Mobeus I&g 2 Regulatory News (MIG)

MOBEUS INCOME & GROWTH 2 VCT PLC

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2018

Mobeus Income & Growth 2 VCT plc ("the Company") today announces its half-year results for the six months ended 30 September 2018.

As at 30 September 2018:

Net assets: £48.96 million

Net asset value ("NAV"): 99.10 pence

Financial Highlights

For the six months ended 30 September 2018

- Net asset value ("NAV") Total Return1 per share increased by 2.7% while Share Price Total Return2 per share increased by 1.7%.

- Investments were sold for £1.58 million cash proceeds which generated realised gains over cost of £0.44 million.

- £1.70 million invested into one new and three existing portfolio companies.

- Total liquidity at the Half-Year is £21.89 million3.

1Calculated as closing NAV per share (99.10p) as a percentage increase of opening NAV per share (96.54p).

2Calculated as closing share price (mid-price) (88.00p) as a percentage increase of opening share price (mid-price) (86.50p).

3Calculated as the total of Current asset investments and Cash at bank and in hand, as well as £1.03m invested in companies preparing to trade.

Performance Summary

Cumulative total shareholder return per share (NAV basis)4:

The longer-term trend of performance on this measure is shown in the chart below:

4 Cumulative total shareholder return (NAV basis) is net asset value plus cumulative dividends paid to date on the current share class launched in 2005.

Note: the above data does not reflect the benefit of income tax relief upon initial subscription for the Company's shares.

Chairman's Statement

I am pleased to present the Half-Year Report for Mobeus Income & Growth 2 VCT plc ("MIG2") covering the six months ended 30 September 2018.

Overview

There were positive returns totalling £0.92 million (£0.44 million realised and £0.48 million unrealised) from the investment portfolio, which contributed to a 2.7% increase in net asset value per share to 99.10p in the six-month period. The realisation of the Company's investments in Fullfield (trading as Motorclean), Hemmels and Lightworks generated combined net cash proceeds of £1.32 million, contributing 0.79 pence to this increase per share. The balance of the increase in net assets arose from income generated from portfolio investments and cash less expenses.

The level of new investment in the period has been satisfactory with one new growth capital investment and further investments in three existing portfolio companies being completed. Additional investments in three existing portfolio companies were completed shortly after the end of the period. Details of these investments are included under the "Investment Portfolio" section of my Statement below and in the Investment Review within the Half-Year Report. Since the changes to the VCT Rules in November 2015, a total of £9.99 million has been invested by this VCT in growth capital investments. Whilst the VCT industry can no longer support management buyout investments, these continue to be an important part of the portfolio, representing 54% of the portfolio by value at the period end.

Performance for the six months ended 30 September 2018

The principal contributions to the increase in Net Asset Value ("NAV") per share were as follows:

The NAV per share at 30 September 2018 was 99.10 pence per share, compared to 96.54 pence per share at 31 March 2018, an increase of 2.56 pence (2.7% as above (2017: 3.3%)) over the period. Your Board regards these returns as satisfactory, in the context of the significant changes in the VCT Rules since 2015, driving more recent investments into smaller, higher risk, but potentially higher reward companies.

Investment Portfolio

The main portfolio movements for the period are summarised below:

The like-for-like change in valuations, after adding back disposal proceeds and excluding new investments, showed an overall increase in the underlying value of the portfolio of 3.4%.

During the period the Company made one new growth capital investment of £0.37 million into Rotageek, a provider of workforce management software. The investment will be used to further the development of technology and grow sales. The Company also made three follow-on investments during the period totalling £1.33 million, comprising a £0.63 million investment into MyTutor, a provider of online tutoring, a £0.64 million investment into Preservica, a seller of proprietary digital archiving software, and a £0.06 million investment into Proactive Investors, a provider of investor media services.

Shortly after the period end, the Company completed three further follow-on investments totalling £0.87 million, comprising a £0.54 million investment into Biosite, a provider of workforce management and security services, £0.29 million into Proactive Investors, and £0.04 million into MPB Group, an online marketplace for used camera and video equipment.

The Company received cash proceeds of £1.58 million during the period, including £1.32 million of realisation proceeds, £0.16 million of loan stock repayments, £0.05 million of deferred and liquidation proceeds and £0.05 million from the repurchase of preference shares.

Sales of portfolio companies in the period generated net realised gains of £0.44 million. The principal gain was from the sale of Lightworks, realising a gain in the period of £0.48 million. However, disappointingly, the sale of Hemmels incurred a loss of £0.24 million, as explained further in the Investment Review.

The main unrealised valuation changes were from Auction Technology Group, Plastic Surgeon and Access IS, while the main decreases were from Wetsuit Outlet and BookingTek. Further details of these movements are explained in the Investment Review.

We remind shareholders that an inherent element of investing in such smaller companies is understanding that not all ventures and companies will succeed. This risk has been heightened by the legislative changes to the VCT scheme which came into effect in March 2018. These changes, were designed firstly to exclude tax-motivated investments where capital is not at risk and secondly, place further restrictions on the way investments are able to be structured.

Interim Dividend

The Board will consider the payment of an interim dividend later in the financial year.

Liquidity

The Company's liquid assets of £21.89 million remain high following the successful fundraising which completed in March 2018. This amount corresponds to 44.8% of net assets (31 March 2018: £21.59 million (45.4%)) and includes both £1.03 million (31 March 2018: £1.03 million) invested in CPTs and £14.64 million from the recent fundraising.

Share buybacks

During the period under review there were no share buybacks.

The Board continues to believe that the policy of maintaining the share price at an average discount of 10% to the prevailing NAV is appropriate in current market conditions. Continuing shareholders benefit from the difference between NAV per share and the price per share at which the shares are bought back.

Shareholder communications

The Investment Adviser holds an annual VCT event for shareholders in central London. Each event includes a presentation on the Mobeus Advised VCTs' investment activity and performance. The next event will be held on Tuesday, 5 February 2019 at the Royal Institute of British Architects. There will be a daytime and a separate evening session. Shareholders have been sent an invitation to this event with further details. If you have not replied to the invitation, but would like to attend, please send an email to vcts@mobeusequity.co.uk to register. The Board looks forward to meeting all shareholders able to attend.

Board Changes

As mentioned in the Company's Annual Report for the year ended 31 March 2018, Nigel Melville retired as Chairman of the Board following the conclusion of the Annual General Meeting on 12 September 2018. I would like to take this opportunity to thank Nigel for his outstanding contribution to the Company.

Outlook

The portfolio has a solid foundation of investments made under the previous MBO strategy, the majority of which are mature and profitable companies providing attractive income returns. Meanwhile, your Board believes that your Company continues to be well positioned to take advantage of the opportunity to provide growth capital. However, it should be noted that our Investment Adviser, Mobeus, perceive current entry valuations to be relatively expensive for the most interesting opportunities.

While the new growth capital element of the portfolio is still young, both your Board and the Investment Adviser will seek to assess, balance and diversify the risks within the growing proportion of the overall portfolio that these investments will represent. Your Board cautions that investing in such earlier stage companies involves increased risk, as those that succeed often take longer to achieve scale. Returns may take longer to emerge and may be more volatile. The least successful investments are likely to emerge before the most successful, causing a slower rate of financial progress to be anticipated in the earlier years, offset by more significant gains in the longer-term.

The recent successful fundraising will provide the Company with sufficient funds to continue the current investment rate in the short to medium-term. However, until these funds are fully invested, there is likely to be some short-term dilution of returns to shareholders in the current low interest rate environment. We expect the current trend for follow-on investments into new and existing growth capital portfolio companies to continue in the foreseeable future.

The Board and Investment Adviser have carried out an analysis of the possible impact of Brexit on the underlying portfolio to identify the principal areas of risk. We continue to monitor Brexit negotiations and take mitigating action where feasible.

Finally, I would like to take this opportunity to thank shareholders for their continued support.

Ian Blackburn

Chairman

21 November 2018

Investment Policy

The Investment Policy is designed to meet the Company's objective.

Investments

The Company invests primarily in a diverse portfolio of UK unquoted companies. Investments are made selectively across a number of sectors, principally in established companies. Investments are usually structured as part loan stock and part equity in order to produce a regular income stream and to generate capital gains from realisations.

There are a number of conditions within the VCT legislation which need to be met by the Company and which may change from time to time. The Company will seek to make investments in accordance with the requirements of prevailing VCT legislation.

Asset allocation and risk diversification policies, including the size and type of investments the Company makes, are determined in part by the requirements of prevailing VCT legislation. No single investment may represent more than 15% (by VCT tax value) of the Company's total investments at the date of investment.

Liquidity

The Company's cash and liquid funds are held in a portfolio of readily realisable interest bearing investments, deposit and current accounts, of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised.

Borrowing

The Company's articles of association permit borrowings of amounts up to 10% of the adjusted capital and reserves (as defined therein). However, the Company has never borrowed and the Board would only consider doing so in exceptional circumstances.

Investment Adviser's Review

Demand for growth capital investment remains strong and there is a large pipeline of investment opportunities. It is expected that the current pace and quantum of new and follow-on investments will continue in the short to medium-term.

Portfolio review

The six months under review has seen one investment into a new growth business of £0.37 million, three existing growth portfolio companies receiving follow-on funding totalling £1.33 million and net cash proceeds received of £1.58 million, primarily from three realisations. After the period end, the Company invested a further £0.87 million into three existing portfolio companies.

Unrealised movements in the value of the portfolio

The value of the existing portfolio increased by £0.48 million during the first half of the year. This net increase in the value of the portfolio of investments was due to increases in individual valuations of £1.85 million outweighing reductions in individual valuations of £1.37 million.

The principal increases in value were seen at Auction Technology Group (£0.24 million), Plastic Surgeon (£0.19 million) and Access IS (£0.18 million). Auction Technology Group is growing in line with its investment plan and has delivered improved gross profit. Plastic Surgeon is trading well on the back of a buoyant house-building market, but also showing improved sales in its other markets. Access IS is trading well and expected to deliver improved turnover and earnings.

The main decreases were seen at Wetsuit Outlet (£0.47 million) and BookingTek (£0.46 million). Wetsuit Outlet has had a disappointing year post investment, with growth in profitability not being achieved as envisaged. Management has since implemented several measures to restore margins. BookingTek has experienced challenging market conditions and delays in securing key contracts.

Realised gains from sales of investments

The net realised gain from sales of investments was £0.44 million during the period under review. This net gain was due to realised gains of £0.68 million being partially offset by a realised loss of £0.24 million.

The largest gain of £0.48 million arose from the sale of Lightworks to Siemens PLM Software, a business of Siemens AG. The sale of Fullfield (trading as Motorclean) back to management resulted in a realised gain of £0.15 million compared to its value at 31 March 2018. The realised loss of £0.24 million resulted from the sale of Hemmels to its largest customer. Although the Hemmels loss was modest in the context of the whole portfolio, it was unexpected, arising shortly after the initial investment, and illustrates the inherent higher risk of investing in early stage growth companies.

The company also realised a gain in the period from deferred consideration receipts of £0.05 million arising from past realisations, during the year.

Investment portfolio yield and capital repayments

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

1Total portfolio income in the period is generated from investee companies within the portfolio. See note 4 for details of all income receivable by the Company.

The Company also received loan stock repayments of £0.16 million and preference share repurchases of £0.05 million, both at cost.

New investment in the period

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

Statement of the Directors' Responsibilities

Responsibility Statement

In accordance with Disclosure and Transparency Rule (DTR) 4.2.10, Ian Blackburn (Chairman), Adam Kingdon (Chairman of the Audit Committee), and Sally Duckworth (Chairman of the Investment Committee), being the Directors of the Company, confirm that, to the best of their knowledge:

a) the unaudited condensed set of financial statements, which has been prepared in accordance with Financial Reporting Standard 104 "Interim Financial Reporting" gives a true and fair view of the assets, liabilities, financial position and profit of the Company, as required by DTR 4.2.10;

b) the Half-Year Management Report which comprises the Chairman's Statement, Investment Policy, Investment Review and Investment Portfolio Summary includes a fair review of the information required by DTR 4.2.7, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

c) a description of the principal risks and uncertainties facing the Company for the remaining six months is set out below, in accordance with DTR 4.2.7; and

d) there were no related party transactions in the first six months of the current financial year that are required to be disclosed in accordance with DTR 4.2.8.

Principal Risks and Uncertainties

In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Financial Statements for the year ended 31 March 2018 ("the Annual Report").

The principal risks faced by the Company are:

• economic;

• investment and strategic;

• loss of approval as a VCT;

• VCT regulatory changes;

• regulatory;

• financial and operating;

• market;

• asset liquidity;

• market liquidity;

• counterparty; and

• cyber and data security.

A more detailed explanation of these risks can be found in the Strategic Report in the Annual Report and Financial Statements for the year ended 31 March 2018, copies of which are available on the Investment Adviser's website, www.mobeusequity.co.uk or by going directly to the VCT's website, www.mig2vct.co.uk.

Going Concern

The Board has assessed the Company's operation as a going concern. The Company's business activities, together with the factors likely to affect its future development, performance and position are set out in the Half-Year management report which comprises the Chairman's Statement, Investment Policy, Investment Review and Investment Portfolio Summary. The Directors have satisfied themselves that the Company continues to maintain a significant cash position. The majority of companies in the portfolio continue to trade profitably and the portfolio taken as a whole remains resilient and well-diversified. The major cash outflows of the Company (namely investments, buybacks and dividends) are within the Company's control.

The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in the Annual Report and Financial Statements for the year ended 31 March 2018. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the Half-Year report and financial statements.

Cautionary Statement

This report may contain forward looking statements with regards to the financial condition and results of the Company, which are made in the light of current economic and business circumstances. Nothing in this report should be construed as a profit forecast.

For and on behalf of the Board:

Ian Blackburn

Chairman

The composition of each of these reserves is explained below:

Called up share capital

The nominal value of shares originally issued, increased for subsequent share issues either via an Offer for Subscription or reduced due to shares bought back by the Company.

Capital redemption reserve

The nominal value of shares bought back and cancelled is held in this reserve, so that the company's capital is maintained.

Share premium reserve

This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under Offers for Subscription.

Revaluation reserve

Increases and decreases in the valuation of investments held at the period end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in note 9), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the period.

Special distributable reserve

The cost of share buybacks is charged to this reserve. In addition, any realised losses on the sale or impairment of investments (excluding transaction costs), and 75% of the Investment Adviser's fee and 100% of any performance fee expense, and the related tax effect, are transferred from the realised capital reserve to this reserve. The cost of any IFA facilitation fee payable as part of the Offer for Subscription is also charged to this reserve.

Realised capital reserve

The following are accounted for in this reserve:

• Gains and losses on realisation of investments;

• Permanent diminution in value of investments;

• Transaction costs incurred in the acquisition of investments;

• 75% of the Investment Adviser's fee (subsequently transferred to the Special distributable reserve along with the related tax effect) and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies; and

• Capital dividends paid.

Revenue reserve

Income and expenses that are revenue in nature are accounted for in this reserve together with the related tax effect, as well as income dividends paid that are classified as revenue in nature.

Unaudited Condensed Statement of Cash Flows

For the six months ended 30 September 2018

Notes to the Unaudited Condensed Financial Statements

for the six months ended 30 September 2018

1. Company information

Mobeus Income and Growth 2 VCT plc is a public limited company incorporated in England, registration number 03946235. The registered office is 30 Haymarket, London, SW1Y 4EX.

2. Basis of preparation

These Financial Statements are prepared in accordance with accounting policies consistent with Financial Reporting Standard 102 ("FRS 102"), Financial Reporting Standard 104 ("FRS 104") - Interim Financial Reporting, with the Companies Act 2006 and the 2014 Statement of Recommended Practice, 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' ('the SORP') (updated in January 2017) issued by the Association of Investment Companies ("AIC"). The Financial Statements have been prepared on the historical cost basis except for the modification to a fair value basis for certain financial instruments as specified in note 9.

The Half-Year Report has not been audited, nor has it been reviewed by the auditor pursuant to the Financial Reporting Council's (FRC) guidance on Review of Interim Financial Information.

3. Principal accounting policies

The accounting policies have been applied consistently throughout the period. Full details of principal accounting policies will be disclosed in the Annual Report, while the policy in respect of investments is included within an outlined box at the top of note 9 on investments.

4. Income

5. Investment Adviser's fees and performance fee

Investment Adviser's fees

25% of the Investment Adviser's fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board's expected long-term split of returns from the investment portfolio of the Company.

100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement. This is because although the incentive fee is linked to an annual dividend target, it is ultimately based upon the achievement of capital growth.

Performance fees

Performance incentive agreement

New Ordinary and former C share fund shares

Basis of calculation

The performance incentive fee payable is calculated as an amount equivalent to 20 per cent of the excess of a "Target rate" comprising:

i) an annual dividend target (indexed each year for RPI); and

ii) a requirement that any cumulative shortfalls below the annual dividend target must be made up in later years. Any excess is not carried forward, whether a fee is payable for that year or not.

Payment of a fee is also conditional upon the average Net Asset Value ("NAV") per share for each such year equalling or exceeding the average "Base NAV" per share for the same year. Base NAV commenced at £1 per share when C fund shares were first issued in 2005, which is adjusted for subsequent shares issued and bought back.

Any performance fee will be payable annually. It will be reduced to the proportion which the number of "Incentive Fee Shares" represent of the total number of shares in issue at any calculation date. Incentive Fees Shares are the only shares upon which an incentive fee is payable. They will be the number of C fund shares in issue just before the Merger of the two former share classes on 10 September 2010, (which subsequently became Ordinary shares) plus Ordinary shares issued under new fundraisings since the Merger. This total is then reduced by an estimated proportion of the shares bought back by the Company since the Merger, that are attributable to the Incentive Fee Shares.

There has been no performance incentive fee accrued for the current period.

6. Taxation

There is a tax charge for the period as the Company has taxable income in excess of deductible expenses.

7. Basic and diluted earnings per share

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

9. Investments at fair value

Reconciliation to Condensed Statement of Cash Flows

Purchases above of £1,702,127 are less than that shown in the Condensed Statement of Cash Flows of £1,746,680 by £44,553. This amount was held in a solicitor's client account included as part of debtors at the period-end for the follow-on investment into MPB Group, which completed on 19 October 2018.

Sales proceeds above of £1,583,263 are less than that shown in the Condensed Statement of Cash Flows of £1,636,573 by £53,310. This amount is deferred consideration arising from the realisation of Gro-Group in December 2017 which was held within debtors at the last year end.

There has been no significant change in the risk analysis as disclosed in note 15 of the Financial Statements in the Company's Annual Report.

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

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

10. Current asset investments and cash at bank and in hand

11. Net asset value per share

12. Post Balance Sheet Events

On 9 October 2018, a follow-on investment of £0.54 million was made into Pattern Analytics Limited (trading as Biosite).

On 10 October 2018, a follow-on investment of £0.29 million was made into Proactive Group Holdings Inc.

On 19 October 2018, a follow-on investment of £0.04 million was made into MPB Group Limited.

On 31 October 2018, The Plastic Surgeon Holdings Limited repurchased A preference shares, realising £0.05 million of proceeds for the Company.

13. Financial statements for the six months ended 30 September 2018

The financial information set out in this Half-Year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The information for the year ended 31 March 2018 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The auditors have reported on these financial statements and that report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

14. Half-Year Report

Copies of this report are being sent to all shareholders. Further copies are available free of charge from the Company's registered office, 30 Haymarket, London, SW1Y 4EX, or can be downloaded via the Company's website at www.mig2vct.co.uk.

Contact details for further enquiries:

Rob Brittain or Robert King at Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail on vcts@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.