Half-year Report

RNS Number : 1227Z
Mobeus Income & Growth 2 VCT PLC
12 December 2017
 

 

Mobeus Income & Growth 2 VCT plc

 

Half-Year Report for the six months ended 30 September 2017

 

Mobeus Income & Growth 2 VCT plc ("MIG2", the "Company", "VCT" or the "Fund") is a Venture Capital Trust ("VCT") advised by Mobeus Equity Partners LLP ("Mobeus"), investing primarily in established, unquoted companies.

 

Company Objective

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

 

Financial Highlights

Results for the six months ended 30 September 2017

As at 30 September 2017

Net assets: £38.83 million

Net asset value ("NAV") per share: 103.25 pence

 

·       Net Asset Value ("NAV") Total Return1 per share was 3.3% while Share Price Total Return2 per share was 5.8% for the Half-Year.

 

·       Shareholders received an interim dividend of 7.00 pence per share in respect of the current year ending 31 March 2018 on 27 July 2017.  A further interim dividend of 9.00 pence per share has been declared, payable on 22 January 2018.

 

·       A total of £3.26 million was received following the successful realisation of Entanet in the Half-Year.

 

·       The Company made two new investments totalling £2.07 million and one follow-on investment of £0.09 million during the Half-Year.

 

·       Total liquidity at the Half-Year is £13.90 million.

 

1 Calculated as closing NAV per share (103.25p) plus dividends paid in the year (7.00p) as a percentage increase of opening NAV (106.70p).

2 Calculated as closing share price (mid-price) (93.00p) plus dividends paid in the year (7.00p) as a percentage increase of opening share price (mid-price) (94.50p).

 

 

Performance Summary

 

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

 

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

 

Period

Net asset value (NAV) per share

Cumulative dividends paid per share

Cumulative total shareholder return per share

 

 

 

(NAV basis)

 

(p)

(p)

(p)

As at 30 September 2017

103.25

69.00

172.25

As at 31 March 2017

106.70

62.00

168.70

As at 31 March 2016

119.61

47.00

166.61

As at 31 March 2015

115.45

42.00

157.45

As at 31 March 2014

120.73

23.00

143.73

As at 30 April 2013

106.75

18.00

124.75

As at 30 April 2012

98.71

14.00

112.71

As at 30 April 2011

96.16

10.00

106.16

As at 30 April 2010

87.47

5.00

92.47

As at 30 April 2009

86.02

4.00

90.02

As at 30 April 2008

98.48

1.50

99.98

 

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

 

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

 

Chairman's Statement

 

I am pleased to present the Half-Year Report for Mobeus Income & Growth 2 VCT plc for the six months ended 30 September 2017.

 

Overview

The six-month period has provided a satisfactory return for shareholders, arising from income and solid portfolio performance.  The successful realisation of the Company's investment in Entanet Holdings Limited for proceeds of £3.26 million made a significant contribution to performance. 

 

The level of new investment has been in line with the Investment Adviser's plans for the period with two new growth capital investments and one follow-on investment.  Further details of these investments are included under "Investment Portfolio" below.  These new investments reflect the change in the VCT Rules focussing on the provision of growth capital to younger and smaller companies.  Since the change to the VCT Rules in November 2015 a total of £5.53 million has been invested by this VCT in nine such companies.  Whilst the VCT industry can no longer support management buyout investments these continue to be important, representing 77% of the portfolio by value.  Overall the portfolio continues to perform satisfactorily.

 

Fundraising 

In order to take advantage of a growing pipeline of investment opportunities, you will be aware that the Company launched an Offer for Subscription to raise up to £10 million, with an over-allotment facility to raise up to an additional £5 million, on 6 September 2017.  I am pleased to report that demand for the Offer has been strong with the Board announcing on 13 October 2017 its decision to utilise the over-allotment facility.  Applications amounting to £14.23 million have been received at the date of this Half-Year Report leaving a further £0.77 million to raise before the Offer is closed. 

 

12,937,145 shares have so far been allotted to shareholders in several allotments at effective Offer prices ranging between 103.17p and 110.99p.

 

Performance for the six months ended 30 September 2017

The Net Asset Value ("NAV") Total Return was 3.3% for the Half-Year compared with a marginal rise for the comparative period in 2016.  The share price total return for the Half-Year was 5.8%, compared with 2.9% for the equivalent period in 2016.

 

Half-Year ended 30 September            

2017

     2016

 

(pence per share)

(pence per share)

Realised and net unrealised gains/(losses) on the investment portfolio

2.63

(0.32)

Income on the investment portfolio and on liquidity         

2.44

2.10

Share buybacks and adjustments           

0.25

0.08

Gross return

5.32

1.86

Less: Investment Adviser's fees and other expenses

(1.77)

(1.83)

Net return

3.55

0.03

 

 

 

After accounting for the interim dividend of 7.00 pence per share paid on 27 July 2017, and this net return of 3.55 pence, the NAV per share at 30 September 2017 was 103.25 pence per share, compared to 106.70 pence per share at 31 March 2017.

 

Investment Portfolio

The value of the investment portfolio reduced by £0.72 million during the first half of the year (2.6% lower than the 31 March 2017 value) and was valued at £26.17 million (including £1.03 million held in companies preparing to trade ("CPTs")) at the period-end. However, the like for like change in valuation showed an overall increase in the value of the portfolio by 3.5%.

 

The 3.5% increase was mainly due to the Company having completed the sale of its investment in Entanet Holdings Limited during the period, realising proceeds of £3.26 million.  This investment has achieved a return on original investment cost of 2.5 times to date, over the three and a half years that the investment was held.  Up to a further £0.33 million of deferred consideration may be received over the next two years, which would increase this return further. 

 

During the period the Company made two new investments. An investment of £0.35 million was made into MyTutorweb, a digital marketplace connecting school pupils seeking private one-to-one tutoring with university student tutors, and £1.72 million (including £1.30 million previously held in a company preparing to trade) was invested into Wetsuit Outlet, a leading online retailer in the water sports market.  A further investment of £0.09 million was also made into MPB Group Limited.

 

The Company received cash proceeds of £3.76 million during the period, including £1.70 million of loan stock repayments. This loan stock repayment figure includes £1.51 million from the realisation of Entanet with the balance part of planned repayments.

 

The portfolio movements for the period are summarised below:

 

 

£m

Portfolio value at 31 March 2017

28.08

New and further investments (excluding use of CPTs)

0.86

Disposal proceeds

(3.76)

Realised gains

1.71

Valuation movements

(0.72)

Portfolio value at 30 September 2017

26.17

 

Interim Dividend

The Board has declared a second interim dividend of 9.00 pence per share (2016: 5.00 pence), payable on 22 January 2018 to shareholders on the register on 22 December 2017 in line with the Company's dividend target. This will bring the total dividends paid in the current year to 16.00 pence per share. The Board does not expect to pay any further dividends during the current financial year, but regards 5.00p of this dividend as fulfilling its current annual dividend target of paying a dividend in respect of each financial year of not less than 5.00 pence per share.  After paying this second interim dividend, cumulative dividends paid per share since the launch of the current share class will increase to 78.00 pence per share.

 

Liquidity

Liquidity of £13.90 million corresponds to 35.8% of net assets (31 March 2017: £12.58 million / 33.1%) and includes both £1.03 million (31 March 2017: £2.64 million) invested in CPTs and £2.29 million due from the first allotment of shares under the Offer.  After including cash received from allotments made after the period-end and the payment of the second interim dividend of 9.00 pence per share referred to above, liquidity will become an estimated £16.81 million (36.9%).

 

Share buybacks

During the period under review, the Company bought back and cancelled 279,220 of its own shares, representing 0.8% of the issued share capital at the beginning of the period.  The average price was 93 pence per share and cost a total £0.26 million, including expenses.

 

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

 

Shareholder communications

The Investment Adviser holds an annual VCT event for shareholders in central London.  Each event includes a presentation on the Mobeus Advised VCTs' investment activity and performance.  The next event will be held on Tuesday 30 January 2018 at the Royal Institute of British Architects in central London.  There will be a daytime and a separate evening session.  Shareholders have been sent an invitation to this event with further details.  If you have not replied to the invitation, but would like to attend, please apply to Mobeus (vcts@mobeusequity.co.uk) by email to register.  The Board looks forward to meeting all shareholders able to attend.

 

Board Appointment

As mentioned in my Annual Report Statement, Ian Blackburn has joined the Board and Ken Vere Nicoll has retired.  In accordance with the Articles of Association, Ian was elected as a Director at the Annual General Meeting held on 14 September 2017 and has been appointed as Chairman of the Nomination and Remuneration Committee.  I am pleased to welcome Ian to the Board.

 

VCT legislation

As you may be aware, the UK Government recently conducted a Patient Capital Review aimed at expanding the provision of long-term capital for growing, innovative firms.  Launched in November 2016, the closing date for responses to the consultation phase was 22 September 2017.  Strong representations were made on behalf of the industry by the Investment Adviser, the Venture Capital Trust Association and The AIC. These submissions emphasised the benefits of the VCT scheme and argued that the structure of VCTs makes them a suitable vehicle to meet the Government's ambitions to provide such capital. 

 

The measures proposed in the Autumn Budget of 22 November 2017  outlined the key findings from the review including a number of legislative changes to the VCT scheme  the earliest of which are due to come into effect from 6 April 2018.  We understand that these changes are designed to exclude tax-motivated investments where capital is not at risk (that is, principally seeking to preserve an investor's capital).

 

Your Board noted the intentions behind these changes. While some of these changes place further restrictions on the way investments may be structured, the Board currently has no reason to believe that they will materially affect the Company's existing investment policy or strategic objectives.

 

A summary of the current VCT regulations and those proposed in the Autumn Budget are stated below.

 

Outlook

Your Board remains of the opinion that your Company is well positioned to take advantage of the strong demand for growth capital investment despite the uncertainties faced by the UK economy.  The fundraising is anticipated to be fully subscribed before the closing date and this will provide the Company with sufficient funds to continue the current investment rate in the short to medium term.

 

While the changes proposed in the recent Autumn Budget are likely to have an impact on the VCT industry, your Board believes that the existing and future investment portfolio should continue to deliver attractive returns and the Company is well positioned to adapt to the changes.

 

Your Board will shortly be issuing further guidance (in a joint announcement with the Boards of the other Mobeus advised VCTs) on the impact of the Budget changes, in a supplementary prospectus to the Offer.  This document will be available on the Mobeus website at: www.obeusequity.co.uk/investor-area/fundraising and the National Storage Mechanism.

 

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

 

Nigel Melville

Chairman

 

12 December 2017

 

Investment Policy

The investment policy is designed to meet the Company's objective.

 

Investments

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

 

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

 

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

 

Liquidity

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

 

Borrowing

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

 

Summary of VCT Regulation

To assist shareholders, the following table contains a summary of the most important rules that determine VCT approval.

 

To achieve continuing status as a VCT, the Company must meet a number of conditions, the most important of which are that:-

 

·       The Company must hold at least 70%2, by VCT tax value1, of its total investments (shares, securities and liquidity) in VCT qualifying holdings, within approximately three years of a fundraising;

 

·       Of these qualifying holdings, an overall minimum of 30% by VCT tax value1 (70% for funds raised on or after 6 April 2011) must be in ordinary shares which carry no preferential rights (save as may be permitted under VCT rules)3;

 

·       No investment in a single company or group of companies may represent more than 15% (by VCT tax value1) of the Company's total investments at the date of investment;

 

·       The Company must pay sufficient levels of income dividend from its revenue available for distribution so as not to retain more than 15% of its income from shares and securities in a year;

 

·       The Company's shares must be listed on a regulated European stock market; and

 

·       Non-qualifying investments can no longer be made, except for certain exemptions in managing the Company's short-term liquidity.

 

To be a VCT qualifying holding, new investments must be in companies:-

 

·       which carry on a qualifying trade;

 

·       which have no more than £15 million of gross assets at the time of investment and £16 million immediately following investment from VCTs;

 

·       whose maximum age is generally seven years (ten years for knowledge intensive businesses);

 

·       that receive no more than an annual limit of £5 million and a lifetime limit of £12 million (£20 million for knowledge intensive companies), from VCTs and similar sources of State Aid funding; and

 

·       that use the funds received from VCTs for growth and development purposes.

 

The conditions below take into account legislation up to the Finance Act 2017 which was enacted with effect from 6 April 2017.

1 VCT tax value means as valued in accordance with prevailing VCT legislation.  The calculation of VCT tax value is arrived at using tax values, based on the cost of the most recent purchase of an investment instrument in a particular company, which differs from the actual cost of each investment shown in the Investment Portfolio Summary.

 

For accounting periods beginning on or after 6 April 2019, this percentage is expected to increase to 80%.

 

3 The requirement for VCTs to hold at least 30% of qualifying investments in "eligible shares" (broadly ordinary equity) from funds raised prior to 6 April 2011 is expected to be withdrawn.  All qualifying investments made by VCTs after 5 April 2018 are expected to be included in funds which are required to comprise at least 70% of qualifying investments in "eligible shares".

 

 

Summary of proposed changes to VCT regulation announced in November 2017 Budget Statement

 

From 6 April 2018:

·      VCTs will be required to invest 30% of funds raised in an accounting period beginning on or after 6 April 2018 in qualifying holdings within 12 months of the end of the accounting period;

 

From the date of Royal Assent (spring of 2018):

·      VCTs may not make investments that do not appear to meet the new 'risk to capital' condition (which requires a company, at the time of investment, to be an entrepreneurial company with the objective to grow and develop, and where there is genuine risk of loss of capital).

 

·      VCTs may no longer offer secured loans to investee companies, and any returns on loan capital above 10 per cent per annum must represent no more than a commercial return on the principal.

 

For accounting periods beginning on or after 6 April 2019:

 

·      The period for reinvestment of proceeds on disposal of qualifying holdings investments will increase from 6 to 12 months;

 

·      The proportion of VCT funds that must be held in qualifying holdings will increase from 70% to 80%.

 

Please note that the above changes are not exhaustive, are yet to be enacted and may change by the time Royal Assent is granted.

 

 

Investment Review

 

There has been an encouraging level of investment activity during the Half-Year including one significant divestment, two new investments and one follow-on investment.

 

The Company faces further regulatory changes following the Government's Patient Capital Review and the resulting measures introduced in the Budget announced on 22 November 2017.  Together with the continuing uncertainty of the Brexit process the current levels of uncertainty are set to continue for some time yet.

New investment

A total of £2.16 million was invested during the six months under review.  Two new investments were made, into MyTutorweb and Wetsuit Outlet.  MyTutorweb, a digital marketplace connecting school pupils seeking private one-to-one tutoring with university student tutors, received growth investment of £0.35 million.  Wetsuit Outlet, a leading online retailer in the water sports market, received growth investment of £1.72 million.   There was one follow-on investment into an existing portfolio company, with a further investment of £0.09 million made into MPB, a leading online retailer of used camera and video equipment, to further support growth. 

 

Patient Capital Review

 

As the Chairman's Statement noted, the UK Government has conducted a review to identify and tackle factors considered to be adversely affecting the supply of longer term capital to small and developing firms.  The consultation period closed on 22 September 2017 and strong representations were made on behalf of the VCT industry by Mobeus as Investment Adviser, the Venture Capital Trust Association and the Association of Investment Companies.

 

As anticipated, the recent Chancellor's Autumn Budget outlined the key findings from the review including a number of changes to the VCT Scheme, the earliest of which are due to come into effect from 6 April 2018.

 

Mobeus, as Investment Adviser, believe these changes should not overall affect the ability of the Company to continue to make successful growth capital investments.

 

New investment in the Half-Year

Company

Business

Date of investment

Amount of new investment (£m)

MyTutorweb

Online tutoring

May 2017

0.35

Wetsuit Outlet

Retailer

July 2017

1.72*

*£1.30 million previously held in Manufacturing Services Investment Limited, a company preparing to trade, along with £0.42 million from the Company was used for this investment.

Further investments in existing portfolio companies in the Half-Year

Company

Business

Date of investment

Amount of new investment (£m)

MPB Group

Online marketplace for used camera and video equipment

September 2017

0.09

MPB is Europe's leading online marketplace for used camera and video equipment.  Based in Brighton, its custom-designed pricing technology enables MPB to offer both buy and sell services through the same platform and offers a one-stop shop for all its customers. This further investment is to provide additional working capital to fund continued expansion of its platform globally, having launched into both the US and German markets. The company's latest audited accounts for the year ended 31 March 2017 show turnover of £13.20 million and loss before interest, tax and amortisation of goodwill of £0.47 million.

 

Realisations in the Half-Year

The Company realised one investment during the period under review, for cash proceeds totalling £3.26 million.  This was the very successful sale of the Company's investment in Entanet Holdings Limited.  Including the loan stock repayments of £0.19 million from TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited) and other receipts of £0.31 million, total cash proceeds for the Half-Year amounted to £3.76 million.

 

Company

Business

Period of investment

Total cash proceeds over the life of the investment/Multiple over cost

Entanet

Wholesale voice and data communications provider

February 2014 to August 2017

£3.69 million

2.5 times cost

The VCT sold this investment in Entanet to AIM quoted CityFibre Infrastructure Holdings plc for £3.26 million in August 2017.  Deferred contingent consideration of up to £0.33 million is potentially payable over the next 24 months.  Excluding this deferred consideration, the Company has so far realised a gain of £1.82 million, being 4.83 pence per share, and has returned an IRR of 39% to date, an excellent outcome.

 

Loan stock repayments

 

The Company has received three loan stock repayments totalling £0.19 million during the period, from TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited).

 

Mobeus Equity Partners LLP

Investment Adviser

 12 December 2017

 

Investment Portfolio Summary

as at 30 September 2017

 

Qualifying investments

Date of first investment / Sector

Total Book cost at 30 September 2017

Valuation at 31 March 2017

Additions
at cost

 

Disposals at
valuation

Valuation at 30 September 2017

Change in valuation for period

% of net assets
by
value

 

 

 

£

£

£

£

£

£

 

 

Unquoted investments

 

 

 

 

 

 

 

 

 

ASL Technology Holdings Limited
Printer and photocopier services

December 2010
Support services

2,092,009

2,258,388

-

-

2,186,975

(71,413)

5.6%

 

Tovey Management Limited
(trading as Access IS)

Provider of data capture and scanning hardware

October 2015
Software and Computer Services

1,733,500

2,119,958

-

-

2,067,254

(52,704)

5.3%

 

Virgin Wines Holding Company Limited
Online wine retailer

November 2013
General retailers

1,284,333

1,761,822

-

-

1,629,743

(132,079)

4.2%

 

Manufacturing Services Investment Limited (trading as Wetsuit Outlet Limited)1
Online retailer in the water sports market

February 2014
General retailers

1,412,992

1,000,300

412,692

-

1,412,992

-

3.6%

 

Gro-Group Holdings Limited
Baby sleep products

March 2013
General retailers

1,123,088

973,928

-

-

1,220,331

246,403

3.1%

 

Vian Marketing Limited
(trading as Tushingham Sails)

Design, manufacture and sale of stand-up paddleboards and windsurfing sails

July 2015
Leisure goods

717,038

987,739

-

-

1,132,350

144,611

3.0%

 

Fullfield Limited
(trading as Motorclean)

Vehicle cleaning and valet services

July 2011
Support services

1,025,152

1,053,281

-

-

1,091,000

37,719

2.9%

 

EOTH Limited
(trading as Rab and Lowe Alpine)

Branded outdoor equipment and clothing

October 2011
General retailers

817,185

1,001,498

-

-

1,069,172

67,674

2.8%

 

Turner Topco Limited
(trading as ATG Media)

Publisher and online auction platform operator

October 2008
Media

1,320,963

1,151,484

-

-

1,044,591

(106,893)

2.7%

 

Tharstern Group Limited
Software based management information systems to the print sector

July 2014
Software and Computer Services

789,815

942,138

-

-

961,550

19,412

2.5%

 

Master Removers Group (formerly Leap New Co Limited
(trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van))

A specialist logistics, storage and removals business

December 2014
Support services

369,625

526,134

-

 

-

747,355

221,221

2.0%

 

RDL Corporation Limited
Recruitment consultants for the pharmaceutical, business intelligence and IT industries

October 2010
Support services

1,000,000

1,031,100

-

-

743,950

(287,150)

1.9%

 

Veritek Global Holdings Limited
Maintenance of imaging equipment

July 2013
Support services

967,780

715,856

-

-

740,516

24,660

1.9%

 

TPSFF Holdings Limited (formerly The Plastic Surgeon Holdings Limited)
Snagging and finishing of domestic and commercial properties

April 2008
Support services

231,532

881,275

-

192,978

739,654

51,357

1.9%

 

Media Business Insight Holdings Limited
A publishing and events business focused on the creative production industries

January 2015
Media

1,447,188

979,875

-

-

714,925

(264,950)

1.8%

 

Redline Worldwide Limited
Provider of security services to the aviation industry

February 2016
Support services

682,222

837,283

-

-

692,348

(144,935)

1.8%

 

Vectair Holdings Limited
Designer and distributor of washroom products

January 2006
Support services

60,293

403,701

-

-

678,593

274,892

1.7%

 

CGI Creative Graphics International Limited
Vinyl graphics to global automotive, recreation vehicle and aerospace markets

June 2014
General Industrials

999,568

888,418

-

-

669,295

(219,123)

1.7%

 

MPB Group Limited
Online marketplace for photographic and video equipment

June 2016
General retailers

463,350

374,244

89,106

-

589,291

125,941

1.5%

 

Pattern Analytics Limited (trading as Biosite)

Workforce management and security services for the construction industry

November 2016

Support services

495,479

495,479

-

-

495,479

-

1.3%

 

Preservica Limited
Seller of proprietary digital archiving software

December 2015
Software and Computer Services

485,770

485,770

-

-

485,770

-

1.3%

 

Blaze Signs Holdings Limited
Manufacturing and installation of signs

April 2006
Support services

437,030

526,492

-

-

469,856

(56,636)

1.2%

 

Ibericos Etc. Limited (trading as Tapas Revolution)

Spanish restaurant chain

January 2017

General retailers

451,248

451,248

-

-

451,248

-

1.2%

 

BookingTek Limited

Software for hotel groups

October 2016

Software and Computer services

450,442

450,442

-

-

450,442

-

1.2%

 

Buster and Punch Holdings Limited (formerly Chatfield Services Limited)

Industrial inspired lighting and interiors retailer

March 2017
General retail

436,391

436,391

-

-

436,391

-

1.1%

 

Bourn Bioscience Limited
Management of In-vitro fertilisation clinics

January 2014
Healthcare
Equipment & Services

757,101

504,586

-

-

435,074

(69,512)

1.1%

 

MyTutorweb Limited

Digital marketplace connecting school pupils seeking one to one online tutoring

May 2017

Support services

349,661

-

349,661

-

349,661

-

0.9%

 

Jablite Holdings Limited
Manufacturer of expanded polystyrene products

April 2015
Construction and materials

281,398

401,864

-

-

171,931

(229,933)

0.4%

 

Lightworks Software Limited
Provider of software for CAD and CAM vendors

April 2006
Software and Computer Services

25,727

92,737

-

-

110,083

17,346

0.3%

 

Racoon International Group Limited (formerly Racoon International Holdings Limited)
Supplier of hair extensions, hair care products and training

December 2006
Personal goods

1,045,985

83,729

-

-

-

(83,729)

0.0%

 

Entanet Holdings Limited

Wholesale voice and data communications provider

February 2014

Fixed line Telecommunications

-

1,550,227

-

1,550,227

-

-

0.0%

 

Newquay Helicopters (2013) Limited (in members' voluntary liquidation)
Helicopter service operators

June 2006
Support services

30,469

-

-

-

-

-

0.0%

 

Total qualifying investments

 

23,784,334

25,367,387

851,459

1,743,205

23,987,820

(487,821)

61.9%2

 

Non-qualifying investments

 

 

 

 

 

 

 

 

 

Media Business Insight Limited

as above

561,884

855,516

-

-

624,192

(231,324)

1.6%

 

Hollydale Management Limited
Company seeking to carry on a business in the food sector

March 2015
Support services

566,400

354,000

-

-

354,000

-

0.9%

 

Manufacturing Services Investment Limited (trading as Wetsuit Outlet)1

as above

304,000

608,000

-

304,000

304,000

-

0.8%

 

Tovey Management Limited
(trading as Access IS)

as above

219,873

219,873

-

-

219,873

-

0.6%

 

Backhouse Management Limited
Company seeking to carry on a business in the motor sector

April 2015
Support services

441,220

169,700

-

-

169,700

-

0.4%

 

Barham Consulting Limited
Company seeking to carry on a business in the catering sector

April 2015
Support services

441,220

169,700

-

-

169,700

-

0.4%

 

Creasy Marketing Services Limited
Company seeking to carry on a business in the textile sector

April 2015
Support services

441,220

169,700

-

-

169,700

-

0.4%

 

McGrigor Management Limited
Company seeking to carry on a business in the pharmaceutical sector

April 2015
Support services

441,220

169,700

-

-

169,700

-

0.4%

 

365 Agile Group
(formerly lafyds plc)

Development of energy saving devices for domestic use

March 2001
Electronic and electrical equipment

254,586

-

-

-

-

-

0.0%

 

Total non-qualifying investments

 

3,671,623

2,716,189

-

304,000

2,180,865

(231,324)

5.5%

 

Total investment portfolio per note 9

 

27,455,957

28,083,576

851,459

2,047,205

26,168,685

(719,145)

67.4%

 

Cash and current asset investments3

 

 

9,935,913

-

-

10,579,961

 

27.2%

 

Total investments including cash and current asset investments

 

27,455,957

38,019,489

851,459

2,047,205

36,748,646

(719,145)

94.6%

 

Other current assets

 

 

185,596

 

 

2,512,800

 

6.5%

 

Current liabilities

 

 

(144,100)

 

 

(429,540)

 

(1.1)%

 

Totals

 

27,455,957

 

851,459

2,047,205

 

 

 

 

Net assets at the period-end

 

 

38,060,985

 

 

 

38,831,906

 

100.0%

 

1 £1,608,300 previously held in Manufacturing Services Limited, a company preparing to trade, was used for the investment into Wetsuit Outlet resulting in a repayment of £304,000.  An additional £412,692 of cash was also invested out of the VCT's cash resources.

 

2 As at 30 September 2017, the Company held more than 70% of its total investments in qualifying holdings, and therefore complied with the VCT Qualifying Investment test.  For the purposes of the VCT qualifying test, the Company is permitted to disregard disposals of investments for six months from the date of disposal.  It also has up to three years to bring new funds raised, before these need to be included in the qualifying investment test.

 

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

 

Statements of the Directors' Responsibilities

 

Responsibility Statement

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

 

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

 

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

 

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

 

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

 

Principal Risks and Uncertainties

In accordance with DTR 4.2.7, the Board confirms that the principal risks and uncertainties facing the Company have not materially changed from those identified in the Annual Report and Accounts for the year ended 31 March 2017 ("the Annual Report").

 

The principal risks faced by the Company are:

 

·       economic;

·       investment and strategic;

·       loss of approval as a VCT;

·       VCT regulatory changes;

·       regulatory;

·       financial and operating;

·       market;

·       asset liquidity;

·       market liquidity;

·       counterparty; and

·       cyber and data security.

 

A more detailed explanation of these risks can be found in the Strategic Report on pages 20 and 21 and in Note 15 on pages 54 - 61 of the Annual Report and Accounts for the year ended 31 March 2017, copies of which are available on the Investment Adviser's website, www.mobeusequity.co.uk or by going directly to the VCT's website, www.mig2vct.co.uk.

 

Going Concern

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

 

The Board's assessment of liquidity risk and details of the Company's policies for managing its capital and financial risks are shown in Note 15 on pages 54 - 61 of the Annual Report and Accounts for the year ended 31 March 2017. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the Half-Year report and annual financial statements.

 

Cautionary Statement

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

 

For and on behalf of the Board

Nigel Melville

Chairman

12 December 2017

 

Unaudited Condensed Income Statement

for the six months ended 30 September 2017

 

 

 

 

 

 

Six months ended 30 September 2017

(unaudited)

 

Year ended 31 March 2017

(audited)

Six months ended 30 September 2016

(unaudited)

 

Notes

Revenue

Capital

Total

 

Revenue

Capital

Total

Revenue

Capital

Total

 

 

£

£

£

 

£

£

£

£

£

£

 

 

 

 

Unrealised (losses)/gains on investments held at fair value

9

-

(719,145)

(719,145)

 

-

229,772

229,772

-

(115,329)

(115,329)

Realised gains on investments held at fair value

9

-

1,709,101

1,709,101

 

-

76,067

76,067 

-

-

-

Income

4

916,695

-

916,695

 

1,679,033

-

1,679,033

752,727

-

752,727

Investment Adviser's fees

5

(111,214)

(333,641)

(444,855)

 

(237,791)

(713,374)

(951,165)

(121,482)

(364,445)

(485,927)

Investment Adviser's performance fee

 

-

-

-

 

-

(2,692)

(2,692)

-

-

-

Other expenses

 

(183,118)

-

(183,118)

 

(304,306)

-

(304,306)

(168,991)

-

(168,991)

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) on ordinary activities before taxation

 

622,363

656,315

1,278,678

 

1,136,936

(410,227)

726,709

462,254

(479,774)

(17,520)

Tax on profit/(loss) on ordinary activities

6

(102,619)

63,392

(39,227)

 

(172,122)

143,213

(28,909)

(72,889)

72,889

-

 

 

 

 

 

 

 

 

 

 

 

 

Profit/(loss) and total comprehensive income

 

519,744

719,707

1,239,451

 

964,814

(267,014)

697,800

389,365

(406,885)

(17,520)

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted earnings per share

 

 

 

 

 

 

 

 

 

 

 

Ordinary Shares

7

1.43p

1.99p

3.42p

 

2.69p

(0.75)p

1.94p

1.08p

(1.13)p

(0.05)p

 

 

 

 

 

 

 

 

 

 

 

 

The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the unrealised (losses)/gains and realised gains on investments and the proportion of the Investment Adviser's fee and performance fee charged to capital.

The total column is the Statement of Total Comprehensive Income of the Company prepared in accordance with Financial Reporting Standards ("FRS").  In order to better reflect the activities of a VCT and in accordance with the 2014 Statement of Recommended Practice ("SORP") (updated in January 2017) by the Association of Investment Companies ("AIC"), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in Section 274 Income Tax Act 2007.

All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the period.

Unaudited Condensed Balance Sheet

as at 30 September 2017

 

 

 

 

 

 

 

30 September 2017

(unaudited)

31 March 2017

(audited)

30 September 2016

(unaudited)

 

Notes

£

£

£

 

 

 

 

 

Fixed assets

 

 

 

 

Investments at fair value

9

26,168,685

28,083,576

29,532,744

Current assets

 

 

 

 

Debtors and prepayments

 

2,512,800

185,596

171,789

Current asset investments

10

7,947,301

5,197,301

6,934,362

Cash at bank and in hand

10

2,632,660

4,738,612

4,531,812

 

 

13,092,761

10,121,509

11,637,963

 

 

 

 

 

Creditors: amounts falling due within one year

 

(429,540)

(144,100)

(100,084)

 

 

 

 

 

Net current assets

 

12,663,221

9,977,409

11,537,879

 

 

 

 

 

Net assets

 

38,831,906

38,060,985

41,070,623

 

 

 

 

 

 

 

 

 

 

Capital and reserves

 

 

 

 

Called up share capital

 

376,099

356,724

358,248

Share premium reserve

 

18,167,334

15,901,497

15,901,497

Capital redemption reserve

 

90,375

87,583

86,059

Revaluation reserve

 

1,311,778

2,001,764

1,656,663

Special distributable reserve

 

6,843,441

7,540,615

7,979,631

Realised capital reserve

 

10,492,795

11,142,462

13,741,824

Revenue reserve

 

1,550,084

1,030,340

1,346,701

 

 

 

 

 

Equity shareholders' funds

 

38,831,906

38,060,985

41,070,623

 

 

 

 

 

Basic and diluted net asset value per share

11

103.25p

106.70p

114.64p

 

 

 

 

 

 

Unaudited Condensed Statement of Changes in Equity

for the six months ended 30 September 2017

 

 

 

 

Non-distributable reserves

Distributable reserves

 

 

Called up

Share

Capital

Revaluation

Special

Realised

Revenue

Total

 

share

premium

redemption

reserve

distributable

capital

reserve

 

 

capital

reserve

reserve

 

reserve

reserve

 

 

 

 

 

 

 

(Note a)

(Note b)

(Note b)

 

 

£

£

£

£

£

£

£

£

 

 

 

 

 

 

 

 

 

At 1 April 2017

356,724

15,901,497

87,583

2,001,764

7,540,615

11,142,462

1,030,340

38,060,985

Comprehensive income
for the period

 

 

 

 

 

 

 

 

(Loss)/profit for the period

-

-

-

(719,145)

-

1,438,852

519,744

1,239,451

 

 

 

 

 

 

 

 

 

Total comprehensive
income for the period

-

-

-

(719,145)

-

1,438,852

519,744

1,239,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contributions by and
distributions to owners

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued under Offer for Subscription (note d)

22,167

2,299,457

-

-

(796)

-

-

2,320,828

Expenses of share offers (note d)

-

(33,620)

-

-

-

-

-

(33,620)

Shares bought back (note c)

(2,792)

-

2,792

-

(258,671)

-

-

(258,671)

Dividends paid

-

-

-

-

-

(2,497,067)

-

(2,497,067)

 

 

 

 

 

 

 

 

 

Total contributions
by and distributions
to owners

19,375

2,265,837

2,792

-

(259,467)

(2,497,067)

-

(468,530)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other movements

 

 

 

 

 

 

 

 

Realised losses transferred
to special reserve (note a)

-

-

-

-

(437,707)

437,707

-

-

Realisation of previously
unrealised depreciation

-

-

-

29,159

-

(29,159)

-

-

 

 

 

 

 

 

 

 

 

Total other movements

-

-

-

29,159

(437,707)

408,548

-

-

 

 

 

 

 

 

 

 

 

At 30 September 2017

376,099

18,167,334

90,375

1,311,778

6,843,441

10,492,795

1,550,084

38,831,906

 

 

 

 

 

 

 

 

 

Notes

a):    The cancellation of the formerly named C Share Fund's share premium reserve (as approved at the Extraordinary General meeting held on 10 September 2008 and by the order of the Court dated 28 October 2009), together with the previous cancellation of the share premium reserve attributable to the former Ordinary Share Fund and C Shares, has provided the Company with a special distributable reserve.  The purpose of this reserve is to fund market purchases of the Company's own shares as and when it is considered by the Board to be in the interests of the shareholders, and to write-off existing and future losses as the Company must take into account capital losses in determining distributable reserves.  The total transfer of £437,707 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the period.

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

c):    During the period, the Company purchased 279,220 of its own shares at the prevailing market price for a total cost of £258,671, which were subsequently cancelled.  The difference between the total cost above of £258,671 and that per the Statement of Cash Flows of £18,002 is due to two share repurchases totalling £240,669 held in creditors at 30 September 2017.

d):   Shares issued as part of Offer for Subscription (net of expenses) per the Cash Flow Statement of £nil differ to that shown above of £2,287,208 (net of expenses of £33,620).  This is due to net funds receivable by the Company, arising from an allotment of shares on 28 September 2017, which was held as a debtor as at 30 September 2017.

The composition of each of these reserves is explained below:

Called up share capital

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

 

Capital redemption reserve

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

 

Share premium reserve

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

 

Revaluation reserve

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

 

Special distributable reserve

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

 

Realised capital reserve

The following are accounted for in this reserve:

 

• Gains and losses on realisation of investments;

• Permanent diminution in value of investments;

• Transaction costs incurred in the acquisition of investments;

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

• Capital dividends paid.

 

Revenue reserve

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

 

Unaudited Condensed Statement of Changes in Equity

for the six months ended 30 September 2016

 

 

 

 

 

 

Non-distributable reserves

Distributable reserves

 

 

Called up

Share

Capital

Revaluation

Special

Realised

Revenue

Total

 

share

premium

redemption

reserve

distributable

capital

reserve

 

 

capital

reserve

reserve

 

reserve

reserve

 

 

 

£

£

£

£

£

£

£

£

 

 

 

 

 

 

 

 

 

At 1 April 2016

360,685

15,901,497

83,622

1,783,724

8,524,729

15,529,419

957,336

43,141,012

Comprehensive income
for the period

 

 

 

 

 

 

 

 

(Loss)/profit for the period

-

-

-

(115,329)

-

(291,556)

389,365

(17,520)

 

 

 

 

 

 

 

 

 

Total comprehensive
income for the period

-

-

-

(115,329)

-

(291,556)

389,365

(17,520)

 

 

 

 

 

 

 

 

 

Contributions by and
distributions to owners

 

 

 

 

 

 

 

 

Shares bought back

(2,437)

-

2,437

-

(253,542)

-

-

(253,542)

Dividends paid

-

-

-

-

-

(1,799,327)

-

(1,799,327)

 

 

 

 

 

 

 

 

 

Total contributions
by and distributions
to owners

(2,437)

-

2,437

-

(253,542)

(1,799,327)

-

(2,052,869)

 

 

 

 

 

 

 

 

 

Other movements

 

 

 

 

 

 

 

 

Realised losses transferred
to special reserve

-

-

-

-

(291,556)

291,556

-

-

Realisation of previously
unrealised appreciation

-

-

-

(11,732)

-

11,732

-

-

Total other movements

-

-

-

(11,732)

(291,556)

303,288

-

-

 

 

 

 

 

 

 

 

 

At 30 September 2016

358,248

15,901,497

86,059

1,656,663

7,979,631

13,741,824

1,346,701

41,070,623

 

 

 

 

 

 

 

 

 

Unaudited Condensed Statement of Cash Flows

for the six months ended 30 September 2017

 

 

 

 

 

 

 

Six months ended

30 September 2017

(unaudited)

Year ended

31 March 2017

(audited)

Six months ended

30 September 2016

(unaudited)

 

Notes

£

£

£

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

Profit/(loss) for the financial period

 

1,239,451

697,800

(17,520)

Adjustments for:

 

 

 

 

Unrealised losses/(gains) on investments

 

719,145

(229,772)

115,329

Realised gains on investments

 

(1,709,101)

(76,067)

-

Tax change for the current period

 

39,227

28,909

-

(Increase)/decrease in debtors

 

(39,996)

80,712

94,519

Increase/(decrease) in creditors and accruals

 

5,544

(44,914)

(60,850)

 

 

 

 

 

Net cash inflow from operations

 

254,270

456,668

131,478

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Purchase of investments

9

(851,459)

(2,257,183)

(374,244)

Disposal of investments

9

3,756,306

3,812,501

59,226

No change/decrease in bank deposits with a maturity over three months

 

-

507,061

-

 

 

 

 

 

Net cash inflow/(outflow) from investing activities

 

2,904,847

2,062,379

(315,018)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Equity dividends paid

8

(2,497,067)

(5,366,566)

(1,799,327)

Purchase of own shares

 

(18,002)

(412,046)

(253,498)

 

 

 

 

 

Net cash outflow from financing activities

 

(2,515,069)

(5,778,612)

(2,052,825)

 

 

 

 

 

Net increase/(decrease) in cash and cash equivalents

 

644,048

(3,259,565)

(2,236,365)

Cash and cash equivalents at start of period

 

9,935,913

13,195,478

13,195,478

 

 

 

 

 

Cash and cash equivalents at end of period

 

10,579,961

9,935,913

10,959,113

 

 

 

 

 

Cash and cash equivalents comprise:

 

 

 

 

Cash at bank and in hand

10

2,632,660

4,738,612

4,531,812

Cash equivalents

10

7,947,301

5,197,301

6,427,301

 

 

 

 

 

 

Notes to the Unaudited Condensed Financial Statements

for the six months ended 30 September 2017

 

1.    Company information

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

 

2.    Basis of preparation

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

 

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

 

3.    Principal accounting policies

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

 

4.    Income

 

 

 

 

 

Six months ended

30 September 2017

            (unaudited)

Year ended

31 March 2017

            (audited)

Six months ended

30 September 2016

            (unaudited)

Income from investments

£

£

£

 

 

 

 

Dividends

82,264

181,950

51,144

Money-market funds

6,899

24,154

14,127

Loan stock interest

823,112

1,443,335

666,444

Bank deposit interest

4,420

29,594

21,012

 

 

 

 

Total Income

916,695

1,679,033

752,727

 

5.    Investment Adviser's fees and performance fee

 

 

 

 

 

Six months ended
30 September 2017
(unaudited)

Year ended
31 March 2017
(audited)

Six months ended
30 September 2016
(unaudited)

 

£

£

£

Mobeus Equity Partners LLP

 

 

 

 

 

 

 

Investment Adviser's fees

444,855

951,165

485,927

Investment Adviser's performance fee

-

2,692

-

 

 

 

 

Total

444,855

953,857

485,927

 

       Investment Adviser's fees

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

 

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

 

Performance fees

New Ordinary and former C share fund shares

Basis of calculation

 

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

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

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

 

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

 

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

 

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

 

6.    Taxation

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

 

 

Six months ended

30 September 2017

(unaudited)

Year ended

31 March 2017

(audited)

Six months ended

30 September 2016

(unaudited)

 

Revenue

Capital

Total

Revenue

Capital

Total

Revenue

Capital

Total

 

£

£

£

£

£

£

£

£

£

a) Analysis of tax change:

 

 

 

 

 

 

 

 

 

UK Corporation tax on profits for the period

102,619

(63,392)

39,227

172,122

(143,213)

28,909 

72,889

(72,889)

-

 

 

 

 

 

 

 

 

 

 

Total current tax charge

102,619

(63,392)

39,227

172,122

(143,213)

28,909 

72,889

(72,889)

-

Corporation tax is based on a rate of 19% (2016: 20%)

 

 

 

 

 

 

 

 

 

b) Profit/(loss) on ordinary activities before tax

622,363

656,315

1,278,678

1,136,936

(410,227)

726,709

462,254

(479,774)

(17,520)

Profit/(loss) on ordinary activities multiplied by small company rate of corporation tax in the UK of 19% (2016: 20%)

118,249

124,699

242,948

227,387

(82,046)

145,341

92,451

(95,955)

(3,504)

Effect of:

 

 

 

 

 

 

 

 

 

UK dividends

(15,630)

-

(15,630)

(36,390)

-

(36,390)

(10,229)

-

(10,229)

Tax losses brought forward from previous years now utilised

-

-

-

-

-

-

(9,333)

-

(9,333)

Unrealised losses/(gains) not taxable/allowable

-

136,638

136,638

-

(45,954)

(45,954)

-

23,066

23,066

Realised gains not taxable

-

(324,729)

(324,729)

-

(15,213)

(15,213)

-

-

-

Utilisation of losses on which deferred tax not recognised

-

-

-

(18,875)

-

(18,875)

-

-

-

 

 

 

 

 

 

 

 

 

 

Actual tax charge

102,619

(63,392)

39,227

172,122

(143,213)

28,909

72,889

(72,889)

-

 

7.    Basic and diluted earnings per share

 

 

 

 

 

Six months ended
30 September 2017
(unaudited)

Year ended
31 March 2017
(audited)

Six months ended
30 September 2016
(unaudited)

 

£

£

£

 

 

 

 

 

 

 

 

Total earnings after taxation:

1,239,451

697,800

(17,520)

Basic and diluted earnings per share (note a)

3.42p

1.94p

(0.05)p

 

 

 

 

Net revenue from ordinary activities after taxation

519,744

964,814

389,365

Basic and diluted revenue earnings per share (note b)

1.43p

2.69p

1.08p

 

 

 

 

Net unrealised capital (losses)/gains

(719,145)

229,772

(115,329)

Net realised capital gains

1,709,101

76,067

-

Capital expenses (net of taxation)

(270,249)

(570,161)

(291,556)

Investment Adviser's performance fee

-

(2,692)

-

 

 

 

 

Total capital return

719,707

(267,014)

(406,885)

Basic and diluted capital earnings per share (note c)

1.99p

(0.75)p

(1.13)p

 

 

 

 

Weighted average number of shares in issue in the period

36,279,026

35,877,280

36,025,948

 

 

 

 

Notes

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

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

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

8.    Dividends paid

 

 

 

 

 

 

 

 

 

Dividend

Type

For year ended
31 March

Pence per share

Date Paid

Six months ended 30 September 2017

£

Year ended

31 March 2017
£

Six months ended 30 September 2016
£

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interim

Capital

2017

5.00p

08/08/2016

-

1,799,327

1,799,327

 

Second Interim

Income

2017

2.50p

31/03/2017

-

891,810

-

 

Second Interim

Capital

2017

7.50p

31/03/2017

-

2,675,429

-

 

Interim

Capital

2018

7.00p

27/07/2017

2,497,067

-

-

 

 

 

 

 

 

2,497,067

5,366,566

1,799,327

 

9.    Investments at fair value

 

 

The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at "fair value through profit and loss" (FVTPL).  All investments held by the Company are classified as FVTPL and measured in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") guidelines, as updated in December 2015.  This classification is followed as the Company's business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income.

 

For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional.

 

Unquoted investments are stated at fair value by the Directors in accordance with the following rules, which are consistent with the IPEV guidelines:

 

All investments are held at the price of a recent investment for an appropriate period where there is considered to have been no change in fair value. Where such a basis is no longer considered appropriate, each investment is considered as a whole on a 'unit of account' basis, alongside the following factors:

 

(i)         Where a value is indicated by a material arms-length transaction by an independent third party in the shares of a company, this value will be used.

 

(ii)         In the absence of i), and depending upon both the subsequent trading performance and investment structure of an investee company, the valuation basis will usually move to either:-

 

a)   a multiple basis. The shares may be valued by applying a suitable price-earnings ratio or revenue multiple to that company's historic, current or forecast post-tax earnings before interest and amortisation of goodwill or revenue (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, a lack of marketability).

 

or:-

 

b)   where a company's underperformance against plan indicates a diminution in the value of the investment,

provision against cost is made, as appropriate.

 

(iii)        Premiums, to the extent that they are considered capital in nature, and that will be received upon repayment of loan stock investments, are accrued at fair value when the Company receives the right to the premium and when considered recoverable.

 

(iv)        Where an earnings multiple or cost less impairment basis is not appropriate and overriding factors apply, discounted cash flow or net asset valuation bases may be applied.

 

All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement.

 

A key judgement made in applying the above accounting policy relates to investments that are permanently impaired. Where the value of an investment has fallen permanently below cost, the loss is treated as a permanent impairment and as a realised loss, even though the investment is still held. The Board assesses the portfolio for such investments and, after agreement with the Investment Adviser, will agree the values that represent the extent to which an investment loss has become realised and treated as a realised loss in the Income Statement. This is based upon an assessment of objective evidence of that investment's future prospects, to determine whether there is potential for the investment to recover in value.

 

The methods of fair value measurement are classified in to hierarchy based on the reliability of the information used to determine the valuation.

 

- Level 1 - Fair value is measured based on quoted prices in an active market.

- Level 2 - Fair value is measured based on directly observable current market prices or indirectly being derived from market prices.

- Level 3 - Fair value is measured using valuation techniques using inputs that are not based on observable market data.

 

 

 

 

 

 

 

 

 

Traded

on AIM

 

Level 1

Unquoted

Ordinary

shares

Level 3

Unquoted

Preference

shares

Level 3

Unquoted

Loan Stock

Level 3

            Total

 

£

£

£

£

£

 

 

 

 

 

 

 

 

 

 

 

 

Cost at 31 March 2017

254,586

10,571,020

23,395

17,664,403

28,513,404

Unrealised (losses)/gains at 31 March 2017

-

(2,271,287)

377,118

3,895,933

2,001,764

Permanent impairment at 31 March 2017

(254,586)

(1,365,869)

(739)

(810,398)

(2,431,592)

 

 

 

 

 

 

Valuation at 31 March 2017

-

6,933,864

399,774

20,749,938

28,083,576

Purchases at cost

-

762,353

-

89,106

851,459

Sale proceeds

-

(2,054,727)

(760)

(1,700,819)

(3,756,306)

Reclasification at value

-

445,804

-

(445,804)

-

Increase/(decrease) in unrealised
gains on investments

-

427,160

(849)

(1,145,456)

(719,145)

Realised gains/(losses) on investments

-

1,750,727

760

(42,386)

1,709,101

 

 

 

 

 

 

Valuation at 30 September 2017

-

8,265,181

398,925

17,504,579

26,168,685

 

 

 

 

 

 

Book cost at 30 September 2017

254,586

11,201,560

22,635

15,977,176

27,455,957

Unrealised gains/(losses) at 30 September 2017

-

(730,965)

376,290

1,666,453

1,311,778

Permanent impairment at 30 September 2017

(254,586)

(2,205,414)

-

(139,050)

(2,599,050)

 

 

 

 

 

 

Valuation at 30 September 2017

-

8,265,181

398,925

17,504,579

26,168,685

 

 

 

 

 

 

 

 

 

 

 

 

Unrealised (losses)/gains at 1 April 2017

(254,586)

(3,637,156)

376,379

3,085,535

(429,828)

Net movement in unrealised appreciation/(depreciation)
in the period

-

427,160

(849)

(1,145,456)

(719,145)

Permanent impairments in the period

-

(83,729)

-

(83,729)

(167,458)

Realisation of previously unrealised gains/(losses)

-

357,346

760

(328,947)

29,159

 

 

 

 

 

 

(Losses)/gains on investments
at 30 September 2017

(254,586)

(2,936,379)

376,290

1,527,403

(1,287,272)

 

 

 

 

 

 

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

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

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

 

 

 

 

 

As at

30 September 2017

£

As at

31 March 2017

£

As at

30 September 2016

£

 

 

 

 

 

 

 

 

Investment methodology

 

 

 

Cost (reviewed for impairment)

-

83,729

-

Recent investment price

5,418,783

5,334,674

10,988,211

Price earnings or revenue multiple

20,577,971

22,665,173

18,544,531

Net asset value

171,931

-

-

 

 

 

 

 

26,168,685

28,083,576

29,532,742

 

 

 

 

 

10.   Current asset investments

 

 

 

 

 

As at

30 September 2017

(unaudited)

£

As at

31 March 2017

(audited)

£

As at

30 September 2016

(unaudited)

£

 

 

 

 

 

 

 

 

OEIC Money market funds

7,947,301

5,197,301

6,427,301

 

 

 

 

Cash equivalents per Condensed
Statement of Cash Flows

7,947,301

5,197,301

6,427,301

Bank deposits that mature after three months

-

-

507,061

 

 

 

 

Current asset investments

7,947,301

5,197,301

6,934,362

 

 

 

 

Cash at bank

2,632,660

4,738,612

4,531,812

 

 

 

 

 

11.   Net asset value per share

 

 

 

 

 

As at

30 September 2017

(unaudited)

As at

31 March 2017

(audited)

As at

30 September 2016

(unaudited)

 

 

 

 

 

 

 

 

Net assets

£38,831,906

£38,060,985

£41,070,623

Number of shares in issue

37,609,938

35,672,387

35,824,744

Net asset value per share (pence)

103.25 p

106.70 p

114.64 p

 

 

 

 

 

12.   Post Balance Sheet Events

Between 20 October 2017 and 21 November 2017 10,720,374 new shares were allotted under the 2017 Offer at effective offer prices ranging from 103.17 pence to 110.99 pence, raising net funds of £11,061,015.

 

On 21 November 2017, a further equity investment of £0.05 million was made into BookingTek Limited.

 

On 5 December 2017, a further loan investment of £0.09 million was made into MPB Group Lmited.

 

13.   Financial statements for the six months ended 30 September 2017

The financial information set out in this Half-Year financial report does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The information for the year ended 31 March 2017 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The auditors have reported on these financial statements and that report was unqualified and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

 

14.   Half-Year Report

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

 

Contact details for further enquiries:

Rob Brittain or Jonathan McGuire at Mobeus Equity Partners LLP (the Company Secretary) on 020 7024 7600 or by e-mail on vcts@mobeusequity.co.uk .

 

Mobeus Equity Partners LLP (the Investment Adviser), on 020 7024 7600 or by e-mail on info@mobeusequity.co.uk.

 

DISCLAIMER

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

 

 

 

…………………………………………..

Director

 

 

 


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