Annual Financial Report

Mobeus Income & Growth 2 VCT plc (formerly Matrix Income & Growth 2 VCT plc ("MIG2", "the Company" or "the Fund")) Annual Results announcement for the year ended 30 April 2013 INVESTMENT OBJECTIVE Mobeus Income & Growth 2 VCT plc , formerly Matrix Income & Growth 2 VCT plc ("Mobeus Income & Growth 2 VCT" or "the Company" or "the VCT") is a Venture Capital Trust managed by Mobeus Equity Partners LLP (previously Matrix Private Equity Partners LLP ("Mobeus")) investing primarily in established, profitable, unquoted companies. Investment Objective - The Company's objective is to provide investors with a regular income stream, arising both from the income generated by the companies selected for the portfolio and from realising any growth in capital. Venture Capital Trust Status - Mobeus Income & Growth 2 VCT has satisfied the requirements as a Venture Capital Trust under section 274 of the Income Tax Act 2007 ("ITA") and the Directors intend to conduct the business of the Company so as to continue to comply with that section. FINANCIAL HIGHLIGHTS The highlights during the year have been:- • Net Asset Value (NAV basis) Total Return for the year was 12.3%. • Net Asset Value (share price basis) Total Return for the year was 10.9%. • 4p dividend declared and paid in the year. Performance Summary Annual results for the year ended 30 April 2013 Ordinary Shares of 1 penny (formerly C Shares until 10 September 2010) To help Shareholders understand the recent past performance of their investment, comparative data is shown below. Total return (NAV basis) comprises NAV per share plus cumulative dividends paid per share: Net Net asset Cumulative dividends Share Cumulative Total Return per assets value per paid per Share (p) price Share to Shareholders since (£ m) Share (p) 1 launch²³ (NAV) (p) (NAV basis) (share price (p) basis) (p) Ordinary Share Fund (formerly C Share Fund until 10 September 2010)² As at 30 April 2013 25.7 106.8 18.0 70.3 124.8 88.3 As at 30 April 2012 24.5 98.7 14.0 67.0 112.7 81.0 As at 30 April 2011 24.9 96.2 10.0 62.0 106.2 72.0 At close of Offer for Subscription in 2005 8.7 94.5 - - - - Former Ordinary Share Fund (raised in 2000/2001)³ As at 30 April 2013 - 88.3 36.7 - 125.0 - As at 30 April 2012 - 81.6 33.4 - 115.0 - As at 30 April 2011 - 79.5 30.1 - 109.6 - At close of Offer for Subscription in 2001 12.4 94.0 - - - - ¹Source: London Stock Exchange ²Launch date 30 September 2005 ³ Launch date 10 May 2000 CHAIRMAN'S STATEMENT I am pleased to present the thirteenth Annual Report of the Company, for the year ended 30 April 2013. The Company changed its name from Matrix Income & Growth 2 VCT plc to Mobeus Income & Growth 2 VCT plc on 29 June 2012. Although the UK Government's continuing deficit and consequential high level of debt are a concern, there are some signs of a return to economic growth. If this continues, it will provide better trading conditions for the companies in the portfolio, the majority of which are already trading profitably. During the year, there has been an 11.5% increase in the unrealised gain in the value of the portfolio. After a slow start to the year, the number of new and follow-on investments increased significantly during the last three months of the year to 30 April 2013. Performance for the year ended 30 April 2013 The net asset value ("NAV") per share at 30 April 2013 was 106.8 pence (2012: 98.7 pence), an increase over the year of 8.1 pence (2012: increase of 2.5 pence). To measure the NAV per share total return over the year on a like-for-like basis, the interim dividend of 4 pence paid to Shareholders on 19 April 2013, in respect of the year ended 30 April 2013, should be added to closing NAV per share, producing a closing return of 110.8 pence. Comparing this to an opening NAV of 98.7 pence, the Company's underlying NAV return per share was 12.1 pence or 12.3%. This increase compares with an increase of 26.1% in the FTSE SmallCap Total Return index and a decrease of 8.3% in the FTSE AIM Total Return index. The share price total return for the year, being the share price at 30 April 2013 after adding the dividend of 4 pence paid before the year end, rose by 10.9% during the year from 67.0 pence to 74.3 pence. Unrealised increases in the valuation of investments held, notably by ATG Media Holdings Limited and Blaze Signs Holdings Limited, are primarily responsible for the increase in returns for the year. Performance of former share classes Shareholders should note that the performance data above relates to the one ordinary share class now in existence, which was formerly called the C share class, before the share class merger completed on 10 September 2010. Shareholders in both the former `O' and `C' share classes may wish to see the performance of their own investment, and this is shown in the Financial Highlights on page 2, and in the Investor Performance appendix on page 53. Revenue and Capital returns for the year ended 30 April 2013 The results for the year ended 30 April 2013 are set out in the following pages. The total return (after tax) attributable to Ordinary Shareholders for the year was a profit of £2,685,399 (2012: £1,333,109), comprising a net capital return of £2,223,498 (2012: £816,532) and a revenue return of £461,901 (2012: £516,577). This improved performance for the year is mainly due to net increases of £2.6 million in the value of the investment portfolio. Portfolio Activity Management buy-out transactions ("MBOs") continue to represent a significant proportion of the portfolio with two new MBO transactions occurring in the year. MBOs now represent 80.8% of the portfolio, with 13.8% in acquisition companies, 3.9% in development capital and 1.5% invested in AIM investments. The portfolio is now invested in a wide range of market sectors with the largest of those being Support Services at 56.5%. There have been four significant investments in the year, two of which were new investments and two of which were further investments into existing portfolio companies to build on success so far and to assist both investee companies to generate further growth. During the year, the VCT invested £3.7 million in total, in new and follow-on investments. This includes funds from the acquisition vehicles Sawrey Limited, Almsworthy Trading Limited, Fosse Management Limited and Peddars Management Limited. In July 2012, the Company made a new investment of £906,762 into Tessella Holdings Limited, via the acquisition vehicle Sawrey Limited, as part of the Manager's Operating Partner programme. In February 2013, the VCT provided an additional £624,769 from Almsworthy Trading Limited into existing portfolio company Fullfield Limited (Motorclean) to enable their acquisition of rival company Forward Valeting Services, to create the UK's largest provider of car valeting services. In March 2013, a new investment of £1,056,417 was made to support the MBO of Gro-Group Holdings Limited, including £1 million from its existing investment in the acquisition vehicle Fosse Management. Based in Devon, Gro-Group is the market leader for baby sleep time products in the UK and Australia. Finally, in April 2013, the VCT invested a further £863,923 from Peddars Management Limited into an existing portfolio company, ATG Media Holdings Limited, to enable ATG, to acquire Bidspotter Inc., a US company providing live bidding and auction software to industrial and commercial auctioneers. A further investment of £167,647 was also made into Newquay Helicopters (2013) Limited (formerly British International Holdings Limited) in order to provide working capital support. After the year end this support has enabled the company to sell the major part of its business, in turn enabling it to repay most of the VCT's loan stock and accrued interest, resulting in proceeds to date of £1,671,825. After the year end, the Company made an investment of £967,781 in Veritek Global Limited, using the acquisition vehicle Madacombe Trading Limited. There have been a number of realisations and loan stock repayments during the year. In May 2012, IGLU.com Holidays Limited was realised for £1,486,978, which contributed to a total return on original investment of 2.5 times money in two and a half years. Blaze Signs Holdings Limited has repaid £979,639 of their outstanding loan including premium during the year which brings total loan proceeds (including interest) received to date to £1,580,136. In March 2013, a portion of loan stock and the entire equity holding of Faversham House Holdings Limited was realised for £154,435 proceeds and generated a gain of £41,471 in the year. The VCT retains loan stock valued at cost, being £111,335. There were three further loan repayments in the year: £83,179 from Fullfield Limited, £84,087 from DiGiCo Global Limited and £26,037 from Tessella Holdings Limited, which is a reflection of the strength of these investee companies' trading. Portfolio review As explained earlier, the performance of the portfolio is the main source of the VCT's good performance this year. The higher valuations for ATG Media Holdings Limited, Blaze Signs Holdings Limited, Fullfield Limited (Motorclean Limited), Ingleby (1879) Limited (EMaC Limited), DiGiCo Global Limited and Focus Pharma Holdings Limited reflect strong trading performances, as also was the case with a number of other companies. There are a smaller number of companies that are struggling to make progress. This is either because they are related to the construction sector or are simply trading below plan. Overall, portfolio companies' performance for the year has been encouraging. The Company now holds 28 investments at the year-end, which were valued at 100.7% of cost, up from 95.6% at the previous year end. Further details of these investments and transactions are provided in the Investment Manager's Review on pages 7 to 12. Income returns Revenue returns have been broadly consistent this year, generating a profit of £461,901, a fall of £54,676 from £516,577 in 2012. This decline is mainly as a result of a large DiGiCo Global Limited dividend (£135,282) received in the previous year before the partial sale of that investment last year, partially offset by an encouraging increase in loan interest receipts. Loan stock interest from investee companies rose to £865,768 (2012: £789,960), as several new investments generated new income, while some investee companies were able to pay interest arrears. The annualised yield from loan stocks at valuation is higher at 6.1% (2012: 4.9%), reflecting a number of new investments yielding good rates of interest. This higher running yield is despite a number of loan repayments in the year. Excluding DiGiCo Global Limited, dividend income from other investee companies has risen 67% to £135,481. The majority of dividends received have either risen on last year's level or have been a maiden dividend by that investee company. Low interest rates continue to restrict revenue generation on bank deposits and money-market funds. Total income from cash and money market funds was £17,675 (2012: £36,458). The Board remains committed to security as the primary aim for uninvested funds rather than attempting to increase the rate of return at the expense of an increase in risk. Investment management fees have remained steady over the year. Running expenses have risen by £17,128, due to higher registrar, audit and trail commission fees (the last primarily a result of higher net assets). Dividends The revenue account generated a net revenue gain for the year, as explained above, of 1.87 pence per share (2012: gain of 2.03 pence). Your Board declared an interim dividend totalling 4 pence per share, of which 1.25 pence was income and 2.75 pence was capital. This was paid on 19 April 2013 and brought total dividends paid to Ordinary Shareholders to 18 pence and the total paid to former O fund Shareholders to 36.7 pence. The Company is required to pay a minimum income dividend each year, to comply with VCT rules. The amount of 1.25p, which was part of the interim dividend of 4p per share already paid on 19 April 2013, is fractionally less than the minimum required. To address this issue, the Board has declared a further interim income dividend of 0.1p in respect of income earned for the year ended 30 April 2013. To save postage costs, this will be paid at the same time as paying the interim dividend for the year ending 30 April 2014, currently planned to be on 22 April 2014 to Shareholders on the Register on 28 March 2014. Share buy-backs During the year ended 30 April 2013, the Company continued to implement its buy-back policy and bought back 776,749 Ordinary Shares in five transactions, representing 3.1% of the shares in issue at the start of the year for an aggregate consideration of £541,894. These shares were subsequently cancelled by the Company. The shares above were bought back for an average price of 69.76 pence per share, at discounts to the net asset value at the date of each buyback ranging from 34.13 % to 30.83%. The value of these discounts has contributed to an increase in net asset value per share of 1.06p, based on the closing number of shares in issue at the year end. Change of ownership at Mobeus Equity Partners, previously Matrix Private Equity Partners As mentioned in last year's Annual Report, the partners of the Investment Manager, Mobeus Equity Partners LLP (formerly Matrix Private Equity Partners LLP) acquired a full interest in the business on 29 June 2012. This led to the Investment Manager becoming a fully independent owner-managed firm. Since this management buy-out, the Company's arrangements with Mobeus have not changed and the Directors continue to look forward to working with Mobeus to provide attractive long term returns on your Company investment, whilst reserving the Company's rights under the investment management agreement. Shareholder communication May I remind you that the Company continues to have its own website which is available at www.mig2vct.co.uk. Around 140 Mobeus VCT Shareholders attended the Manager's third annual Shareholder Workshop in January 2013. Shareholders attending heard presentations from the Manager and the CEO of DiGiCo Global Limited, one of the VCT's portfolio companies. Auditor With effect from 28 March 2013, the Company's auditor, PKF (UK) LLP merged with BDO LLP to become part of BDO LLP. The Board has subsequently appointed BDO LLP as the Company's auditor to fill the casual vacancy arising as a result of the resignation of PKF (UK) LLP following the merger. Strategy Your Board considers the Company's strategy at least annually. The main issues addressed are the investment objectives and policies, the role and performance of the Investment Manager and the methods of providing Shareholders with a satisfactory return on their investment. As Shareholders will know, our strategy has been to seek to maximise the Net Asset Value return by: 1. setting the Investment Manager a target of a minimum average annual return of 8%; 2. not issuing new shares while additional funds are not required to take up new investment opportunities or until the renewal vote due in September 2015; 3. buying back shares at a price which considers the interests of the continuing Shareholders, together with those of Shareholders seeking to realise their investment; and 4. paying a consistent annual dividend while maintaining the net asset value of the fund. It is pleasing to report that: 1. returns on the Ordinary Shares for the three years and the year to 30 April 2013 were 36.9% (11% compound per year) and 12.2% respectively. These are significantly higher than achieved in previous years; 2. the proportion of net assets invested in businesses is higher than it would have been if more new shares had been issued since the Company's last fund-raising in 2009. Given the very low return earned on uninvested funds, this has delivered higher returns; 3. buying back shares at the discount to net asset value has created demand from outside investors for the Company's shares and has increased the returns; and 4. an annual dividend of 4p has been paid over the past three years. The increase in the net asset value to 106.8p allows for higher dividends to be paid in future years. The level of uninvested funds, augmented by regular disposals of portfolio investments, has enabled the Company to take up all the available new investment opportunities to date. However, as part of our most recent strategy review, the analysis of the anticipated cash inflows and outflows from operations and investment activities over the next 18 months indicated that, as a result of a recovery in the market and of an increase in the average size of new investments, the amount of new investment opportunities will exceed the amount of disposals to an extent that additional funds will be required if all the new investment opportunities are to be taken up. Consequently, your Board is considering raising additional funds during the current financial year. If a fund-raising were to proceed, it would entail the following revisions to our current stategy: 1. extending the life of the Company until the fifth anniversary of the latest allotment of shares, in order to maintain the tax reliefs on the new shares to be issued. Resolutions to authorise the allotment of shares arising from a fund-raising and to extend the life of the Company will be put to Shareholders at the Annual General Meeting to be held on 20 September 2013. If either of the resolutions were not passed or if they were passed but the fund-raising were not to proceed, it would be the Directors' intention to continue to hold a renewal vote as currently scheduled, in September 2015; and 2. adopting a buy-back policy with the objective of maintaining the discount to NAV at 10% or less. The attractiveness of any fundraising will be enhanced if prospective investors can see a clearer opportunity to exit at a level closer to net asset value. Outlook So far during 2013, global quoted stock markets have shown a significant amount of volatility. Markets are adjusting to the expectation of future reductions in support, from the quantitative easing programme undertaken by central banks. On balance, it seems that the threats to economic growth posed by the Eurozone crisis are perceived as lower for now. Against this, the UK Government's continued austerity plan limits the scope for fiscal stimulus to provide a source of growth to the small business sector. The environment for smaller companies remains uncertain, if UK economic growth is limited. On a more positive note, recent data on the UK economy appears to indicate that a recovery from the financial crisis is underway, and business surveys reveal a cautious optimism in the corporate sector. As explained above, the Board is mindful that the VCT should have adequate liquidity to take advantage of the increased number and quality of businesses currently being evaluated by the Manager. In view of the uncertain environment above, it is imperative that only the highest quality businesses are selected with the terms of the deal structured so as to minimise the downside risk to Shareholders. The cautious approach of selecting well-run profitable companies operating in niche markets is the primary reason for the quality of the investment portfolio currently held within the VCT. Annual General Meeting The Annual General Meeting of the Company will be held at 12.00 noon on 20 September 2013 at the offices of SGH Martineau LLP, One America Square, Crosswall, London EC3N 2SG. An explanation of the resolutions to be proposed at this meeting may be found in the Directors' Report. I would like to take this opportunity to thank Shareholders for their continued support and I hope I have the opportunity of meeting you at the Annual General Meeting. Nigel Melville Chairman 1 August 2013 SUMMARY OF THE STATEMENT OF DIRECTORS' RESPONSIBILITIES REPORT The Directors confirm, to the best of their knowledge: • that the Financial Statements have been prepared in accordance with UK Generally Accepted Accounting Practice and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and • that the annual report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. By order of the Board Nigel Melville Chairman 1 August 2013 INVESTMENT POLICY Investment policy The Company's policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are structured as part loan and part equity in order to receive regular income and to generate capital gains from trade sales and flotations of investee companies. Investments are made selectively across a number of sectors, primarily in management buyout transactions (MBOs) i.e. to support incumbent management teams in acquiring the business they manage but do not own. Investments are primarily made in companies that are established and profitable. The Company's cash and liquid resources may be invested to maximise income returns in a range of instruments of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised. UK companies The companies in which investments are made must have no more than £15 million of gross assets at the time of investment and £16 million immediately following the investment to be classed as a Venture Capital Trust ("VCT") qualifying holding. VCT regulation The investment policy is designed to ensure that the Company continues to qualify and is approved as a VCT by HM Revenue & Customs ("HMRC"). Amongst other conditions, the Company may not invest more than 15 per cent. of its investments in a single company and must achieve at least 70 per cent. by value of its investments throughout the period in shares or securities in VCT qualifying holdings, of which a minimum overall of 30 per cent. by value must be ordinary shares which carry no preferential rights. In addition, although the Company can invest less than 30 per cent. of an investment in a specific company in ordinary shares, it must have at least 10 per cent. by value of its total investments in each VCT qualifying company in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules). The VCT regulations in respect of funds raised after 6 April 2011 have changed, such that 70% of qualifying holdings invested with such funds must be held in equity. Asset mix The Investment Manager aims to hold approximately 80 per cent of net assets by value in the Company's qualifying investments. The balance is held in readily realisable interest bearing investments and deposits and in some non-qualifying holdings in the same investee companies in which qualifying investments have been made. Risk diversification and maximum exposures Risk is spread by investing in a number of different businesses across different industry sectors. To reduce the risk of high exposure to equities, each qualifying investment is structured using a significant proportion of loan stock (up to 70 per cent. of the total investment in each VCT qualifying company). Initial investments in VCT qualifying companies are generally made in amounts ranging from £200,000 to £2 million at cost, or such amounts as VCT legislation permits. Normally, no holding in any one company will be greater than 10 per cent. (but in any event will not be greater than 15 per cent.) of the value of the Company's investments, based on cost, at the time of investment. Ongoing monitoring of each investment is carried out by the Investment Manager, generally through taking a seat on the board of each VCT qualifying company. Co-investment The Company aims to invest alongside the three other VCTs advised by the Investment Manager with a similar investment policy. This enables the Company to participate in larger combined investments advised on by the Investment Manager . Borrowing The VCT has no borrowing and does not have any current plans for future borrowings. MANAGEMENT The Board has overall responsibility for the Company's affairs including the determination of its investment policy. Investment and divestment proposals are originated, negotiated and recommended by the Investment Manager (Mobeus Equity Partners LLP) and are then subject to formal approval by the Directors. Mobeus Equity Partners LLP also provides Company Secretarial and Accountancy services to the VCT. INVESTMENT MANAGER'S REVIEW Overview The investment portfolio has benefitted from two main developments over the year. The continued positive trend in the volume and quality of opportunities seen by the team has led to a number of completions, and strong performance across the portfolio has led to further valuation uplifts. The UK economy continues to present challenges to the small company sector. Despite this, the investment portfolio is demonstrating resilience, and many portfolio companies are growing profits. Our strategy of selecting established, profitable and cash flow generative companies with high quality, motivated management teams is generating good returns. As a result of both realisations and loan repayments, the Company's liquidity position has strengthened and so it is well resourced to invest. Where appropriate, we have actively encouraged management teams to pursue an acquisition strategy, supported by additional investment. This approach has led to two follow-on investments to support sizeable acquisitions, both completed in the early part of 2013. The long-standing investment strategy of investing in well-structured MBO deals, partly in equity and partly in income yielding loan stocks, gives substantial downside protection to Shareholders' capital. A large part of the investment management team's work involves being actively engaged with the management teams of investee companies and encouraging them to question budgets, forecasts and cost structures and to take cost cutting measures as necessary to ensure that their business is robust to the difficult economic environment within which many are operating. The fruits of this are shown in the financial robustness and profitability of most companies in the portfolio, and the way in which many have recovered from the depths of the recession in 2008-9. New investment There have been two significant investments into new portfolio companies during the year. In July 2012, the Company invested £906,762 into the MBO of Tessella Holdings Limited, an international provider of science-powered technology and consulting services. The Company used its acquisition vehicle Sawrey Limited, in which it had already invested £1 million, to acquire Tessella, resulting in a small partial return of capital. Founded in 1980, Tessella delivers innovative and cost-effective solutions to complex real-world commercial and technical challenges such as developing smarter drug trials, and minimising risk in oil and gas exploration. This company has made an encouraging start since investment and is already making staged loan stock repayments. In March 2013, the Company completed a new investment of £1,056,417, to support the MBO of Gro-Group Holdings Limited. The amount invested included £1 million from the Company's existing investment in the acquisition vehicle Fosse Management Limited. Devon based Gro-Group created the original, and now internationally renowned, Gro-bag which has become the number one baby sleep bag brand in the UK and Australia. Market penetration of the product has increased from zero to around 90% since the company was founded in 2000 and turnover has grown to £12 million. Shortly after the period-end in July 2013, the VCT completed a further new investment of £967,781 in Veritek Global Limited (resulting in a small refund of the VCT's existing investment of £1 million in the acquisition vehicle, Madacombe Trading) to support the MBO of Veritek, a Europe-wide provider of installation, maintenance and support services for blue-chip owners of printing equipment. Follow-on investment As explained earlier, the investment management team has focussed on the opportunities for expansion by acquisition within the existing portfolio. The principal aim of this is enhancing the value of existing successful investments through further funding; backing successful management teams within the portfolio is likely to involve a materially lower investment risk than a first investment in a new portfolio company. Two such investments have been completed in 2013. The first of these was completed in February; the VCT provided an additional £624,769, via acquisition vehicle Almsworthy Trading Limited, to finance Motorclean Limited's acquisition of a competitor, Forward Valeting Services, to create the UK's largest provider of car valeting services. This resulted in a repayment of funds to the Company from Almsworthy of £375,231. In April 2013, a further £863,923 was invested into ATG Media Holdings Limited to enable it to acquire Bidspotter Inc., a US business engaged in providing live bidding and auction software to industrial and commercial liquidation auctioneers. £1 million already invested into Peddars Management Limited was used to finance the transaction, resulting in a net repayment to the VCT of £ 136,077. Although most portfolio companies have shown significant resilience during the year, two portfolio companies required relatively small amounts of further funds. In June 2012, £57,143 was further advanced to PXP Holdings Limited, as part of a major-restructuring of the company following a sustained period of poor trading in a challenging market. Improved performance is expected during 2013. A further loan of £167,647 was advanced to support the working capital requirements of Newquay Helicopters (2013) Limited (formerly British International Holdings Limited). This was to provide working capital pending the disposal of the company's major trading subsidiary which has now occurred. The company has now repaid the principal and premiums of the first two loan stocks, together with all premiums and interest arrears for total cash proceeds of £1,671,825. The capital proceeds of £1,248,800 compare with a related investment cost of £934,000. This is a pleasing outcome and there is prospect for further returns of capital as the company realises its remaining assets and activities. The Operating Partner Programme as a whole has continued to generate successful investments for the Company. Four of the seven acquisition vehicles in the portfolio at the start of the year have been utilised in either new or follow-on investments. The programme has £2 million remaining in two vehicles, each headed by an experienced chairman well known to the Investment Manager. Realisations There have been a number of cash returns in the period, comprising investment realisations and loan stock repayments. During the year these have generated net cash proceeds of £3,380,036. In May 2012, the Company realised its entire investment in IGLU.com Holidays Limited, the specialist online ski and cruise holiday travel agent, for net cash proceeds of £1,455,265 through a sale to Growth Capital Partners. This realisation contributed to total cash proceeds of £2,530,414 to the Company over the two and a half year life of the investment, representing a 2.53 times return on the Company's original investment of £1,000,000. We supported this established online ski agent through a period of rapid growth in its cruise holiday business since the MBO in December 2009. IGLU is now one of the leading distributors of cruise holidays in the UK, and the largest independent retailer of ski holidays. This company's annual revenue now exceeds £90 million. In March 2013, a portion of loan stock and the entire equity holding of Faversham House Holdings Limited was realised for proceeds of £154,435, generating a gain of £41,471 in the year, but a loss against original cost of £ 109,100. The VCT retains loan stock valued at cost, being £111,335. Strong cash generation is a continuing feature of a number of companies in the portfolio and as a result the VCT has received several loan stock repayments. Blaze Signs Holdings Limited has now fully repaid its original loan and also made repayments of its second loan totalling £979,639 (including premium of £ 226,071). In addition to this, Blaze has paid arrears of loan interest of £ 109,073 in the current year. Fullfield Limited (£83,179), DiGiCo Global Limited (£84,087) and Tessella Holdings Limited (£26,037) have also made loan repayments in the year. The Portfolio The portfolio at 30 April 2013 comprised 28 investments (2012: 31) with a cost of £21.6 million (2012: £23.3 million) and valued at £21.8 million (2012: £22.3 million). On a like-for-like basis, the portfolio's value has increased by 11.8% compared with the valuations prevailing at 30 April 2012. Many portfolio companies have performed well over the year. ATG Media Holdings Limited and DiGiCo Global Limited have again traded strongly despite the pressures of the economic environment. DiGiCo has recently launched a new range of products. Blaze Signs Holdings Limited has made an impressive recovery over the last two years and has benefitted from high profile contracts including work for the Olympics, enabling it to repay a large part of its loans as noted above. Focus Pharma Holdings Limited achieved record results, is performing well on product development and launches and has a healthy pipeline of new products. Fullfield Limited continues to show strong cash generation, and is expected to improve further following its acquisition of Forward Valeting. EMaC Limited has exceeded expectations since investment last year, and its value has now moved significantly above cost. The partial disposal of the investment in Faversham House for in excess of the opening valuation has enabled an uplift in the remaining value of the loan stock. Tessella Holdings Limited has made a solid start since investment, with the pipeline of opportunities across the group remaining good. Against these positive performances, PXP Holdings Limited and The Plastic Surgeon Holdings Limited continue to suffer from the downturn in the construction and house building sectors. However, management have worked well to reposition both of these businesses and make the necessary cut in costs. Youngman Group Limited's trading environment remains fragile, although it has traded profitably throughout the period. ASL Technology Holding Limited's performance is improving but the group's overall performance is behind investment plan. RDL Corporation Limited has continued to perform below expectations, with its IT recruitment business in particular at lower than planned levels. Overall, we are encouraged by the strong and resilient performance of the majority of our investee companies. Our strategy remains to invest in mature, profitable companies and by retaining investments until they have reached the optimum point for exit, maximum value will be achieved for shareholders. Outlook The UK economy outlook remains uncertain, but the Investment Manager remains committed to pursue its MBO strategy and we are encouraged by the healthy deal flow and the quality of opportunities being seen. We will continue to apply a more broad touch to our investments looking at both new businesses and at opportunities that may arise within the existing portfolio. The uncertainty in the small company sector necessitates that each investee company takes appropriate actions to respond to the challenges ahead. We are maintaining our prudent and measured risk approach to making new investments and aim to ensure that the portfolio remains well capitalised. We are confident we can deliver good returns to investors over the medium to long term. Details of the Company's ten largest investments by value (excluding the three acquisition companies), representing 50.1% by cost and 67.0% by value of the portfolio, are set out in the Annual report. INVESTMENT PORTFOLIO SUMMARY as at 30 April 2013 Date of first Total Book Valuation Additions Disposals Valuation Change in % of investment/ cost at 30 at 30 at cost at at 30 valuation net Sector April 2013 April 2012 valuation April 2013 for year assets by value £ £ £ £ £ £ Qualifying investments AIM quoted investments Omega December 2010 214,998 259,789 - - 331,455 71,666 1.3% Diagnostics Group plc In vitro Pharmaceuticals diagnostics for food intolerance, auto-immune diseases and infectious diseases Vphase plc March 2001 254,586 1,014 - - 507 (507) 0.0% Development of Electronic and energy saving electrical devices for equipment domestic use Sub-total AIM 469,584 260,803 - - 331,962 71,159 1.3% investments Unquoted investments ATG Media October 2008 1,631,830 1,865,911 863,923 - 3,334,643 604,809 13.0% Holdings Limited1 Publisher and Media online auction platform operator Fullfield July 2011 1,624,769 1,062,194 624,769 - 1,920,275 233,312 7.5% Limited trading as Motorclean Limited2 Vehicle Support cleaning and services valet services Ingleby (1879) October 2008 1,000,000 1,000,000 - - 1,328,301 328,301 5.2% Limited trading as EMaC Limited Service plans Support for the motor services trade Blaze Signs April 2006 644,930 1,422,619 - 979,639 1,143,484 700,504 4.5% Holdings Limited Manufacturing Support and services installation of signs Gro-Group March 2013 1,056,417 - 1,056,417 - 1,056,417 - 4.1% Holdings Limited3 Baby sleep General products retailers Ackling January 2012 1,000,000 1,000,000 - - 1,000,000 - 3.9% Management Limited Food Food production manufacturing, & distribution distribution and brand management Culbone Trading April 2012 1,000,000 1,000,000 - - 1,000,000 - 3.9% Limited Outsourced Support services services Madacombe April 2012 1,000,000 1,000,000 - - 1,000,000 - 3.9% Trading Limited Engineering Support services services Newquay June 2006 1,000,000 1,005,644 - - 997,500 (8,144) 3.9% Helicopters (2013) Limited (previously British International Holdings Limited) Helicopter Support service services operators Focus Pharma October 2007 517,827 578,529 - - 914,513 335,984 3.6% Holdings Limited Licensor and Support distributer of services generic pharmaceuticals Tessella July 2012 880,725 - 906,762 26,037 880,725 - 3.4% Holdings Limited4 Provider of Support science powered services technology and consulting services EOTH Limited October 2011 817,185 817,185 - - 842,294 25,109 3.3% trading as Equip Outdoor Technologies Limited Branded outdoor General equipment and retailers clothing Youngman Group October 2005 1,000,052 699,966 - - 699,966 - 2.7% Limited Manufacturer of Support ladders and services access towers Machineworks April 2006 25,727 550,340 - - 674,691 124,351 2.6% Software Limited Software for Software and CAM and machine Computer tool vendors Services RDL Corporation October 2010 1,000,000 921,169 - - 663,859 (257,310) 2.6% Limited Recruitment Support consultants for services the pharmaceutical , business intelligence and IT industries ASL Technology December 2010 1,360,130 801,951 - - 611,725 (190,226) 2.4% Holdings Limited Printer and Support photocopier services services The Plastic April 2008 392,264 203,433 - - 353,544 150,111 1.4% Surgeon Holdings Limited Snagging and Support finishing of services domestic and commercial properties Racoon December 2006 878,527 254,441 - - 250,551 (3,890) 1.0% International Holdings Limited Supplier of Personal goods hair extensions, hair care products and training Vectair January 2006 60,293 154,045 - - 222,027 67,982 0.9% Holdings Limited Design and sale Support of washroom services products Lightworks April 2006 25,727 116,629 - - 146,059 29,430 0.6% Software Limited Software for Software and CAD vendors Computer Services Monsal Holdings December 2007 847,614 76,897 - - 76,897 - 0.3% Limited Supplier of Engineering engineering services to the water and waste sectors PXP Holdings December 2006 1,220,579 - 57,143 - 57,143 - 0.2% Limited (Pinewood Structures) Design, Construction manufacture and supply of timber frames for buildings IGLU.com December 2009 - 1,455,265 - 1,455,265 - - 0.0% Holidays Limited Online ski and Retail cruise travel agent Almsworthy March 2012 - 1,000,000 - 375,231 - - 0.0% Trading Limited 2 Specialist Support construction, services building support services, building products and related services Peddars January 2012 - 1,000,000 - 136,077 - - 0.0% Management Limited1 Database Support management, services mapping, data mapping and management services to legal and building industries Fosse January 2012 - 1,000,000 - - - - 0.0% Management Limited3 Brand Support management, services consumer products and retail Sawrey Limited4 March 2011 - 1,000,000 - 93,238 - 0.0% Marketing Support services and services media Legion Group August 2005 150,000 - - - - - 0.0% plc Provision of Support manned Services guarding, mobile patrolling, and alarm response services Sub-total 19,134,596 19,986,218 3,509,014 3,065,487 19,174,614 2,140,323 74.9% unquoted investments Total 19,604,180 20,247,021 3,509,014 3,065,487 19,506,576 2,211,482 76.2%5 qualifying investments Non-qualifying investments Money market 3,727,300 2,099,906 - - 3,727,300 14.5% funds6 DiGiCo Global December 2011 1,250,204 1,334,291 - 84,087 1,587,065 336,861 6.1% Limited (formerly Newincco1124 Limited) Design and Technology, manufacture of hardware and audio mixing equipment desks Newquay as above 327,647 320,000 167,647 - 487,647 - 1.9% Helicopters (2013) Limited (formerly British International Holdings Limited) Cash 211,420 79,786 - - 211,420 0.8% Faversham House December 2010 111,335 216,647 - 112,964 111,335 7,652 0.4% Holdings Limited Publisher, Media exhibition organiser and operator of websites for the environmental, visual communications and building services sectors Ingleby (1879) as above 95,723 95,723 - - 95,723 - 0.4% Limited trading as EMaC Limited ATG Media as above 104 443 - - 647 204 0.0% Holdings Limited1 Fullfield as above - 83,179 - 83,179 - - 0.0% Limited trading as Motorclean Limited Fuse 8 plc March 2004 250,000 - - - - - 0.0% (Award International Holdings plc) Promotional Support goods and Services services agency Legion Group as above 106 - - - - - 0.0% plc Total 5,973,839 4,229,975 167,647 280,230 6,221,137 344,717 24.1% non-qualifying investments Debtors 157,722 213,610 157,722 0.6% Creditors (190,059) (163,967) (190,059) (0.9)% Net assets 25,545,682 3,676,661 3,345,717 2,556,199 7 Net assets at 24,526,639 25,695,376 100.0% year-end 1£863,923 was further invested into ATG Media Holdings Limited. This finance was provided by the acquisition vehicle Peddars Management Limited and resulted in a net repayment to the Company of £136,077. 2£624,769 was further invested into Fullfield Limited (trading as Motorclean). This finance was provided by the acquisition vehicle Almsworthy Trading Limited and resulted in a net repayment to the Company of £375,231. 3£1,000,000 of this investment into Gro-Group Limited was provided by Fosse Management Limited, one of the Company's acquisition vehicles. 4£906,762 of this investment into Tessella Holdings Limited was provided by Sawrey Limited, one of the Company's acquisition vehicles and resulted in a net repayment to the Company of £93,238. 5As at 30 April 2013, the Company held more than 70% of its total investments in qualifying holdings, and therefore complied with the VCT Investment test. 6Disclosed within current assets as current investments in the Balance Sheet. 7 Total investment additions figure of £3,676,661 differs to that shown in note 9 of £281,207. This is due to recent investments in Fullfield Limited, Gro-Group Holdings Limited, Tessella Holdings Limited and ATG Media Holdings Limited being funded via amounts already invested in acquisition vehicles Almsworthy Trading Limited, Fosse Management Limited, Sawrey Limited, and Peddars Management Limited respectively. PRINCIPAL RISKS, MANAGEMENT AND REGULATORY ENVIRONMENT The Board believes that the principal risks faced by the VCT are: Economic risk events such as an economic recession and movement in interest rates could affect trading conditions for smaller companies and consequently the value of the VCT's qualifying investments. Loss of approval as a Venture Capital Trust the VCT must comply with section 274 of the Income Tax Act 2007 which allows it to be exempted from capital gains tax on investment gains. Any breach of these rules may lead to the VCT losing its approval as a VCT, qualifying shareholders who have not held their shares for the designated holding period having to repay the income tax relief they obtained and future dividends paid by the VCT becoming subject to tax. The VCT would also lose its exemption from corporation tax on capital gains. Funds raised after 5 April 2012 and used by an investee company for the acquisition of shares in another company are restricted from being qualifying for VCT purposes. This may reduce the number of investment opportunities for such funds. Investment and strategic risk inappropriate strategy or consistently weak VCT qualifying investment recommendations might lead to under performance and poor returns to Shareholders. Investment in unquoted small companies by its nature involves a higher degree of risk than investment in companies traded on the London Stock Exchange main market. Smaller companies often have limited product lines, markets or financial resources and may be dependent for their management on a smaller number of key individuals. This may make them more risk-prone and volatile investments. Regulatory risk the VCT is required to comply with the Companies Act 2006, the rules of the UK Listing Authority and United Kingdom Accounting Standards. Breach of any of these might lead to suspension of the VCT's Stock Exchange listing, financial penalties or a qualified audit report. In addition, rules and regulations, or their interpretation, may change from time to time, which may limit the types of investments the Company can make and/or reduce the level of returns which would otherwise be achievable. Financial and operating risk inadequate controls might lead to misappropriation of assets. Inappropriate accounting policies might lead to misreporting or breaches of regulations. Failure of the Manager's and Administrator's accounting systems or disruption to its business might lead to an inability to provide accurate reporting and monitoring. Market risk movements in the valuations of the VCT's investments will, inter alia, be connected to movements in UK Stock Market indices. They may also be more susceptible to changes to political, exchange rate, taxation, economic and other regulatory changes and conditions. Asset liquidity risk the VCT's investments may be difficult to realise especially in the current economic climate. Market liquidity risk Shareholders may find it difficult to sell their shares at a price which is close to the net asset value. Credit/counterparty risk a counterparty may fail to discharge an obligation or commitment that it has entered into with the Company. For further information, please see the discussion on `credit risk' in Note 12 below. Fraud and dishonesty risk fraud may occur involving company assets perpetrated by a third party, the Investment Manager or other service provider. The Board seeks to mitigate the internal risks by setting policy and by undertaking a key risk management review at each quarterly Board meeting. Performance is regularly reviewed and assurances in respect of adequate internal controls and key risks are sought and received from Mobeus on a six monthly basis. In the mitigation and management of these risks, the Board applies rigorously the principles detailed in the AIC Code of Corporate Governance. The Board also has a share buyback policy to try to mitigate the Market Liquidity risk. This policy is reviewed at each quarterly Board Meeting. Income Statement Year ended 30 April 2013 Year ended 30 April 2012 for the year ended 30 April 2013 Notes Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Unrealised 9 - 2,556,199 2,556,199 - 949,129 949,129 gains on investments Realised gains 9 - 34,319 34,319 - 230,239 230,239 on investments Income 2 1,025,133 - 1,025,133 1,042,824 - 1,042,824 Investment 3 (151,992) (455,974) (607,966) (152,221) (456,662) (608,883) management fees Other expenses (322,286) - (322,286) (280,200) - (280,200) Profit on 550,855 2,134,544 2,685,399 610,403 722,706 1,333,109 ordinary activities before taxation Taxation on 4 (88,954) 88,954 - (93,826) 93,826 - profit on ordinary activities Profit on 461,901 2,223,498 2,685,399 516,577 816,532 1,333,109 ordinary activities after taxation Basic and 1.87p 9.00p 10.87p 2.03p 3.20p 5.23p diluted earnings per S hare: Ordinary shares 6 All the items in the above statement derive from continuing operations. There were no other gains or losses in the year. The total column of this statement is the profit and loss account of the Company. Other than revaluation movements arising on investments held at fair value through profit and loss, there were no differences between the profit as stated above and historical cost. The notes below form part of these financial statements. Balance Sheet as at 30 April 2013 Company number: 3946235 As at As at Notes 30 April 2013 30 April 2012 £ £ Fixed assets Investments at fair value 9 21,788,993 22,297,304 Current assets Debtors and prepayments 7 157,722 213,610 Current Investments 8 3,727,300 2,099,906 Cash at bank 8 211,420 79,786 4,096,442 2,393,302 Creditors: amounts falling due (190,059) (163,967) within one year Net current assets 3,906,383 2,229,335 Net assets 25,695,376 24,526,639 Capital and reserves Called up share capital 10 240,707 248,475 Capital redemption reserve 10 65,940 58,172 Revaluation reserve 10 2,827,063 1,478,804 Special distributable reserve 10 13,176,946 14,350,803 Profit and loss account 10 9,384,720 8,390,385 Equity shareholders' funds 25,695,376 24,526,639 Net asset value per share - basic and diluted Ordinary Shares 6 106.75p 98.71p Nigel Melville Chairman 1 August 2013 The notes below form part of these financial statements. Reconciliation of Movements in Shareholders' Funds for the year ended 30 April 2013 Year ended Year ended Notes 30 April 2013 30 April 2012 £ £ Opening shareholders' funds 24,526,639 24,863,968 Share capital bought back 10 (541,894) (668,744) Profit for the year 2,685,399 1,333,109 Dividends paid in year 5 (974,768) (1,001,694) Closing shareholders' funds 25,695,376 24,526,639 Cash Flow Statement for the year ended 30 April 2013 Year ended Year ended 30 April 2013 30 April 2012 Notes £ £ Interest income received 884,548 671,990 Dividend income 157,147 241,452 Other income 6,678 - Investment management fees paid (607,966) (608,883) Cash payments for other expenses (287,611) (280,803) Net cash inflow from operating 152,796 23,756 activities Investing activities Purchase of investments 9 (281,207) (8,152,849) Disposals of investments 9 3,380,036 5,421,329 Net cash inflow/(outflow) from 3,098,829 (2,731,520) investing activities Dividends Equity dividends paid 5 (974,768) (1,001,694) Cash inflow/(outflow) before financing 2,276,857 (3,709,458) and liquid resource management Financing Purchase of own shares (517,829) (725,638) Net cash outflow from financing (517,829) (725,638) Management of liquid resources (Increase)/decrease in monies held in (1,627,394) 4,438,591 current investments Increase in cash for the year 131,634 3,495 Notes to the Accounts for the year ended 30 April 2013 1.Basis of accounting The accounts have been prepared under UK Generally Accepted Accounting Practice (UK GAAP) and the Statement of Recommended Practice, `Financial Statements of Investment Trust Companies and Venture Capital Trusts' ("the SORP") issued by the Association of Investment Companies in January 2009. The financial statements are prepared under the historical cost convention except for the measurement of certain financial instruments at fair value. 2.Income 2013 2012 £ £ Income from bank deposits 991 764 Income from investments - from equities 135,481 216,406 - from overseas based OEICs 12,066 22,552 - from UK based OEICs 4,618 13,142 - from loan stock 865,768 789,960 1,017,933 1,042,060 Other income 6,209 - Total income 1,025,133 1,042,824 Total income comprises Dividends 152,165 252,100 Interest 866,759 790,724 Other 6,209 - 1,025,133 1,042,824 Income from investments comprises Listed overseas securities 12,066 22,552 Unlisted UK securities 140,099 229,548 Loan stock interest 865,768 789,960 1,017,933 1,042,060 Total loan stock interest due but not recognised in the year was £405,722 (2012: £232,301). 3.Investment Manager's fees Revenue Capital Total Revenue Capital Total 2013 2013 2013 2012 2012 2012 £ £ £ £ £ £ Mobeus Equity 151,992 455,974 607,966 152,221 456,662 608,883 Partners LLP Under the terms of a revised investment management agreement dated 10 September 2010, Mobeus Equity Partners LLP ("Mobeus") (formerly called Matrix Private Equity Partners LLP ("MPEP") up to 29 June 2012) provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fee of £113,589 per annum, the latter being subject to changes in the retail prices index each year. This agreement replaced the previous agreements with MPEP dated 10 May 2000 and 20 September 2005, and the accounting services agreement and the secretarial services agreement with Matrix-Securities Limited both dated 20 September 2005, all of which were terminated on 10 September 2010. In accordance with the policy statement published under "Management and Administration" in the Company's prospectus dated 10 May 2000, the Directors have charged 75% of the investment management expenses to the capital account. This is in line with the Board's expectation of the long-term split of returns from the investment portfolio of the Company. For the year ended 30 April 2013, the expense cap hasn't been breached (2012: £nil). The following performance incentive fee arrangements continue to be in place, and operated as detailed below: C share fund • the performance incentive fee payable will be calculated as an amount equivalent to 20 per cent of the excess of annual dividends paid to the holders of New Ordinary Shares but then reduced to the proportion which the C Shares aggregate merger net asset value represents of the entire merger net asset value of the Company; and • the dividend shortfall per former C Share at 30 April 2013 is 22.93p (£ 3,593,163 in aggregate, being 65.1% of the total shortfall at the year-end (where 65.1% was the proportion of C shares to the total number of shares in issue at the date of the Share Merger) and taking into account the target rate of dividends and the dividends paid to shareholders). The 6p annual dividend hurdle (as adjusted for RPI) and the £1 NAV maintenance provisions will continue to apply in respect of shares in issue and funds raised at the date of the Share Merger. Ordinary share fund During the year, the rights to any performance fee from the original Ordinary share fund lapsed. This is because the hurdle of 80p of cumulative dividends paid on each former Ordinary Share had to be fulfilled by 22 December 2012, which has not occurred. 4.Taxation on ordinary activities 2013 2013 2013 2012 2012 2012 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ a) Analysis of tax charge: UK Corporation tax on (88,954) 88,954 - (93,826) 93,826 - profits for the year Total current tax (88,954) 88,954 - (93,826) 93,826 - charge Corporation tax is based on a rate of 20% (2012: 20%) b) Profit on ordinary 550,855 2,134,544 2,685,399 610,403 722,706 1,333,109 activities before tax Profit on ordinary 110,171 426,909 537,080 122,081 144,541 266,622 activities multiplied by small company rate of corporation tax in the UK of 20% (2012: 20%) Effect of: UK dividends (27,097) - (27,097) (43,282) - (43,282) Unrealised gains not - (511,240) (511,240) - (189,826) (189,826) allowable Realised gains not - (6,864) (6,864) - (46,048) (46,048) taxable Marginal rate relief 5,880 (5,880) - 15,027 (15,027) - Unrelieved - 8,121 8,121 - 12,534 12,534 expenditure Actual current tax 88,954 (88,954) - 93,826 (93,826) - charge Tax relief relating to investment management fees is allocated between revenue and capital where such relief can be utilised. No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust. There is no potential liability to deferred tax (2012: nil). There is an unrecognised deferred tax asset of £362,594 (2012: £307,179). This unrecognised deferred tax asset relates to taxable losses arising from expenses exceeding taxable income. In the directors' opinion, these are unlikely to be recovered for the foreseeable future and therefore have not been recognised. 5.Dividends paid and payable 2013 2012 £ £ Amounts recognised as distributions to equity holders in the year: Ordinary shares Interim income dividend paid for the year ended 30 April 303,182 500,847 2013 of 1.25p (2012: 2p) per share Interim capital dividend paid for the year ended 30 April 671,586 500,847 2013 of 2.75p (2012: 2p) per share Total paid 974,768 1,001,694 Any proposed final dividend is subject to approval by Shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. Set out below are the total income dividends payable in respect of the financial year, which is the basis on which the requirements of section 274 of the Income Tax Act 2007 are considered. 2013 2012 £ £ Ordinary shares Revenue available for distribution by way of dividends 461,901 516,577 for the year Interim income dividend for the year ended 30 April 2013 303,182 500,847 paid of 1.25p (2012: 2p) per share Second interim income dividend for the year ended 30 24,071 - April 2013 of 0.1p (2012: nil p) per share 6.Basic and diluted earnings and return per share 2013 2012 £ £ Total earnings after taxation: 2,685,399 1,333,109 Basic and diluted earnings per share (note a) 10.87p 5.23p Net revenue from ordinary activities after 461,901 516,577 taxation Basic and diluted revenue earnings per share 1.87p 2.03p (note b) Net realised capital gains 34,319 230,239 Net unrealised capital gains 2,556,199 949,129 Capital expenses (net of taxation) (367,020) (362,836) Total capital return 2,223,498 816,532 Basic and diluted capital earnings per share 9.00p 3.20p (note c) Weighted average number of shares in issue in 24,697,137 25,484,692 the year Notes: a.Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b.Revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue. c.Capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue. d.There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted returns. 7.Debtors 2013 2012 £ £ Amounts due within one year: Accrued income 152,748 200,946 Prepayments 4,974 12,664 157,722 213,610 8.Current asset investments Current asset investments total £3,727,300 (2012: £2,099,906) and comprise investments in four OEIC money market funds (three Dublin based and one London based). The share of each OEIC represented by these holdings is less than 1% in all cases. All of this sum is subject to same day access. These sums are regarded as monies held pending investment and are treated as liquid resources in the Cash Flow Statement and in note 18 contained in the Annual Report & Accounts. 9.Investments at fair value Movements in investments during the year are summarised as follows: Traded on Unquoted Unquoted Loan Stock Total AIM equity preference shares shares £ £ £ £ £ Cost at 30 April 2012 469,584 7,015,231 43,413 15,797,142 23,325,370 Permanent impairment at (250,000) (150,106) - (774,864) (1,174,970) 30 April 2012 Unrealised gains/ 41,219 618,637 (17,565) (495,387) 146,904 (losses) at 30 April 2012 Valuation at 30 April 260,803 7,483,762 25,848 14,526,891 22,297,304 2012 Purchases at cost - 57,143 - 224,064 281,207 Sale proceeds - (1,729,512) (2,326) (1,687,063) (3,418,901) Reclassified* - (1,060,980) 476 1,060,504 - Realised gains - 47,258 - 25,926 73,184 Unrealised gains/ 71,159 2,102,333 (1,000) 383,707 2,556,199 (losses) Closing valuation at 30 331,962 6,900,004 22,998 14,534,029 21,788,993 April 2013 Cost at 30 April 2013 469,584 6,365,282 39,734 14,764,699 21,639,299 Permanent impairment at (254,586) (400,106) - (774,864) (1,429,556) 30 April 2013 Unrealised gains/ 116,964 934,828 (16,736) 544,194 1,579,250 (losses) at 30 April 2013 Valuation at 30 April 331,962 6,900,004 22,998 14,534,029 21,788,993 2013 8 The equity of acquisition vehicles was exchanged for equity and loan stock issued by the eventual acquirer of the target business. A breakdown of the increases and the decreases in unrealised valuations of the portfolio is shown in the Investment Portfolio Summary above. Reconciliation of investment transactions to cash and income statement movements The difference between sales proceeds above of £3,418,901 and disposals of investments shown by the Cash Flow Statement of £3,380,036, is transaction costs of £38,865. These transaction costs also account for the difference between realised gains above of £73,184 and that shown in the Income Statement of £34,319. Unrealised gains/(losses) at 30 April 2013 of £1,579,250 differ to that shown in the Revaluation Reserve of £2,827,063. The difference of £1,247,813 is loan stock received (net of a £84,087 repayment made during the year) as part of the disposal of DiGiCo Europe Limited in December 2011 which was not recognised as a realised gain in that year. 10.Movement in share capital and reserves Called Capital Revaluation Special Profit Total up Share redemption reserve distributable and loss capital reserve reserve * account* £ £ £ £ £ £ At 30 April 248,475 58,172 1,478,804 14,350,803 8,390,385 24,526,639 2012 Share (7,768) 7,768 - (541,894) - (541,894) buybacks Transfer of - - - (631,963) 631,963 - realised losses to Special distributable reserve (note) Realised gain - - - - 34,319 34,319 on investments Realisation - - (1,207,940) - 1,207,940 - of previously unrealised gain Dividends - - - - (974,768) (974,768) paid Profit for - - 2,556,199 - 94,881 2,651,080 the year As at 30 240,707 65,940 2,827,063 13,176,946 9,384,720 25,695,376 April 2013 *These reserves less net unrealised losses on Level 1 investments per note 9 total £22,424,044 (2012: £22,532,407) and are regarded as distributable reserves for the purpose of assessing the Company's ability to pay dividends to shareholders. The Company's revaluation reserve represents the capital reserve (unrealised) upon investments held at the year end. The cancellation of the formerly named C Share Fund's share premium account (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 account 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 £631,963 to the special distributable reserve from the profit and loss account is the total of realised losses incurred by the Company in the year. 11.Basic and diluted net asset value per share Net asset value per Ordinary Share is based on net assets at the end of the year, and on 24,070,716 (2012: 24,847,465) Ordinary Shares, being the number of Ordinary Shares in issue on that date. 12.Management of capital The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern, so that it can continue to provide returns for shareholders and to provide an adequate return to shareholders by allocating its capital to assets commensurate with the level of risk. By its nature, the Company has an amount of capital, at least 70% (as measured under the tax legislation) of which is and must be, and remain, invested in the relatively high risk asset class of small UK companies within three years of that capital being subscribed. The Company accordingly has limited scope to manage its capital structure in the light of changes in economic conditions and the risk characteristics of the underlying assets. Subject to this overall constraint upon changing the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares, or sell assets if so required to maintain a level of liquidity to remain a going concern. Although, as the Investment Policy implies, the Board would consider levels of gearing, there are no current plans to do so. It regards the net assets of the Company as the Company's capital, as the level of liabilities are small and the management of them is not directly related to managing the return to shareholders. There has been no change in this approach from the previous year. 13.Post balance sheet events On 30 May 2013, Newquay Helicopters (2013) Limited (formerly British International Holdings Limited ) repaid the principal, premiums and loan interest arrears of its first two loan stocks for total cash proceeds of £ 1,671,825. The capital proceeds of £1,248,800 within this sum compares to a related investment cost of £934,000. On 26 July 2013, £967,781 was invested in Veritek Global Limited, using the acquisition vehicle Madacombe Trading Limited. 14. Statutory information The financial information set out in these statements does not constitute the Company's statutory accounts for the year ended 30 April 2013 in terms of section 434 of the Companies Act 2006 but is derived from those accounts. Statutory accounts for the year ended 30 April 2013 will be delivered to Companies House following the Company's Annual General Meeting. The auditors have reported on those accounts: their report was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. 15. Annual Report The Annual Report for the year ended 30 April 2013 will shortly be made available on the Company's website: www.mig2vct.co.uk. and Shareholders will be notified of this by email or post or sent a hard copy in the post in accordance with their instructions. Copies will be available thereafter to members of the public from the Company's registered office. 16. Annual General Meeting The Annual General Meeting of the Company will be held at 12.00 noon on 20 September 2013 at the offices of SGH Martineau LLP, One America Square, Crosswall, London EC3N 2SG. Contact details for further enquiries: Robert Brittain of Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail to mig2@mobeusequity.co.uk. Mark Wignall or Mike Walker at Mobeus Equity Partners LLP (the Investment Manager) on 020 7024 7600 or by e-mail to 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.

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