arrived at using tax values, based on the cost of the most recent purchase of an investment instrument in a particular company, which differs from the actual cost of each investment shown in the Investment Portfolio Summary.
2 For accounting periods beginning on or after 6 April 2019, this percentage is expected to increase to 80%.
3 The requirement for VCTs to hold at least 30% of qualifying investments in "eligible shares" (broadly ordinary equity) from funds raised prior to 6 April 2011 is expected to be withdrawn. All qualifying investments made by VCTs after 5 April 2018 are expected to be included in funds which are required to comprise at least 70% of qualifying investments in "eligible shares".
|
Summary of proposed changes to VCT regulation announced in November 2017 Budget Statement
From 6 April 2018: · VCTs will be required to invest 30% of funds raised in an accounting period beginning on or after 6 April 2018 in qualifying holdings within 12 months of the end of the accounting period;
From the date of Royal Assent (spring of 2018): · VCTs may not make investments that do not appear to meet the new 'risk to capital' condition (which requires a company, at the time of investment, to be an entrepreneurial company with the objective to grow and develop, and where there is genuine risk of loss of capital).
· VCTs may no longer offer secured loans to investee companies, and any returns on loan capital above 10 per cent per annum must represent no more than a commercial return on the principal.
For accounting periods beginning on or after 6 April 2019:
· The period for reinvestment of proceeds on disposal of qualifying holdings investments will increase from 6 to 12 months;
· The proportion of VCT funds that must be held in qualifying holdings will increase from 70% to 80%.
Please note that the above changes are not exhaustive, are yet to be enacted and may change by the time Royal Assent is granted.
|
Investment Review
There has been an encouraging level of investment activity during the Half-Year including one significant divestment, two new investments and one follow-on investment.
The Company faces further regulatory changes following the Government's Patient Capital Review and the resulting measures introduced in the Budget announced on 22 November 2017. Together with the continuing uncertainty of the Brexit process the current levels of uncertainty are set to continue for some time yet.
New investment
A total of £2.16 million was invested during the six months under review. Two new investments were made, into MyTutorweb and Wetsuit Outlet. MyTutorweb, a digital marketplace connecting school pupils seeking private one-to-one tutoring with university student tutors, received growth investment of £0.35 million. Wetsuit Outlet, a leading online retailer in the water sports market, received growth investment of £1.72 million. There was one follow-on investment into an existing portfolio company, with a further investment of £0.09 million made into MPB, a leading online retailer of used camera and video equipment, to further support growth.
Patient Capital Review
As the Chairman's Statement noted, the UK Government has conducted a review to identify and tackle factors considered to be adversely affecting the supply of longer term capital to small and developing firms. The consultation period closed on 22 September 2017 and strong representations were made on behalf of the VCT industry by Mobeus as Investment Adviser, the Venture Capital Trust Association and the Association of Investment Companies.
As anticipated, the recent Chancellor's Autumn Budget outlined the key findings from the review including a number of changes to the VCT Scheme, the earliest of which are due to come into effect from 6 April 2018.
Mobeus, as Investment Adviser, believe these changes should not overall affect the ability of the Company to continue to make successful growth capital investments.
New investment in the Half-Year
Company | Business | Date of investment | Amount of new investment (£m) |
MyTutorweb | Online tutoring | May 2017 | 0.35 |
MyTutorweb is a digital marketplace that connects school pupils who are seeking private one-to-one tutoring with university student tutors. The business is satisfying a growing demand from both schools and parents to improve pupils' exam results and enhance their prospects. The investment represents an opportunity to consolidate the £2 billion UK tutoring market, expand MyTutorweb's market presence and will also be used to drive technological development. The company's latest audited accounts for the year ended 31 December 2016 show a turnover of £0.21 million and loss before interest, tax and amortisation of goodwill of £0.79 million. | |||
Wetsuit Outlet | Retailer | July 2017 | 1.72* |
B2C Holdings Limited (trading as Wetsuit Outlet) has established itself as a leading online retailer in the water sports market, stocking an impressive brand portfolio including Musto, Billabong, Rip Curl, O'Neill, Red Paddle (an existing Mobeus investment) and Gul. The investment will enable management to expand existing activities and enter two new markets. Established in 2005, the company has developed into a successful and profitable business with revenues of £11.51 million and £1.77 million profit before interest, tax and amortisation of goodwill in the financial year ended 31 March 2017. | |||
*£1.30 million previously held in Manufacturing Services Investment Limited, a company preparing to trade, along with £0.42 million from the Company was used for this investment. | |||
Further investments in existing portfolio companies in the Half-Year
Company | Business | Date of investment | Amount of new investment (£m) |
MPB Group | Online marketplace for used camera and video equipment | September 2017 | 0.09 |
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. This further investment is to provide additional working capital to fund continued expansion of its platform globally, having launched into both the US and German markets. The company's latest audited accounts for the year ended 31 March 2017 show turnover of £13.20 million and loss before interest, tax and amortisation of goodwill of £0.47 million. | |||
Realisations in the Half-Year
The Company realised one investment during the period under review, for cash proceeds totalling £3.26 million. This was the very successful sale of the Company's investment in Entanet Holdings Limited. Including the loan stock repayments of £0.19 million from TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited) and other receipts of £0.31 million, total cash proceeds for the Half-Year amounted to £3.76 million.
Company | Business | Period of investment | Total cash proceeds over the life of the investment/Multiple over cost |
Entanet | Wholesale voice and data communications provider | February 2014 to August 2017 | £3.69 million 2.5 times cost |
The VCT sold this investment in Entanet to AIM quoted CityFibre Infrastructure Holdings plc for £3.26 million in August 2017. Deferred contingent consideration of up to £0.33 million is potentially payable over the next 24 months. Excluding this deferred consideration, the Company has so far realised a gain of £1.82 million, being 4.83 pence per share, and has returned an IRR of 39% to date, an excellent outcome. | |||
Loan stock repayments
The Company has received three loan stock repayments totalling £0.19 million during the period, from TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited).
Mobeus Equity Partners LLP
Investment Adviser
12 December 2017
Investment Portfolio Summary
as at 30 September 2017
| Qualifying investments | Date of first investment / Sector | Total Book cost at 30 September 2017 | Valuation at 31 March 2017 | Additionsat cost
| Disposals atvaluation | Valuation at 30 September 2017 | Change in valuation for period | % of net assetsbyvalue |
|
|
| £ | £ | £ | £ | £ | £ |
|
| Unquoted investments |
|
|
|
|
|
|
|
|
| ASL Technology Holdings LimitedPrinter and photocopier services | December 2010Support services | 2,092,009 | 2,258,388 | - | - | 2,186,975 | (71,413) | 5.6% |
| Tovey Management Limited(trading as Access IS)Provider of data capture and scanning hardware | October 2015Software and Computer Services | 1,733,500 | 2,119,958 | - | - | 2,067,254 | (52,704) | 5.3% |
| Virgin Wines Holding Company LimitedOnline wine retailer | November 2013General retailers | 1,284,333 | 1,761,822 | - | - | 1,629,743 | (132,079) | 4.2% |
| Manufacturing Services Investment Limited (trading as Wetsuit Outlet Limited)1Online retailer in the water sports market | February 2014General retailers | 1,412,992 | 1,000,300 | 412,692 | - | 1,412,992 | - | 3.6% |
| Gro-Group Holdings LimitedBaby sleep products | March 2013General retailers | 1,123,088 | 973,928 | - | - | 1,220,331 | 246,403 | 3.1% |
| Vian Marketing Limited(trading as Tushingham Sails)Design, manufacture and sale of stand-up paddleboards and windsurfing sails | July 2015Leisure goods | 717,038 | 987,739 | - | - | 1,132,350 | 144,611 | 3.0% |
| Fullfield Limited(trading as Motorclean)Vehicle cleaning and valet services | July 2011Support services | 1,025,152 | 1,053,281 | - | - | 1,091,000 | 37,719 | 2.9% |
| EOTH Limited(trading as Rab and Lowe Alpine)Branded outdoor equipment and clothing | October 2011General retailers | 817,185 | 1,001,498 | - | - | 1,069,172 | 67,674 | 2.8% |
| Turner Topco Limited(trading as ATG Media)Publisher and online auction platform operator | October 2008Media | 1,320,963 | 1,151,484 | - | - | 1,044,591 | (106,893) | 2.7% |
| Tharstern Group LimitedSoftware based management information systems to the print sector | July 2014Software and Computer Services | 789,815 | 942,138 | - | - | 961,550 | 19,412 | 2.5% |
| Master Removers Group (formerly Leap New Co Limited(trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van))A specialist logistics, storage and removals business | December 2014Support services | 369,625 | 526,134 | - |
- | 747,355 | 221,221 | 2.0% |
| RDL Corporation LimitedRecruitment consultants for the pharmaceutical, business intelligence and IT industries | October 2010Support services | 1,000,000 | 1,031,100 | - | - | 743,950 | (287,150) | 1.9% |
| Veritek Global Holdings LimitedMaintenance of imaging equipment | July 2013Support services | 967,780 | 715,856 | - | - | 740,516 | 24,660 | 1.9% |
| TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited)Snagging and finishing of domestic and commercial properties | April 2008Support services | 231,532 | 881,275 | - | 192,978 | 739,654 | 51,357 | 1.9% |
| Media Business Insight Holdings LimitedA publishing and events business focused on the creative production industries | January 2015Media | 1,447,188 | 979,875 | - | - | 714,925 | (264,950) | 1.8% |
| Redline Worldwide LimitedProvider of security services to the aviation industry | February 2016Support services | 682,222 | 837,283 | - | - | 692,348 | (144,935) | 1.8% |
| Vectair Holdings LimitedDesigner and distributor of washroom products | January 2006Support services | 60,293 | 403,701 | - | - | 678,593 | 274,892 | 1.7% |
| CGI Creative Graphics International LimitedVinyl graphics to global automotive, recreation vehicle and aerospace markets | June 2014General Industrials | 999,568 | 888,418 | - | - | 669,295 | (219,123) | 1.7% |
| MPB Group LimitedOnline marketplace for photographic and video equipment | June 2016General retailers | 463,350 | 374,244 | 89,106 | - | 589,291 | 125,941 | 1.5% |
| Pattern Analytics Limited (trading as Biosite) Workforce management and security services for the construction industry | November 2016 Support services | 495,479 | 495,479 | - | - | 495,479 | - | 1.3% |
| Preservica LimitedSeller of proprietary digital archiving software | December 2015Software and Computer Services | 485,770 | 485,770 | - | - | 485,770 | - | 1.3% |
| Blaze Signs Holdings LimitedManufacturing and installation of signs | April 2006Support services | 437,030 | 526,492 | - | - | 469,856 | (56,636) | 1.2% |
| Ibericos Etc. Limited (trading as Tapas Revolution) Spanish restaurant chain | January 2017 General retailers | 451,248 | 451,248 | - | - | 451,248 | - | 1.2% |
| BookingTek Limited Software for hotel groups | October 2016 Software and Computer services | 450,442 | 450,442 | - | - | 450,442 | - | 1.2% |
| Buster and Punch Holdings Limited (formerly Chatfield Services Limited) Industrial inspired lighting and interiors retailer | March 2017General retail | 436,391 | 436,391 | - | - | 436,391 | - | 1.1% |
| Bourn Bioscience LimitedManagement of In-vitro fertilisation clinics | January 2014HealthcareEquipment & Services | 757,101 | 504,586 | - | - | 435,074 | (69,512) | 1.1% |
| MyTutorweb Limited Digital marketplace connecting school pupils seeking one to one online tutoring | May 2017 Support services | 349,661 | - | 349,661 | - | 349,661 | - | 0.9% |
| Jablite Holdings LimitedManufacturer of expanded polystyrene products | April 2015Construction and materials | 281,398 | 401,864 | - | - | 171,931 | (229,933) | 0.4% |
| Lightworks Software LimitedProvider of software for CAD and CAM vendors | April 2006Software and Computer Services | 25,727 | 92,737 | - | - | 110,083 | 17,346 | 0.3% |
| Racoon International Group Limited (formerly Racoon International Holdings Limited)Supplier of hair extensions, hair care products and training | December 2006Personal goods | 1,045,985 | 83,729 | - | - | - | (83,729) | 0.0% |
| Entanet Holdings Limited Wholesale voice and data communications provider | February 2014 Fixed line Telecommunications | - | 1,550,227 | - | 1,550,227 | - | - | 0.0% |
| Newquay Helicopters (2013) Limited (in members' voluntary liquidation)Helicopter service operators | June 2006Support services | 30,469 | - | - | - | - | - | 0.0% |
| Total qualifying investments |
| 23,784,334 | 25,367,387 | 851,459 | 1,743,205 | 23,987,820 | (487,821) | 61.9%2 |
| Non-qualifying investments |
|
|
|
|
|
|
|
|
| Media Business Insight Limited | as above | 561,884 | 855,516 | - | - | 624,192 | (231,324) | 1.6% |
| Hollydale Management LimitedCompany seeking to carry on a business in the food sector | March 2015Support services | 566,400 | 354,000 | - | - | 354,000 | - | 0.9% |
| Manufacturing Services Investment Limited (trading as Wetsuit Outlet)1 | as above | 304,000 | 608,000 | - | 304,000 | 304,000 | - | 0.8% |
| Tovey Management Limited(trading as Access IS) | as above | 219,873 | 219,873 | - | - | 219,873 | - | 0.6% |
| Backhouse Management LimitedCompany seeking to carry on a business in the motor sector | April 2015Support services | 441,220 | 169,700 | - | - | 169,700 | - | 0.4% |
| Barham Consulting LimitedCompany seeking to carry on a business in the catering sector | April 2015Support services | 441,220 | 169,700 | - | - | 169,700 | - | 0.4% |
| Creasy Marketing Services LimitedCompany seeking to carry on a business in the textile sector | April 2015Support services | 441,220 | 169,700 | - | - | 169,700 | - | 0.4% |
| McGrigor Management LimitedCompany seeking to carry on a business in the pharmaceutical sector | April 2015Support services | 441,220 | 169,700 | - | - | 169,700 | - | 0.4% |
| 365 Agile Group(formerly lafyds plc)Development of energy saving devices for domestic use | March 2001Electronic and electrical equipment | 254,586 | - | - | - | - | - | 0.0% |
| Total non-qualifying investments |
| 3,671,623 | 2,716,189 | - | 304,000 | 2,180,865 | (231,324) | 5.5% |
| Total investment portfolio per note 9 |
| 27,455,957 | 28,083,576 | 851,459 | 2,047,205 | 26,168,685 | (719,145) | 67.4% |
| Cash and current asset investments3 |
|
| 9,935,913 | - | - | 10,579,961 |
| 27.2% |
| Total investments including cash and current asset investments |
| 27,455,957 | 38,019,489 | 851,459 | 2,047,205 | 36,748,646 | (719,145) | 94.6% |
| Other current assets |
|
| 185,596 |
|
| 2,512,800 |
| 6.5% |
| Current liabilities |
|
| (144,100) |
|
| (429,540) |
| (1.1)% |
| Totals |
| 27,455,957 |
| 851,459 | 2,047,205 |
|
|
|
| Net assets at the period-end |
|
| 38,060,985 |
|
|
38,831,906 |
| 100.0% |
1 £1,608,300 previously held in Manufacturing Services Limited, a company preparing to trade, was used for the investment into Wetsuit Outlet resulting in a repayment of £304,000. An additional £412,692 of cash was also invested out of the VCT's cash resources.
2 As at 30 September 2017, 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 six months from the date of disposal. It also has up to three years to bring 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.
Statements of the Directors' Responsibilities
Responsibility Statement
In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Nigel Melville (Chairman), Adam Kingdon (Chairman of the Audit Committee), Sally Duckworth (Chairman of the Investment Committee) and Ian Blackburn (Chairman of the Nomination & Remuneration Committee), being the Directors of the Company confirm that to the best of their knowledge:
(a) the unaudited condensed set of financial statements, which has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit of the Company, as required by DTR 4.2.10;
(b) the Half-Year Management Report which comprises the Chairman's Statement, Investment Policy, Investment Review and the Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;
(c) a description of the principal risks and uncertainties facing the Company for the remaining six months is set out below, in accordance with DTR 4.2.7; and
(d) there were no related party transactions in the first six months of the current financial year that are required to be disclosed, in accordance with DTR 4.2.8.
Principal Risks and Uncertainties
In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Accounts for the year ended 31 March 2017 ("the Annual Report").
The principal risks faced by the Company are:
· economic;
· investment and strategic;
· loss of approval as a VCT;
· VCT regulatory changes;
· regulatory;
· financial and operating;
· market;
· asset liquidity;
· market liquidity;
· counterparty; and
· cyber and data security.
A more detailed explanation of these risks can be found in the Strategic Report on pages 20 and 21 and in Note 15 on pages 54 - 61 of the Annual Report and Accounts for the year ended 31 March 2017, copies of which are available on the Investment Adviser's website, www.mobeusequity.co.uk or by going directly to the VCT's website, www.mig2vct.co.uk.
Going Concern
The Board has assessed the Company's operation as a going concern. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Half-Year management report which comprises the Chairman's Statement, Investment Policy, Investment Review and Investment Portfolio Summary. The Directors have satisfied themselves that the Company continues to maintain a significant cash position. The majority of companies in the portfolio continue to trade profitably and the portfolio taken as a whole remains resilient and well-diversified. The major cash outflows of the Company (namely investments, buybacks and dividends) are within the Company's control.
The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in Note 15 on pages 54 - 61 of the Annual Report and Accounts for the year ended 31 March 2017. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the Half-Year report and annual financial statements.
Cautionary Statement
This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast.
For and on behalf of the Board
Nigel Melville
Chairman
12 December 2017
Unaudited Condensed Income Statement
for the six months ended 30 September 2017
|
|
|
| ||||||||
|
| Six months ended 30 September 2017 (unaudited) |
| Year ended 31 March 2017 (audited) | Six months ended 30 September 2016 (unaudited) | ||||||
| Notes | Revenue | Capital | Total |
| Revenue | Capital | Total | Revenue | Capital | Total |
|
| £ | £ | £ |
| £ | £ | £ | £ | £ | £ |
|
|
|
| ||||||||
Unrealised (losses)/gains on investments held at fair value | 9 | - | (719,145) | (719,145) |
| - | 229,772 | 229,772 | - | (115,329) | (115,329) |
Realised gains on investments held at fair value | 9 | - | 1,709,101 | 1,709,101 |
| - | 76,067 | 76,067 | - | - | - |
Income | 4 | 916,695 | - | 916,695 |
| 1,679,033 | - | 1,679,033 | 752,727 | - | 752,727 |
Investment Adviser's fees | 5 | (111,214) | (333,641) | (444,855) |
| (237,791) | (713,374) | (951,165) | (121,482) | (364,445) | (485,927) |
Investment Adviser's performance fee |
| - | - | - |
| - | (2,692) | (2,692) | - | - | - |
Other expenses |
| (183,118) | - | (183,118) |
| (304,306) | - | (304,306) | (168,991) | - | (168,991) |
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) on ordinary activities before taxation |
| 622,363 | 656,315 | 1,278,678 |
| 1,136,936 | (410,227) | 726,709 | 462,254 | (479,774) | (17,520) |
Tax on profit/(loss) on ordinary activities | 6 | (102,619) | 63,392 | (39,227) |
| (172,122) | 143,213 | (28,909) | (72,889) | 72,889 | - |
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(loss) and total comprehensive income |
| 519,744 | 719,707 | 1,239,451 |
| 964,814 | (267,014) | 697,800 | 389,365 | (406,885) | (17,520) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
Ordinary Shares | 7 | 1.43p | 1.99p | 3.42p |
| 2.69p | (0.75)p | 1.94p | 1.08p | (1.13)p | (0.05)p |
|
|
|
|
|
|
|
|
|
|
|
|
The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised (losses)/gains and realised gains on investments and the proportion of the Investment Adviser's fee and performance fee charged to capital.
The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS"). In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.
All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the period.
Unaudited Condensed Balance Sheet
as at 30 September 2017
|
|
|
|
|
|
| 30 September 2017 (unaudited) | 31 March 2017 (audited) | 30 September 2016 (unaudited) |
| Notes | £ | £ | £ |
|
|
|
|
|
Fixed assets |
|
|
|
|
Investments at fair value | 9 | 26,168,685 | 28,083,576 | 29,532,744 |
Current assets |
|
|
|
|
Debtors and prepayments |
| 2,512,800 | 185,596 | 171,789 |
Current asset investments | 10 | 7,947,301 | 5,197,301 | 6,934,362 |
Cash at bank and in hand | 10 | 2,632,660 | 4,738,612 | 4,531,812 |
|
| 13,092,761 | 10,121,509 | 11,637,963 |
|
|
|
|
|
Creditors: amounts falling due within one year |
| (429,540) | (144,100) | (100,084) |
|
|
|
|
|
Net current assets |
| 12,663,221 | 9,977,409 | 11,537,879 |
|
|
|
|
|
Net assets |
| 38,831,906 | 38,060,985 | 41,070,623 |
|
|
|
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
Called up share capital |
| 376,099 | 356,724 | 358,248 |
Share premium reserve |
| 18,167,334 | 15,901,497 | 15,901,497 |
Capital redemption reserve |
| 90,375 | 87,583 | 86,059 |
Revaluation reserve |
| 1,311,778 | 2,001,764 | 1,656,663 |
Special distributable reserve |
| 6,843,441 | 7,540,615 | 7,979,631 |
Realised capital reserve |
| 10,492,795 | 11,142,462 | 13,741,824 |
Revenue reserve |
| 1,550,084 | 1,030,340 | 1,346,701 |
|
|
|
|
|
Equity shareholders' funds |
| 38,831,906 | 38,060,985 | 41,070,623 |
|
|
|
|
|
Basic and diluted net asset value per share | 11 | 103.25p | 106.70p | 114.64p |
|
|
|
|
|
Unaudited Condensed Statement of Changes in Equity
for the six months ended 30 September 2017
|
|
| ||||||
| Non-distributable reserves | Distributable reserves |
| |||||
| Called up | Share | Capital | Revaluation | Special | Realised | Revenue | Total |
| share | premium | redemption | reserve | distributable | capital | reserve |
|
| capital | reserve | reserve |
| reserve | reserve |
|
|
|
|
|
|
| (Note a) | (Note b) | (Note b) |
|
| £ | £ | £ | £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
|
|
At 1 April 2017 | 356,724 | 15,901,497 | 87,583 | 2,001,764 | 7,540,615 | 11,142,462 | 1,030,340 | 38,060,985 |
Comprehensive incomefor the period |
|
|
|
|
|
|
|
|
(Loss)/profit for the period | - | - | - | (719,145) | - | 1,438,852 | 519,744 | 1,239,451 |
|
|
|
|
|
|
|
|
|
Total comprehensiveincome for the period | - | - | - | (719,145) | - | 1,438,852 | 519,744 | 1,239,451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions by anddistributions to owners |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Shares issued under Offer for Subscription (note d) | 22,167 | 2,299,457 | - | - | (796) | - | - | 2,320,828 |
Expenses of share offers (note d) | - | (33,620) | - | - | - | - | - | (33,620) |
Shares bought back (note c) | (2,792) | - | 2,792 | - | (258,671) | - | - | (258,671) |
Dividends paid | - | - | - | - | - | (2,497,067) | - | (2,497,067) |
|
|
|
|
|
|
|
|
|
Total contributionsby and distributionsto owners | 19,375 | 2,265,837 | 2,792 | - | (259,467) | (2,497,067) | - | (468,530) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other movements |
|
|
|
|
|
|
|
|
Realised losses transferredto special reserve (note a) | - | - | - | - | (437,707) | 437,707 | - | - |
Realisation of previouslyunrealised depreciation | - | - | - | 29,159 | - | (29,159) | - | - |
|
|
|
|
|
|
|
|
|
Total other movements | - | - | - | 29,159 | (437,707) | 408,548 | - | - |
|
|
|
|
|
|
|
|
|
At 30 September 2017 | 376,099 | 18,167,334 | 90,375 | 1,311,778 | 6,843,441 | 10,492,795 | 1,550,084 | 38,831,906 |
|
|
|
|
|
|
|
|
|
Notes
a): The cancellation of the formerly named C Share Fund's share premium reserve (as approved at the Extraordinary General meeting held on 10 September 2008 and by the order of the Court dated 28 October 2009), together with the previous cancellation of the share premium reserve attributable to the former Ordinary Share Fund and C Shares, has provided the Company with a special distributable reserve. The purpose of this reserve is to fund market purchases of the Company's own shares as and when it is considered by the Board to be in the interests of the shareholders, and to write-off existing and future losses as the Company must take into account capital losses in determining distributable reserves. The total transfer of £437,707 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the period.
b): The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company.
c): During the period, the Company purchased 279,220 of its own shares at the prevailing market price for a total cost of £258,671, which were subsequently cancelled. The difference between the total cost above of £258,671 and that per the Statement of Cash Flows of £18,002 is due to two share repurchases totalling £240,669 held in creditors at 30 September 2017.
d): Shares issued as part of Offer for Subscription (net of expenses) per the Cash Flow Statement of £nil differ to that shown above of £2,287,208 (net of expenses of £33,620). This is due to net funds receivable by the Company, arising from an allotment of shares on 28 September 2017, which was held as a debtor as at 30 September 2017.
The composition of each of these reserves is explained below:
Called up share capital The nominal value of shares originally issued, increased for subsequent share issues either via an Offer for Subscription or reduced due to shares bought back by the Company.
Capital redemption reserve The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained.
Share premium reserve This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under Offers for Subscription.
Revaluation reserve Increases and decreases in the valuation of investments held at the period end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in note 9), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the period.
Special distributable reserve The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser's fee and 100% of any performance fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve.
Realised capital reserve The following are accounted for in this reserve:
• Gains and losses on realisation of investments; • Permanent diminution in value of investments; • Transaction costs incurred in the acquisition of investments; • 75% of the Investment Adviser's fee (subsequently transferred to the Special distributable reserve along with the related tax effect) and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies, and • Capital dividends paid.
Revenue reserve Income and expenses that are revenue in nature are accounted for in this reserve togther with the related tax effect, as well as income dividends paid that are classified as revenue in nature. |
Unaudited Condensed Statement of Changes in Equity
for the six months ended 30 September 2016
|
|
| ||||||
| Non-distributable reserves | Distributable reserves |
| |||||
| Called up | Share | Capital | Revaluation | Special | Realised | Revenue | Total |
| share | premium | redemption | reserve | distributable | capital | reserve |
|
| capital | reserve | reserve |
| reserve | reserve |
|
|
| £ | £ | £ | £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
|
|
At 1 April 2016 | 360,685 | 15,901,497 | 83,622 | 1,783,724 | 8,524,729 | 15,529,419 | 957,336 | 43,141,012 |
Comprehensive incomefor the period |
|
|
|
|
|
|
|
|
(Loss)/profit for the period | - | - | - | (115,329) | - | (291,556) | 389,365 | (17,520) |
|
|
|
|
|
|
|
|
|
Total comprehensiveincome for the period | - | - | - | (115,329) | - | (291,556) | 389,365 | (17,520) |
|
|
|
|
|
|
|
|
|
Contributions by anddistributions to owners |
|
|
|
|
|
|
|
|
Shares bought back | (2,437) | - | 2,437 | - | (253,542) | - | - | (253,542) |
Dividends paid | - | - | - | - | - | (1,799,327) | - | (1,799,327) |
|
|
|
|
|
|
|
|
|
Total contributionsby and distributionsto owners | (2,437) | - | 2,437 | - | (253,542) | (1,799,327) | - | (2,052,869) |
|
|
|
|
|
|
|
|
|
Other movements |
|
|
|
|
|
|
|
|
Realised losses transferredto special reserve | - | - | - | - | (291,556) | 291,556 | - | - |
Realisation of previouslyunrealised appreciation | - | - | - | (11,732) | - | 11,732 | - | - |
Total other movements | - | - | - | (11,732) | (291,556) | 303,288 | - | - |
|
|
|
|
|
|
|
|
|
At 30 September 2016 | 358,248 | 15,901,497 | 86,059 | 1,656,663 | 7,979,631 | 13,741,824 | 1,346,701 | 41,070,623 |
|
|
|
|
|
|
|
|
|
Unaudited Condensed Statement of Cash Flows
for the six months ended 30 September 2017
|
|
|
|
|
|
| Six months ended 30 September 2017 (unaudited) | Year ended 31 March 2017 (audited) | Six months ended 30 September 2016 (unaudited) |
| Notes | £ | £ | £ |
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Profit/(loss) for the financial period |
| 1,239,451 | 697,800 | (17,520) |
Adjustments for: |
|
|
|
|
Unrealised losses/(gains) on investments |
| 719,145 | (229,772) | 115,329 |
Realised gains on investments |
| (1,709,101) | (76,067) | - |
Tax change for the current period |
| 39,227 | 28,909 | - |
(Increase)/decrease in debtors |
| (39,996) | 80,712 | 94,519 |
Increase/(decrease) in creditors and accruals |
| 5,544 | (44,914) | (60,850) |
|
|
|
|
|
Net cash inflow from operations |
| 254,270 | 456,668 | 131,478 |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Purchase of investments | 9 | (851,459) | (2,257,183) | (374,244) |
Disposal of investments | 9 | 3,756,306 | 3,812,501 | 59,226 |
No change/decrease in bank deposits with a maturity over three months |
| - | 507,061 | - |
|
|
|
|
|
Net cash inflow/(outflow) from investing activities |
| 2,904,847 | 2,062,379 | (315,018) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Equity dividends paid | 8 | (2,497,067) | (5,366,566) | (1,799,327) |
Purchase of own shares |
| (18,002) | (412,046) | (253,498) |
|
|
|
|
|
Net cash outflow from financing activities |
| (2,515,069) | (5,778,612) | (2,052,825) |
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents |
| 644,048 | (3,259,565) | (2,236,365) |
Cash and cash equivalents at start of period |
| 9,935,913 | 13,195,478 | 13,195,478 |
|
|
|
|
|
Cash and cash equivalents at end of period |
| 10,579,961 | 9,935,913 | 10,959,113 |
|
|
|
|
|
Cash and cash equivalents comprise: |
|
|
|
|
Cash at bank and in hand | 10 | 2,632,660 | 4,738,612 | 4,531,812 |
Cash equivalents | 10 | 7,947,301 | 5,197,301 | 6,427,301 |
|
|
|
|
|
Notes to the Unaudited Condensed Financial Statements
for the six months ended 30 September 2017
1. Company information
Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in England, registration number 03946235. The registered office is 30 Haymarket, London, SW1Y 4EX.
2. Basis of preparation
These Financial Statements are prepared in accordance with accounting policies consistent with Financial Reporting Standard 102 ("FRS 102"), Financial Reporting Standard 104 ("FRS 104") - Interim Financial Reporting, with the Companies Act 2006 and the 2014 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies ("AIC"). The Financial Statements have been prepared on the historical cost basis except for the modification to a fair value basis for certain financial instruments as specified in note 9.
The Half-Year Report has not been audited, nor has it been reviewed by the auditor pursuant to the Financial Reporting Council's (FRC) guidance on Review of Interim Financial Information.
3. Principal accounting policies
The accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report, while the policy in respect of investments is included within an outlined box at the top of note 9 on investments.
4. Income
|
|
|
|
| Six months ended 30 September 2017 (unaudited) | Year ended 31 March 2017 (audited) | Six months ended 30 September 2016 (unaudited) |
Income from investments | £ | £ | £ |
|
|
|
|
Dividends | 82,264 | 181,950 | 51,144 |
Money-market funds | 6,899 | 24,154 | 14,127 |
Loan stock interest | 823,112 | 1,443,335 | 666,444 |
Bank deposit interest | 4,420 | 29,594 | 21,012 |
|
|
|
|
Total Income | 916,695 | 1,679,033 | 752,727 |
5. Investment Adviser's fees and performance fee
|
|
|
|
| Six months ended30 September 2017(unaudited) | Year ended31 March 2017(audited) | Six months ended30 September 2016(unaudited) |
| £ | £ | £ |
Mobeus Equity Partners LLP |
|
|
|
|
|
|
|
Investment Adviser's fees | 444,855 | 951,165 | 485,927 |
Investment Adviser's performance fee | - | 2,692 | - |
|
|
|
|
Total | 444,855 | 953,857 | 485,927 |
Investment Adviser's fees
25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company.
100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement. This is because although the incentive fee is linked to an annual dividend target, it is ultimately based upon the achievement of capital growth.
Performance fees
New Ordinary and former C share fund shares
Basis of calculation
The performance incentive fee payable is calculated as an amount equivalent to 20 per cent of the excess of a "Target rate" comprising:-
i) an annual dividend target (indexed each year for RPI), and
ii) a requirement that any cumulative shortfalls below the annual dividend target must be made up in later years. Any excess is not carried forward, whether a fee is payable for that year or not.
Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding the average "Base NAV" per share for the same year. Base NAV commenced at £1 per share when C fund shares were first issued in 2005, which is adjusted for subsequent shares issued and bought back.
Any performance fee will be payable annually. It will be reduced to the proportion which the number of "Incentive Fee Shares" represent of the total number of shares in issue at any calculation date. Incentive Fees Shares are the only shares upon which an incentive fee is payable. They will be the number of C fund shares in issue just before the Merger of the two former share classes on 10 September 2010, (which subsequently became Ordinary shares) plus Ordinary shares issued under new fundraisings since the Merger. This total is then reduced by an estimated proportion of the shares bought back by the Company since the Merger, that are attributable to the Incentive Fee Shares.
There has been no performance incentive fee accrued for the current period.
6. Taxation
There is a tax charge for the period as the Company has taxable income in excess of the deductible expenses.
| Six months ended 30 September 2017 (unaudited) | Year ended 31 March 2017 (audited) | Six months ended 30 September 2016 (unaudited) | ||||||
| Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
| £ | £ | £ | £ | £ | £ | £ | £ | £ |
a) Analysis of tax change: |
|
|
|
|
|
|
|
|
|
UK Corporation tax on profits for the period | 102,619 | (63,392) | 39,227 | 172,122 | (143,213) | 28,909 | 72,889 | (72,889) | - |
|
|
|
|
|
|
|
|
|
|
Total current tax charge | 102,619 | (63,392) | 39,227 | 172,122 | (143,213) | 28,909 | 72,889 | (72,889) | - |
Corporation tax is based on a rate of 19% (2016: 20%) |
|
|
|
|
|
|
|
|
|
b) Profit/(loss) on ordinary activities before tax | 622,363 | 656,315 | 1,278,678 | 1,136,936 | (410,227) | 726,709 | 462,254 | (479,774) | (17,520) |
Profit/(loss) on ordinary activities multiplied by small company rate of corporation tax in the UK of 19% (2016: 20%) | 118,249 | 124,699 | 242,948 | 227,387 | (82,046) | 145,341 | 92,451 | (95,955) | (3,504) |
Effect of: |
|
|
|
|
|
|
|
|
|
UK dividends | (15,630) | - | (15,630) | (36,390) | - | (36,390) | (10,229) | - | (10,229) |
Tax losses brought forward from previous years now utilised | - | - | - | - | - | - | (9,333) | - | (9,333) |
Unrealised losses/(gains) not taxable/allowable | - | 136,638 | 136,638 | - | (45,954) | (45,954) | - | 23,066 | 23,066 |
Realised gains not taxable | - | (324,729) | (324,729) | - | (15,213) | (15,213) | - | - | - |
Utilisation of losses on which deferred tax not recognised | - | - | - | (18,875) | - | (18,875) | - | - | - |
|
|
|
|
|
|
|
|
|
|
Actual tax charge | 102,619 | (63,392) | 39,227 | 172,122 | (143,213) | 28,909 | 72,889 | (72,889) | - |
7. Basic and diluted earnings per share
|
|
|
|
| Six months ended30 September 2017(unaudited) | Year ended31 March 2017(audited) | Six months ended30 September 2016(unaudited) |
| £ | £ | £ |
|
|
|
|
|
|
|
|
Total earnings after taxation: | 1,239,451 | 697,800 | (17,520) |
Basic and diluted earnings per share (note a) | 3.42p | 1.94p | (0.05)p |
|
|
|
|
Net revenue from ordinary activities after taxation | 519,744 | 964,814 | 389,365 |
Basic and diluted revenue earnings per share (note b) | 1.43p | 2.69p | 1.08p |
|
|
|
|
Net unrealised capital (losses)/gains | (719,145) | 229,772 | (115,329) |
Net realised capital gains | 1,709,101 | 76,067 | - |
Capital expenses (net of taxation) | (270,249) | (570,161) | (291,556) |
Investment Adviser's performance fee | - | (2,692) | - |
|
|
|
|
Total capital return | 719,707 | (267,014) | (406,885) |
Basic and diluted capital earnings per share (note c) | 1.99p | (0.75)p | (1.13)p |
|
|
|
|
Weighted average number of shares in issue in the period | 36,279,026 | 35,877,280 | 36,025,948 |
|
|
|
|
Notes
a) Basic and diluted earnings per share is total earnings after taxation divided by the weighted average number of shares in issue.
b) Basic and diluted revenue earnings per share is revenue earnings after taxation divided by the weighted average number of shares in issue.
c) Basic and diluted capital earnings per share is total capital earnings divided by the weighted average number of shares in issue.
8. Dividends paid
|
|
|
|
|
|
|
|
|
Dividend | Type | For year ended31 March | Pence per share | Date Paid | Six months ended 30 September 2017 £ | Year ended 31 March 2017£ | Six months ended 30 September 2016£ |
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interim | Capital | 2017 | 5.00p | 08/08/2016 | - | 1,799,327 | 1,799,327 |
|
Second Interim | Income | 2017 | 2.50p | 31/03/2017 | - | 891,810 | - |
|
Second Interim | Capital | 2017 | 7.50p | 31/03/2017 | - | 2,675,429 | - |
|
Interim | Capital | 2018 | 7.00p | 27/07/2017 | 2,497,067 | - | - |
|
|
|
|
|
| 2,497,067 | 5,366,566 | 1,799,327 |
|
9. Investments at fair value
|
|
|
|
|
|
|
| Traded on AIM
Level 1 | Unquoted Ordinary shares Level 3 | Unquoted Preference shares Level 3 | Unquoted Loan Stock Level 3 | Total |
| £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
|
|
|
|
|
Cost at 31 March 2017 | 254,586 | 10,571,020 | 23,395 | 17,664,403 | 28,513,404 |
Unrealised (losses)/gains at 31 March 2017 | - | (2,271,287) | 377,118 | 3,895,933 | 2,001,764 |
Permanent impairment at 31 March 2017 | (254,586) | (1,365,869) | (739) | (810,398) | (2,431,592) |
|
|
|
|
|
|
Valuation at 31 March 2017 | - | 6,933,864 | 399,774 | 20,749,938 | 28,083,576 |
Purchases at cost | - | 762,353 | - | 89,106 | 851,459 |
Sale proceeds | - | (2,054,727) | (760) | (1,700,819) | (3,756,306) |
Reclasification at value | - | 445,804 | - | (445,804) | - |
Increase/(decrease) in unrealisedgains on investments | - | 427,160 | (849) | (1,145,456) | (719,145) |
Realised gains/(losses) on investments | - | 1,750,727 | 760 | (42,386) | 1,709,101 |
|
|
|
|
|
|
Valuation at 30 September 2017 | - | 8,265,181 | 398,925 | 17,504,579 | 26,168,685 |
|
|
|
|
|
|
Book cost at 30 September 2017 | 254,586 | 11,201,560 | 22,635 | 15,977,176 | 27,455,957 |
Unrealised gains/(losses) at 30 September 2017 | - | (730,965) | 376,290 | 1,666,453 | 1,311,778 |
Permanent impairment at 30 September 2017 | (254,586) | (2,205,414) | - | (139,050) | (2,599,050) |
|
|
|
|
|
|
Valuation at 30 September 2017 | - | 8,265,181 | 398,925 | 17,504,579 | 26,168,685 |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealised (losses)/gains at 1 April 2017 | (254,586) | (3,637,156) | 376,379 | 3,085,535 | (429,828) |
Net movement in unrealised appreciation/(depreciation)in the period | - | 427,160 | (849) | (1,145,456) | (719,145) |
Permanent impairments in the period | - | (83,729) | - | (83,729) | (167,458) |
Realisation of previously unrealised gains/(losses) | - | 357,346 | 760 | (328,947) | 29,159 |
|
|
|
|
|
|
(Losses)/gains on investmentsat 30 September 2017 | (254,586) | (2,936,379) | 376,290 | 1,527,403 | (1,287,272) |
|
|
|
|
|
|
There has been no significant change in the risk analysis as disclosed in note 15 of the Financial Statements in the Company's Annual Report.
The decrease in unrealised valuations of the loan stock investments above reflects the changes in the entitlement to loan premiums, and/or in the underlying enterprise value of the investee company. The decrease does not arise from assessments of credit or market risk upon these instruments.
Level 3 unquoted equity and loan investments are valued in accordance with IPEV guidelines as follows:
|
|
|
|
| As at 30 September 2017 £ | As at 31 March 2017 £ | As at 30 September 2016 £ |
|
|
|
|
|
|
|
|
Investment methodology |
|
|
|
Cost (reviewed for impairment) | - | 83,729 | - |
Recent investment price | 5,418,783 | 5,334,674 | 10,988,211 |
Price earnings or revenue multiple | 20,577,971 | 22,665,173 | 18,544,531 |
Net asset value | 171,931 | - | - |
|
|
|
|
| 26,168,685 | 28,083,576 | 29,532,742 |
|
|
|
|
10. Current asset investments
|
|
|
|
| As at 30 September 2017 (unaudited) £ | As at 31 March 2017 (audited) £ | As at 30 September 2016 (unaudited) £ |
|
|
|
|
|
|
|
|
OEIC Money market funds | 7,947,301 | 5,197,301 | 6,427,301 |
|
|
|
|
Cash equivalents per CondensedStatement of Cash Flows | 7,947,301 | 5,197,301 | 6,427,301 |
Bank deposits that mature after three months | - | - | 507,061 |
|
|
|
|
Current asset investments | 7,947,301 | 5,197,301 | 6,934,362 |
|
|
|
|
Cash at bank | 2,632,660 | 4,738,612 | 4,531,812 |
|
|
|
|
11. Net asset value per share
|
|
|
|
| As at 30 September 2017 (unaudited) | As at 31 March 2017 (audited) | As at 30 September 2016 (unaudited) |
|
|
|
|
|
|
|
|
Net assets | £38,831,906 | £38,060,985 | £41,070,623 |
Number of shares in issue | 37,609,938 | 35,672,387 | 35,824,744 |
Net asset value per share (pence) | 103.25 p | 106.70 p | 114.64 p |
|
|
|
|
12. Post Balance Sheet Events
Between 20 October 2017 and 21 November 2017 10,720,374 new shares were allotted under the 2017 Offer at effective offer prices ranging from 103.17 pence to 110.99 pence, raising net funds of £11,061,015.
On 21 November 2017, a further equity investment of £0.05 million was made into BookingTek Limited.
On 5 December 2017, a further loan investment of £0.09 million was made into MPB Group Lmited.
13. Financial statements for the six months ended 30 September 2017
The financial information set out in this Half-Year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The information for the year ended 31 March 2017 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The auditors have reported on these financial statements and that report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
14. Half-Year Report
Copies of this statement are being sent to all shareholders. Further copies are available free of charge from the Company's registered office, 30 Haymarket, London, SW1Y 4EX, or can be downloaded via the Company's website at www.mig2vct.co.uk.
Contact details for further enquiries:
Rob Brittain or Jonathan McGuire at Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail on vcts@mobeusequity.co.uk .
Mobeus Equity Partners LLP (the Investment Adviser), on 020 7024 7600 or by e-mail on info@mobeusequity.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, or forms part of, this announcement.
…………………………………………..
Director