MOBEUS INCOME & GROWTH 2 VCT PLC

Annual Report • Jul 17, 2023

Mobeus Income & Growth 2 VCT plc A Venture Capital Trust Annual Report & Financial Statements for the year ended 31 March 2023 Mobeus Income & Growth 2 VCT plc, (“the Company”) is a Venture Capital Trust (“VCT”) advised by Gresham House Asset Management Limited (“Gresham House” or “Investment Adviser”), investing primarily in established unquoted growth companies that meet the ‘qualifying company’ requirements of VCT legislation. Objective of the Company 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. Dividend Policy The Company seeks to pay dividends at least annually out of income and capital as appropriate, and subject to fulfilling certain regulatory requirements. More details are provided on pages 3 to 4 of the Chair’s Statement and on page 11. YOUR PRIVACY We are committed to protecting and respecting your privacy. To understand how we collect, use and otherwise process personal data relating to you, or that you provide to us, please read our privacy notice, which can be found at www.mig2vct.co.uk. 1 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Contents Financial Highlights Financial Highlights and Performance Summary 2 Chair’s Statement 3 Strategic Report 7 - Company Objective and Business Model 7 - Objective 7 - Summary of Investment Policy 7 - The Company and its Business Model 7 - Summary of VCT Legislation 8 - Performance and Key Performance Indicators 9 - Investment Adviser’s Review 13 - Twelve largest investments in the Portfolio by Valuation 20 - Investment Portfolio Summary 24 - Key Policies 27 - Investment Policy 27 - Stakeholder Engagement and Directors’ Duties 28 - Principal and emerging risks, management and regulatory environment 30 - Going concern and Long-Term viability of the Company 32 Reports of the Directors 33 - Board of Directors 33 - Directors’ Report 34 - Corporate Governance Statement 38 - Report of the Audit Committee 41 - Directors’ Remuneration Report 43 - Statement of Directors’ Responsibilities 47 Independent Auditor’s Report 48 Financial Statements 53 Information for Shareholders 77 - Shareholder Information 77 - Performance Data at 31 March 2023 79 - VCT Tax Benefits for the Investor 81 - Notice of the Annual General Meeting 82 - Glossary of terms 85 - Corporate Information 86 2 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Results for the year ended 31 March 2023 As at 31 March 2023: Net assets: £70.43 million Net Asset Value (“NAV”) per share: 71.54 pence ➤ Net asset value (“NAV”) total return 1 per share of (12.3)% 2 . ➤ Share price total return 1 per share of (6.9)% 3 . ➤ Dividends paid and declared of 13.00 pence per share. Cumulative dividends paid since inception amount to 147.00 pence per share. ➤ £3.32 million was invested into five new growth capital investments and five existing portfolio companies. ➤ Net unrealised losses were £(9.14) million. ➤ Sale of investments generated £8.05 million of cash proceeds and a net loss of £(0.28) million. 1 Definitions of key terms and alternative performance measures (“APMs”)/Key Performance Indicators (“KPIs”) shown above and throughout this report are provided in the Glossary of terms on page 85. 2 Further details on the NAV total return are shown in the Performance and Key Performance Indicators section of the Strategic Report on pages 9 to 12. 3 The difference in NAV and share price total returns arises principally due to the timing of NAV announcements. Performance Summary The table below shows the recent past performance of the current share class, first raised in 2005/06 at an original subscription price of 100 pence per share, before the benefit of income tax relief. Performance data for all fundraising rounds are shown in the tables on pages 79 to 80 of this Annual Report. Reporting date as at Net assets (£m) Net asset value (NAV) per share (p) Share price 2 (mid-market price) (p) Cumulative dividends paid per share (p) Cumulative total return per share since launch 1 Dividends paid and declared in respect of each year (p) (NAV basis) (p) (Share price basis) (p) 31 March 2023 70.43 71.54 68.50 147.00 218.54 215.50 13.00 31 March 2022 77.51 96.37 87.50 134.00 230.37 221.50 12.00 31 March 2021 73.90 100.91 85.50 116.00 216.91 201.50 13.00 31 March 2020 43.57 72.99 70.50 109.00 181.99 179.50 26.00 31 March 2019 48.73 99.60 85.50 83.00 182.60 168.50 5.00 1 Definitions of key terms and alternative performance measures (“APMs”)/Key Performance Indicators (“KPIs”) shown above and throughout this report are provided in the Glossary of terms on page 85. 2 Source: Panmure Gordon & Co (mid-market price). Financial Highlights and Performance Summary Financial Highlights 3 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 I am pleased to present the annual results of Mobeus Income & Growth 2 VCT plc for the year ended 31 March 2023. Overview The Company’s financial year took place during a period of significant political and economic disruption. A high point for many technology and growth markets occurred at the end of 2021 before the impact of global events including the Russian invasion of Ukraine, political turmoil in the UK and across Europe as well as rising inflation and associated increase in interest rates. Stock markets continue to be volatile and there has been a substantial downward re-rating of growth stock valuations across global markets. Recently inflation has moderated, albeit remaining relatively high, and the UK economy narrowly avoided recession. However, the IMF forecast for 2023 warns of an ongoing threat of recession which would likely result in additional challenges for your portfolio companies, particularly in respect of input cost inflation and dampened customer demand. Nevertheless, we believe your Company is well prepared for most scenarios with strong liquidity available to support the portfolio and through extensive planning and preparation by each of the portfolio companies’ management teams with the assistance of Gresham House. The Company has continued to provide finance to new and existing investee companies and delivered three notable exits during the year in the form of Media Business Insight (MBI), Equip Outdoor Technologies (EOTH) and Tharstern Group Limited (Tharstern). Looking forward we anticipate a quieter exit environment in the current year. The Board was pleased to learn of the commitment from the UK Government to extend the VCT ‘sunset clause’ beyond the end date of 5 April 2025, although Shareholders should note the VCT industry has seen no further detail provided to date and any extension will most likely require parliamentary approval. If the clause had not been extended, investor income tax relief on new VCT subscriptions would not have been available. Performance NAV total return, expressed on a pence per share basis, was derived as follows: Year ended 31 March 2023 (pence per share) 2022 (pence per share) Net realised and unrealised (losses)/ gains on the investment portfolio (9.60) 15.04 Income from the investment portfolio and liquid assets 1.87 1.34 Share buybacks and adjustments (2.00) 0.89 Gross return (9.73) 17.27 Less: Investment Adviser’s fees and other expenses (2.10) (3.81) Net return (11.83) 13.46 NAV total return per share (12.3)% 13.3% The Company’s NAV total return per share decreased by (12.3)% for the year ended 31 March 2023 (2022: 13.3%), calculated as the closing NAV per share of 71.54 pence plus 13.00 pence of dividends paid in the year, divided by the opening NAV per share of 96.37 pence. The share price total return was down (6.9)% (2022: 23.4%). The difference between the share price and NAV total returns arises principally due to the timing of NAV announcements which are usually made on a date following the date to which they relate and is explained more fully under Performance in the Strategic Report on pages 9 to 12. The negative NAV total return for the year was principally the result of unrealised losses in the value of investments in the portfolio, driven initially by lower benchmark market comparables and, more recently, by the weaker trading performance of investee companies as the impact of inflation and higher interest rates on consumer spending and business investment began to bite. In the Association of Investment Companies’ analysis of Cumulative NAV Total Returns at 31 March 2023, the Company was ranked 7th out of 36 Generalist VCTs over five years and 1st out of 31 Generalist VCTs over ten years. Shareholders should note that the AIC’s rankings are based on the latest available published NAVs and therefore do not reflect NAV per share movements up to 31 March 2023. For further details on the performance of the Company, please refer to the Strategic Report on pages 9 to 12. Target Return The Board’s current target is to achieve an average NAV total return of 8.0% per annum. Although this year’s NAV total return decreased by (12.3)% (2022: 13.3%) the average over five years of 11.3% per annum, is well in excess of the target. The Board reminds Shareholders that investment portfolio returns and dividend payments should always be viewed over the longer term. Dividends The Board continues to be committed to providing an attractive dividend stream to Shareholders. In respect of the year ended 31 March 2023, the Company paid Shareholders two interim dividends totalling 13.00 pence per share comprising 6.00 pence per share on 7 November 2022 and a further dividend of 7.00 pence per share paid on 30 March 2023 to Shareholders on the register on 30 September 2022 and 3 March 2023 respectively. To date, cumulative dividends paid since inception total 147.00 pence per share. The Company has now met or exceeded the Board’s dividend target of paying at least 5.00 pence per share in respect of the last thirteen financial years. The continuing change in the portfolio to younger growth capital investments, as the older, more mature companies with higher income yields are sold, is likely to make it more difficult to maintain a consistently high level of dividends from income and capital returns alone in any given year. This year the Company experienced a reduction in income from portfolio companies and investments but was able to exceed the dividend target as it had sufficient distributable reserves from past realised profits. Shareholders should also note that there may be circumstances where the Company is required to pay dividends in order to maintain its regulatory status as a VCT, for example, to stay above the minimum percentage of assets required to be held in qualifying investments. It should also be noted that the payment of dividends causes the Company’s NAV per share to reduce by a corresponding amount. The Board takes all of these variables into account when setting the level of dividends and continues to monitor the sustainability of the annual dividend target. On 20 June 2023 by order of the Court, the share premium account and capital redemption reserve of the Company was reduced (as approved at the General Chair’s Statement Chair’s Statement 4 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Meeting of the Company held on 12 October 2022) and has been transferred to 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, make dividend payments, and to write-off existing and future losses as the Company must take into account capital losses in determining distributable reserves. Investment and portfolio performance The portfolio movements across the year were as follows: 2023 £mn 2022 £mn Opening portfolio value 52.16 41.83 New and further investments 3.32 4.61 Disposal proceeds (8.05) (6.37) Net realised (losses)/gains (0.28) 2.54 Valuation movements (9.14) 9.55 Portfolio value at 31 March 38.01 52.16 During the year, the Company invested a total of £3.32 million into five new and five existing portfolio companies (2022: £4.61 million; three and seven respectively). New investments totalling £1.88 million were made into: ● Bidnamic – a marketing technology business; ● FocalPoint – a GPS enhancement software supplier; ● Orri – an intensive day care provider for adults with eating disorders; ● Connect Earth – an environmental data provider; and ● Cognassist – education and neuro-inclusion solutions. Additional funding of £1.44 million was provided across five existing portfolio companies: ● Northern Bloc – a dairy and allergen-free ice cream brand; ● Rotageek – a workforce management software system; ● Andersen EV – a provider of premium EV chargers; ● Vivacity – an AI and Urban Traffic Control business; and ● Bleach London – a hair colourants brand. Post the year-end, £0.39 million was invested into a new portfolio company, Dayrize, a provider of a rapid sustainability impact assessment tool. Additionally, £0.30 million was further invested into Legatics, an existing portfolio company. Further details of the new investments can be found in the Investment Adviser’s Report on page 14-15. The Company generated a total of £8.05 million in proceeds from full and partial realisations alongside loan repayments and other capital receipts in the year ended 31 March 2023 as detailed below. In June 2022, the Company realised its investment in Media Business Insight (MBI), a publishing and events business focussed on the production industries, generating proceeds of £2.80 million (including deferred proceeds and loan repayments made earlier in the year) resulting in a realised gain in the year of £0.16 million. Returns received over the life of the investment amounted to £4.50 million, a 2.2x multiple of cost and an IRR of 13.8 %. In November 2022 we were delighted by the sale of the equity in EOTH, trading as Rab and Lowe Alpine, receiving £4.34 million including preference share dividends on completion which generated a realised gain in the year of £0.70 million. To date total proceeds received amount to £5.64 million providing a 6.9x multiple of cost and an IRR of 23.2%. The Company has retained interest bearing loan stock to continue to generate future income. In March 2023, the sale of Tharstern completed generating a realised gain of £0.35 million. Over the life of this investment a 2.6x return and IRR of 15.0% was achieved. Unfortunately in October 2022, Andersen EV, an electric charger provider, was compelled to enter into administration as a result of a substantial deterioration in its trading environment, which resulted in a realised loss of £(0.65) million in the year. This was particularly disappointing as the Company, alongside the other Mobeus VCTs, made a follow-on investment into the company in May 2022. The company had secured some impressive clients and funding was provided to drive product development in a premium brand operating in the emerging electric car charging market. However, over the summer months, a combination of global supply issues, inflationary cost increases and the removal of Government consumer support for the purchase of EV chargers quickly impacted its ability to continue trading and so necessitated the appointment of administrators. On 22 December 2022, Parsley Box Group PLC delisted from the AIM market and its shares were cancelled. It has subsequently re-registered as a private company. Also in the year, Tapas Revolution, the Spanish restaurant chain, went into administration. Under the HMRC Financial Health Test (more detail below), the Company was unable to invest further into this portfolio company and as a result it was necessary for an Administrator to be appointed. It is likely that other company failures will be seen during the rest of the financial year as we are unable to invest and assist some portfolio companies further. Including Andersen EV above, a total of £1.49 million has been recognised as a realised loss across three companies which are experiencing significant trading issues. The portfolio’s valuation at the year-end demonstrates the impact of slowing consumer and business spending on consumer facing portfolio companies, in particular Virgin Wines. Virgin Wines is an AIM-listed investment, which has also suffered from the negative sentiment of its sector, in spite of broadly positive news flows from the company itself and relative outperformance versus its peers. It contributed £2.68 million of the unrealised portfolio reduction of £9.14 million. Other smaller valuation decreases were registered by Buster & Punch and Wetsuit Outlet, which were also marked down as a result of experiencing challenging trading conditions. The impact of the decline in consumer confidence on the portfolio companies operating in the consumer sector has therefore contributed to the overall realised and unrealised reduction in the value of the portfolio by £(9.42) million in the year ended 31 March 2023 (2022: increase of £12.09 million), or a fall of (18.1)% on a like-for-like basis compared to the value of the portfolio at the start of the year. During these uncertain times, the management of the portfolio is absolutely critical and the Investment Adviser is, and has been, focused on deploying its Talent Management team to support its investments. We continue to expect follow-on investments to remain a significant feature of our portfolio companies as they seek to achieve scale and move to profitability. Follow-on investment requests are subject to the same scrutiny as new deals and both rely on certain criteria being met, including the recently introduced HMRC Financial Health Test. Shareholders should be aware that this test is an effective tightening of the interpretation of HMRC policy and Chair’s Statement 5 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 practice in a technical aspect of the VCT financing rules, now resulting in the restriction of potential follow-on investments to support certain companies, where more than half their subscribed share capital has been lost. In a small number of cases, this may result in the Company not being able to make follow-on investments, even where a compelling business case exists, which in turn could impact the prospects of the portfolio company. The Board continues to monitor developments in the interpretation of this area of legislation carefully. Further details of the Company’s investment activity and the performance of the portfolio are contained in the Investment Adviser’s Review and the Investment Portfolio Summary on pages 13 to 26. Liquidity & Fundraising Cash and cash equivalents held by the Company as at 31 March 2023 amounted to £32.51 million, or 46.2% of net assets. In October 2022, on considering the future cash requirements of the Company and the potential demand for the Company’s shares following the successful fundraise in January 2022, the Board approved a further fundraise for the 2022/23 tax year. Having provided a period of time between the launch of the prospectus and acceptance of applications, the Board was pleased that the initial amount of £8 million (as well as an over-allotment facility of a further £8 million), launched early in October 2022, was fully subscribed by 8 November 2022. Shares were allotted in November 2022 and February 2023 and your Company extends a warm welcome to an equal mix of both new and existing Shareholders. The fundraising launched in October 2022 was to ensure that the Company retained adequate levels of liquidity to: take advantage of new investment opportunities; fund further expansion of existing portfolio companies; facilitate attractive Shareholders returns, including the payment of dividends; and to buy back its shares from Shareholders who wish to sell. Currently, the Board do not anticipate a fundraise in 2023. Share buy-backs During the year, the Company bought back and cancelled 1,464,956 of its own shares (2022: 697,498), representing 1.8% of the shares in issue at the beginning of the year (2022: 1.0%), at a total cost of £1.15 million, inclusive of expenses (2022: £0.64 million). It is the Company’s policy to cancel all shares bought back in this way. The Board regularly reviews its buyback policy and currently seeks to maintain the discount at which the Company’s shares trade at no more than 5% below the latest published NAV. Shareholder Communications & Annual General Meeting May I remind you that the Company has its own website which is available at: www.mig2vct.co.uk. The Investment Adviser held a virtual Shareholder Event on the afternoon of 23 March 2023 with a live Q&A session which we hope you were able to join. We are pleased that double the number of attendees joined the meeting this year. A recording of the event is available via a link on the Company’s website. Your Board is pleased to be able to hold the next Annual General Meeting (“AGM”) of the Company at 11.00 am on Wednesday, 13 September 2023 at the offices of Shakespeare Martineau, 6th Floor, 60 Gracechurch Street, London, EC3V 0HR. A webcast will also be available at the same time for those Shareholders who cannot attend in person. However, please note that you will not be able to vote via this method and so are encouraged to return your proxy form before the deadline of 11:00 am on Monday 11 September 2023. Information setting out how to join the meeting by virtual means will be shown on the Company’s website. For further details, please see the Notice of the Meeting which can be found at the end of this Annual Report & Financial Statements, on pages 82 to 84. Board Composition & Succession Throughout the year the Board comprised three directors. Following the retirement of Adam Kingdon in September 2022, whom we thank for his services to the Company, we were delighted that Sarah Clark joined as a director on 4 November 2023. Sarah brings new skills and depth of knowledge to the Company and will be standing for election at the forthcoming AGM. Sarah was also appointed as the Chair of the Investment Committee and is a member of all other Company’s Committees. After considering and reviewing its composition, the Board agreed that the directors have the breadth and depth of relevant knowledge and experience plus the appropriate skill sets. The Board now consists of one male and two female directors. Fraud Warning We have been made aware of a number of Shareholders being contacted in connection with sophisticated but fraudulent financial scams which purport to come from the Company or to be authorised by it. This is often by a phone call or an email usually originating from outside of the UK, claiming or appearing to be from a corporate finance firm offering to buy your shares at an inflated price. The Board strongly recommends Shareholders take time to read the Company’s Fraud warning section, including details of who to contact, contained within the Information for Shareholders section on pages 77 and 78. Environmental, Social and Governance (“ESG”) The Board and the Investment Adviser believe that the consideration of environmental, social and corporate governance (“ESG”) factors throughout the investment cycle will contribute towards enhanced Shareholder value. Gresham House has a team which is focused on sustainability and the Board views this as an opportunity to enhance the Company’s existing protocols and procedures through the adoption of the highest industry standards. The future FCA reporting requirements consistent with the Task Force on Climate-related Financial Disclosures, which commenced on 1 January 2021, do not currently apply to the Company but will be kept under review, the Board being mindful of any recommended changes. Consumer Duty The Financial Conduct Authority (FCA) has introduced the concept of Consumer Duty, the rules and principles of which come into effect in July 2023. Consumer Duty is an advance on the existing concept of ‘treating customers fairly’. It sets higher and clearer standards of consumer protection across financial services and requires all firms to put their customers needs first. As the Company is not regulated by the FCA it does not directly fall into the scope of Consumer Duty. However, Gresham House as the Investment Adviser alongside any IFAs or financial platforms used to distribute future fundraising offers are subject to Consumer Duty. It is incumbent on all parties to uphold the principles behind Consumer Duty Chair’s Statement 6 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Chair’s Statement and to that end we are working with the Investment Adviser to review the information we should provide to assist consumers and their advisers to discharge their obligations under Consumer Duty. Outlook The geopolitical and macroeconomic background conditions are likely to remain uncertain in the near future. Interest rates are set to remain relatively high to combat inflation around the world. This background will continue to provide trading challenges for our portfolio companies, although historically these conditions have also provided an opportunity for the Company to make high quality investments and build strategic stakes in businesses with great potential. The issues affecting the banking sector may also mean that debt markets continue to be constrained which may, notwithstanding the recent successful sales of EOTH and Tharstern, keep the exit environment subdued compared to recent years. However, as the Company is not time-limited this is not expected to be a significant issue. The combined impact of inflation, interest rates and restrictions in Government spending are expected to continue to weigh down on UK consumer and business confidence. Therefore, we anticipate that further market stresses will become evident as the year progresses with all sectors vulnerable. However, the Company has a reasonably large and diverse portfolio, managed by a professional and capable investment team, which will mitigate the challenges that lie ahead. Allied to our strong balance sheet, the Board remains confident that it will be able to continue paying an attractive dividend. I would like to take this opportunity once again to thank all Shareholders for your continued support and to extend a warm welcome to new Shareholders. Ian Blackburn Chair 12 July 2023 7 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report Company Objective and Business Model Introduction The Directors are pleased to present the Strategic Report of the Company for the year ended 31 March 2023. The purpose of this Report is to inform Shareholders and help them assess how the Directors have performed their duty to promote the success of the Company. The Report has been prepared by the Directors in accordance with section 414A of the Companies Act 2006 (“the Act”). Objective The Objective of the Company 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, while continuing at all times to qualify as a VCT. Summary of Investment Policy The Company’s policy is to invest primarily in a diverse portfolio of UK unquoted companies. Investments are generally structured as part loan and part equity in order to produce a regular income stream and to generate capital gain from realisations. The Company’s cash and liquid funds are held in a portfolio of readily realisable interest bearing investments which can be of varying maturities, subject to the overriding criterion that the risk of loss of capital be minimised. The Company will seek to make investments in accordance with the requirements of prevailing VCT legislation. A summary of this is set out overleaf, in the table “Summary of VCT Regulation”. The Company and its Business Model The Company is a Venture Capital Trust. Its Objective and Investment Policy are designed to ensure that it continues to qualify as a VCT, and continues to be approved as such by HM Revenue & Customs, whilst maximising returns to Shareholders from both income and capital. A summary of the most important rules that determine VCT approval is contained in the panel headed “Summary of VCT Regulation” overleaf. The Company is a fully listed company on the London Stock Exchange, which also fulfils a VCT regulatory requirement. It is therefore also required to comply with the Listing Rules governing such companies. The Company is externally advised with a Board comprising Non-Executive Directors. The Board has overall responsibility for the Company’s affairs including the determination of its Investment Policy (material changes to which are subject to approval by Shareholders). Investment advice and operational support are outsourced to external service providers (including the Investment Adviser, Company Secretary and Administrator and Registrar), with the key strategic and operational framework and key policies set and monitored by the Board. Investment and divestment proposals are originated, negotiated and recommended by the Investment Adviser and are then subject to review and approval by the Directors. The Company invests alongside five other VCTs advised or managed by Gresham House in proportion to the relative net assets of each VCT- (excluding direct AIM investments) at the date the investment proposal submitted to each Board. The total percentage of equity held in each investment by all funds advised by Gresham House is shown in Note 9 on page 66. Private individuals invest in the Company to benefit from both income and capital returns from the portfolio. By subscribing for shares in a VCT they also receive immediate income tax relief (currently 30% of the amount subscribed by an investor). Investors receive tax-free dividends from the Company and incur no capital gains tax upon the eventual sale of the shares. These tax benefits are subject to the VCT maintaining its approved VCT status and the shares being held for a minimum of five years from the date of subscription. Page 81 contains information setting out the tax benefits for an investor in VCT shares. The Company’s investee companies are primarily unquoted businesses and operate in the UK. These businesses fulfil the criteria and characteristics as set out in the current Investment Policy. The Company’s business model is set out in the diagram below. Strategic Report 8 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 To maintain its 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 80%, by VCT tax value 1 , of its total investments (shares, securities and liquidity) in VCT qualifying holdings, within approximately three years of a fundraising; ● all qualifying investments made by VCTs after 5 April 2018, together with qualifying investments made by funds raised after 5 April 2011 are, in aggregate, required to comprise at least 70% by VCT tax value in “eligible shares”, which carry no preferential rights (save as may be permitted under VCT rules); ● no investment in a single company or group of companies may represent more than 15% (by VCT tax value) 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 the LSE or a regulated European stock market; ● non-qualifying investments cannot be made, except for certain exemptions in managing the Company’s short-term liquidity; ● VCTs are 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; and ● the period for reinvestment of proceeds on disposal of qualifying investments is 12 months. 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 no more than £16 million immediately following investment from VCTs; ● whose maximum age is generally up to 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 (for knowledge intensive companies the annual limit is £10 million and the lifetime limit is £20 million), from VCTs and similar sources of State Aid funding; and ● that use the funds received from VCTs for growth and development purposes. In addition, VCTs may not: ● offer secured loans to investee companies, and any returns on loan capital above 10% must represent no more than a commercial return on the principal; and ● make investments that do not meet the ‘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 a genuine risk of loss of capital). 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 may differ from the actual cost of each investment shown in the Investment Portfolio Summary on pages 24 to 26. Strategic Report Summary of VCT Legislation To assist Shareholders, the following table contains a summary of the most important rules that determine VCT approval. 9 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report Performance and Key Performance Indicators The Board has identified six key performance indicators that are used in its own assessment of the Company’s progress. Some of these are classified as alternative performance measures (“APMs”) in line with Financial Reporting Council (“FRC”) guidance. See Glossary of terms for details on page 85. APMs are measures of performance that are in addition to the data reported in the Financial Statements. It is intended that these will provide Shareholders with sufficient information to assess how the Company has performed against its Objectives in the year ended 31 March 2023, and over the longer-term, through the application of its investment and other principal policies: 1. Annual and cumulative returns per share for the year The Company’s objective is to generate long-term growth in capital and income. To assess this, the Board monitors the growth in total returns per share, both on a NAV basis and a share price basis, adjusted for dividends paid in the year. NAV basis reflects the net assets of the Company and share price basis reflects the price at which a Shareholder could expect to sell their shares. These are the most widely used measures of performance in the VCT sector. Total returns per share for the year The Net Asset Value and share price total returns per share for the year ended 31 March 2023 decreased by (12.3)% and (6.9)% respectively, as shown below: NAV basis (p) Share price basis (p) Closing NAV per share 71.54 Closing share price 68.50 Plus: dividend paid in year 13.00 Plus: dividend paid in year 13.00 NAV Total return for year 84.54 Share Price Total return for year 81.50 Less: opening NAV per share 96.37 Less: opening share price 87.50 Decrease in NAV total return for year per share (Note 1) (11.83) Decrease in Share Price total return for year per share (Note 2) (6.00) % NAV total return for year (12.3)% % Share Price total return for year (6.9)% The analysis of the source of the NAV total returns is set out below: Note 1: NAV total return per share for the year is comprised of: Year ended 31 March 2023 (pence) 2022 (pence) Gross portfolio capital returns (9.60) 15.04 Gross income returns 1.87 1.34 Costs (2.10) (3.81) Other movements (2.00) 0.89 NAV return for the year as above (11.83) 13.46 The contributions from portfolio returns and income are shown before deducting attributable costs. They are explained below under review of financial performance for the year. Costs are referred to in Note 6 on page 12. Note 2: The Share Price total return differs from the NAV total return because the share prices quoted are typically by reference to the latest announced NAV per share. 10 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Cumulative total returns per share (NAV basis) The longer term trend of performance on this measure is shown in the chart below:- Pence per share Net Asset Value Cumulative dividends paid 0 10 20 30 40 50 60 70 80 90 100 110 120 130 140 150 160 31/03/2022 31/03/202331/03/202131/03/202031/03/201931/03/2018 Cumulative NAV total return (pence per share) 181.99 216.91 230.37182.60174.54 170 180 190 200 210 220 230 96.54 78.00 99.60 83.00 72.99 109.00 100.91 116.00 96.37 134.00 218.54 71.54 147.00 For similar performance data to that shown above for each allotment in each fundraising since the inception of the Company, please see the Performance Data on pages 79 to 80 of this Annual Report. Review of financial results for the year ended 31 March 2023: 2023 £mn 2022 £mn Capital (loss)/profit (10.56) 9.84 Revenue profit 0.92 0.27 Total (loss)/profit (9.64) 10.11 The capital loss for the year of £(10.56) million ((10.73) pence of NAV return per share, net of costs charged to capital) is primarily due to a net decrease in the unrealised valuation of portfolio companies as well as realised loss from the permanent impairment of three companies. This was partially offset by the exits of Media Business Insight Holdings Limited and Tharstern Group Limited and a partial exit of EOTH Limited (trading as Equip Outdoor Technologies). The reduction in capital returns from £9.84 million to a loss of £(10.56) million is principally due to lower realised gains compared to 2022 and a net unrealised loss in the period of £(9.14) million compared to unrealised gains of £9.56 million in 2022 (£18.70 million fall). The revenue profit for the year of £0.92 million (0.94 pence of NAV return per share, net of costs charged to revenue) is derived from income, primarily dividends, liquidity fund interest and loan interest, exceeding revenue expenses. The increase from the previous year is mainly due to an increase in dividend income, particularly due to preference dividends received from EOTH and interest on liquidity funds. The higher revenue profit also resulted from a reduction in Investment Adviser fees due to lower net assets throughout the year offset by running costs such as higher audit fees, subscription costs as well as provisions made against loan interest. Strategic Report 11 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report 2. The VCT’s performance compared with its peer group performance The Board places emphasis on benchmarking the Company’s performance against a peer group of generalist VCTs and aims to maintain the Company’s performance within the top quartile of this peer group. Using the benchmark of NAV Cumulative total return on an investment of £100, performance is as follows: Year to 31 March 2023 Ranking Number of VCTs (AIC generalist VCTs) 10 years 1 st 31 5 years 7 th 36 3 years 6 th 40 1 year 30 th 39 Source: Association of Investment Companies (“AIC”) based on statistics prepared by Morningstar as at 31 March 2023. The Company has maintained a ranking with the Board’s target of being within the top quartile compared to a peer group of AIC Generalist VCTs across the 3, 5 and 10-year periods and will strive to improve the relative performance over the 1-year period. Shareholders should note that the 1-year performance figures might be skewed by the timing of results and therefore this ranking can be subject to fluctuations. 3. Dividends paid compared with dividend target The Board has set a target of paying a regular dividend of not less than 5.00 pence per share in respect of each financial year. Whilst the Board cannot guarantee future payments, it believes this target is still achievable although, as the proportion of more established income generating investments in the portfolio reduces, it will become more challenging. Pence per share Dividends paid/payable in respect of the year Cumulative dividends paid/payable in respect of the year 0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00 110.00 120.00 31/03/202331/03/202231/03/202131/03/202031/03/2019 5.00 83.00 26.00 109.00 13.00 130.00 140.00 150.00 122.00 12.00 134.00 13.00 147.00 An interim dividend declared for the year ended 31 March 2023 of 6.00 pence per share, was paid on 7 November 2022 to Shareholders on the Register of Members as at the record date of 30 September 2022, and a 7.00 pence per share, was paid on 30 March 2023 to Shareholders on the Register of Members as at the record date of 3 March 2023. The 13.00 pence dividend in respect of the year ended 31 March 2023 exceeded the Company’s 5.00 pence dividend target for the year. 4. Compliance with VCT legislation In making their investment in a VCT, Shareholders become eligible for several tax benefits under VCT tax legislation, as long as the Company also complies with VCT tax legislation. To achieve this, the Company must meet a number of tests set by the VCT tax legislation. The principal tests are summarised in the ‘Summary of VCT Legislation’ on page 8. In respect of the year ended 31 March 2023, the Company continued to meet these tests. 12 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report 5. Share price and discount to NAV The Board recognises that Shareholders may wish to sell their shares from time to time and that the secondary market for VCT shares can be limited. The impact of this limited secondary market is that the Company’s share price will typically trade at a level which is less than the Company’s NAV per share. Subject to the Company having sufficient available funds and distributable reserves, it is the Board’s current intention to pursue a buyback policy with the objective of maintaining the discount to the latest published NAV per share at which the shares trade at approximately 5% or less. It has succeeded in carrying out this objective during the year. The discount for the Company’s shares at 31 March 2023 was 4.5% (2022: 4.9%) based upon the share price shown in the Performance Summary on page 2 and the latest announce NAV per share at 31 December 2022 of 71.70 pence per share (adjusted for a 7.00 pence dividend paid on 30 March 2023). The Board considers that a 5% discount represents a fair balance between assisting investors who wish to sell shares and the majority of investors who wish to continue to invest in a portfolio of investments in unquoted shares. Any future purchases will be subject to the Company having appropriate authorities from Shareholders and sufficient funds available for this purpose. Share buybacks will also be subject to the Listing Rules and any applicable law at the relevant time. Shares bought back in the market are always cancelled. Continuing Shareholders benefit from the difference between the NAV and the price at which the shares are bought back and cancelled. During the year ended 31 March 2023, Shareholders holding 1.46 million shares, expressed their desire to sell their investments. The Company instructed its brokers, Panmure Gordon (UK) Limited (“Panmure Gordon”), to purchase these shares at prices representing a discount of approximately 5% to the previously announced NAV per share. The Company subsequently purchased these shares at prices between 68.12 and 85.44 pence per share and cancelled them. In total, during the year the Company bought back 1.8% of the issued share capital of the Company at the beginning of the year. 6. Costs Shareholders will be aware there are a number of costs involved in operating a VCT. Although Shareholders do not bear costs in excess of an expense cap of 3.60% of closing net assets in respect of each financial year, the Board aims to maintain the Ongoing charges ratio 1 before any performance fees at not more than 3%. The Board monitors costs using the Ongoing Charges Ratio which is set out in the table below: 2023 2022 Ongoing charges 2.75% 2.50% Performance fee 0.00% 1.29% Ongoing charges plus accrued performance fee 2.75% 3.79% 1 - The Ongoing Charges Ratio has been calculated using the Association of Investment Companies recommended methodology. The calculation of the expense cap as defined in the Investment Adviser’s Agreement is detailed in Note 4a). The Ongoing charges ratio of 2.75% is well within the Board’s target ratio of 3%. The increase in the ratio from 2.50% to 2.75% over the year reflects the decrease in average net assets over the year in spite of Investment Adviser fees and other expenses overall remaining relatively flat year on year. Investment Adviser fees and other expenses Investment Adviser fees have decreased from £1.65 million to £1.58 million, charged to both revenue (decrease of £0.02 million) and capital (decrease of £0.05 million). This was mainly due to the net asset value, upon which Investment Adviser’s fees are calculated (quarterly in arrears) being lower for most of the year. Also, the Investment Adviser performance incentive fee target was not achieved during the year. Other expenses (all charged to revenue) have increased by £0.08 million to £0.48 million. This resulted from a combination of a rise in audit fees, subscriptions fees and provision for loan interest. Further details of these are contained in Note 4 to the Financial Statements on pages 59 to 61 of this Annual Report. 13 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report Investment Adviser’s Review Portfolio Review The continuing harsh economic conditions continue to create challenging circumstances for portfolio companies. UK business has seen both demand and operating margins come under pressure in the face of increases in inflation, interest rates and the associated threat of recession, unprecedented in recent years and not experienced by a generation of management teams. Whilst markets have somewhat stabilised, the impact of this is now being seen on consumer confidence and business investment. Gresham House, as Investment Adviser views portfolio value change in the first half of the financial year characterised as by declining market multiples with relatively stable company level trading performance carried over in part from the momentum gained during the prior financial year. However, in the latter months of 2022 and into 2023, the situation has reversed with trading performance beginning to suffer somewhat. Although markets remain buoyant and less volatile, in large part this is attributable to the weighting of tech giants such as Alphabet and Meta who are not directly representative of the real UK growth economy. Against this backdrop, the latest US data suggests growth rates have more than halved to 1.1%. Whilst inflation is expected to be moderating following the rises in base rates, it is still at a very high level and has impacted economic growth expectations. There are also early signs that supply chains are returning to normality, that the labour shortage is easing and that there are pockets of positive market sentiment. The outlook is therefore mixed, and the emphasis is thus on robust funding structures and on being prepared for all eventualities. The Company’s investment values have been insulated partially from market movements and lower revenue growth by the preferred investment structures employed in many of the portfolio companies. This acts to moderate valuation swings and the net result is a more modest decline in portfolio value. The Gresham House non-executive directors who sit on each portfolio company board have responded by working with their boards to ensure that appropriate scenario planning has been done to achieve the best results during these uncertain times. Furthermore, the direct impact high interest rates on the Company’s portfolio is negligible as most portfolio companies do not have any significant third-party debt. There is also now a greater focus on cash management and capital efficiency. With ample liquidity following the recent fund raise, the Company is also well placed to support portfolio companies with follow-on funding where it is appropriate and can be done on attractive terms. Strong liquidity will also benefit the attractive new investment environment for the Company which, in our view is strong and we are seeing a number of interesting business propositions. There are some specific highs in the portfolio such as Preservica which continues to see strong trading and is out-performing budget. The partial exit from EOTH was also an excellent result after a long running process which had to negotiate numerous economic and geo-political hurdles and shortly before the end of the year was the exit of Tharstern. By contrast, there were also some significant falls. The largest was at Virgin Wines, where market sentiment shifted heavily against the whole sector despite Virgin Wines itself outperforming its peers. MyTutor was also impacted by declining sector multiples combined with slower than anticipated growth over the year and Tapas has entered administration since the year-end with no expected recovery for the VCTs. The portfolio’s valuation changes in the year are summarised as follows: Investment Portfolio Capital Movement 2023 £mn 2022 £mn Increase in the value of unrealised investments 0.67 14.91 Decrease in the value of unrealised investments (9.81) (5.36) Net (decrease)/increase in the value of unrealised investments (9.14) 9.55 Realised gains 1.21 2.54 Realised losses (1.49) - Net realised (losses)/gains in the year (0.28) 2.54 Net investment portfolio movement in the year (9.42) 12.09 The portfolio movements in the year are summarised as follows: 2023 £mn 2022 £mn Opening portfolio value 52.16 41.83 New and further investments 3.32 4.61 Disposal proceeds (8.05) (6.37) Net realised (losses)/gains (0.28) 2.54 Valuation movements (9.14) 9.55 Portfolio value at 31 March 38.01 52.16 14 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 New Investments during the year A total of £1.88 million was invested into five new investments during the year, as detailed below: Company Business Date of investment Amount of new investment (£m) Bidnamic Marketing technology May 2022 0.43 Lads Store Limited, trading as “Bidnamic” ( bidnamic.com ) is a marketing technology business that offers a platform for online retailers to manage their search engine marketing spend. The technology was all developed internally and uses bespoke machine learning algorithms to automate the management and optimisation of online retailers’ Google shopping spend. The ARR of the business has grown substantially over the last two years and this is projected to continue. The investment round will be used further to enhance the product’s capabilities and drive continued ARR growth through expanding the sales & marketing team and building a presence in North America. FocalPoint GPS enhancement software provider September 2022 0.42 Focal Point Positioning Limited ( focalpointpositioning.com ) is a deep tech business with a growing IP and software portfolio. Its proprietary technology applies advanced physics and machine learning dramatically to improve the satellite-based location sensitivity, accuracy, and security of devices such as smartphones, wearables and vehicles and reduce costs. Orri Specialists in eating disorder support September 2022 0.37 Orri Limited ( orri-uk.com ) is an intensive day care provider for adults with eating disorders. Orri provides an alternative to expensive residential in-patient treatment and lighter-touch outpatient services by providing highly structured day and half day sessions either online or in-person at its clinic on Hallam Street, London. Orri opened its current clinic in London in February 2019 which provides a homely environment in a converted 4-storey house but which is operating at capacity. The plan sees a larger site being leased nearby with Hallam Street being used to provide a step-down outpatient service. Connect Earth Environmental data provider March 2023 0.22 Founded in 2021, Connect Earth (connect.earth) is a London-based environmental data company that democratises easy access to sustainability data. With its carbon tracking API technology, Connect Earth supports financial institutions in offering their customers transparent insights into the climate impact of their daily spending and investment decisions. Connect Earth’s defensible and scalable product platform suite has the potential to be a future market winner in the nascent but rapidly growing carbon emission data market, for example, by enabling banks to provide end retail and business customers with carbon footprint insights of their spending. This funding round is designed to facilitate the delivery of the technology and product roadmap to broaden the commercial reach of a proven product. Cognassist Education and neuro- inclusion solutions March 2023 0.44 Cognassist (cognassist.com) is an education and neuro-inclusion solutions company that provides a Software-as-a-Service (SaaS) platform focused on identifying and supporting individuals with hidden learning needs. The business is underpinned by extensive scientific research and a vast cognitive dataset. Founded in 2019 by Chris Quickfall, Cognassist has scaled its underlying business within the education market, enabling apprentices to unlock government funding and helping diverse minds to thrive. This investment will empower Cognassist to continue its growth within the education market and penetrate the enterprise market, where demand for neuro-inclusive solutions to adequately support employees is rapidly emerging. Strategic Report 15 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report Further investments during the year A total of £1.44 million was invested into five existing portfolio companies during the year, as detailed below: Company Business Date of investment Amount of further investment (£m) Northern Bloc Dairy and allergen-Free ice cream producer April 2022 0.12 Northern Bloc Ice Cream ( northern-bloc.com ) is an established food brand in the emerging and rapidly growing vegan market. By focusing on chef quality and natural ingredients, Northern Bloc has carved out an early mover position in the dairy and allergen-free ice cream sector. The company’s focus on plant-based alternatives has strong environmental credentials as well as it being the first ice cream brand to move wholly into sustainable packaging. Following the initial investment in December 2020, Northern Bloc has grown and strengthened its prospects against a challenging market backdrop. This further investment provides additional working capital and funds a new production facility to increase its resilience, flexibility and margins in the future. Andersen EV Provider of premium electric vehicle (EV) chargers May 2022 0.27 Muller EV Limited (trading as Andersen EV) ( andersen-ev.com ) is a design-led manufacturer of premium electric vehicle chargers. Incorporated in 2016, this business has secured high profile partnerships with Porsche and Jaguar Land Rover, establishing an attractive niche position in charging points for the high end EV market. This follow-on funding was to further support its premium brand and product positioning whilst ensuring all new and existing products met the most recent and highest safety and compliance standards. Unfortunately, external factors caused its market and trading prospects to worsen rapidly, including substantially reduced demand, global supply chain issues, inflation and the removal of government consumer support for the purchase of EV chargers. The company therefore entered administration in October 2022. RotaGeek Workforce management software June 2022 0.18 RotaGeek ( rotageek.com ) is a provider of cloud-based enterprise software to help larger retail, leisure and healthcare organisations to schedule staff effectively. RotaGeek has proven its ability to solve the scheduling issue for large retail clients effectively competing due to the strength of its technologically advanced proposition. The company has made significant commercial progress since the VCTs first investment nearly doubling Annual Recurring Revenues (ARR). This investment aims to boost ARR and enable the company to take advantage of further large client opportunities. Vivacity Provider of artificial intelligence & urban traffic control systems July 2022 0.59 Vivacity ( vivacitylabs.com ) develops camera sensors with on-board video analytics software that enables real-time anonymised data gathering of road transport system usage. It offers city transport authorities the ability to manage their road infrastructure more effectively, enabling more efficient monitoring of congestion and pollution levels as well as planning for other issues, such as the changing nature of road usage (e.g. the increasing number of cyclists). The technology and software represent a significant leap forward for local planning authorities which have traditionally relied upon manual data collection methods. This new investment will help boost the company’s revenues through development of new functionality to enhance its product suite which can also be installed into the existing asset base. Bleach Hair Colourants brand August 2022 0.28 Bleach London Holdings (“Bleach”) ( bleachlondon.com ) is an established brand which develops and markets a range of innovative haircare and colouring products. Bleach is regarded as a leading authority in the hair colourant market having opened one of the world’s first salons focused on colouring and subsequently launched its first range of products in 2013. This further investment was part of a wider £5.5 million investment round alongside existing shareholders and a strategic partner. The funds will be used to drive further expansion into the strategically important North American market and to consolidate the brand’s position in the UK. 16 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Portfolio valuation movements Across the portfolio, comparable market multiples that are used as the basis of valuation have declined over the year, some by over 30%, but the levels at the year-end reflect a degree of stabilisation over the final quarter. Together with several downward revisions to trading forecasts in the latter half of the year, this has driven a general decline in investee company values. As noted, the preference investment structures used in many of the portfolio companies serve to moderate the impact of such company value movements on VCT value. The need to protect and develop value going forwards in such an uncertain environment underlines the need for portfolio readiness and planning, robust funding and close monitoring by the Gresham House team. The main reductions within total valuation decreases of £(9.81) million, were: ● Virgin Wines £(2.68) million ● MyTutor £(1.24) million ● Wetsuit Outlet £(1.12) million ● Buster and Punch £(1.05) million ● Connect Childcare £(0.85) million Virgin Wines has suffered from negative sentiment across its sector despite outperforming its peers although more recently, it also experienced some short term operational difficulties particularly in the last quarter of 2022. MyTutor’s growth has slowed post COVID coupled with a decline in market multiples. Buster and Punch and Wetsuit Outlet are both consumer facing businesses that have experienced challenging trading conditions which resulted in profit downgrades. Connect Childcare has struggled to grow revenues as rapidly as hoped and is managing its cash carefully. The uplifts within the total valuation increase of £0.67 million were: ● Master Removers £0.27 million ● Preservica £0.22 million ● Orri £0.18 million Master Removers continues to trade well despite an uncertain housing market across much of the period under review. Preservica is performing well and increasing its recurring revenues. Finally, Orri has been valued on a revenue multiple and the VCT has benefitted from an increase in value due to the investment structuring. Portfolio Realisations during the year The Company completed three full or partial exits during the year, as detailed below: Company Business Period of investment Total cash proceeds over the life of the investment/ Multiple over cost MBI Publishing and events business January 2015 to June 2022 £4.50 million 2.2x cost The Company realised its entire investment in MBI for £2.80 million (realised gain in the year: £0.16 million) including deferred proceeds received since completion. Total proceeds received over the life of the investment were £4.50 million compared to an original investment cost of £2.01 million, representing a multiple on cost of 2.2x and an IRR of 13.8%. EOTH Branded clothing (RAB and Lowe Alpine) October 2011 to November 2022 £5.64 million 6.9x cost The Company realised its equity investment in EOTH for £3.67 million (realised gain in the year: £0.70 million) including preference dividends. Total proceeds received over the life of the investment were £5.64 million compared to an original investment cost of £0.82 million, representing a multiple on cost of 6.9x and an IRR of 23.2%. The Company has retained its interest yielding loan stock investment. Once repaid, this should increase the multiple on cost to 7.9x. Tharstern Software based management information systems July 2014 to March 2023 £2.17 million 2.6x cost The Company realised its investment in Tharstern Group for £1.55 million (realised gain of £0.35 million). Total proceeds received over the life of the investment were £2.17 million compared to an original cost of £0.84 million, representing a multiple on cost of 2.6x and an IRR of 15.0%. Also during the year, the Company received a loan repayment from Jablite Holdings Limited. Portfolio income and yield In the year under review, the Company received the following amounts in loan interest and dividend income: Investment Portfolio Yield 2023 £m 2022 £m Interest received in the year 0.50 0.79 Dividends received in the year 0.76 0.29 Total portfolio income in the year 1 1.26 1.08 Portfolio Value at 31 March 38.01 52.16 Portfolio Income Yield (Income as a % of Portfolio value at 31 March) 3.3% 2.1 % 1 Total portfolio income in the year is generated solely from investee companies within the portfolio. Investment Adviser’s Review Strategic Report 17 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report New investments made after the year-end The Company made one new investment of £0.39 million after the year-end, as detailed below: Company Business Date of investment Amount of new investment (£m) Dayrize Sustainability impact assessment tool provider May 2023 0.39 Founded in 2020, Amsterdam-based Dayrize has developed a rapid sustainability impact assessment tool that delivers product-level insights for consumer goods brands and retailers, enabling them to be leaders in sustainability. Its proprietary software platform and methodology bring together an array of data sources to provide a single holistic product-level sustainability score that is comparable across product categories in under two seconds. This funding round is to drive product development and develop its market strategy to build on an opportunity to emerge as a market leader in the industry. Further investments made after the year-end The Company made a further investment of £0.30 million into an existing portfolio company after the year-end, as detailed below: Company Business Date of investment Amount of further investment (£m) Legatics Holdings Limited SaaS LegalTech software July 2023 0.30 Legatics (legatics.com) transforms legal transactions by enabling deal teams to collaborate and close deals in an interactive online environment. Designed by lawyers to improve legacy working methods and solve practical transactional issues, the legal transaction management platform increases collaboration, efficiency and transparency. As a result, Legatics has been used by around 1,500 companies, and has been procured by more than half of the top global banking and finance law firms, with collaborations having been hosted in over 60 countries. This funding round will provide headroom to further accelerate growth and to drive efficiencies to reach profitability. Environmental, Social and Governance considerations The Board and the Investment Adviser believe that the consideration of environmental, social and corporate governance (“ESG”) factors throughout the investment cycle should contribute towards enhanced shareholder value. The Investment Adviser has a team which is focused on sustainability as well as the Investment Adviser’s Sustainability Committee who provide oversight and accountability for the Investment Adviser’s approach to sustainability across its operations and investment practices. This is viewed as an opportunity to enhance the Company’s existing protocols and procedures through the adoption of the highest industry standards. Each investment executive is responsible for setting and achieving their own individual ESG objectives in support of the wider overarching ESG goals of the Investment Adviser. The Investment Adviser’s Private Equity division has its own Sustainable Investment Policy, in which it commits to: ● Ensuring its team understands the imperative for effective ESG management and is equipped to carry this out through management support and training. ● Conduct regular monitoring of ESG risks, opportunities and performance in its investments. ● Incorporate ESG into its monitoring processes. Outlook Whilst the year under review has once again been marked with volatility and uncertainty as a result of a number of factors affecting both the global and UK economy, the portfolio has continued to trade well under the circumstances. Rising costs and recessionary pressures will place further strains on the portfolio however, the Investment Adviser with its wealth of team experience will provide all additional help and advice to portfolio company management to help weather this storm. In terms of new investment, evidence shows that investing through the economic cycle has the potential to yield strong returns and Gresham House is seeing a number of opportunities, which although not without some risk, have the potential to drive shareholder value. Gresham House Asset Management Limited Investment Adviser 12 July 2023 18 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Investment Adviser’s Review Strategic Report Investments by market sector Investments by value remain spread across a number of sectors, primarily in retailers, software and computer services and industrial support services. Although the portfolio appears concentrated on three main sectors, the range of companies contained within these sectors is considered to be very diverse and the Investment Adviser continues to target further investments to complement these sectors. 31 March 2023 31 March 2022 0% 20% 25% 30%35% 40% 45% 50% 55% 10%5% 15% Industrial support services Software & computer services Media Retailers 1.1% 0.4% 0.5% 0.7% 0.0% 1.4% 0.7% 3.9% 1.1% 1.5% 5.1% 0.0% 33.3% 40.3% 44.4% 38.4% 11.1% 12.0% Consumer services Technology, hardware & equipment Healthcare General industrials Travel & Leisure Construction and materials Food producers 60% 0.1% 0.0% 2.6% 1.4% All of the retailers investments have branded online direct-to-consumer businesses with no physical high street retail presence, being Bella & Duke, Bleach London, Buster and Punch, EOTH (trading as RAB and Lowe Alpine), MPB Group, Parsley Box, Wetsuit Outlet, and Virgin Wines. Age of the portfolio by value 20232023 < 1 year 1 - 2 years 2 - 3 years 3 - 4 years MBO Growth Capital 4 - 5 years > 5 years 20222022 20232023 20222022 5.9% 3.7% 96.3% 15.8% 84.2% 24.7% 1.3% 59.6% 4.0% 4.5% 20.4% 3.3% 6.8% 58.4% 9.8% 1.3% Type of investment transaction by value 20232023 < 1 year 1 - 2 years 2 - 3 years 3 - 4 years MBO Growth Capital 4 - 5 years > 5 years 20222022 20232023 20222022 5.9% 3.7% 96.3% 15.8% 84.2% 24.7% 1.3% 59.6% 4.0% 4.5% 20.4% 3.3% 6.8% 58.4% 9.8% 1.3% Growth Capital contains all investments made after the 2015 rule change which are young businesses using the Company’s investment for growth and development purposes (as defined under VCT legislation). This category also contains a small number of growth capital style investments made before the 2015 rule change under the Investment Adviser’s MBO strategy. MBO contains MBO type investments made under the Investment Adviser’s previous MBO strategy. This typically includes companies which are more mature compared to those invested under the growth capital strategy. 19 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report This page has been left blank intentionally. 20 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Twelve largest investments in the portfolio at 31 March 2023 by valuation Bella & Duke Limited www.bellaandduke.com Cost £2,062,000 Valuation £5,660,000 Basis of valuation Revenue multiple Equity % held 10.2% Income receivable in year £Nil Business A premium frozen raw dog food provider Location Edinburgh Original transaction Growth capital Audited financial information Year ended 31 March 2023 Turnover £22,945,000 Operating profit £458,000 Loss before tax £(622,000) Net assets £2,431,000 Year ended 31 March 2022 Turnover £19,271,000 Operating loss £(2,024,000) Loss before tax £(2,763,000) Net assets £2,998,000 Additions/disposals during the year None. Preservica Limited www.preservica.com Cost £2,429,000 Valuation £8,826,000 Basis of valuation Revenue multiple Equity % held 9.4% Income receivable in year £59,707 Business Seller of proprietary digital archiving software Location Abingdon, Oxfordshire Original transaction Growth capital Audited financial information Year ended 31 March 2022 Turnover Not disclosed Operating profit/(loss) Not disclosed Profit before tax Not disclosed Net liabilities £(1,001,000) Year ended 31 March 2021 Turnover Not disclosed Operating profit/(loss) Not disclosed Profit before tax Not disclosed Net liabilities £(3,057,000) Additions/disposals during the year None. MPB Group Limited www.mpb.com Cost £870,000 Valuation £4,277,000 Basis of valuation Revenue multiple Equity % held 2.6% Income receivable in year £Nil Business Online marketplace for photographic and video equipment Location Brighton Original transaction Growth capital Audited financial information Year ended 31 March 2022 Turnover £97,793,000 Operating loss £(4,959,000) Loss before tax £(7,703,000) Net assets £25,624,000 Year ended 31 March 2021 Turnover £64,888,000 Operating loss £(911,000) Loss before tax £(2,857,000) Net assets £31,267,000 Additions/disposals during the year None. Strategic Report 21 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 MyTutorWeb Limited (trading as MyTutor) www.mytutor.co.uk Cost £1,847,000 Valuation £2,139,000 Basis of valuation Revenue multiple Equity % held 4.0% Income receivable in year £Nil Business Provider of a digital marketplace connecting school pupils seeking one-to-one online tutoring Location London Original transaction Growth capital Audited financial information Year ended 31 December 2021 Turnover £17,152,000 Operating loss £(7,482,000) Loss before tax £(7,520,000) Net assets £11,247,000 Year ended 31 December 2020 Turnover £7,246,000 Operating loss £(2,379,000) Loss before tax £(2,389,000) Net assets £3,242,000 Additions/disposals during the year None. End Ordinary Group Limited (trading as Buster and Punch) www.busterandpunch.com Cost £1,232,000 Valuation £1,672,000 Basis of valuation Earnings multiple Equity % held 6.4% Income receivable in year £Nil Business Industrial inspired lighting and interiors retailer Location Stamford, Lincolnshire Original transaction Growth capital Audited financial information Year ended 31 March 2022 Turnover £21,678,000 Operating profit £2,899,000 Profit before tax £2,474,000 Net assets £11,684,000 Year ended 31 March 2021 Turnover £16,177,000 Operating profit £3,209,000 Profit before tax £2,877,000 Net assets £9,448,000 Additions/disposals during the year None. Master Removers Group 2019 Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) www.ward-thomas.co.uk Cost £252,000 Valuation £2,422,000 Basis of valuation Earnings multiple Equity % held 4.8% Income receivable in year £98,198 Business A specialist logistics, storage and removals business Location London Original transaction Growth capital Audited financial information Year ended 30 September 2022 Turnover £41,617,000 Operating profit £8,531,000 Profit before tax £3,903,000 Net assets £17,688,000 Year ended 30 September 2021 Turnover £38,530,000 Operating profit £8,694,000 Profit before tax £4,163,000 Net assets £16,378,000 Additions/disposals during the year None. Strategic Report Financial information above and opposite is derived from publicly available Report and Accounts. The valuation of each investee company is derived in line with the valuation methodology detailed in Note 8 and is typically based upon each investee company’s latest management accounts information not yet disclosed to public sources. Further details of the investments in the portfolio may be found on the Gresham House website: www.greshamhouse.co.uk Operating profit is stated before charging depreciation and amortisation, where appropriate, for all investee companies. 22 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Vivacity Labs Limited www.vivacitylabs.com Cost £1,467,000 Valuation £1,467,000 Basis of valuation Earnings multiple Equity % held 5.3% Income receivable in year £Nil Business Provider of artificial intelligence & urban traffic control systems Location London Original transaction Growth capital Unaudited financial information Year ended 31 December 2021 Turnover Not disclosed Operating profit/(loss) Not disclosed Profit before tax Not disclosed Net assets £3,954,000 Year ended 31 December 2020 Turnover Not disclosed Operating profit/(loss) Not disclosed Profit before tax Not disclosed Net assets £632,000 Additions/disposals during the year Follow-on investment in July 2022. Data Discovery Solutions Limited (trading as ActiveNav) www.activenavigation.com Cost £1,207,000 Valuation £1,395,000 Basis of valuation Revenue multiple Equity % held 6.1% Income receivable in year £Nil Business Provider of a global market leading file analysis software for information governance, security and compliance Location Winchester Original transaction Growth capital Audited financial information Year ended 29 June 2022 Turnover £6,345,000 Operating loss £(59,000) Loss before tax £(1,769,000) Net assets £8,201,000 Year ended 29 June 2021 Turnover £5,521,000 Operating loss £(156,000) Loss before tax £(1,581,000) Net assets £6,885,000 Additions/disposals during the year None. Strategic Report Arkk Consulting Limited (trading as Arkk Solutions) www.arkksolutions.com Cost £1,300,000 Valuation £1,373,000 Basis of valuation Revenue multiple Equity % held 5.5% Income receivable in year £29,980 Business Provider of services and software to enable organisations to remain compliant with regulatory reporting requirements Location London Original transaction Growth capital Audited financial information Year ended 31 December 2021 Turnover Not disclosed Operating profit/(loss) Not disclosed Profit before tax Not disclosed Net liabilities £(1,056,000) Year ended 31 December 2020 Turnover Not disclosed Operating profit/(loss) Not disclosed Profit before tax Not disclosed Net liabilities £(428,000) Additions/disposals during the year None. 23 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 EOTH Limited (trading as Rab and Lowe Alpine) www.equipuk.com Cost £816,000 Valuation £800,000 Basis of valuation Net asset value Equity % held 1.5% Income receivable in year £742,793 Business Branded outdoor equipment and clothing (Rab and Lowe Alpine) Location Alfreton, Derbyshire Original transaction Growth capital Audited financial information Year ended 31 January 2022 Turnover £95,790,000 Operating profit £20,360,000 Profit before tax £16,642,000 Net assets £45,230,000 Year ended 31 January 2021 Turnover £61,258,000 Operating profit £8,241,000 Profit before tax £5,913,000 Net assets £32,711,000 Additions/disposals during the year Partial equity realisation in November 2022. Legatics Holdings Limited www.legatics.com Cost £605,000 Valuation £605,000 Basis of valuation Revenue multiple Equity % held 5.5% Income receivable in year £Nil Business Saas Legal Tech software Location London Original transaction Growth capital Unaudited financial information Year ended 31 May 2022 Turnover Not disclosed Operating profit/(loss) Not disclosed Profit before tax Not disclosed Net assets £1,461,000 Year ended 31 May 2021 Turnover Not disclosed Operating profit/(loss) Not disclosed Profit before tax Not disclosed Net liabilities £(49,000) Additions/disposals during the year None. Virgin Wines UK plc www.virginwines.co.uk Cost £31,000 Valuation £1,170,000 Basis of valuation Bid price (AIM quoted) Equity % held 5.5% Income receivable in year £Nil Business Online wine retailer Location Norwich Original transaction Management buyout Audited financial information Year ended 1 July 2022 Turnover £69,152,000 Operating profit £6,164,000 Profit before tax £5,098,000 Net assets £22,073,000 Year ended 2 July 2021 Turnover £73,634,000 Operating profit £3,468,000 Profit before tax £1,678,000 Net assets £17,627,000 Additions/disposals during the year None. Strategic Report Financial information above and opposite is derived from publicly available Report and Accounts. The valuation of each investee company is derived in line with the valuation methodology detailed in Note 8 and is typically based upon each investee company’s latest management accounts information not yet disclosed to public sources. Further details of the investments in the portfolio may be found on the Gresham House website: www.greshamhouse.co.uk Operating profit is stated before charging depreciation and amortisation, where appropriate, for all investee companies. 24 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Date of first investment and Sector Total Book cost at 31 March 2023 Valuation at 31 March 2022 Additions at cost Disposals at opening valuation Change in valuation for year Valuation at 31 March 2023 % of net assets by value £ £ £ £ £ £ Qualifying investments Preservica Limited Seller of proprietary digital archiving software December 2015 Software & computer services 2,428,743 8,602,347 - - 223,573 8,825,920 12.5% Bella & Duke Limited A premium frozen raw dog food provider February 2020 Retailers 2,062,146 5,941,407 - - (281,190) 5,660,217 8.0% MPB Group Limited Online marketplace for photographic and video equipment June 2016 Retailers 869,871 4,392,111 - - (115,520) 4,276,591 6.1% My Tutorweb Limited (trading as MyTutor) Digital marketplace connecting school pupils seeking one-to-one online tutoring May 2017 Industrial support services 1,846,886 3,376,630 - - (1,237,857) 2,138,773 3.0% End Ordinary Group Limited (trading as Buster and Punch) Industrial inspired lighting and interiors retailer March 2017 Retailers 1,231,510 2,718,017 - - (1,045,920) 1,672,097 2.4% Vivacity Labs Limited Provider of artificial intelligence & urban traffic control systems February 2021 Technology, hardware & equipment 1,467,160 876,541 590,619 - - 1,467,160 2.1% Data Discovery Solutions Limited (trading as ActiveNav) Provider of global market leading file analysis software for information governance, security and compliance November 2019 Software & computer services 1,207,040 1,988,095 - - (593,547) 1,394,548 2.0% Arkk Consulting Limited (trading as Arkk Solutions) Provider of services and software to enable organisations to remain compliant with regulatory reporting requirements May 2019 Software & computer services 1,299,865 1,384,705 - - (11,986) 1,372,719 1.9% Virgin Wines UK Plc (AIM quoted) Online wine retailer November 2013 Retailers 30,541 3,847,574 - - (2,677,911) 1,169,663 1.7% EOTH Limited (trading as Equip Outdoor Technologies) 6 Branded outdoor equipment and clothing (Rab and Lowe Alpine) October 2011 Retailers 816,267 3,773,864 - (2,974,125) - 799,739 1.1% Legatics Holdings Limited SaaS LegalTech software provider June 2021 Software & computer services 605,374 605,374 - - - 605,374 0.9% Pets’ Kitchen Limited (trading as Vet’s Klinic) Veterinary clinics June 2021 Consumer services 561,680 561,680 - - - 561,680 0.8% Proximity Insight Holdings Limited Super-App used by customer-facing teams of brands and retailers to engage, inspire and transact with customers February 2022 Software & computer services 555,000 555,000 - - - 555,000 0.8% Orri Limited An intensive day care provider for adults with eating disorders September 2022 Healthcare 366,800 - 366,800 - 180,509 547,309 0.8% IPV Limited Provider of media asset software November 2019 Software & computer services 535,459 535,459 - - - 535,459 0.8% Caledonian Leisure Limited Provider of UK leisure and experience breaks March 2021 Travel & leisure 522,509 759,329 - (236,319) 523,010 0.7% Rota Geek Limited Workforce management software August 2018 Software & computer services 916,500 636,263 183,300 (343,329) 476,234 0.7% Investment Portfolio Summary as at 31 March 2023 Strategic Report Green Growth focused portfolio Blue MBO focused portfolio 25 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Date of first investment and Sector Total Book cost at 31 March 2023 Valuation at 31 March 2022 Additions at cost Disposals at opening valuation Change in valuation for year Valuation at 31 March 2023 % of net assets by value £ £ £ £ £ £ Cognassist UK Limited Provider of neurodiversity assessments and support software March 2023 Software & computer services 438,000 - 438,000 - - 438,000 0.6% Lads Store Limited (trading as Bidnamic) SaaS platform for optimisation of search engine marketing spend May 2022 Software & computer services 429,323 - 429,323 - (2,853) 426,470 0.6% Focal Point Positioning Limited A positioning technology company September 2022 Software & computer services 419,357 - 419,357 - - 419,357 0.6% Bleach London Holdings Limited Hair colourants brand December 2019 Retailers 822,715 593,174 283,033 - (485,267) 390,940 0.6% Manufacturing Services Investment Limited (trading as Wetsuit Outlet) Online retailer in the water sports market July 2017 Retailers 1,412,992 1,411,513 - - (1,029,800) 381,713 0.5% CGI Creative Graphics International Limited Vinyl graphics to global automotive, recreation vehicle and aerospace markets June 2014 General industrials 999,568 262,160 - - (11,992) 250,168 0.4% Connect Earth Limited Environmental data provider March 2023 Software & computer services 218,996 - 218,996 - - 218,996 0.3% Northern Bloc Ice Cream Limited Supplier of premium vegan ice cream December 2020 Food producers 424,200 558,851 121,200 - (538,653) 141,398 0.2% Connect Childcare Group Limited Nursery management software provider December 2020 Software & computer services 828,419 954,882 - - (851,332) 103,550 0.1% Parsley Box Group Limited (formerly Parsley Box Plc) 4 Supplier of home delivered, ambient ready meals targeting the over 60s May 2019 Retailers 520,549 215,280 - - (182,988) 32,292 0.0% RDL Corporation Limited Recruitment consultants for the pharmaceutical, business intelligence and IT industries October 2010 Industrial support services 1,000,000 255,219 - (254,219) (1,000) - 0.0% Spanish Restaurant Group Limited (trading as Tapas Revolution)(in administration) Spanish restaurant chain January 2017 Travel & Leisure 947,645 574,893 - (574,893) - - 0.0% Racoon International Group Limited Supplier of hair extensions, hair care products and training December 2006 Personal goods 906,935 - - - - - 0.0% Muller EV Limited (trading as Andersen EV) (in administration) Provider of premium electric vehicle (EV) chargers June 2020 Technology, hardware & equipment 653,998 381,500 272,498 (653,998) - - 0.0% Veritek Global Holdings Limited 5 Maintenance of imaging equipment July 2013 Industrial support services 530,985 - - - - - 0.0% BookingTek Limited Software for hotel groups October 2016 Software & computer services 450,283 - - - - - 0.0% Strategic Report Green Growth focused portfolio Blue MBO focused portfolio 26 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Investment Portfolio Summary as at 31 March 2023 Date of first investment and Sector Total Book cost at 31 March 2023 Valuation at 31 March 2022 Additions at cost Disposals at opening valuation Change in valuation for year Valuation at 31 March 2023 % of net assets by value £ £ £ £ £ £ Realised in year Kudos Innovations Limited Online platform that provides and promotes academic research dissemination November 2018 Software & computer services 277,950 66,223 - - (66,223) - 0.0% Jablite Holdings Limited (in members’ voluntary liquidation) Manufacturer of expanded polystyrene products April 2015 Construction and materials 254,550 37,110 - (37,110) - - 0.0% Media Business Insight Holdings Limited A publishing and events business focused on the creative production industries January 2015 Media - 2,646,394 - (2,646,394) - - 0.0% Tharstern Group Limited Software based management Information systems July 2014 Software & computer services - 1,191,908 - (1,191,908) - - 0.0% Total qualifying investments 28,859,816 49,703,503 3,323,126 (8,332,647) (9,309,605) 35,384,377 50.2% 1 Non-qualifying investments Master Removers Group 2019 Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) A specialist logistics, storage and removals business December 2014 Industrial support services 251,763 2,153,619 - - 268,070 2,421,689 3.4% Manufacturing Services Investment Limited (trading as Wetsuit Outlet) Online retailer in the water sports market July 2017 Retailers 304,000 304,000 - - (94,727) 209,273 0.3% Racoon International Group Limited Supplier of hair extensions, hair care products and training December 2006 Personal goods 139,050 - - - - - 0.0% Total non-qualifying investments 694,813 2,457,619 - - 173,343 2,630,962 3.7% Total investment portfolio per Note 8, page 64 29,554,629 52,161,122 3,323,126 (8,332,647) (9,136,262) 38,015,339 53.9% Cash and current asset investments 2 26,259,504 - - 32,512,904 46.2% Total investments including cash and current asset investments 29,554,629 78,420,626 3,323,126 (8,332,647) (9,136,262) 70,528,243 100.1% Other current assets 260,786 172,167 0.3% Current liabilities (1,175,430) (273,853) (0.4)% Totals 29,554,629 3,323,126 (8,332,647) Net assets at the year-end 77,505,982 70,426,557 100.0% Total Investment Portfolio split by type Growth focused portfolio 3 25,947,550 43,920,757 3,323,126 (4,203,016) (6,445,359) 36,595,508 96.3% MBO focused portfolio 3 3,607,079 8,240,365 - (4,129,631) (2,690,903) 1,419,831 3.7% Investment Adviser’s Total 29,554,629 52,161,122 3,323,126 (8,332,647) (9,136,262) 38,015,339 100.0% Strategic Report ¹ As at 31 March 2023, the Company held more than 80% of its total investments in qualifying holdings, and therefore complied with the VCT Qualifying Investment test. For the purposes of the VCT qualifying test, the Company is permitted to disregard disposals of investments for twelve months from the date of disposal. It also has up to three years to bring in new funds raised, before these need to be included in the qualifying investment test. ² Disclosed as Current asset investments and Cash at bank within Current assets in the Balance Sheet on page 54. ³ The growth focused portfolio contains all investments made after the change in the VCT regulations in 2015 plus some investments that are growth in nature made before this date. The MBO focused portfolio contains investments made prior to 2015 as part of the previous MBO strategy. 4 Parsley Box Group Plc was delisted from AIM in December 2022; the company changed its name on 11 January 2023 to Parsley Box Group Limited. 5 The Company’s holding in Veritek Global Holdings Limited was restructured during the peirod resulting in a write-off of £436,796 of the loan stock held. 6 In November 2022, the equity value of the Company’s holding in EOTH Limited was realised. The Company retains an interest yielding loan stock as well as deferred shares held at nominal value. Green Growth focused portfolio Blue MBO focused portfolio 27 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Key policies The Board has put in place the following policies to be applied to meet the Company’s overall Objective and to cover specific areas of the Company’s business. 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. Diversity Policy The Directors have considered diversity in relation to the composition of the Board and it’s Committees and have concluded that its membership is diverse in relation to gender and its breadth of experience. The Board and it’s Committees comprise of one male and two female directors. The Company does not have any senior managers or employees. The Board has made a commitment to always consider diversity in making future appointments. The Directors had taken the Board’s diversity into consideration in the recruitment and appointment of a successor to Adam Kingdom, and took this opportunity to re-emphasise the commitment it made to continue to consider diversity when making all future appointments. Other policies In addition to the Investment Policy, the Diversity Policy and the policies on payment of dividends and share buybacks, which are detailed earlier in this section, the Company has adopted a number of further policies relating to: ● Environmental and social responsibility; ● Human rights; ● Anti-bribery; ● Global greenhouse gas emissions; ● Whistleblowing; and ● Anti-Tax Evasion These are set out in the Directors’ Report on pages 34 to 37 of this Annual Report. Strategic Report 28 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Stakeholder Engagement and Directors’ Duties The Board has discussed the discharge of their Director’s duties under Section 172 of the Companies Act 2006 having regard to the factors set out under Provision 5 of the Association of Investment Companies (AIC) Code and in line with the UK Corporate Governance Code. The views of and the impact of the Company’s activities on the key stakeholders are an important consideration for the Board when making relevant decisions. The Board, in normal circumstances, engages directly with stakeholder groups through either regular or annual meetings and investor presentations to assist the directors in understanding the issues to which they must have regard. The table below sets out the interests of key stakeholders that have been considered throughout the year during the Board’s discussions and in decision making. Stakeholders Engagement Type Outcome Strategic Report Shareholders The key mechanisms of Shareholder engagement are: ● Annual General Meeting ● Annual, Interim Reports and Interim Management Statements ● Annual Investor Events ● RNS Announcements ● Website ● Offer for subscription ● The AGM will be held on 13 September 2023. There will also be a live stream providing access to view the meeting remotely for those that cannot attend the meeting in person, although only Shareholders physically attending will be able to formally take part in the meeting and vote on resolutions by a show of hands. Shareholders unable to attend are therefore encouraged to submit their votes on resolutions via proxy forms ahead of the meeting. A recording of the AGM webcast will be available on the Compnay’s website under Key Shareholder Information following the meeting. ● Shareholders are provided with Annual and Interim Reports in hard or soft copy according to their choice, which are also available on the Company’s website. Voluntary Interim Management Statements are released in the quarters between reports to ensure that Shareholders are kept up to date with events. The website is an important source of information for Shareholders and announcements are also regularly made through the London Stock Exchange. ● The Share buyback programme has continued to be offered throughout the year. This provides Shareholders with liquidity if they wish to sell their shares, at a price close to the latest announced NAV per share, the Board having considered the interests of remaining Shareholders. Further details are contained in the Chair’s Statement on page 5 and in the Director’s Report on page 34. ● Shareholders are welcome to contact the Chair or the Investment Adviser by email as advised on page 86 of this Report. ● The Annual Shareholder Event was successfully held as a virtual event on 23 March 2023 with a live Q&A session to encourage more interaction between the Shareholders and the Board. A recording of the event is available via a link on the Company’s website at www.mig2vct.co.uk for those Shareholders that were unable to join on the day. ● The Company seeks to create value for Shareholders by generating good returns which are eventually distributed to Shareholders as dividends. The importance of tax-free dividends to Shareholders is recognised by the Board and considered at each quarterly meeting and a decision was made to declare an interim dividend of 6.00 pence per share for payment in November 2022 and a further interim dividend of 7.00 pence per share for payment on 30 March 2023. The Company’s dividend target has consistently been achieved or exceeded as outlined in the Chairman’s Statement on page 3 and in the Strategic Report. ● The liquidity level of the Company has remained strong and is managed with the primary aim of preserving capital, as discussed at each Board meeting. Liquidity levels are managed after considering, inter alia, new and follow on investments, applicable annual dividend commitments as well as the provision of the buyback facility. Stakeholders Engagement Type Outcome 29 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Strategic Report Stakeholders Engagement Type Outcome Stakeholders Engagement Type Outcome ● The Board, along with the three other Mobeus VCTs, opened 2022/2023 Offers for Subscription on 5 October 2022 having considered: – the impact of dilution of Shareholder’s holdings; – the ability to adhere to the dividend policy of the Company; – the effect on the Net Asset Value; – the ability of the Company and its liquidity levels to be able to meet HMRC’s VCT investment rules and timeline; – the costs involved in issuing a prospectus and charges to Shareholders; and – the risk to performance and the equal treatment of investors across the four Mobeus VCTs and those investors that the Company co-invests with. Suppliers Including: Registrar, Broker, Auditor, Lawyer, Sponsor, Banker and the VCT Status Adviser ● The Investment Adviser regularly communicates with each of the professional advisers and secures an annual confirmation of the policies they have in place. The Board review the performance of each provider on an annual basis. Government & Regulators The Board is committed to conducting business in line with the appropriate laws and regulation. Mobeus Income & Growth 2 VCT plc does not provide financial contributions to political parties or lobby groups. ● As a UK listed company the Board and Investment Adviser comply with the Companies Act, the UKLA, HMRC, UK Accounting Standards and FCA regulatory requirements in addition to the Alternative Investment Fund Managers Directive, to ensure the Company can continue to trade. Non-compliance with the VCT regulations in particular is viewed as a principal risk for the Company. The Company continued to comply with these regulations throughout the year and to the date of this Report. Investee Companies The Board has delegated authority for the day-to-day management of the Company to the Investment Adviser and engages with the Investment Adviser in setting, approving and overseeing the execution of the business strategy and related policies. ● The Board has delegated authority for the day-to-day management of the Company to the Investment Adviser in setting, approving, and overseeing the execution of the business strategy and related policies. ● The Board aims to have a diverse mix of companies across a range of different sectors and regularly reviews the composition of the portfolio. ● The Investment Adviser reports at the Company’s quarterly Board meetings on each of the portfolio companies. Members of the Investment Adviser sit on the majority of the portfolio companies’ boards. This is to provide input on key matters such as advancing the shareholder value agenda, ensuring class leading corporate governance and encouraging best practice in areas such as ESG. ● Gresham House organises, seminars and events that involve portfolio companies to benefit from the Gresham House network. Investment Adviser The Investment Adviser’s performance is vital for the Company to deliver its investment strategy, meeting its objectives and generating investment returns for Shareholders, and is a crucial relationship for the Board. ● The Investment Adviser meets with the Board at each quarterly meeting and is in frequent contact throughout the periods in between meetings e.g. to approve or reject investment transactions. All key strategic and operational topics are discussed in detail and a close dialogue is maintained with the Board. The Board take an active interest in the challenges faced by the portfolio companies. The Board considers each potential disposal based on the company’s performance, market conditions and the offer(s) in its decision to sell the Company’s holding. The Investment Adviser’s performance is evaluated annually and its re-appointment is dependent on the outcome of that evaluation. 30 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Principal and emerging risks, management and regulatory environment The Directors acknowledge the Board’s responsibilities for the Company’s internal control systems and have instigated systems and procedures for identifying, evaluating and managing the significant and emerging risks faced by the Company. This includes a key risk management review and robust assessment of the risks, which takes place at each quarterly board meeting. Further details of these are contained in the corporate governance section of the Directors’ Report on page 38. The principal risks and the emerging risk identified by the Board are set out below: Risk Possible consequence How the Board manages risk Political and Economic Events such as the war in Ukraine, the impact of Brexit, an economic recession, supply shortages or movements in sterling or interest rates, could affect trading conditions for smaller companies and consequently the value of the Company’s qualifying investments. Movements in UK Stock Market indices may affect the valuation of the Company’s investments, as well as affecting the Company’s own share price and its discount to net asset value. ● The Board monitors the portfolio as a whole to: (1) ensure that the Company invests, as far as is possible, in a diversified portfolio of companies; (2) ensure that developments in the macro- economic environment such as movements in interest rates and availability of labour under new immigration plans are monitored; and (3) ensure ongoing discussions are held by the Investment Adviser with all the portfolio companies to ascertain where support is required during the current uncertain economic environment. Cash comprises a significant proportion of the net assets of the Company, further to the successful realisations and the fund-raise earlier in the year giving the Company a strong liquidity position. Investment and strategic Investment in VCT qualifying earlier stage unquoted small companies involves a higher degree of risk than investment in fully listed companies. Smaller companies often have limited product lines, markets or financial resources, may not be profitable at the point of investment and may be dependent for their management on a smaller number of key individuals. This may lead to variable investment returns and the use of more subjective valuation methodologies. ● The Board regularly reviews the Company’s Objective and Investment Policy. ● Careful selection and review of the investment portfolio on a regular basis. ● The Investment Adviser has provided a growing pipeline of compliant investment opportunities and continues to strengthen its investment team. ● The valuation of the investment portfolio and valuation methodologies are reviewed by the Board each quarter. Loss of approval as a Venture Capital Trust The Company must comply with section 274 of the Income Tax Act 2007 (“ITA”) which allows it to be exempt from capital gains tax on investment gains. Any breach of these rules may lead to the Company losing 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 Company becoming subject to tax. The Company would also lose its exemption from corporation tax on capital gains. ● The Company’s VCT qualifying status is continually reviewed by the Investment Adviser. ● The Board receives regular reports from its VCT Status Adviser who has been retained by the Board to monitor the Company’s ongoing compliance with the VCT Rules. VCT Regulatory Changes The Company is required to comply with the VCT specific regulations relating to European State Aid regulations as enacted by the UK Government which still apply. Non-compliance would result in a loss of VCT status. ● The Board receives advice from the VCT Status Adviser in respect of these requirements, including those arising from the withdrawal from the EU, and conducts its affairs in order to comply with these requirements. Regulatory Changes The Company is required to comply with the Companies Act, the Listing Rules of the UK Listing Authority and United Kingdom Accounting Standards. Changes to and breaches of any of these might lead to suspension of the Company’s Stock Exchange listing, financial penalties or a qualified audit report. ● Regulatory and legislative developments are kept under review by the Company’s solicitors and the Board. 31 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Risk Possible consequence How the Board manages risk Financial and operating Failure of systems (including breaches of cyber security) at any of the third-party service providers that the Company has contracted with could lead to inaccurate reporting or monitoring. Inadequate controls could lead to the misappropriation or insecurity of assets. ● The Board carries out an bi-annual review of the internal controls in place and reviews the risks facing the Company at Board meetings and receives control reports by exception. Market Movements in the valuations of the Company’s investments will, inter alia, be connected to movements in UK Stock Market indices as well as affecting the Company’s own share price and its discount to net asset value. ● The Board receives quarterly valuation reports from the Investment Adviser and remains focused on the investments being at fair value, after considering many factors, including the impact of market movements. ● The Investment Adviser alerts the Board of any adverse movements. Asset liquidity The Company’s investments may be difficult to realise. ● The Board receives reports from the Investment Adviser and reviews the portfolio at each quarterly Board meeting. It carefully monitors investments where a particular risk has been identified. Market liquidity Shareholders may find it difficult to sell their shares at a price which is close to the net asset value given the limited secondary market in VCT shares. ● The Board has a share buyback policy which seeks to mitigate market liquidity risk. The policy is reviewed at each quarterly meeting. Cyber and Data Security The Company and its Shareholders may suffer losses in the event of the IT systems at principal suppliers being compromised by cyber attack. Outsourcing and the increase in remote working could give rise to cyber and data security risk and internal control risk. ● The Board reviews the performance of the service providers annually and has obtained assurance that such providers have controls in place in respect of the systems and processes to reduce the risk of breaches of their cyber security. Emerging Risk: Environmental, Social and Governance Non-compliance with current and future reporting requirements could lead to a fall in demand from investors. That may affect the level of capital the Company has available to meet its investment objectives. ● ESG and climate change impacts are taken into account when considering new investment proposals. The Investment Adviser monitors the potential impact on investee companies of any proposed new legislation regarding environmental, social and governance matters and advises and adapts accordingly. ● The Board recognises that climate change is an important emerging risk which the Company is taking into account in their strategic planning although the Company itself has little direct impact on environmental issues. Measures had been introduced to decrease the amount of travel undertaken prior to the pandemic and working from home and to reduce the cost and environmental impact of providing paper copies of Shareholder correspondence. The risk profile of the Company changed as a result of changes to VCT legislation 2015. As the Company is required to focus its new investment activity on growth capital investments in younger companies it is anticipated that investment returns will be more volatile and have a higher risk profile. The Board also discusses emerging risks as and when they arise, such as the potential for recession and the resultant impact on portfolio companies, and puts in place mitigating actions to manage the risk. 32 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Going concern and Long-Term viability of the Company The Board is required to assess 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 preceding pages of this Strategic Report. The majority of companies in the portfolio are well funded and the portfolio taken as a whole remains resilient and well-diversified, although the impact of the cost of living crisis and the challenging economic environment may still impose considerable demands on the liquidity and trading prospects of some of these companies in the near-term. In keeping with the ongoing need to take advantage of opportunities for further investment within the portfolio, the Company announced its intention to raise further funds in the 2022/23 tax year, with the offer reaching full subscription. The major cash outflows of the Company (namely investments, share buybacks and dividends) are within the Company’s control. Accordingly, the Board believes that the Company’s cash position, noting the successful fundraise earlier in the year, is adequate to enable the Company to continue as a going concern under any plausible stress scenario. Further details of this assessment are shown within Note 2 on page 58. The Board’s assessment of liquidity risk, and details of the Company’s policies for managing financial risk and its capital, are shown in Notes 15 and 16 on pages 68 to 76. Accordingly, the Directors believe that it is appropriate to continue to apply the going concern basis of accounting in preparing the annual Financial Statements. Furthermore, the Directors have considered whether there are any material uncertainties that the Company may face during the twelve months from the date of approval of the financial statements that may impact on its ability to operate as a going concern. In particular, the Directors have continued to consider the impact of changes to VCT legislation. No further material uncertainties have been identified by the Board. Viability Statement The UK Corporate Governance Code includes a requirement for companies to include a Viability Statement in the Annual Report addressed to Shareholders with the intention of providing an improved and broader assessment of long term solvency and liquidity. The Code does not define long term but expects the period to be longer than twelve months with individual companies choosing a period appropriate to the nature of their own businesses. The Directors have chosen a period of three years, as explained further below. The Directors have carried out a robust assessment comprising the emerging risks, such as ESG and Climate Change as shown on page 31 and principal risks, facing the Company and the disclosure of the principal and emerging risks are listed on pages 30 to 31 and above. Subsequent to this review they have a reasonable expectation that the Company will continue to operate and meet its liabilities, as they fall due, for the next three years. The Directors believe that a three-year period is appropriate given the frequency with which it is necessary to review and assess the impact of past, current and proposed regulatory changes. A period greater than three years is considered to be too uncertain for it to be meaningful. The Directors’ assessment has been made with reference to the Company’s current position and prospects, the Company’s present strategy, the Board’s risk appetite and the Company’s principal and emerging risks and how these are managed, as described on the previous pages. The Board is mindful of these risks but considers that its actions to manage those risks provide reasonable assurance that the Company’s affairs are safeguarded for the stated period. The Directors have reached this conclusion after giving careful consideration to the Company’s strategy. They believe the Company’s current strategy of “providing investors with a regular income stream by way of tax-free dividends and to generate capital growth through portfolio realisations” remains valid. The Board has focused upon the range of future investments that the Company will be permitted to fund under the current VCT legislation. The Board expects that positive returns should continue to be achievable from future investments and from the existing portfolio. The Company has made five more new investments in compliance with the VCT rules introduced in 2015 and its revised Investment Policy, and the Investment Adviser continues to build a healthy pipeline of such investment opportunities. The Board will continue to monitor this assumption on a regular basis and is encouraged, in the current circumstances, by the returns generated from some of these investments to date. The Board will continue to monitor returns from growth capital investments on a regular basis and the prospective returns thereon over the next three years. The Board considers that the Company has sufficient liquidity to maintain its present investment rate in the short to medium-term. Shareholders should be aware that, under the Company’s Articles of Association, it is required to hold a continuation vote at the next AGM falling after the fifth anniversary of last allotting shares. As shares were last allotted in February 2023 (under the Offer for Subscription), this factor has not affected the Board’s assumptions for the next three years. Future prospects For a discussion of the Company’s future prospects (both short and medium-term), please see the Chair’s Statement on page 3 and the Investment Adviser’s Review on page 13. Ian Blackburn Chair 12 July 2023 Strategic Report 33 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors Ian Blackburn Independent, Non-executive Chairman and Chair of Nomination and Remuneration and Management Engagement Committees Appointed to the Board: 1 July 2017. Experience: Ian is an FCA who specialised in Corporate Finance at KPMG before building and selling two listed food groups. He has extensive UK and European strategic, operations and finance experience as CEO and FD of Perkins Foods Plc and Zetar Plc. Currently he is an active investor in a number of SMEs including Chairman and Non-Executive roles with Mood Foods Limited, SlimLine Wine Limited, Pink Prosecco Limited and Make it Plain Limited. He is also the treasurer of The Thomas Fryer Charity and a trustee of The Rutland Learning Trust (Multi Academy Trust). Sarah Clark Independent, Non-executive Director Chair of Investment Committee Appointed to the Board: 4 November 2022. Experience: Sarah has broad international commercial experience in a variety of industries including travel, retail, financial services, fintech and e-commerce in markets spanning Europe, the USA, and the Middle East and Africa combined with a deep understanding of digital technologies. Her experience ranges from running Central Europe, the Middle East & Africa at PayPal Inc to setting up and running European subsidiaries of North American start-ups, LootCrate and Clearco, one of the largest providers of revenue-based finance to ecommerce businesses. She is also a Non-Executive Director of Trilium Services Limited and of the Gynaecology Cancer Research Fund. Sally Duckworth Independent, Non-executive Director Chair of Audit Committee Appointed to the Board: 1 January 2007. Experience: Sally has worked in the financial services sector since 1990 and in the private equity industry since 2000. She has extensive C-suite, chairperson and VC experience in investing in, growing restructuring and exiting early and development stage technology companies. After qualifying as an associate chartered accountant with Price Waterhouse she moved to J.P. Morgan as an investment banker and then became an early-stage technology investor at Quester Capital Management, as part of their VCT investment team. After leaving Quester Capital Management, she was a founder of an angel network, Endeavour Ventures Limited before becoming chief operating and financial officer for Redkite Financial Service Services; a business they exited to NASDAQ-listed NICE Actimize. She then spent three years as chief executive officer of You at Work Limited, a full-service employee benefits provider, helping to restructure the business and subsequently helped to restructure what is now Eta Green Power Limited. Sally has sat on a large number of boards and currently chairs StorMagic Limited, which was a gold winner in two different categories of the 2021 Cybersecurity Excellence Awards and is a Non-Executive Director on the board of JP Morgan’s Japanese Investment Trust and Immortalit.AI Limited. She is an Ambassador for Women on Boards, was shortlisted as one of the top 5 Non-Executive Directors in Private Equity in the 2021 Non-Executive Director Awards and was a Judge for the Lloyds sponsored British Business Excellence Awards in 2021 for the SMB category. Board of Directors Reports of the Directors For details of the share interest and remuneration of the Directors please see page 45 of the Directors’ Remuneration Report. Details of the attendance record of the Directors is also reported in the Directors’ Remuneration Report on the same page. 34 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors The Directors present the Annual Report and Audited Financial Statements of the Company for the year ended 31 March 2023. The Corporate Governance Statement on pages 38 to 47, including the Report of the Audit Committee on pages 41 to 42, form part of this Directors’ Report. The Board believes that the Annual Report and Financial Statements taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company’s performance, position, business model and strategy. The Company is registered in England and Wales as a Public Limited Company (registration number 03946235). The Company has satisfied the requirements for full approval as a Venture Capital Trust under section 274 of the Income Tax Act 2007 (“ITA”). It is the Directors’ intention to continue to manage the Company’s affairs in such a manner as to comply with section 274 of the ITA. To enable capital profits to be distributed by way of dividends, the Company revoked its status as an investment company as defined in section 833 of the Companies Act 2006 (“the Companies Act”) on 7 July 2005. The Company does not intend to re-apply for such status. Share capital The Company’s Ordinary shares of 1.00 penny each (“shares”) are listed on the London Stock Exchange (“LSE”). Issued Share Capital The issued share capital of the Company as at 31 March 2023 was £984,370 (2022: £804,263 ) and the number of shares in issue at this date was 98,437,045 (2022: 80,426,321 ). Buyback of shares The following disclosure is made in accordance with Part 6 of Schedule 7 of The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended in 2013). The reason the Company makes market purchases of its own shares is to enhance the liquidity of the Company’s shares and to seek to manage the level and volatility of the discount to Net Asset Value at which the Company’s shares may trade. At the Annual General Meeting of the Company held on 21 September 2022, Shareholders granted the Company authority, pursuant to section 701 of the Companies Act 2006, to make market purchases of up to 12,055,905 million of its own shares, representing 14.99% of the issued share capital of the Company at that date. Such authority has been in place through the year under review. During the year under review, the Company bought back 1,464,956 (2022: 697,498) of its own shares at a total cost (including expenses) of £1,147,478 (2022: £643,810). These shares represented 1.8% of the issued share capital at the beginning of the year (2022: 1.0%). All shares bought back by the Company were subsequently cancelled. Substantial interests As at the date of the Report, the Company had not been notified of any beneficial interest exceeding 3% of the issued share capital. Dividends Shareholders received a two interim dividends in respect of the year ended 31 March 2023 of 6.00 pence per share on 7 November 2022 and 7.00 pence per share on 30 March 2023 respectively. Directors The names, dates of appointment and brief biographical details of each of the Directors are given on the previous page of this Annual Report. Disclosure of Information to the Auditor So far as each of the Directors in office at 31 March 2023 are aware, there is no relevant audit information of which the auditor is unaware. They have individually taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information. Director’s indemnity and officers’ liability insurance The Directors have individually entered into Deeds of indemnity with the Company which indemnifies each Director, subject to the provisions of the Companies Act 2006 and the limitations set out in each deed, against any liability arising out of any claim made against him or her in relation to the performance of their duties as Directors of the Company. Copies of each Deed of indemnity entered into by the Company for the Directors are available at 5th floor, 80 Cheapside, London EV2V 6EE. The Company maintains a Directors’ and Officers’ liability insurance policy. The policy does not provide cover for fraudulent or dishonest actions by the Directors. Environmental and social responsibility policies The Board recognises its obligations under Company law to provide information in this respect about environmental matters (including the impact of the Company’s business on the environment), human rights and social and community issues, including information about any policies the Company has in relation to these matters and the effectiveness of these policies. The Board has recognised ESG and Climate Change as an emerging risk, as referenced on page 31, and takes full consideration of relevant factors within the overall assessment of potential investee companies. It is considered alongside investment assessments of potential investee companies. The Board seeks to maintain high standards of conduct in respect of ethical, environmental, governance and social issues and to conduct the Company’s affairs responsibly. It considers relevant social and environmental matters when appropriate and particularly with regard to investment decisions. The Investment Adviser encourages good practice within the companies in which the Company invests. The Board seeks to avoid investing in certain areas which it considers to be unethical and does not invest in companies which do not operate within relevant ethical, environmental and social legislation or otherwise fail to comply with appropriate industry standards. The Investment Adviser has aligned its current ESG procedures and protocols to the high standards of Gresham House plc. The Investment Adviser believes that this approach will contribute towards the enhancement of shareholder value going forward. The Company does not have any employees or officers and the Board therefore believes that there is limited scope for developing environmental, social or community policies. The Company has however adopted electronic communications for Shareholders as a means of reducing the volume of paper that the Company uses to produce its reports. It uses mixed source paper from well-managed forests as endorsed by the Forest Stewardship Council for the printing of its circulars and annual and Interim reports. The Investment Adviser is conscious of the need to reduce its impact on the environment and has taken a number of Directors’ Report 35 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors initiatives in its offices including recycling and the reduction of its energy consumption. Global greenhouse gas emissions The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013, (including those within the Company’s underlying investment portfolio). The Company does not fall within the scope of The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 effective as of 1 April 2019 which implements the Government’s policy on Streamlined Energy and Carbon Reporting, replacing the Carbon Reduction Commitment Scheme. The 2018 Regulations require companies that have consumed over 40,000 kilowatt- hours of energy to include energy and carbon information in their Directors’ Report. This does not apply to the Company as it qualifies as a low energy user. Human rights policy The Board seeks to conduct the Company’s affairs responsibly and gives full consideration to the human rights implications of its decisions, particularly with regard to investment decisions. Anti-bribery policy The Company has adopted a zero- tolerance approach to bribery and has established an anti-bribery policy and procedures, copies of which are available in the Corporate Governance section of the Company’s website: www.mig2vct.co.uk Whistleblowing policy The Board has considered the recommendation made in the UK Corporate Governance Code with regard to a policy on whistleblowing and has reviewed the arrangements at the Investment Adviser under which staff may, in confidence, raise concerns. It has concluded that adequate arrangements are in place at the Investment Adviser for the proportionate and independent investigation of such matters and, where necessary, for appropriate follow-up action to be taken by the Investment Adviser. The Board has also asked each of its service providers to confirm that they have a suitable whistle-blowing policy in place. Anti-Tax Evasion The Company has also adopted a zero-tolerance approach to tax evasion in compliance with the Criminal Finance Act 2017 and the corporate criminal offence of failing to take reasonable steps to prevent the facilitation of tax evasion. The Company has applied due diligence procedures, taking an appropriate risk-based approach, in respect of persons who perform or will perform services on behalf of the Company, in order to mitigate risks. Financial risk management The main risks arising from the Company’s financial instruments are due to fluctuations in market prices, investment risk, liquidity risk, interest rates and credit risk. The Board regularly reviews and agrees policies for managing these risks and full details can be found in Note 15 to the Financial Statements on pages 68 to 75 of this Annual Report. Post balance sheet events For a full list of the post balance sheet events that have occurred since 31 March 2023, please see Note 18 to the Accounts on page 76. Articles of Association The Company may amend its Articles of Association (“the Articles”) by special resolution in accordance with section 21 of the Companies Act 2006. It is not the Company’s intention to change its Articles at the forthcoming AGM. Annual General Meeting The Notice of the Annual General Meeting, which will be held at 11.00 am on Wednesday, 13 September 2023 at the offices of Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch Street, London EC3V 0HR is set out on pages 82 to 84 of this Annual Report. A webcast of the Annual General Meeting will also be available and details of how to join virtually will be shown on the Company’s website. If possible, Shareholders intending to join the Meeting by means of the webcast (which would be as an attendee only) are requested to join at least ten minutes prior to the commencement of the Annual General Meeting at 11.00 am on Wednesday, 13 September 2023. Where a member intends to join the Annual General Meeting by means of the webcast, they shall be permitted to ask questions at the Annual General Meeting but shall not be entitled to vote on resolutions at the Annual General Meeting (and are, therefore, encouraged to lodge their proxy vote and appoint the Chair of the Annual General Meeting as their proxy.) A proxy form for the meeting is enclosed separately with Shareholders’ copies of this Annual Report. Proxy votes may also be submitted electronically via the Link Group Signal Shares Portal at www.signalshares.com. Shareholders may also request a hard copy proxy form by contacting the Company’s Registrar Link Group, using their details as stated on page 86. Shareholders are encouraged to lodge their proxy vote and appoint the Chair of the Annual General Meeting as their proxy, as soon as possible. Resolutions 1 to 8 are being proposed as ordinary resolutions requiring more than 50% of the votes cast at the meeting to be in favour and resolutions 9 and 10 will be proposed as special resolutions requiring the approval of at least 75% of the votes cast at the meeting. The following is an explanation of the business to be proposed: Resolution 1 – To receive the Annual Report and Financial Statements The Directors are required to present the Financial Statements, Directors’ report and Auditor’s report for the financial year ended 31 March 2023 to the meeting. Resolution 2 – To approve the Directors’ Remuneration Report Under section 420 of the Companies Act 2006 (the “Act”), the Directors must prepare an annual report detailing the remuneration of the Directors and a statement by the Chair of the Remuneration Committee (together the “Directors’ Remuneration Report”). The Act also requires that a resolution be put to Shareholders each year for their approval of that report. The Directors’ Remuneration Report can be found on pages 43 to 46 of this Annual Report and Financial Statements. Resolution 2 is an advisory vote only. Full details of Directors’ remuneration can be found in the Directors’ Remuneration Report on page 45 of this Annual Report. Resolution 3 – To approve the Company’s Remuneration Policy The Company is required to put its Remuneration Policy to Shareholders every three years under section 439A of the Companies Act and is subject to a binding shareholder vote. A resolution on the Remuneration Policy was last voted on at the Annual General Meeting held on 36 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors 9 September 2020 and therefore a similar resolution will be proposed at the forthcoming meeting. The Remuneration Policy is set out below and full details of Directors’ remuneration can be found in the Directors’ Remuneration Report on pages 43 to 46 of this Annual Report. Remuneration Policy To ensure that the levels of remuneration are sufficient to attract, retain and motivate directors of the quality required to manage the Company in order to achieve the Company’s Objective. Resolutions 4 to 6 – To re-elect and elect the Directors The Company’s Articles of Association require that each Director appointed to the Board shall retire and seek election at their first annual general meeting following appointment and every three years thereafter. The Board considers that it is not appropriate for the Directors to be appointed for a specified term. The Board has previously agreed that each Director will retire and offer themselves for re-election annually after serving on the Board for more than nine years. However, following the publication of the revised UK Corporate Governance Code in July 2018, which applied to the Company from 1 January 2019 onwards, the Board has agreed to follow the recommendation of provision 18, namely that all directors be subject to annual re-election. Ian Blackburn Independent non-executive chair Following his annual performance review, the remaining Directors agree that Ian continues to carry out his duties effectively and makes a significant contribution to the Company’s long-term sustainable success. The remaining Directors are confident that he is a strong and effective Chair and director and have no hesitation in recommending his re-election to Shareholders. Sally Duckworth Independent non-executive director Following Sally’s performance review, the remaining Directors agree that she continues to make a significant contribution to the work of the Board and continues to demonstrate commitment to her role and as Chair of the Audit Committee. The other Directors have no hesitation in recommending her re- election to Shareholders. Sally has agreed to remain a director for another year. The Directors believe that the Board comprises an appropriate balance of skills, experience and knowledge. Sarah Clark Independent non-executive director Sarah, having only joined in November 2022, has not undergone a formal performance evaluation process as yet, however, the remaining directors agree that she has already made a significant contribution to the Board’s work. Sarah is standing for election at the Annual General Meeting, which is the first since her appointment on 4 November 2022. Resolution 7 – To reappoint BDO LLP as auditor of the Company, to hold office until the conclusion of the next general meeting at which accounts are laid before the Company and to authorise the Directors to determine the remuneration of the auditor. At each meeting at which the Company’s accounts are presented to its members, the Company is required to appoint an auditor to serve until the next such meeting. The Board, on the recommendation of the Audit Committee, recommends the re- appointment of BDO LLP. This resolution also gives authority to the Directors to determine the remuneration of the auditor. For further information, please see the report of the Audit Committee on pages 41 and 42. Resolution 8 – Authority to allot shares in the Company and Resolution 9 – Disapply the pre-emption rights of members These two resolutions grant the Directors the authority to generally allot shares for cash to a limited and defined extent otherwise than pro rata to existing Shareholders. Resolution 8 will enable the Directors to allot new shares up to an aggregate nominal value of £328,123, representing one-third of the existing issued share capital of the Company as at the date of the Notice convening the Annual General Meeting. Under section 561(1) of the Act, if the Directors wish to allot new shares or sell or transfer treasury shares for cash they must first offer such shares to existing Shareholders in proportion to their current holdings. It is proposed by Resolution 9 to sanction the disapplication of such pre-emption rights in respect of the allotment of equity securities: (i) with an aggregate nominal value of up to, but not exceeding, £98,437 of the issued share capital in connection with offer(s) for subscription; and (ii) otherwise than pursuant to (i) above, with an aggregate nominal value of equity securities of up to 10% of the issued share capital of the Company from time to time, in each case where the proceeds may be used in whole or part to purchase the Company’s shares in the market. The Company normally allots shares at prices based on the prevailing net asset value per share of the existing shares on the date of allotment (plus costs). The Directors thus seek to manage any potential dilution of existing shareholdings as a result of the disapplication of Shareholders’ pre- emption rights proposed in resolution 9. The Company does not currently hold any shares as treasury shares. Both of these authorities, unless previously renewed, varied or revoked, will expire on the date falling fifteen months after the passing of the resolution or, if earlier, on the conclusion of the Annual General Meeting of the Company to be held in 2024. However, the Directors may allot securities after the expiry dates specified above in pursuance of offers or agreements made prior to the expiration of these authorities. Both resolutions renew previous authorities approved at the Annual General Meeting of the Company held on 21 September 2022 and are intended to be used for the purposes of top-up offer(s) for subscription. Resolution 10 – Authority to purchase the Company’s own shares This resolution authorises the Company to purchase its own shares pursuant to section 701 of the Companies Act. The authority is limited to the purchase of an aggregate of 14,755,712 shares (representing approximately 14.99% of the issued share capital of the Company as at the date of the notice convening the Annual General Meeting) or, if lower, such number of shares (rounded down to the nearest whole share) as shall equal 14.99% of the issued share capital at the date the resolution is passed. The maximum price that may be paid for a share will be the higher of (i) an amount that is not more than 5% above the average of the middle market quotations of the shares as derived from the Daily Official List of the UK Listing Authority for the five business days preceding the date such shares are contracted to be Directors’ Report 37 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors purchased and (ii) the price stipulated by Article 5(6) of the Market Abuse Regulation (EU) 596/2014 (as such Regulation forms part of UK law and as amended). The minimum price that may be paid for a share is 1 penny, being the nominal value thereof. Market liquidity in VCTs is normally very restricted. The passing of this resolution will enable the Company to purchase its own shares thereby providing a mechanism by which the Company may enhance the liquidity of its shares and seek to manage the level and volatility of the discount to NAV at which its shares may trade. It is the Directors’ intention to cancel any shares bought back under this authority. Shareholders should note that the Directors do not intend to exercise this authority unless they believe to do so would result in an increase in net assets per share which would be in the interests of Shareholders generally. This resolution will expire on the date falling fifteen months after the passing of this resolution or, if earlier, on the conclusion of the Annual General Meeting of the Company to be held in 2024 except that the Company may purchase its own shares after this date in pursuance of a contract or contracts made prior to the expiration of this authority. Recommendation The Board recommends that Shareholders vote in favour of the resolutions to be proposed at the Annual General Meeting, as the Directors intend to do in respect of their own beneficial holdings of 48,463 shares (representing 0.05% of the issued share capital as at the date of publication). Voting rights of Shareholders At general meetings of the Company, Shareholders have one vote on a show of hands, and one vote per share held on a poll. No member shall be entitled to vote or exercise any rights at a general meeting unless all their shares have been paid up in full. Any instrument of proxy must be deposited at the place specified by the Directors no later than 48 hours before the time fixed for holding the meeting. There are no restrictions on voting rights and no agreements between holders of securities that may prevent or restrict the transfer of securities or voting rights. By order of the Board Gresham House Asset Management Limited Company Secretary 12 July 2023 38 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors This Corporate Governance Statement forms part of the Directors’ Report. The Directors have adopted the Association of Investment Companies (AIC) Code of Corporate Governance 2019 (“the AIC Code”) for the financial year ended 31 March 2023. The Board has considered the principles and recommendations of the AIC Code by reference to the AIC Corporate Governance Guide for investment companies (“AIC Guide”). The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the UK Corporate Governance Code (“the UK Code”), as well as setting out additional principles and recommendations on issues that are of specific relevance to the Company. The Board considers that reporting against the principles and recommendations of the AIC Code, and by reference to the AIC Guide (which incorporates the UK Code), will provide the most appropriate information to Shareholders. The AIC Code was endorsed by the Financial Reporting Council (FRC) in February 2019. In adopting the AIC Code, the Company will therefore meet its obligations in relation to the reporting requirements of the Financial Conduct Authority’s Listing and Disclosure and Transparency Rules on Corporate Governance. The AIC Code can be viewed on the AIC’s website at www.theaic.co.uk/aic-code-of- corporate-governance Statement of Compliance This statement has been compiled in accordance with the FCA’s Disclosure and Transparency Rule (DTR) 7.2 on Corporate Governance Statements. The Board considers that the Company has complied with the recommendations of the AIC Code and relevant provisions of the UK Code throughout the year under review, except as explained in the following paragraphs. A table providing further explanations of how the Company has complied with the AIC Code during the year is available in the Corporate Governance section of the Company’s website: www.mig2vct.co.uk. As an externally managed VCT, most of the Company’s operations are delegated to third parties and the Company has no executive directors, employees or internal operations. The Board has therefore concluded, for the reasons set out in the AIC Guide, that not all the provisions of the UK Code are relevant to the Company. Firstly, as the Company does not employ a chief executive, nor any executive directors, the provisions of the AIC Code relating to the rate of the chief executive and executive directors’ remuneration are not relevant to the Company. Secondly, the systems and procedures of the Investment Adviser, the provision of VCT monitoring services by Philip Hare & Associates LLP, as well as the size of the Company’s operations, give the Board full confidence that an internal audit function is not necessary. The Company has therefore not reported further in respect of these provisions. Internal control The Board acknowledges that it is responsible for the Company’s system of internal control and for reviewing its effectiveness. Internal control systems are designed to manage the particular needs of the Company and the risks to which it is exposed and can by their nature only provide reasonable and not absolute assurance against material misstatement or loss. The Company’s internal control system aims to ensure the maintenance of proper accounting records, the reliability of the finance information used for publication and upon which business decisions are made, and that the assets of the Company are safeguarded. The financial controls operated by the Board include regular reviews of signing authorities, quarterly management accounts and the processes by which investments in the portfolio are valued. The Board also provides authorisation of the Investment Policy and regular reviews of the financial results and investment performance. The Board has put in place ongoing procedures for identifying, evaluating and managing the significant risks faced by the Company. As part of this process an annual review of the control systems is carried out. The review covers a consideration of the key business, operational, compliance and financial risks facing the Company and includes a review of the risks in relation to the financial reporting process. The Board reviews a schedule of key risks and the management accounts at each quarterly Board meeting. It is assisted by the Audit Committee in respect of the Annual and Interim Reports and other published financial information. The Board has delegated, contractually to third parties, the management of the investment portfolio, the day-to-day accounting, company secretarial and administration requirements and the registration services. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered, including the financial control systems in operation at the service providers in so far as they relate to the affairs of the Company. The Board regularly monitors these controls from a risk perspective and receives reports from the Registrar and Investment Adviser and Administrator when appropriate. The Board, assisted by the Audit Committee, carries out separate assessments in respect of the Annual and Interim Reports and other published financial information. As part of these reviews, the Board appraises all the relevant risks ensuing from the internal control process referred to above. The main aspects of the internal controls which have been in place throughout the year in relation to financial reporting are: ● Internal controls are in place for the preparation and reconciliation of the valuations prepared by the Investment Adviser. ● Independent reviews of the valuations of investments within the portfolio are undertaken quarterly by the Board. ● The information contained in the Annual Report and other financial reports is reviewed separately by the Audit Committee prior to consideration by the Board. ● The Board reviews all financial information prior to publication. The system of internal control and the procedure for the review of control systems has been in place and operational throughout the year under review and up to the date of this Report. The Audit Committee and the Board carried out an assessment of the effectiveness of internal controls in managing risk which was conducted on the basis of reports from the relevant service providers. The last review took place on 29 June 2023. The Board has identified no significant problems with the Company’s internal control mechanisms. Section 172 Director Duties The Directors continue to have regard to the interests of the Company’s Shareholders and other stakeholders, including the impact of its activities on the community, environment and the Company’s reputation, when making decisions. The Directors, acting fairly and in good faith, consider what is most likely to promote the success of the Company for its members and stakeholders in the long-term. For further information on how the Directors have fulfilled their duties under Section 172 of the Companies Act 2006, please see pages 28 to 31. Corporate Governance Statement 39 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors Fees paid to the Investment Adviser The fees paid to the Investment Adviser are set out in Note 4 to the Financial Statements on page 59. In addition, the Investment Adviser received fees totalling £272,662 (2022: £288,267) during the year ended 31 March 2023, being £72,592 (2022: £98,172) for arrangement fees, and £200,070 (2022: £190,095) for acting as non-executive directors on a number of investee company boards. These amounts are the share of such fees attributable to investments made by the Company. Alternative Investment Fund Manager (“AIFM”) The Board appointed the Company as its own AIFM in compliance with the European Commission’s Alternative Investment Fund Management Directive with effect from 22 July 2014. The Company is registered as a small AIFM, and is therefore exempt from the principal requirements of the Directive. Gresham House continues to provide investment advisory and administrative services to the Company. However, in order for the Company to continue to discharge its safekeeping responsibilities for the documents of title to its investments, the Board, has contracted a third-party, Apex Group, to act as custodian. The Board and its Committees The powers of the Directors have been granted by company law, the Company’s Articles of Association and resolutions passed by the Company’s members in general meeting. Resolutions are proposed annually at each annual general meeting of the Company to authorise the Directors to allot shares, disapply the pre-emption rights of members and buyback the Company’s own shares on behalf of the Company. These authorities are currently in place and resolutions to renew them will be proposed at the Annual General Meeting of the Company to be held on 13 September 2023. The Board has agreed a schedule of matters specifically reserved for decision by the Board. These include compliance with the requirements of the Companies Act 2006 and the Income Tax Act 2007, the UK Listing Authority and the London Stock Exchange; strategy and management of the Company; changes relating to the Company’s capital structure or its status as a plc; financial reporting and controls; board and committee appointments as recommended by the Nomination and Remuneration Committee and terms of reference of committees; material contracts of the Company and contracts of the Company not in the ordinary course of business. In regard to the Chair of the Board’s tenure, the length of service of all directors is considered on an ongoing basis, with the Nomination and Remuneration Committee giving consideration to succession and composition at its year-end meeting, in compliance with the AIC Code of Corporate Governance guidance. Ian Blackburn was appointed by the Board on 1 July 2017, Sally Duckworth was appointed by the Board on 1 January 2007 and Sarah Clark was appointed by the Board on 4 November 2022. They will each be seeking re-election/election at the upcoming Annual General Meeting on 13 September 2023. There have been no new appointments to the Board since the year-end to the date of this report. The Board is of the view that a term of service in excess of nine years is not in itself prejudicial to a director’s ability to carry out their duties effectively and from an independent perspective; the nature of the Company’s business is such that an individual director’s experience and continuity of non-executive board membership can significantly enhance the effectiveness of the Board as a whole. Following the performance evaluation of the Directors during the year, the Board confirms that each of Ian Blackburn, Sally Duckworth and Sarah Clark have and continue to demonstrate commitment to their roles and to be effective in carrying out their duties on behalf of the Company. Copies of the directors’ letters of appointment will be available for inspection at the place of the Annual General Meeting for at least 15 minutes before and during the Meeting. Diversity and inclusion Number of board members Percentage of the board Number of senior positions on the Board Men 1 33.33% Not applicable Women 2 66.66% See paragraph below Not specified/ prefer not to say In accordance with Listing Rule 9.6.8R, the Board reports that as an externally managed Company, there are no executive management roles such as CEO or CFO and therefore, as allowed by the above rule, the Board do not need to report against this target as it is not applicable. However, the roles within the Company which are considered to be senior, in addition to the Chair of the Company, are the Chairs of the Audit and Investment Committees both of which were held by women at the year-end and continue to be so. The Board only consists of three directors, all of whom are white and of either British or Canadian nationality and therefore there is no minority ethnic Board representation. The Board have committed to include diversity and inclusion for all their future recruitment and Women on Boards were consulted in the recruitment of Sarah Clark to attract more diverse candidates. Being a smaller Board does make it more challenging to achieve diversity however the Board is more diverse in other aspects as shown in the Directors’ biographies on page 33. Board Committees The Board has established four Committees, the Nomination and Remuneration Committee, the Investment Committee, the Management Engagement Committee and the Audit Committee, each with responsibilities for specific areas of its activity. Each of the Committees have written terms of reference, which detail their authority and duties. Shareholders may obtain copies of these by making a written request to the Company Secretary or by downloading these documents from the Company’s website: www.mig2vct.co.uk. The Board has satisfied itself that each of its Committees has sufficient resources to undertake its duties. As a result of there only being 3 directors appointed by the Company, the Audit Committee and Nomination and Remuneration Committee below are chaired by Ian Blackburn who is also the Chair of the Board which is not in line with the AIC Code of Corporate Governance. Audit Committee The Audit Committee is chaired by Sally Duckworth and comprises herself, Ian Blackburn and Sarah Clark. A full description of the work of the Audit Committee is set out in the Report of the Audit Committee on pages 41 and 42 of this Annual Report. 40 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors Nomination and Remuneration Committee The Nomination and Remuneration Committee is chaired by Ian Blackburn and comprises himself, Sally Duckworth and Sarah Clark. Due to there only being three directors appointed to the Company, it was deemed appropriate that the Chair, who was independent upon appointment to the Board, should be a member of the Nomination and Remuneration Committee. In accordance with the AIC Code of Corporate Governance, the Chair of the Board will not chair the committee when it is dealing with the appointment of their successor. In considering nominations, the Committee is responsible for making recommendations to the Board concerning new appointments of Directors to the Board and its committees; the periodic review of the composition of the Board and its committees; and the annual performance review of the Board, the Directors and the Chair. This includes the ongoing review of each Director’s actual or potential conflicts of interest which may arise as a result of the external business activities of Board members. The Board remains committed to include consideration of gender and diversity for all future appointments. A full description of the work of the Committee with regard to remuneration is included within the Directors’ Remuneration Report on pages 43 to 46. Investment Committee The Investment Committee is chaired by Sarah Clark and comprises all three Directors. The Committee meets as necessary to consider the investment proposals put forward by the Investment Adviser. The Committee advises the Board on the development and implementation of the Investment Policy and leads the process for the ongoing monitoring of investee companies and the Company’s investment therein. Investment guidance has been issued to the Investment Adviser and the Committee ensures that this guidance is adhered to. New investments and divestments are approved by the Committee following discussions between Committee members and are subsequently ratified by the Board. Investment matters are discussed at each Board meeting. During the year, the Committee formally approved all investments, divestments and variation decisions, meeting informally on numerous occasions. The Committee considers and agrees, on the advice of the Investment Adviser for recommendation to the Board, all unquoted investment valuations. Investments are valued in accordance with the International Private Equity and Venture Capital (IPEV) Valuation Guidelines under which investments are valued at fair value as defined in those guidelines. Any AIM or other quoted investment will be valued at the closing bid price of its shares as at the relevant reporting date, in accordance with generally accepted accounting practice. Management Engagement Committee The Management Engagement Committee membership comprises all directors. The Committee has responsibility for carrying out a review of the performance of the Investment Adviser and other key service providers on an annual basis. Financial risk management The main risks arising from the Company’s financial instruments are due to investment risk, liquidity risk, credit risk, fluctuations in market prices (market price risk), cash flow interest rate risk and currency risk. The Board regularly reviews and agrees policies for managing these risks and full details can be found in Note 15 to the Accounts on pages 68 to 75 of this Annual Report. Investment management and Service providers The Directors carry out an annual review of the performance of and contractual arrangements with the Investment Adviser, Gresham House Asset Management Limited. The annual review of the Investment Adviser forms part of the Board’s overall internal control procedures discussed above. As part of this review, the Board considers the quality and continuity of the investment management team, investment performance, quality of information provided to the Board, remuneration of the Investment Adviser, the investment process and the results achieved to date. A review of the performance of the Company is included in the Strategic Report on pages 9 to 12. The Board concluded that the Investment Adviser had performed consistently well over the medium-term and has returned a good performance in respect of the year under review. The Company’s investment portfolio has performed very well and the Investment Adviser has been proactive in ensuring the Company remains informed and well-positioned to maintain compliance with VCT tax legislation. The Board places significant emphasis on the Company’s performance against its peers and further information on this has been included in the Strategic Report on page 11. The Board further considered the Investment Adviser’s commitment to the promotion of the Company and was satisfied that this was highly prioritised by the Investment Adviser as evidenced by, inter alia, the Mobeus VCT fundraisings which have taken place between 2010 and 2023 and annual Shareholder events. The Board considers that the Investment Adviser continued to exercise independent judgement while producing valuations which reflect fair value. Overall, the Board continues to believe that the Investment Adviser possesses the experience, knowledge and resources that are required to support the Board in achieving the Company’s long term investment objectives. The Directors therefore believe that the continued appointment of the Investment Adviser to the Company on the terms currently agreed is in the interests of Shareholders, and this was formally approved by the Board on 29 June 2023. The principal terms of the Company’s Investment Advisory Agreement, amended and restated on 30 September 2016, and its Performance Incentive Fee Agreement, novated on 30 September 2021 to Gresham House are set out in Note 4 to the Financial Statements on page 59 of this Annual Report. The Board seeks to ensure that the terms of these agreements represent an appropriate balance between cost and the incentivisation of the Investment Adviser. By order of the Board Gresham House Asset Management Limited Company Secretary 12 July 2023 Corporate Governance Statement 41 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors This Report of the Audit Committee forms part of the Directors’ Report. The Audit Committee is chaired by Sally Duckworth and comprises herself, Ian Blackburn and Sarah Clark. Due to there only being three directors appointed to the Company, it was deemed appropriate that the Chair, who was independent upon appointment to the Board, should be a member of the Audit Committee. The duties of the Committee are set out in the Terms of Reference which can be found on the website in the Corporate Governance section at: www.mig2vct.co.uk. A summary of the Audit Committee’s principal activities for the year to 31 March 2023 is provided below: Financial statements The Interim and Annual Reports to Shareholders were thoroughly reviewed by the Committee prior to submission to the Board for approval. Internal control The Committee has monitored the system of internal controls throughout the year under review as described in more detail in this Report on page 38. It receives a report by exception on the Company’s progress against its internal controls at its Annual and Interim results meetings and reviews a schedule of key risks at each meeting. A full review of the internal controls in operation by the Company was undertaken by the Committee on 29 June 2023. Valuation of investments The Investment Adviser prepared valuations of the investments in the portfolio at the end of each quarter and these were considered in detail and agreed by the Investment Committee for recommendation to the Board. The Audit Committee continued to monitor the adequacy of the controls over the preparation of these valuations. As part of this process, it focused on ensuring that both the bases of the valuations and any assumptions used were reasonable and in accordance with the IPEV Valuation Guidelines. The Committee received a review within a report from the external auditor as part of the year-end audit process. This report was discussed in full by the Committee, the Investment Adviser and, with the Auditor as necessary, before a recommendation to approve the valuations was made to the Board. Key issues considered by the Committee The key accounting and reporting issues considered by the Committee in addition to those described above during the year included: Going concern and long-term viability The Committee monitors the Company’s resources at each quarterly board meeting and has satisfied itself that the Company has an adequate level of resources for the foreseeable future. It has assessed the viability of the Company for three years and beyond. Consideration is given to the cash balances and holdings in money market funds, together with the ability of the Company to realise its investments. See page 32 of the Strategic Report for further details. Recognition of impairment and realised losses If an investment has been impaired such that there is no realistic expectation that there will be a full return from the investment, the loss is treated as a permanent impairment and is recognised as a realised loss in the Financial Statements. The Committee reviews the appropriateness and completeness of such impairments. Compliance with the VCT tests The Company engages the services of a VCT Status Adviser (Philip Hare & Associates LLP) to advise on its ongoing compliance with the legislative requirements relating to VCTs. A report on the Company’s compliance supported by the tests carried out is produced by the VCT Status Adviser on a bi-annual basis and reviewed by the Committee for recommendation to the Board. The Committee has continued to consider the risk and compliance aspects of changes to the VCT Rules introduced by the Finance Act (No 2) 2015 and the Finance Act (No 2) 2018. As an essential part of this work, the Committee has held ongoing discussions with the Company’s VCT Status Adviser throughout the year. Tax Compliance Services Philip Hare & Associates LLP were appointed during the year ended 31 December 2018 and continued to provide such services during the year under review. Income from investee companies The Committee notes that revenue from loan stock and dividends may be uncertain given the type of companies in which the Company invests. Dividends in particular may be difficult to predict. The payments received however have a direct impact on the level of income dividends the Company is able to pay to Shareholders. The Committee agrees policies for revenue recognition and reviews their application at each of its meetings. It considers schedules of income received and receivable from each of the investee companies and assesses, in consultation with the Investment Adviser, the likelihood of receipt of each of the amounts. Key risks faced by the Company The Board has identified the key risks faced by the Company and established appropriate controls (as disclosed in the Strategic Report on page 30). The Committee monitors these controls and reviews any incidences of non- compliance. Further details are set out in the section of this report that discusses the Company’s system of internal controls (page 38). Cyber Security The Board sought and obtained assurances during the year from the Investment Adviser, the Registrar and the other service providers concerning their cyber security procedures and policies. Board papers are circulated and stored through an electronic platform providing additional cyber security protection. Anti-tax evasion policy In compliance with the Criminal Finance Act 2017 the Company adopted a zero tolerance towards the criminal facilitation of tax evasion. A summary of the policy is available on page 35 of the Annual Report. Safekeeping of the Company’s documents of title to its investments The Committee has established procedures for the safekeeping of the Company’s documents of title under a Safekeeping Agreement dated 17 February 2022 with Apex Fund and Corporate Services (Guernsey) Limited, for accessing and dealing with these documents. Relationship with the external auditor and re-appointment The Committee is responsible for overseeing the relationship with the external Auditor, assessing the effectiveness of the external audit Report of the Audit Committee 42 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors process and making recommendations on the appointment and removal of the external Auditor. It makes recommendations to the Board on the level of audit fees and the terms of engagement for the Auditor. The external Auditor is invited to attend Audit Committee meetings, where appropriate, and also has the opportunity to meet with the Committee and its Chairman without representatives of the Investment Adviser being present. The Committee undertook an audit tender process in 2016 in compliance with the requirements on audit firm rotation under the European Audit Regulation Directive. As a consequence of that process, BDO LLP were reappointed. BDO LLP has been the independent auditor to the Company since 2008. The Audit Committee also undertakes an annual review of the external Auditor and the effectiveness of the audit process on an annual basis. When assessing the effectiveness of the process, the Committee considers whether the Auditor: ● demonstrated strong technical knowledge and a clear understanding of the business; ● indicated professional scepticism in key judgements and raised any significant issues in advance of the audit process commencing; ● provided an audit team that is appropriately resourced; ● demonstrated a proactive approach to the audit planning process and engaged with the Committee Chairman and other key individuals within the business; ● provided a clear explanation of the scope and strategy of the audit; ● demonstrated the ability to communicate clearly and promptly with the members of the Committee and the Investment Adviser and produce comprehensive reports on its findings; ● demonstrated that it has appropriate procedures and safeguards in place to maintain its independence and objectivity; ● charged justifiable fees in respect of the scope of services provided; and ● handled key audit issues effectively and responded robustly to the Committee’s questions. This review constituted the Audit Committee’s annual assessment of the effectiveness of the external audit process. The Audit Committee concluded that the re-appointment of BDO LLP is in the best interests of the Company and Shareholders and the Board recommends their re-appointment by Shareholders at the forthcoming Annual General Meeting. Non-audit services The Board regularly reviews and monitors the external Auditor’s independence and objectivity. As part of this it reviews the nature and extent of services supplied by the Auditor to ensure that independence is maintained. The Committee has reviewed the implications of the Financial Reporting Council‘s (“FRC”) Revised Ethical Reporting Standard 2019 effective from 5 March 2020. The Committee, based upon the review of this 2019 Ethical Standard, has decided to purchase certain non-audit services, such as tax compliance services and iXBRL tagging, from separate firms. The auditor is permitted to provide audit-related services in respect of the Half-Year Report (if requested by the Board), whereas PHA provides tax compliance services, and Arkk Consulting Limited, one of the Company’s investee companies, provides the iXBRL tagging service. Additional disclosures in the Directors’ Report Disclosures required by certain publicly- traded companies as set out in Part 6 of Schedule 7 of the Large and Medium- sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended 2013) are contained in the Directors’ Report on page 34. By order of the Board Sally Duckworth Chair of the Audit Committee 12 July 2023 Report of the Audit Committee 43 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors Introduction This Report has been prepared by the Directors in accordance with the requirements of Schedule 8 of The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, the Companies Act 2006 and the Listing Rules of the UK Listing Authority (“the Listing Rules”). The Company’s independent auditor is required to give its opinion on the information provided on Directors’ emoluments and Director’s interests on page 45 of this Annual Report and this is explained further in the Auditor’s report to Shareholders on pages 48 to 52. The resolution to approve the Directors’ Remuneration Policy as set out in the Annual Report for the year ended 31 March 2022 was approved by Shareholders at the Annual General Meeting of the Company held on 9 September 2020. Full details of the Remuneration Policy can be found within this report in the adjacent column and on page 44. The resolution to approve the Directors’ Annual Remuneration Report, as set out in the Annual Report for the year ended 31 March 2022, was approved by Shareholders at the Annual General Meeting of the Company held on 22 September 2022. An ordinary resolution will be proposed at the forthcoming Annual General Meeting of the Company to be held on 13 September 2023 for the approval of the Annual Remuneration Report as set out below. Remuneration statement by the Chair of the Nomination and Remuneration Committee This report sets out the Company’s forward-looking Directors’ Remuneration Policy and the Annual Remuneration Report which describes how this policy has been applied during the year. The Committee reviewed the fees paid in the year ended 31 March 2023 and as part of this review it considered information on the fees paid to directors of a peer group of VCTs of a similar size operating in its sector. As a result of the increased level of regulation and size of the Company, the Committee have recommended, with effect from 1 April 2023 an increase in Director’s fees of 5%. Ian Blackburn Chair of the Nomination and Remuneration Committee 12 July 2023 Directors’ Remuneration Policy The remuneration policy is set by the Board on the recommendation of the Nomination and Remuneration Committee. In determining the Company’s remuneration policy, the Committee seeks to determine a level of fees appropriate to attract and retain individuals of sufficient calibre to lead the Company in achieving its strategy. When considering the level of Directors’ fees, it takes account of the required workload and responsibilities of each role and the value and amount of time that a Director is required to commit to the Company. It further considers remuneration levels elsewhere in the Venture Capital Trust industry for companies of a similar size and structure, together with other relevant information. The level of fees paid to each of the Directors is reviewed annually by the Nomination and Remuneration Committee which makes recommendations to the Board. The Committee has access to independent advice where and when it considers appropriate. In coming to a decision on the Board’s remuneration, the Committee reviewed an analysis of VCT industry remuneration obtained from David Cartwright FCA. The Committee agreed that an increase in remuneration from the previous year to £36,750 per annum paid to each Director, with the addition of a fee of £3,150 paid to the Chairman of the Board. The Directors may, at their discretion, pay additional sums in respect of specific tasks carried out by individual Directors on behalf of the Company. Since all the Directors are Non-Executive, the Company is not required to comply with the executive director’s provisions of the Listing Rules, the UK Corporate Governance Code and the AIC Code of Corporate Governance in respect of Directors’ remuneration, except in so far as they relate specifically to Non- Executive Directors. Performance-related remuneration Whilst it is a key element of this policy to recruit directors of the calibre required to lead the Company in achieving its short and long-term objectives no component of the fees paid is directly related to performance. Pensions All the Directors are Non-Executive and the Company does not provide pension benefits to any of the Directors. Additional benefits The Company does not have any other schemes in place to pay bonuses or benefits to the Directors. No arrangements have been entered into between the Company and the Directors to entitle any of the Directors to compensation for loss of office. None of the Directors receive pension benefits from the Company and the Company has not granted any Director any options over the share capital of the Company. Recruitment remuneration Remuneration of any new Director, who may subsequently be appointed to the Board, will be in line with the Remuneration Policy set out in this Report and the levels of remuneration stated therein, as modified from time to time. Shareholders’ views on remuneration The Board prioritises the views of Shareholders and encourages an open discussion at general meetings of the Company. It takes Shareholders’ views into account, where appropriate, when formulating its remuneration policy. Shareholders can contact the Chair or the Company Secretary, Gresham House, at any time by email using the address: mobeusvcts@greshamhouse. com. Directors’ Remuneration Report 44 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors Directors’ terms of appointment In accordance with the 2019 AIC Code, Ian Blackburn and Sally Duckworth have agreed to offer themselves for re-election annually and will next seek re-election by Shareholders at the Company’s Annual General Meeting on 13 September 2023. Sarah Clark was appointed to the Board in November 2022, and under the Articles, is seeking election at this, the first Annual General Meeting since her appointment to the Board. All of the Directors are Non-Executive and none of the Directors has a service contract with the Company. All Directors receive a formal letter of appointment setting out the terms of their appointment and their specific duties and responsibilities and the fees pertaining to their appointment. A Director’s appointment may be terminated on three months’ notice being given by the Company and in certain other circumstances. Copies of the Directors’ appointment letters will be available for inspection at the place of the Annual General Meeting on 13 September 2023 from 10.45 am. New Directors are asked to undertake that they have sufficient time to carry out their responsibilities to the Company and to disclose their other significant time commitments to the Board before appointment. Shareholder approval of the Company’s Remuneration Policy This policy applied throughout the financial year ended 31 March 2023. A resolution to approve the Directors’ Remuneration Policy, as set out in the Annual Report for the year ended 31 March 2020 was approved by Shareholders at the Annual General Meeting held on 9 September 2020. The Company received proxy votes in favour of the resolution representing 96.28% (including those who appointed the Chair to vote at their discretion) of the votes received (against 3.72%). The Board is required to ask Shareholders to approve the Remuneration Policy every three years. The Directors will therefore recommend that Shareholders approve the Policy again at the Annual General Meeting of the Company to be held on 13 September 2023. Directors’ Annual Remuneration Report This section of the report sets out how the Remuneration Policy, described on the previous pages, is being implemented. A resolution to approve the Directors’ Annual Remuneration Report as set out in the Annual Report for the year ended 31 March 2022 was approved by Shareholders at the AGM of the Company held on 21 September 2023. The Company also received proxy votes in favour of the resolution representing 96.03% of the votes submitted (including those who appointed the Chair to vote at his discretion) (against: 3.97%). An ordinary resolution for the approval of the Annual Remuneration Report will be proposed at the AGM of the Company to be held on 13 September 2023. Future Remuneration Policy The table below illustrates how the Company’s Objective is supported by its Remuneration Policy. It sets out details of each component of the pay package and the maximum amount receivable per annum by each Director. The Nomination and Remuneration Committee and the Board review the fees paid to Directors annually in accordance with the Remuneration Policy set out below and may decide that an increase in fees is appropriate in respect of subsequent years. Director and Role Components of Pay Package Maximum Payment per annum Performance Conditions Ian Blackburn Chair of the Board Chair of the Nomination and Remuneration Committee Chair of the Management Engagement Committee Director’s fee (incl. fee for acting as Chair of the Board) £39,900 None Sarah Clark Chair of the Investment Committee Director’s fee £36,750 None Sally Duckworth Chair of the Audit Committee Director’s fee £36,750 None Total maximum fees payable £113,400 Company Objective 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. Remuneration Policy To ensure that the levels of remuneration paid are sufficient to attract, retain and motivate directors of the quality and experience required to manage the Company in order to achieve the Company’s Objective. Directors’ Remuneration Report Nomination and Remuneration Committee The Committee is chaired by Ian Blackburn with Sally Duckworth and Sarah Clark as its other members. All members of the Committee were considered to be independent of the Investment Adviser during the year under review. The Committee meets at least once a year and is responsible for making recommendations to the Board on remuneration policy and reviewing the policy’s ongoing appropriateness and relevance. It carries out an annual review of the remuneration of the Directors and makes recommendations to the Board on the level of Directors’ fees. The Committee may, at its discretion, recommend to the Board that individual Directors should be awarded further payments in respect of additional work undertaken on behalf of the Company. It is responsible for the appointment of remuneration consultants, if this should be considered necessary, including establishing the selection criteria and terms of reference for such an appointment. The Committee met twice during the year under review with full attendance from all its members. The Committee’s duties in respect of Nominations to the Board are outlined on page 39 of the Annual Report. 45 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors Directors’ attendance at Board and Committee meetings in the financial year ended 31 March 2023 The table below sets out the Directors’ attendance at quarterly Board meetings and Committee meetings held during the year to 31 March 2023. In addition to the quarterly Board meetings, the Board met on other occasions to consider specific issues as they arose. Directors Board Meetings (4) Audit Committee Meetings (2) Nomination and Remuneration Committee Meetings (2) Eligible Attended Eligible Attended Eligible Attended Ian Blackburn 4 4 2 2 2 2 Sally Duckworth 4 4 2 2 2 2 Sarah Clark 2 2 1 1 1 1 Adam Kingdon 2 2 1 1 1 1 Annual percentage change in Directors’ Remuneration % change for the year to 31 March 2023 % change for the year to 31 March 2022 3 % change for the year to 31 March 2021 Ian Blackburn (2.6) 8.3 - Sally Duckworth 12.9 3.3 - Sarah Clark 1 n/a n/a n/a Adam Kingdon 2 12.9 3.3 - 1 Sarah Clark was appointed as a director on 4 November 2022 and her fee was pro-rated from that date. 2 Adam Kingdon retired as a director on 21 September 2022 and his fee was pro-rated to that date. 3 In 2022, discretionary payments of £3,000 and £1,000 were paid to the Chair and Directors, respectively. No sums were paid to third parties in respect of any of the Director’s services during the year under review. Relative importance of spend on Directors’ fees Year to 31 March 2023 Year to 31 March 2022 £ £ Total directors’ fees 103,758 101,000 Dividends paid/payable in respect of the year 11,709,416 8,726,149 Share Buybacks 1,147,478 643,810 Directors fees as a share of: Closing net assets 0.1% 0.1% Dividends paid and payable in respect of the year 0.9% 1.2% Total fees and expenses 1 5.0% 3.3% 1 - this figure is the combined total of Investment Adviser’s fees (including performance fees) and Other expenses disclosed in the Income Statement. Directors’ remuneration: 5-year comparison Director 2023 £ 2018 £ Change Chair Fee 38,000 26,000 46.2% Directors' Fee (inc. committee chairman fee) 35,000 23,000 52.2% Directors’ interests in the Company’s shares (audited) The Company does not require the Directors to hold shares in the Company. The Directors, however, believe that it is in the best interests of the Company and its Shareholders for each Director to maintain an interest in the Company. The Directors who held office throughout the year under review and their interests as at 31 March 2023 were: 31 March 2023 31 March 2022 Director Shares held Percentage of issued share capital Shares held Percentage of issued share capital Ian Blackburn 48,463 0.05% 48,463 0.06% Sally Duckworth - - - - Sarah Clark - - - - Adam Kingdon - - 5,709 0.01% There have been no further changes to the Directors’ share interests between the year-end and the date of this Annual Report. The remuneration of the Directors contains no performance related variable element. As the Company has no employees, the directors do not consider it relevant to compare director fees against employee pay. 46 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors Company performance The graph below charts the total shareholder return of the Company’s shares on a share price basis (assuming all dividends are re-invested and excluding the tax relief available to Shareholders) over the past ten years compared with that of an index of all VCTs and an index of generalist VCTs which are members of the AIC (based on figures provided by Morningstar). The Board considers these indices to be the most appropriate to use to measure the Company’s relative performance over the medium to long term. The total shareholder returns have each been rebased to 100 pence at 30 April 2013. An explanation of the performance of the Company is given in the Chair’s Statement on page 3, the Performance section of the Strategic Report on pages 9 to 12 and in the Investment Adviser’s Review and Investment Portfolio Summary on pages 13 to 26. By order of the Board Gresham House Asset Management Limited Company Secretary 12 July 2023 Mobeus Income & Growth 2 VCT plc NAV Cumulative total return AIC Generalist VCTs NAV Cumulative total return AIC ALL VCTs NAV Cumulative total return Total return (pence) 100p 120p 140p 160p 180p 200p 220p 240p 260p 31 March 2020 31 March 2021 31 March 2022 31 March 2023 30 April 2013 30 April 2014 31 March 2015 31 March 2017 31 March 2016 31 March 2019 31 March 2018 Cumulative total return (NAV) basis Directors’ Remuneration Report 47 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Reports of the Directors The Directors are responsible for preparing the Annual Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the financial statements and have elected to prepare the company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland (‘FRS 102’) and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss for the company for that period. In preparing these Financial Statements, the Directors are required to: ● select suitable accounting policies and then apply them consistently; ● make judgements and accounting estimates that are reasonable and prudent; ● state whether the Financial Statements have been prepared in accordance with United Kingdom accounting standards, subject to any material departures disclosed and explained in the Financial Statements; ● prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and ● prepare a Strategic Report, a Directors’ Report and Directors’ Remuneration Report which comply with the requirements of the Companies Act 2006. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Website publication The Directors are responsible for ensuring the Annual Report and the Financial Statements are made available on a website. Financial Statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of Financial Statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the Financial Statements contained therein. Directors’ responsibilities pursuant to Disclosure and Transparency Rule 4 of the UK Listing Authority The Directors confirm to the best of their knowledge that: (a) The Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and the profit of the Company. (b) The Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. Having taken advice from the Audit Committee, the Board considers the Annual Report and Financial Statements, taken as a whole, as fair, balanced and understandable and that it provides the information necessary for Shareholders to assess the Company’s position, performance, business model and strategy. Neither the Company nor the Directors accept any liability to any person in relation to the Annual Report except to the extent that such liability could arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A and schedule 10A of the Financial Services and Markets Act 2000. The names and functions of the Directors are stated on page 33. For and on behalf of the Board Ian Blackburn Chair 12 July 2023 Statement of Directors’ Responsibilities 48 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 In our opinion the financial statements: ● give a true and fair view of the state of the Company’s affairs as at 31 March 2023 and of its loss for the year then ended; ● have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and ● have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Mobeus Income & Growth 2 VCT Plc (“the Company”) for the year ended 31 March 2023 which comprise the Income statement, the Balance Sheet, the Statement of Changes in Equity, the Statement of Cash Flows and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee. Independence Following the recommendation of the audit committee, we were appointed by the Board of Directors in 2009 to audit the financial statements for the year ended 30 April 2009 and subsequent financial periods. The period of total uninterrupted engagement, including retenders and reappointments is 15 years, covering the years ended 30 April 2009 to 31 March 2023. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included: ● Obtaining the VCT compliance reports during the year and as at year end and reviewing the calculations therein to check that the Company was meeting its requirements to retain VCT status; ● Reviewing the forecasted cash flows that support the Directors’ assessment of going concern, challenging assumptions and judgements made in the forecasts, and assessing them for reasonableness. In particular, we considered the available cash resources relative to the forecast expenditure which was assessed against the prior year for reasonableness; ● Evaluating the Directors’ method of assessing the going concern in light of market volatility and the present uncertainties in economic recovery created by the ongoing matters including the current situation in Ukraine/Russia, high cost of living crisis, increase in inflation; and ● Calculating financial ratios to ascertain the financial health of the Company. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Overview 2023 2022 Key audit matters Valuation of unquoted investments 3 3 Materiality £760,000 (2022: £1,040,000) based on 2% (2022: 2%) of Total investments An overview of the scope of our audit Our audit was scoped by obtaining an understanding of the company and its environment including the company’s system of internal control and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. This matter was addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Independent Auditor’s Report to the Members of Mobeus Income & Growth 2 VCT plc Independent Auditor’s Report 49 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Independent Auditor’s Report Key audit matter How the scope of our audit addressed the key audit matter Valuation of unquoted investments (Note 8) We consider the valuation of unquoted investments to be the most significant audit area as there is a high level of estimation uncertainty involved in determining the unquoted investment valuations. There is also an inherent risk of management override arising from the unquoted investment valuations being prepared by the Investment Advisor, who is remunerated based on the net asset value of the Company. For these reasons we considered the valuation of unquoted investments to be a key audit matter. Our sample for the testing of the unquoted investments was stratified according to risk considering, inter alia, the value of the individual investments, the nature of the investments, the extent of the fair value movement and the subjectivity of the valuation technique. For investments in our sample we: Challenged whether the valuation methodology was the most appropriate in the circumstances under the International Private Equity and Venture Capital Valuation (“IPEV”) guidelines and applicable accounting standards. Recalculated the value attributable to the company, having regard to the application of enterprise value across the capital structures of the investee companies. For a sample of investments valued using less subjective valuation techniques (price of recent investment reviewed for changes in fair value) we: ● Agreed the cost or price of the recent investment to supporting documentation; ● Considered whether the investment was an arm’s length transaction through reviewing the parties involved in the transaction and checking whether or not they were already investors of the investee company; ● Considered whether there were any indications that the cost or price of the recent investment was no longer representative of fair value considering, inter alia the current performance of the investee company and the milestones and assumptions set out in the investment proposal; and ● Considered whether the price of the recent investment is supported by alternative valuation techniques. For a sample of investments that were valued using more subjective techniques (earnings and revenue multiples) we: ● Challenged and corroborated inputs to the valuation with reference to management information of investee companies and market data, including considering the impact of the current situation in Ukraine/ Russia, high cost of living crisis and increase in inflation on the valuation. We assessed the impact of estimation uncertainty concerning these assumptions and the disclosure of these uncertainties in the financial statements; ● Reviewed the historical financial statements and any recent management information available to support assumptions about maintainable revenues and earnings used in the valuation; ● Considered the revenue or earnings multiples applied by reference to observable listed company market data; and ● Challenged the consistency and appropriateness of adjustments made to such market data in establishing the earnings or revenue multiple applied in arriving at the valuations adopted by agreeing the adjusted multiples to independent sources, the peer group, the market and sector in which the investee company operates and obtaining independent third party multiples. Where appropriate, we performed a sensitivity analysis by developing our own point estimate where we considered that alternative input assumptions could reasonably have been applied and we considered the overall impact of such sensitivities on the portfolio of investments in determining whether the valuations as a whole are reasonable and free from bias. Key observations: Based on the procedures performed we consider the investment valuations to be appropriate considering the level of estimation uncertainty. 50 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Independent Auditor’s Report Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Company financial statements 2023 £mn 2022 £mn Materiality 0.760 1.040 Basis for determining materiality 2% of Total investments Rationale for the benchmark applied In setting materiality, we have had regard to the nature and disposition of the investment portfolio. Given that the VCT’s portfolio is comprised of unquoted investments which would typically have a wider spread of reasonable alternative possible valuations, we have applied a percentage of 2% of total investments, as asset values are the primary focus of the users of these financial statements. Performance materiality 0.570 0.780 Basis for determining performance materiality 75% of materiality Company financial statements 2023 £mn 2022 £mn Rationale for the percentage applied for performance materiality The level of performance materiality applied was set after having considered a number of factors including the expected total value of known and likely misstatements and the level of transactions in the year. Lower testing threshold We determined that for Revenue return before tax, a misstatement of less than materiality for the financial statements as a whole, could influence users of the financial statements as it is a measure of the Company’s performance of income generated from its investments after expenses. As a result, we determined a lower testing threshold for those items impacting revenue return of £92,000 based on 5% of Income (2022: £104,000 based on 5% of Income ). Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £38,000 (2022: £53,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report and financial statements other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Corporate governance statement The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. Going concern and longer-term viability ● The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified; and ● The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate. Other Code provisions ● Directors’ statement on fair, balanced and understandable; ● Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks; ● The section of the annual report that describes the review of effectiveness of risk management and internal control systems; and ● The section describing the work of the Audit Committee. Other Companies Act 2006 reporting Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below. Strategic report and Directors’ report In our opinion, based on the work undertaken in the course of the audit: 51 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Independent Auditor’s Report ● the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ● the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors’ report. Directors’ remuneration In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006. Matters on which we are required to report by exception We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: ● adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or ● the financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the accounting records and returns; or ● certain disclosures of Directors’ remuneration specified by law are not made; or ● we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: Non-compliance with laws and regulations Based on: ● Our understanding of the Company and the industry in which it operates; ● Discussion with management and those charged with governance; and ● Obtaining an understanding of the Company’s policies and procedures regarding compliance with laws and regulations, we considered the significant laws and regulations to be the Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, industry practice represented by the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (“the SORP”) and updated in 2022 with consequential amendments and the applicable financial reporting framework. We also considered the Company’s qualification as a VCT under UK tax legislation. Our procedures in respect of the above included: ● Agreement of the financial statement disclosures to underlying supporting documentation; ● Enquiries of management and those charged with governance relating to the existence of any non-compliance with laws and regulations; ● Obtaining the VCT compliance reports prepared by management’s expert during the year and as at year end and reviewing their calculations for the year end report to check that the Company was meeting its requirements to retain VCT status; and ● Reviewing minutes of meeting of those charged with governance throughout the period for instances of non-compliance with laws and regulations. Fraud We assessed the susceptibility of the financial statement to material misstatement including fraud. Our risk assessment procedures included: ● Enquiry with management and those charged with governance regarding any known or suspected instances of fraud; ● Obtaining an understanding of the Company’s policies and procedures relating to: ● Detecting and responding to the risks of fraud; and ● Internal controls established to mitigate risks related to fraud. ● Review of minutes of Board and other Committee meetings throughout the period for any known or suspected instances of fraud; ● Discussion amongst the engagement team as to how and where fraud might occur in the financial statements; and ● Obtaining an understanding of the control environment in monitoring compliance with laws and regulations. Based on our risk assessment, we considered the areas most susceptible to fraud to be the valuation of unquoted investments and management override of controls. 52 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Our procedures in respect of the above included: ● The procedures set out in the Key Audit Matters section above; ● Obtaining independent evidence to support the ownership of a sample of investments; ● Recalculating investment management fees and incentive fees in total; ● Obtaining independent confirmation of bank balances; and ● Testing of journals, based on risk assessment criteria as well as an unpredictable sample, to supporting documentation and evaluating whether there was evidence of bias by the Investment Adviser and Directors that represented a risk of material misstatement due to fraud. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Vanessa Jayne Bradley (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, UK 12 July 2023 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Independent Auditor’s Report 53 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Year ended 31 March 2023 Year ended 31 March 2022 Notes Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Net investment portfolio (losses)/gains 8 - (9,412,604) (9,412,604) - 12,095,784 12,095,784 Income 3 1,841,863 - 1,841,863 1,080,796 - 1,080,796 Investment Adviser's fees 4a (395,609) (1,186,829) (1,582,438) (412,075) (1,236,223) (1,648,298) Investment Adviser's performance fees 4b - - - - (1,014,703) (1,014,703) Other expenses 4d (485,231) - (485,231) (403,366) - (403,366) (Loss)/profit on ordinary activities before taxation 961,023 (10,599,433) (9,638,410) 265,355 9,844,858 10,110,213 Taxation on (loss)/profit on ordinary activities 5 (37,670) 37,670 - - - - (Loss)/profit for the year and total comprehensive income 923,353 (10,561,763) (9,638,410) 265,355 9,844,858 10,110,213 Basic and diluted earnings per ordinary share: 7 1.09p (12.47)p (11.38)p 0.36p 13.42p 13.78p The revenue column of the Income Statement includes all income and expenses. The capital column accounts for the net investment portfolio (losses)/gains (unrealised (losses)/gains and realised (losses)/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 activities of a VCT and in accordance with the 2014 Statement of Recommended Practice (“SORP”) (updated in July 2022) by the Association of Investment Companies (“AIC”), supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The revenue column of profit attributable to equity shareholders is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Section 274 Income Tax Act 2007. All the items in the above statement derive from continuing operations of the Company. No operations were acquired or discontinued in the year. The Notes on pages 58 to 76 form part of these Financial Statements. Income Statement for the year ended 31 March 2023 Financial Statements Financial Statements 54 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements Balance Sheet Company No. 03946235 as at 31 March 2023 31 March 2023 31 March 2022 Notes £ £ Fixed assets Investments at fair value 8 38,015,339 52,161,122 Current assets Debtors and prepayments 10 172,167 260,786 Current asset investments 11 28,611,496 23,458,496 Cash at bank 11 3,901,408 2,801,008 32,685,071 26,520,290 Creditors: amounts falling due within one year 12 (273,853) (1,175,430) Net current assets 32,411,218 25,344,860 Net assets 70,426,557 77,505,982 Capital and reserves Called up share capital 13 984,370 804,263 Share premium reserve 43,649,899 28,258,001 Capital redemption reserve 30,656 16,006 Revaluation reserve 12,709,695 24,455,488 Special distributable reserve 2,665,952 12,033,364 Realised capital reserve 8,845,711 10,521,719 Revenue reserve 1,540,274 1,417,141 Equity shareholders' funds 70,426,557 77,505,982 Basic and diluted net asset value per ordinary share 14 71.54p 96.37p The Financial Statements were approved and authorised for issue by the Board of Directors on 12 July 2023 and are signed on their behalf by: Ian Blackburn Chair The Notes on pages 58 to 76 form part of these Financial Statements. 55 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements Statement of Changes in Equity for the year ended 31 March 2023 Non-distributable reserves Distributable reserves Called up Share Capital Special Realised Revenue share premium redemption Revaluation distributable capital reserve capital reserve reserve reserve reserve reserve Total (Note a) (Note b) (Note b) Notes £ £ £ £ £ £ £ £ At 1 April 2022 804,263 28,258,001 16,006 24,455,488 12,033,364 10,521,719 1,417,141 77,505,982 Comprehensive income for the year (Loss)/profit for the year - - - (9,136,262) - (1,425,501) 923,353 (9,638,410) Total comprehensive income for the year - - - (9,136,262) - (1,425,501) 923,353 (9,638,410) Contributions by and distributions to owners Shares issued under Offer for Subscription (Note c) 13 194,757 15,793,243 - - - - - 15,988,000 Issue costs on Offer for Subscription (Note c) 13 - (401,345) - - (176,146) - - (577,491) Shares bought back (Note d) 13 (14,650) - 14,650 - (1,147,478) - - (1,147,478) Dividends paid 6 - - - - (4,001,107) (6,902,719) (800,220) (11,704,046) Total contributions by and distributions to owners 180,107 15,391,898 14,650 - (5,324,731) (6,902,719) (800,220) 2,558,985 Other movements Realised losses transferred to special reserve (Note a) - - - - (4,042,681) 4,042,681 - - Realisation of previously unrealised gains - - - (2,609,531) - 2,609,531 - - Total other movements - - - (2,609,531) (4,042,681) 6,652,212 - - At 31 March 2023 984,370 43,649,899 30,656 12,709,695 2,665,952 8,845,711 1,540,274 70,426,557 Notes a): The Company’s special reserve is available to fund buybacks of shares as and when it is considered by the Board to be in the interests of Shareholders, and to absorb any existing and future realised losses and for other corporate purposes. At 31 March 2023, the Company has a special reserve of £2,665,952, all of which arises from shares issued more than three years ago. Reserves originating from share issues are not distributable under VCT rules if they arise from share issues that are within three years of the end of an accounting period in which shares were issued. The total transfer of £4,042,681 from the realised capital reserve to the special distributable reserve above is the total of realised losses incurred by the Company in the year. b): The realised capital reserve and the revenue reserve together comprise the Profit and Loss Account of the Company. c): Under an Offer for Subscription launched on 17 October 2022, a total of 19,475,680 were allotted on 16 November 2022 and 6 February 2023, raising net funds of £15,410,509 for the Company. This figure is net of issues costs of £401,345 and facilitation fees of £176,146. d): During the year, the Company purchased 1,464,956 of its own shares at the prevailing market price for a total cost of £1,147,478, which were subsequently cancelled. 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 a 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. The Notes on pages 58 to 76 form part of these Financial Statements. 56 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements Statement of Changes in Equity for the year ended 31 March 2022 Non-distributable reserves Distributable reserves Called up Share Capital Special Realised Revenue share premium redemption Revaluation distributable capital reserve capital reserve reserve reserve reserve reserve Total Notes £ £ £ £ £ £ £ £ At 1 April 2021 732,303 21,025,160 9,031 16,598,524 19,524,067 13,397,234 2,612,549 73,898,868 Comprehensive income for the year Profit for the year - - - 9,557,514 - 287,344 265,355 10,110,213 Total comprehensive income for the year - - - 9,557,514 - 287,344 265,355 10,110,213 Contributions by and distributions to owners - Shares issued via Offer for Subscription 78,935 7,421,065 - - - - - 7,500,000 Issue costs and facilitation fees on Offer for Subscription - (188,224) - - (51,097) - - (239,321) Shares bought back (6,975) - 6,975 - (643,810) - - (643,810) Dividends paid - - - - (4,544,870) (7,114,335) (1,460,763) (13,119,968) Total contributions by and distributions to owners 71,960 7,232,841 6,975 - (5,239,777) (7,114,335) (1,460,763) (6,503,099) Other movements Realised losses transferred to special reserve - - - - (2,250,926) 2,250,926 - - Realisation of previously unrealised gains - - - (1,700,550) - 1,700,550 - - Total other movements - - - (1,700,550) (2,250,926) 3,951,476 - - At 31 March 2022 804,263 28,258,001 16,006 24,455,488 12,033,364 10,521,719 1,417,141 77,505,982 Notes - continued from previous page 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 recent Offers for Subscription. Revaluation reserve Increases and decreases in the valuation of investments held at the year-end are accounted for in this reserve, except to the extent that the diminution is deemed permanent. In accordance with stating all investments at fair value through profit and loss (as recorded in Note 8), all such movements through both revaluation and realised capital reserves are shown within the Income Statement for the year. Special distributable reserve This reserve is created from cancellations of the balances upon the Share premium reserve, which are transferred to this reserve from time to time. The cost of share buybacks and any realised losses on the sale or impairment of investments (excluding transaction costs) are charged to this reserve. 75% of the Investment Adviser fee expense, and the related tax effect, that are charged to the realised capital reserve are transferred to this reserve. This reserve will also be charged any facilitation payments to financial advisers, which arose as part of the Offer for Subscription. Realised capital reserve The following are accounted for in this reserve: ● Gains and losses on realisation of investments; ● Permanent diminution in value of investments; ● Transaction costs incurred in the acquisition and disposal of investments; ● 75% of the Investment Adviser’s fee (subsequently transferred to the Special distributable reserve along with the related tax effect) and 100% of any performance fee payable, together with the related tax effect to this reserve in accordance with the policies, and ● Capital dividends paid. Revenue reserve Income and expenses that are revenue in nature are accounted for in this reserve as well as 25% of the Investment Advisor fee together with the related tax effect, as well as income dividends paid that are classified as revenue in nature. The Notes on pages 58 to 76 form part of these Financial Statements. 57 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements Statement of Cash Flows for the year ended 31 March 2023 Notes Year ended 31 March 2023 £ Year ended 31 March 2022 £ Cash flows from operating activities (Loss)/profit for the financial year (9,638,410) 10,110,213 Adjustments for: Net investment portfolio losses/(gains) 9,412,604 (12,095,784) Dividend income (762,761) (287,264) Interest income (1,079,102) (801,295) Decrease in debtors 39,066 12,954 (Decrease)/increase in creditors and accruals (902,172) 1,003,986 Net cash outflow from operations (2,930,775) (976,394) Corporation tax paid - - Net cash outflow from operating activities (2,930,775) (976,394) Cash flows from investing activities Purchase of investments 8 (3,201,926) (4,728,594) Disposal of investments 8 8,056,018 8,447,833 Dividends received 762,761 279,501 Interest received 1,007,742 809,058 Net cash inflow from investing activities 6,624,595 3,719,239 Cash flows from financing activities Shares issued as part of Offer for subscription 15,988,000 7,500,000 Issue costs and facilitiation fees as part of Offer for subscription (577,491) (239,321) Equity dividends paid 6 (11,704,046) (13,119,968) Purchase of own shares 13 (1,146,883) (643,810) Net cash inflow/(outflow) from financing activities 2,559,580 (6,503,099) Net increase/(decrease) in cash and cash equivalents 6,253,400 (3,760,254) Cash and cash equivalents at start of year 26,259,504 30,019,758 Cash and cash equivalents at end of the year 32,512,904 26,259,504 Cash and cash equivalents comprise: Cash equivalents 11 28,611,496 23,458,496 Cash at bank and in hand 11 3,901,408 2,801,008 The Notes on pages 58 to 76 form part of these Financial Statements. 58 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements 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 5 New Street Square, London, EC4A 3TW. 2 Basis of preparation A summary of the principal accounting policies, all of which have been applied consistently throughout the year are set out at the start of the related disclosure throughout the Notes to the Financial Statements. All accounting policies are included within an outlined box at the top of each relevant Note. These Financial Statements have been prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 (“FRS102”), with the Companies Act 2006 and the 2014 Statement of Recommended practice, ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ (‘the SORP’) (updated in July 2022) issued by the Association of Investment Companies (“AIC”). The Company has a number of financial instruments which are disclosed under FRS102 s11/12 as shown in Note 15. After performing the necessary enquiries, the Directors have undertaken an assessment of the Company’s ability to meet its liabilities as they fall due. The Company has significant cash and liquid resources and no external debt or capital commitments. The Company’s cash flow forecasts, which consider levels of anticipated new and follow on investment, as well as investment income and annual running cost projections, are discussed at each quarterly Board meeting and, in particular, have been considered in light the current economic environment. Following this assessment, the Directors have a reasonable expectation that the Company will have adequate resources to continue to meet its liabilities for at least 12 months from the date of these Financial Statements. The Directors therefore consider the preparation of these financial statements on a going concern basis to be appropriate. 3 Income Dividends receivable on quoted equity shares are brought into account on the ex-dividend date. Dividends receivable on unquoted equity shares are brought into account when the Company’s right to receive payment is established and there is no reasonable doubt that payment will be received. Interest income on loan stock is accrued on a daily basis. Provision is made against this income where recovery is doubtful or where it will not be received in the foreseeable future. Where the loan stocks only require interest or a redemption premium to be paid on redemption, the interest and redemption premium is recognised as income or capital as appropriate once redemption is reasonably certain. When a redemption premium is designed to protect the value of the instrument holder’s investment rather than reflect a commercial rate of revenue return, the redemption premium is recognised as capital. The treatment of redemption premiums is analysed to consider if they are revenue or capital in nature on a company by company basis. Accordingly, the redemption premium recognised in the year ended 31 March 2023 has been classified as capital and has been included within gains on investments. 2023 2022 £ £ Income from bank deposits 23,675 1,306 Income from investments – from equities 762,761 279,501 – from overseas based OEICs 407,532 10,492 – from UK based OEICs 147,023 1,167 – from loan stock 500,872 788,330 1,818,188 1,079,490 Total income 1,841,863 1,080,796 Total income comprises Dividends 1,317,316 291,160 Interest 524,547 789,636 1,841,863 1,080,796 Total loan stock interest due but not recognised in the year was £361,395 (2022: £336,436). The increase is due to the additional provision of interest of four investee companies, partially offset by the removal of loan interest resulting from a loan conversion at one investee company as well as the sale of two investee companies. Notes to the Financial Statements for the year ended 31 March 2023 59 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements 4 Investment Adviser’s fees and Other expenses All expenses are accounted for on an accruals basis. a) Investment Adviser’s fees 25% of the Investment Adviser’s fees are charged to the revenue column of the Income Statement, while 75% is charged against the capital column of the Income Statement. This is in line with the Board’s expected long-term split of returns from the investment portfolio of the Company. 100% of any performance incentive fee payable for the year is charged against the capital column of the Income Statement. This is because although the incentive fee is linked to an annual dividend target, it is ultimately based upon the achievement of capital growth. 2023 2022 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Gresham House Asset Management Limited Investment Adviser’s fees 395,609 1,186,829 1,582,438 412,075 1,236,223 1,648,298 395,609 1,186,829 1,582,438 412,075 1,236,223 1,648,298 Under the terms of a revised investment management agreement dated 10 September 2010, (as amended and restated on 15 September 2016 such agreement having been novated to Gresham House) provides investment advisory, administrative and company secretarial services to the Company, for a fee of 2% per annum calculated on a quarterly basis by reference to the net assets at the end of the preceding quarter, plus a fee of £113,589 per annum, the latter being subject to changes in the retail prices index each year. In 2013, it was agreed to waive such further increases due to indexation, until otherwise agreed with the Board. In accordance with the policy statement published under “Management and Administration” in the Company’s prospectus dated 10 May 2000, the Directors have charged 75% of the investment management expenses to the capital account. This is in line with the Board’s expectation of the long-term split of returns from the investment portfolio of the Company. Under the terms of the management agreement the total Investment Adviser and administration expenses of the Company excluding any irrecoverable VAT, exceptional costs and any performance incentive fee, are linked to a maximum of 3.6% of the value of the Company’s closing net assets. For the year ended 31 March 2023, the expense cap has not been breached (2022: £nil). In accordance with general market practice, the Investment Adviser earned arrangement fees and fees for supplying Directors and/or monitoring services from investee companies. The share of such fees attributable to the investments made by the Company were £72,592 (2022: £98,172) and £200,070 (2022: £190,095) respectively. 60 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements b) Performance fees 2023 2022 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ Gresham House Asset Management Limited - - - - 1,014,703 1,014,703 Performance incentive agreement The following performance incentive fee arrangement dated 20 September 2005 continues to be in place, and operated as detailed below: New Ordinary and former C share fund shares Basis of Calculation The performance incentive fee payable is calculated as an amount equivalent to 20 per cent of the excess of a “Target rate” comprising:- i) an annual dividend target (indexed each year for RPI) and ii) a requirement that any cumulative shortfalls below the annual dividend target must be made up in later years. Any excess is not carried forward, whether a fee is payable for that year or not. Payment of a fee is also conditional upon the average Net Asset Value (“NAV”) per share for each such year equalling or exceeding the average “Base NAV” per share for the same year. Base NAV commenced at £1 per share when C fund shares were first issued in 2005, which is adjusted for subsequent shares issued and bought back. Any performance fee will be payable annually. It will be reduced to the proportion which the number of “Incentive Fee Shares” represent of the total number of shares in issue at any calculation date. Incentive Fees Shares are the only shares upon which an incentive fee is payable. They will be the number of C fund shares in issue just before the Merger of the two former share classes on 10 September 2010, (which subsequently became Ordinary shares) plus Ordinary shares issued under new fundraisings since the Merger. This total is then reduced by an estimated proportion of the shares bought back by the Company since the Merger, that are attributable to the Incentive Fee Shares. Clarifications to the agreement During the year ended 31 March 2016, the Board and the Investment Adviser agreed to confirm and clarify in more detail a number of principles and interpretations applied to the agreement. The principal ones are reflected in the paragraphs above and explained below:- First, the incentive fee is paid upon dividends paid in a year, not declared and paid in a year, as the original agreement stated. Secondly, the average NAV referred to above is calculated on a daily weighted average basis throughout the year. In turn, this average NAV is compared to a Base NAV that is also calculated on a daily weighted average basis throughout the year. Thirdly, the methodologies to account for new shares issued and buybacks of shares, their inclusion in the incentive fee calculations and to identify the proportion of all shares upon which an incentive fee is payable have been clarified. Finally, it has been agreed that any excess of cumulative dividends paid over the cumulative annual dividend target is not carried forward, whether a fee is paid for that year or not. These clarifications have been incorporated into the performance incentive agreement. The Board has been advised that, as these and a number of more minor clarifications, are clarifications of the Incentive Agreement, rather than changes to it, there was no need to seek shareholder approval for them. Position at 31 March 2023 The cumulative dividends paid exceeded the annual cumulative dividend target at 31 March 2023 by 2.69p per share (£3,279,964 in aggregate being 93.1% of the total excess) at the year-end, (where 93.1% is the proportion of Incentive Fee Shares to the total number of shares in issue at the year-end date) and taking into account the target rate of dividends and the dividends paid to shareholders. The 6.00 pence annual dividend hurdle was 10.30 pence per share at the year-end after adjustment for RPI. The Base NAV was 97.03 pence per share at the year end, compared to an average NAV for the year of 88.50 pence per share. There is no Incentive fee payable for the year (2022: £1,014,703). Notes to the Financial Statements for the year ended 31 March 2023 61 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements c) Offer for subscription fees 2023 2022 £mn £mn Funds raised by MIG2 VCT 15.99 7.26 Offer costs payable to Gresham House at 3.00% of funds raised by the Company 0.48 0.22 Under the terms of an Offer for Subscription, with the other Mobeus advised VCTs, launched on 17 October 2022, Gresham House was entitled to fees of 3.00% of the investment amount received from investors. This amount totalled £2.28 million across all four VCTs, out of which all the costs associated with the allotment were met, excluding any payments to advisers facilitated under the terms of the Offer. d) Other expenses Expenses are charged wholly to revenue, with the exception of expenses incidental to the acquisition or disposal of an investment, which are written off to the capital column of the Income Statement or deducted from the disposal proceeds as appropriate. 2023 2022 £ £ Directors’ remuneration (including NIC of £5,589 (2022: £6,278)) (Note a) 109,347 107,278 IFA trail commission 68,959 67,648 Broker’s fees 12,000 12,000 Auditors’ fees – Audit of Company (Note b) (excluding VAT) 56,586 38,080 Registrar's fees 37,264 42,671 Printing 51,880 56,969 Legal & professional fees 30,224 22,768 VCT monitoring fees 8,400 8,400 Directors' insurance 13,133 9,659 Listing and regulatory fees 42,545 29,177 Sundry 22,216 8,716 Other expenses 452,554 339,113 Provision against loan interest receivable (Note c) 32,677 - Other expenses 485,231 403,366 a): Directors’ remuneration is a related party transaction, see analysis of Directors’ fees payable and their interests in the shares of the Company in the Directors’ Remuneration Report on pages 44 to 46, which excludes NIC above. The key management personnel are the three Non-Executive Directors. The Company has no employees. There were no amounts outstanding and due to the Directors at 31 March 2023 (2022: £nil). b): Included within the comparative figure is £7,073 relating to advanced audit procedures in respect of the Financial Statements carried out at the 2022 Half-Year. No such procedures were carried out in the current year, or are intended to be carried out in future years. c): Provision against loan interest receivable are impairments on interest amounts recognised in a previous year (2022:£nil). 62 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Notes to the Financial Statements for the year ended 31 March 2023 Financial Statements 5 Taxation on ordinary activities The tax expense for the year comprises current tax and is recognised in profit or loss. The current income tax charge is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date. Any tax relief obtained in respect of Investment Adviser fees allocated to capital is reflected in the realised capital reserve and a corresponding amount is charged against revenue. The tax relief is the amount by which corporation tax payable is reduced as a result of these capital expenses. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differences between the Company’s taxable profits and its results as stated in the Financial Statements that arise from the inclusion of gains and losses in the tax assessments in periods different from those in which they are recognised in the Financial Statements. Deferred tax is measured at the average tax rates that are expected to apply in the years in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax is measured on a non-discounted basis. A deferred tax asset would be recognised only to the extent that it is more likely than not that future taxable profits will be available against which the asset can be utilised. 2023 2022 Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ a) Analysis of tax charge: UK Corporation tax on profits for the year 37,670 (37,670) - - - - Total current tax charge 37,670 (37,670) - - - - Corporation tax is based on a rate of 19% (2022: 19%) b) (Loss)/profit on ordinary activities before tax 961,023 (10,599,433) (9,638,410) 265,355 9,844,858 10,110,213 (Loss)/profit on ordinary activities multiplied by small company rate of corporation tax in the UK of 19% (2022: 19%) 182,594 (2,013,892) (1,831,298) 50,417 1,870,523 1,920,940 Effect of: UK dividends (144,924) - (144,924) (53,105) - (53,105) Net investment portfolio gains not taxable/deductible - 1,788,395 1,788,395 - (2,298,199) (2,298,199) Unrelieved expenditure - 187,827 187,827 2,688 427,676 430,364 Actual tax charge 37,670 (37,670) - - - - Tax relief relating to Investment Adviser fees is allocated between revenue and capital where such relief can be utilised. No asset or liability has been recognised for deferred tax in relation to capital gains or losses on revaluing investments as the Company is exempt from corporation tax in relation to capital gains or losses as a result of qualifying as a Venture Capital Trust. There is no potential liability to deferred tax (2022: £nil). There is an unrecognised deferred tax asset of £980,314 (2022: £733,172). The deferred tax asset relates to unrelieved management expenses and is not recognised because the Company may not generate sufficient taxable income in the foreseeable future to utilise these expenses. 6 Dividends paid and payable Dividends payable are recognised as distributions in the Financial Statements when the Company’s liability to pay them has been established. This liability is established for interim dividends when they are paid, and for final dividends when they are approved by Shareholders, usually at the Company’s Annual General Meeting. A key judgement in applying the above accounting policy is in determining the amount of minimum income dividend to be paid in respect of a year. The Company’s status as a VCT means it has to comply with Section 274 of the Income Tax Act 2007, which requires that no more than 15% of the income from shares and securities in a year can be retained from the revenue available for distribution for the year. 63 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements Amounts recognised as distributions to equity Shareholders in the year: Dividend Type For year ended 31 March Pence per share Date paid 2023 £ 2022 £ Interim Income 2021 1.25p 30/07/2021 - 915,378 Interim Capital 2021 4.75p 30/07/2021 - 3,478,438 Interim Income 2022 0.75p 07/01/2022 - 545,385 Interim Capital 2022 5.00p 07/01/2022 - 3,635,896 Interim Capital 2022 6.25p 07/01/2022 - 4,544,870 Interim Capital 2023 5.00p 07/11/2022 4,001,107 - Interim Income 2023 1.00p 07/11/2022 800,220 - Interim Capital 2023 7.00p 30/03/2023 6,902,719 - 11,704,046 13,119,968 * These dividends were paid out of the Company’s special distributable reserve. Set out below are the total income dividends payable in respect of the financial year, which is the basis on which the requirements of section 274 of the Income Tax Act 2007 are considered. Recognised income distributions in the Financial Statements for the year Dividend Type For year ended 31 March Pence per share Date paid/payable 2023 £ 2022 £ Revenue available for distribution by way of dividends for the year 923,353 265,355 Interim Income 2022 0.75p 07/01/2022 - 545,385 Interim Income 2023 1.00p 07/11/2022 800,220 - Total income dividends for the year 800,220 545,385 7 Basic and diluted earnings and return per share 2023 2022 £ £ Total earnings after taxation: (9,638,410) 10,110,213 Basic and diluted earnings per share (Note a) (11.38)p 13.78p Net revenue earnings from ordinary activities after taxation 923,353 265,355 Basic and diluted revenue earnings per share (Note b) 1.09p 0.36p Net investment portfolio (losses)/gains (9,412,604) 12,095,784 Capital Investment Adviser's fees (net of taxation) (1,149,159) (1,236,223) Investment Adviser's performance fee - (1,014,703) Total capital earnings (10,561,763) 9,844,858 Basic and diluted capital earnings per share (Note c) (12.47)p 13.42p Weighted average number of shares in issue in the year 84,717,306 73,353,491 Notes: a) Basic earnings per share is total earnings after taxation divided by the weighted average number of shares in issue. b) Basic revenue earnings per share is the revenue return after taxation divided by the weighted average number of shares in issue. c) Basic capital earnings per share is the total capital return after taxation divided by the weighted average number of shares in issue. d) There are no instruments that will increase the number of shares in issue in future. Accordingly, the above figures currently represent both basic and diluted returns. 64 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Notes to the Financial Statements for the year ended 31 March 2023 Financial Statements 8 Investments at fair value The most critical estimates, assumptions and judgements relate to the determination of the carrying value of investments at “fair value through profit and loss” (FVTPL) and these are explained throughout the below. 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 2022. This classification is followed as the Company’s business is to invest in financial assets with a view to profiting from their total return in the form of capital growth and income. Purchases and sales of unlisted investments are recognised when the contract for acquisition or sale becomes unconditional. For investments actively traded on organised financial markets, fair value is generally determined by reference to Stock Exchange market quoted bid prices at the close of business on the balance sheet date. Purchases and sales of quoted investments are recognised on the trade date where a contract of sale exists whose terms require delivery within a time frame determined by the relevant market. Where the terms of a disposal state that consideration may be received at some future date and, subject to the conditionality and materiality of the amount of deferred consideration, an estimate of the fair value discounted for the time value of money may be recognised through the Income Statement. In other cases, the proceeds will only be recognised once the right to receive payment is established and there is no reasonable doubt that payment will be received. Unquoted investments are stated at fair value by the Directors at each measurement date in accordance with appropriate valuation techniques, which are consistent with the IPEV guidelines:- (i) Each investment is considered as a whole on a ‘unit of account’ basis, i.e. that the value of each portfolio company is considered as a whole, alongside consideration of:- The price of new or follow on investments made, if deemed to be made as part of an orderly transaction, are considered to be at fair value at the date of the transaction. The inputs that derived the investment price are calibrated within individual valuation models and at every subsequent quarterly measurement date, are reconsidered for any changes in light of more recent events or changes in the market performance of the investee company. The valuation bases used are the following: - a multiple basis. The enterprise value of the investment may be determined by applying a suitable price-earnings ratio, revenue or gross profit multiple to that company’s historic, current or forecast post-tax earnings before interest, depreciation and amortisation, or revenue, or gross profit (the ratio used being based on a comparable sector but the resulting value being adjusted to reflect points of difference identified by the Investment Adviser compared to the sector including, inter alia, scale and liquidity); or: - where a company’s underperformance against plan indicates a diminution in the value of the investment, provision against the price of a new investment is made, as appropriate. (ii) Premiums, to the extent that they are considered capital in nature, and that they will be received upon repayment of loan stock investments are accrued at fair value when the Company receives the right to the premium and when considered recoverable. (iii) Where a multiple or the price of recent investment less impairment basis is not appropriate and overriding factors apply, a discounted cash flow, net asset valuation, realisation proceeds, or a weighted average of these bases may be applied. The methodology applied takes account of the nature, facts and circumstances of the individual investment and uses reasonable data, market input, assumptions and estimates in order to ascertain fair value. Methodologies are applied consistently each year except where a change results in a better estimate of fair value. Capital gains and losses on investments, whether realised or unrealised, are dealt with in the profit and loss and revaluation reserves and movements in the period are shown in the Income Statement. All figures are shown net of any applicable transaction costs incurred by the Company. All investments are initially recognised and subsequently measured at fair value. Changes in fair value are recognised in the Income Statement. The key judgements for the Directors are in relation to identifying the most appropriate valuation methodologies for estimating the fair value of unquoted investments. The most relevant methodologies applied are explained above. A further key judgement made related to investments that are permanently impaired. Where the value of an investment has fallen permanently below the price of recent investment, the loss is treated as a permanent impairment and a realised loss, even though the investment is still held. The key estimates involved in determining the fair value of a company can include: - identifying a relevant basket of market comparables; - deducing the discount to apply to those market comparables; - determining maintainable earnings or revenues; or - identifying surplus cash. The methods of fair value measurement are classified into hierarchy based upon the reliabilty of the information used to determine the valuation. - Level 1 - Fair value is measured based upon quoted equity prices in an active market. - Level 2 - Fair value is measured 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. 65 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements Movements in investments during the year are summarised as follows: Traded on AIM Level 1 Unquoted equity shares Level 3 Unquoted preference shares Level 3 Unquoted Loan Stock Level 3 Total £ £ £ £ Cost at 31 March 2022 551,090 19,279,388 1,649,045 8,155,689 29,635,212 Permanent impairment at 31 March 2022 - (1,790,358) (170) (139,050) (1,929,578) Unrealised gains/(losses) at 31 March 2022 3,511,764 22,484,855 128,364 (1,669,495) 24,455,488 Valuation at 31 March 2022 4,062,854 39,973,885 1,777,239 6,347,144 52,161,122 Purchases at cost (Note b) - 2,704,018 435,808 183,300 3,323,126 Sale proceeds (Note b) - (2,862,112) (3,672,961) (1,521,232) (8,056,305) Reclassification at value (Note d) (215,280) 862,720 (553,090) (94,350) - Net realised gains on investments (Note a) - (3,116,676) 3,671,205 (830,871) (276,342) Net unrealised (losses)/gains on investments (Note c) (2,677,911) (5,869,867) 86,136 (674,620) (9,136,262) Valuation at 31 March 2023 1,169,663 31,691,968 1,744,337 3,409,371 38,015,339 Cost at 31 March 2023 30,541 21,463,346 1,530,007 6,530,735 29,554,629 Permanent impairment at 31 March 2023 - (2,652,947) (170) (1,595,868) (4,248,985) Unrealised gains/(losses) at 31 March 2023 1,139,122 12,881,569 214,500 (1,525,496) 12,709,695 Valuation at 31 March 2023 1,169,663 31,691,968 1,744,337 3,409,371 38,015,339 Net realised losses on investments of £276,342 together with net unrealised losses on investments of £9,136,262 equal net investment portfolio losses of £9,412,604 shown on the Income Statement. A breakdown of the increases and the decreases in unrealised valuations of the portfolio is shown in the Investment Portfolio Summary on pages 24 to 26. Major movements in investments Note a) Disposals of investment portfolio companies during the year were: Company Type Investment Cost Disposal Proceeds Opening Valuation Net realised gain/(loss) in year £ £ £ £ EOTH Limited (trading as Equip Outdoor Technologies) Partial realisation 918 3,670,363 2,974,125 696,238 Tharstern Group Limited Realisation 789,815 1,548,431 1,191,908 356,523 Media Business Insight Holdings Limited Realisation 1,510,027 2,801,644 2,646,394 155,250 Veritek Global Holdings Limited Loan restructure 436,795 - - - Oakheath Limited (dissolved) Liquidation 384,720 - - - Prefcap Limited (dissolved) Liquidation 254,586 - - - Jablite Holdings Limited (in liquidation) Loan repayment 26,848 37,110 37,110 - RDL Corporation Limited Impairment - - 254,219 (254,219) Spanish Restaurant Group Limited (trading as Tapas Revolution) (in administration) Impairment - - 574,893 (574,893) Muller EV Limited (trading as Andersen EV) (in administration) Impairment - - 653,998 (653,998) Other Transaction cost - (1,243) - (1,243) 3,403,709 8,056,305 8,332,647 (276,342) * - Includes impact of permanent impairment of remaining equity holding which was converted to deferred shares with nominal value in November 2022. 66 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Notes to the Financial Statements for the year ended 31 March 2023 Financial Statements Note b) Purchases above of £3,323,126 are more than that shown in the Statement of Cash Flows of £3,201,926 by £121,200. This is due to a further investment in Northern Bloc Ice Cream Limited for which funds were held as a debtor at the previous year end, and was completed during the year. The sale proceeds shown above of £8,056,305 is £286 different to that shown in the Statement of Cash Flows of £8,056,018 due to additional proceeds received in respect of the realisation of Tharstern Group Limited. Note c) The major components of the net decrease in unrealised valuations of £9,136,262 in the year were decreases of £2,677,911 in Virgin Wines UK Plc (held via Rapunzel NewCo Limited), £1,237,857 in MyTutorWeb Limited (trading as MyTutor), £1,124,527 in Manufacturing Services Investment Limited (trading as Wetsuit Outlet), £1,045,920 in End Ordinary Group Limited (trading as Buster and Punch) and £851,332 in Connect Childcare. These decreases were partly offset by increases of £268,070 in Master Removers Group (2019) Limited, £223,573 in Preservica Limited and £180,509 in Orri Limited. Note d) The amount of £862,720 transferred to unquoted equity shares represents the conversion of the loans held in one portfolio company into equity shares, one AIM company being delisted, and the reclassification of one company’s shares to better reflect the nature of the instruments. Note e) During the year, permanent impairments of the cost of investments have increased from £1,929,578 to £4,248,985. The increase of £2,319,407 is due to the impairment of five companies of £2,958,773 offset by the removal of the cost of £639,306 of two companies that were impaired in a previous year and liquidated in the year. 9 Significant interests At 31 March 2023 the Company held significant investments, amounting to 3% or more of the equity capital of an undertaking, in the following companies. The Company does not hold more than 20% in any of the companies. Equity investment (Ordinary Shares) Investment in loan stock and preference shares Total investment (at cost) Percentage of investee company’s total equity % of equity held by all funds advised by Gresham House 1 £ £ £ Preservica Limited 971,522 1,457,221 2,428,743 9.4% 57.9% Bella & Duke Limited 2,062,146 - 2,062,146 10.2% 21.2% My Tutorweb Limited (trading as MyTutor) 1,846,886 - 1,846,886 4.0% 22.6% Manufacturing Services Investment Limited (trading as Wetsuit Outlet) 858,496 858,496 1,716,992 4.7% 27.5% Vivacity Labs Limited 1,467,160 - 1,467,160 5.7% 21.5% Arkk Consulting Limited (trading as Arkk Solutions) 545,395 754,470 1,299,865 5.5% 30.1% End Ordinary Group Limited (trading as Buster and Punch) 1,231,510 - 1,231,510 6.4% 34.6% Data Discovery Solutions Limited (trading as Active Navigation) 1,207,040 - 1,207,040 6.6% 35.1% Racoon International Group Limited 906,935 139,050 1,045,985 17.9% 47.5% RDL Corporation Limited 173,932 826,068 1,000,000 8.9% 44.5% CGI Creative Graphics International Limited 328,613 670,955 999,568 4.3% 26.9% Spanish Restaurant Group Limited (trading as Tapas Revolution) 315,896 631,749 947,645 5.2% 29.0% Rota Geek Limited 733,200 183,300 916,500 3.9% 20.5% Connect Childcare Group Limited 414,219 414,200 828,419 3.0% 14.4% Bleach London Holdings Limited 822,715 - 822,715 3.5% 14.9% Muller EV Limited (trading as Andersen EV) (in liquidation) 653,998 - 653,998 9.8% 38.7% Legatics Holdings Limited 605,374 - 605,374 5.5% 27.3% Pet's Kitchen Limited (trading as Vets' Klinic) 320,960 240,720 561,680 4.0% 20.0% IPV Limited 535,459 - 535,459 4.8% 26.6% Veritek Global Holdings Limited 26,001 504,984 530,985 7.0% 63.4% Caledonian Leisure Limited 313,507 209,002 522,509 6.3% 30.0% Northern Bloc Ice Cream Limited 424,200 - 424,200 6.3% 28.0% Jablite Holdings Limited (in members’ voluntary liquidation) 254,380 170 254,550 6.8% 6.8% Master Removers Group 2019 Limited (trading as Anthony Ward Thomas, Bishopsgate and Aussie Man & Van) 251,763 - 251,763 4.8% 28.0% Virgin Wines UK plc 2 30,541 - 30,541 5.5% 41.5% 67 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements 1 - The percentage of equity held for these companies is the fully diluted figure if, in the event that, management of the investee company exercises share options, where available. 2 - The proportion of equity held by the Mobeus VCTs is 36.1%. 5.4% is held by other funds held by Gresham House Asset Management. It is considered that, under FRS102 s9.9, “Consolidated and Separate Financial Statements”, the above investments are held as part of an investment portfolio and that accordingly, their value to the Company lies in their marketable value as part of that portfolio and as such are not required to be consolidated. Also, the above investments are considered to be held as part of an investment portfolio and are accounted for in accordance with FRS102 14.4B. All of the above companies are incorporated in the United Kingdom. 10 Debtors 2023 2022 £ £ Amounts due within one year: Accrued income 161,074 122,391 Prepayments 10,807 17,195 Other debtors 286 121,200 172,167 260,786 11 Current asset investments and Cash at bank Cash equivalents, for the purposes of the Statement of Cash Flows, comprises bank deposits. Current asset investments are funds held in OEIC money-market funds and are disposable without curtailing or disrupting the business and are readily convertible into known amounts of cash at their carrying values at immediate notice. Cash, for the purposes of the Statement of Cash Flows is cash held with banks in accounts subject to immediate access. Cash at bank in the Balance Sheet is the same. 2023 2022 £ £ OEIC Money market funds (Cash equivalents per Statement of Cash Flows) 28,611,496 23,458,496 Current asset investments 28,611,496 23,458,496 Cash at bank 3,901,408 2,801,008 12 Creditors: amounts falling due within one year 2023 2022 £ £ Trade creditors 8,158 11,934 Accruals 265,695 1,163,496 273,853 1,175,430 68 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Notes to the Financial Statements for the year ended 31 March 2023 Financial Statements 13 Called up share capital 2023 2022 £ £ Allotted, called-up and fully paid: Ordinary shares of 1p each: 98,437,045 (2022: 80,426,321) 984,370 804,263 Purchased Date of purchase Nominal value £ 314,695 18 August 2022 3,147 89,495 23 September 2022 895 219,022 07 October 2022 2,190 668,525 10 January 2023 6,685 125,000 02 March 2023 1,250 48,219 28 March 2023 483 1,464,956 14,650 Under the Offer for Subscription launched on 17 October 2022 9,693,240 ordinary shares were allotted on 24 November 2022 at an average effective offer price of 82.54 pence per share, raising net funds of £7,711,345, and 9,782,440 ordinary shares were allotted on 6 February 2023 at an average effective offer price of 81.64 pence per share, raising net funds of £7,699,164. During the year the Company repurchased 1,464,956 (2022: 697,498) of its own ordinary shares (representing 1.8% (2022: 1.0%) of the ordinary shares in issue at the start of the year) at the prevailing market price for a total cost of £1,147,478 (2022: £643,810). These shares were subsequently cancelled by the Company. This figure differs to that shown in the Statement of Cash Flow of £1,146,883 by £595 which is due to the stamp duty paid shortly after the year end. 14 Basic and diluted net asset value per share As at 31 March 2023 As at 31 March 2022 Net assets £70,426,557 £77,505,982 Number of ordinary shares in issue 98,437,045 80,426,321 Net asset value per share (pence) 71.54p 96.37p 15 Financial instruments The Company’s financial instruments predominantly comprise investments held at fair value through profit and loss, namely equity and preference shares and fixed and floating rate interest securities that are held in accordance with the Company’s investment objective. Other financial instruments are held at amortised cost comprising loans and receivables being Cash at bank, Current asset investments and short term debtors and financial liabilities being creditors, all that arise directly from the Company’s operations. The principal purpose of these financial instruments is to generate revenue and capital appreciation for the Company’s operations, although cash and current asset investments are held to yield revenue return only. The Company has no gearing or other financial liabilities apart from short-term creditors. It is, and has been throughout the year under review, the Company’s policy that no trading in derivative financial instruments shall be undertaken. The accounting policy for determining the fair value of investments is set out in Note 8 to the Financial Statements. The composition of investments held is shown below and in Note 8. Loans and receivables such as cash at bank and current asset investments, and other financial liabilities are stated at amortised cost which the Directors consider is equivalent to fair value. 69 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements Classification of financial instruments The Company held the following categories of financial instruments at 31 March 2023: 2023 2022 (Fair value) (Fair value) £ £ Assets at fair value through profit and loss: Investment portfolio 38,015,339 52,161,122 Other basic financial assets held at amortised cost Current asset investments 28,611,496 23,458,496 Cash at bank 3,901,408 2,801,008 Accrued income 161,074 122,391 Other debtors 286 121,200 Financial liabilities held at amortised cost Other creditors (273,853) (1,175,430) Total for financial instruments 70,415,750 77,488,787 Non financial instruments 10,807 17,195 Net assets 70,426,557 77,505,982 There are no differences between book value and fair value as disclosed above. The investment portfolio principally consists of unquoted investments – 96.9% (2022: 92.2%) and AIM quoted stocks – 3.1% (2022: 7.8%). The investment portfolio has a 100.0% (2022: 100.0%) concentration of risk towards small UK based, sterling denominated companies, and represents 54.0% (2022: 67.3%) of net assets at the year-end. Current asset investments are money market funds and bank deposits which, along with Cash at bank are discussed under credit risk below, which represent 46.2% (2022: 33.9%) of net assets at the year-end. The main risks arising from the Company’s financial instruments are the investment risk and the liquidity risk of the unquoted and quoted portfolio. Other important risks are credit risk, fluctuations in market prices (market price risk), and cash flow interest rate risk, although currency risk is also discussed overleaf. The Board regularly reviews and agrees policies for managing each of these risks and they are summarised overleaf. These have been in place throughout the current and preceding years. Investment risk The Company’s investment portfolio is made up of predominantly UK companies which are not quoted on any recognised stock exchange. One asset is AIM listed representing 3.1% of the portfolio value at the year end. The companies held in the portfolio are usually smaller than those which are quoted on the main market of the London Stock Exchange. They are therefore usually regarded as carrying more risk compared to larger companies, as they are more sensitive to changes in key financial indicators, such as a reduction in its turnover or an increase in costs. The Board is of the view that the Investment Adviser mitigates this risk as the investment in an investee company is held as part of a portfolio of such companies so that the performance of one company does not significantly affect the value of the portfolio as a whole. The Investment Adviser also usually takes a seat on the Board of each investee company such that it is able to monitor its progress on a regular basis and contribute to the strategic direction of the company. Liquidity risk The investments in equity and fixed interest stocks of unquoted companies that the Company holds are not traded, and therefore they are not readily realisable. In the case of the Company’s quoted portfolio, the shares of these companies are thinly traded and as such the prices are more volatile than those of more widely traded securities. The ability of the Company to realise the investments at their carrying value may at times not be possible if there are no willing purchasers and, as the Company owns minority stakes, could require a number of months and the co-operation of other shareholders to achieve at a reasonable valuation. The Company’s ability to sell investments may also be constrained by the requirements set down for VCTs. The maturity profile of the Company’s loan stock investments disclosed within the consideration of credit risk below indicates that these assets are also not readily realisable until dates up to five years from the year-end. To counter these risks to the Company’s liquidity, the Investment Adviser maintains sufficient cash and money market funds to meet running costs and other commitments. The Company invests its surplus funds in high quality money market funds and bank deposits of £32,512,904 (2022: £26,259,504) which are all accessible at varying points over the next 12 months. The Board also receives regular cash flow projections in order to manage this liquidity risk. 70 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Notes to the Financial Statements for the year ended 31 March 2023 Financial Statements The table below shows a maturity analysis of financial liabilities: 2023 <3 months 3-6 months 6-12 months over 12 months Total Financial liabilities £ £ £ £ £ Other creditors 134,755 139,098 - - 273,853 2022 <3 months 3-6 months 6-12 months over 12 months Total Financial liabilities £ £ £ £ £ Other creditors 91,405 1,084,025 - - 1,175,430 The Company does not have any derivative financial liabilities. Credit risk Credit risk is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Company. The Company’s maximum exposure to credit risk is: 2023 £ 2022 £ Loan stock investments 3,409,371 6,347,144 Preference shares 1,744,337 1,777,239 Current asset investments 28,611,496 23,458,496 Accrued income 161,074 122,391 Other debtors 286 121,200 Cash at bank 3,901,408 2,801,008  37,827,972 34,627,478 The Company has an exposure to credit risk in respect of the loan stock investments it has made into investee companies, most of which have no security attached to them, and in a minority of cases, such security ranks beneath any bank debt that an investee company may owe. The loan stock is held in companies with turnover under £50 million, which may be considered less stable than larger, longer established businesses. The Investment Adviser undertakes extensive financial and commercial due diligence before recommending an investment to the Board. The Investment Adviser usually takes a seat on the Board of each investee company and the Board of the VCT receives regular updates on each company at each quarter end. The accrued income shown above of £161,074 was all due within six months of the year-end. The following table shows the maturity of the loan stock investments referred to above. In some cases, the loan maturities are not the contractual ones, but are the best estimate using management’s expectations of when it is likely that such loans may be repaid. Repayable within 2023 £ 2022 £ 0 to 1 year 1,161,884 836,849 1 to 2 years 799,739 2,795,761 2 to 3 years 858,120 706,399 3 to 4 years 406,328 1,304,194 4 to 5 years 183,300 494,939 > 5 years - 209,002 Total 3,409,371 6,347,144 71 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements Included within loan stock investments above are loans at a carrying value of £1,046,755 which are past their repayment date but have been renegotiated. These loan stock investments are made as part of the qualifying investments within the investment portfolio, and the risk management processes applied to the loan stock investments have already been set out under market price risk below. An aged analysis of the loan stock investments included above, which are past due but not individually impaired, is set out below. For this purpose, these loans are considered to be past due when any payment due date under the loan’s contractual terms (such as payment of interest or redemption date) is received late or missed. We are required to report in this format and include the full value of the loan even though, in some cases it is only in respect of interest that they are in default. 0-6 months 6-12 months over 12 months 2023 Total £ £ £ £ Loans to investee companies past due - - 838,002 838,002 0-6 months 6-12 months over 12 months 2022 Total £ £ £ £ Loans to investee companies past due - - 1,256,736 1,256,736 Credit risk also arises from cash and cash equivalents, deposits with banks and amounts held in liquidity funds. There is a risk of liquidity fund defaults such that there could be defaults within their underlying portfolios that could affect the values at which the Company could sell its holdings. As the four OEIC money market funds holding £28,611,496 (2022: £23,458,496) are all triple A rated funds, along with bank deposits of £3,901,408 (2022: £2,801,008) at two well-known financial institutions with a minimum credit rating of A2, credit risk is considered to be relatively low in current circumstances. The Board manages credit risk in respect of these money market funds and cash by ensuring a spread of such investments such that none should exceed 15% of the Company’s total investment assets. The Company’s current account included within the bank deposit figure above is held with NatWest Bank plc, so the risk of default is low. There could also be a failure by counter parties to deliver securities which the Company has paid for, or pay for securities which the Company has delivered. This risk is considered to be small as most of the Company’s investment transactions are in unquoted investments, where investments are conducted through solicitors, to ensure that payment matches delivery. In respect of any quoted investment transactions that are undertaken, the Company uses brokers with a high credit quality, and these trades usually have a short settlement period. Accordingly, counterparty risk is considered to be relatively low. Market price risk Market price risk arises from uncertainty about the future valuations of the unquoted portfolio held in accordance with the Company’s investment objectives. These future valuations are determined by many factors but include the operational and financial performance of the underlying investee companies (Investment risk), as well as market perceptions of the future performance of the UK economy and its impact upon the economic environment in which these companies operate. This risk represents the potential loss that the Company might suffer through holding its investment portfolio in the face of market movements, which was a maximum of £38,015,339 (2022: £52,161,122) at the year-end, representing the fair value of the investment portfolio. The investments in equity and fixed interest stocks of unquoted companies that the Company holds are not traded and as such the prices are more uncertain than those of more widely traded securities. As, in a number of cases, the unquoted investments are valued by reference to price earnings ratios prevailing in quoted comparable sectors (discounted for points of difference from quoted comparators), their valuations are exposed to changes in the price earnings ratios that exist in the quoted markets. The Board’s strategy in managing the market price risk inherent in the Company’s portfolio of equities and loan stock investments is determined by the requirement to meet the Company’s Objective, as set out on page 7 in the Strategic Report. As part of the investment management process, the Board seeks to maintain an appropriate spread of market risk, and also has full and timely access to relevant information from the Investment Adviser. No single investment is permitted to exceed 15% of total investment assets at the point of investment. The Investment Committee meets regularly and reviews the investment performance and financial results, as well as compliance with the Company’s objectives. The Company does not use derivative instruments to hedge against market risk. 72 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Notes to the Financial Statements for the year ended 31 March 2023 Financial Statements Market price risk sensitivity The Board believes that the Company’s assets are mainly exposed to market price risk, as the Company is required to hold most of its assets in the form of sterling denominated investments in small companies. Although a small proportion of these assets are quoted on AIM, the majority of these assets are unquoted. All of the investments made by the Investment Adviser in unquoted companies, irrespective of the instruments the Company actually holds, (whether shares, preference shares or loan stock) carry a full market risk, even though some of the loan stocks may be secured on assets, but behind any prior ranking bank debt in the investee company. The Board considers that the value of investments in equity and loan stock instruments are ultimately sensitive to changes in their trading performance (discussed under investment risk above) and to changes in quoted share prices, insofar as such changes eventually affect the estimated enterprise value of the portfolio’s unquoted companies. The table below shows the impact on profit and net assets if there were to be a 20% (2022: 20%) movement in overall share prices, and has used a 20% change in the quoted market comparator multiple as a proxy for this. The sensitivity analysis below assumes the actual portfolio of investments held by the Company is perfectly correlated to this overall movement in share prices. However, Shareholders should note that this level of correlation is unlikely to be the case in reality, particularly in the case small, unquoted companies which may have other factors which may influence the extent of the valuation change, e.g. a strong niche brand may limit the valuation fall compares to comparators, or may be more affected by external market factors than larger companies. For each of the companies in the investment portfolio that are valued on a multiple basis, the calculation below has applied plus and minus 20% to the multiple (such as earnings or revenue) derived from quoted market comparators that are used to value the companies. The companies valued on a multiple basis represent £34.39 million of the total investment portfolio of £38.02 million. The remainder of the portfolio, valued at net asset value, has had a 20% variance applied. The impact of both calculations is shown below. The impact of a change of 20% (2022: 20%) has been selected as this is considered reasonable given the level of volatility observed both on a historical basis and market expectations for future movement. Valuation Technique Base Case Change in input Change in fair value of investments (£’000) Change in NAV (pence per share) Revenue Multiple 2.11 +20% 4,249 4.32 –20% (3,869) (3.93) EBITDA Multiple 5.45 +20% 1,270 1.29 –20% (692) (0.70) Bid price - +20% 234 0.24 –20% (234) (0.24) Recent Investment Price - - - - * As detailed in the accounting policies, the base case is based on market comparables, discounted where appropriate for marketability, in accordance with the IPEV guidelines. Cash flow interest rate risk The Company’s fixed and floating rate interest securities, its equity and preference equity investments and net revenue may be affected by interest rate movements. Investments are often in relatively small businesses, which are relatively high risk investments sensitive to interest rate fluctuations. Due to the short time to maturity of some of the Company’s floating rate investments, it may not be possible to re-invest in assets which provide the same rates as those currently held. The Company’s assets include fixed and floating rate interest instruments, as shown below. The rate of interest earned is regularly reviewed by the Board, as part of the risk management processes applied to these instruments, already disclosed under market price risk above. 73 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements The interest rate profile of the Company’s financial net assets at 31 March 2023 was: Financial net assets on which no interest paid Fixed rate financial assets Variable rate financial assets Total Weighted average interest rate Average period to maturity £ £ £ £ % (years) Equity shares 32,861,631 - - 32,861,631 Preference shares - 1,744,337 - 1,744,337 6.6 4.3 Loan stocks - 3,409,371 - 3,409,371 6.5 1.9 Current asset investments - - 28,611,496 28,611,496 3.5 Cash at bank - - 3,901,408 3,901,408 1.0 Debtors 161,360 - - 161,360 Creditors (273,853) - - (273,853) Total for financial instruments 32,749,138 5,153,708 32,512,904 70,415,750 Non-financial instruments 10,807 - - 10,807 Total net assets 32,759,945 5,153,708 32,512,904 70,426,557 The interest rate profile of the Company’s financial net assets at 31 March 2022 was: Financial net assets on which no interest paid Fixed rate financial assets Variable rate financial assets Total Weighted average interest rate Average period to maturity £ £ £ £ % (years) Equity shares 44,036,739 - - 44,036,739 Preference shares - 1,777,239 - 1,777,239 0.0 3.3 Loan stocks - 6,347,144 - 6,347,144 10.2 2.3 Current asset investments - - 23,458,496 23,458,496 0.5 Cash at bank - - 2,801,008 2,801,008 0.0 Debtors 243,591 - - 243,591 Creditors (1,175,430) - - (1,175,430) Total for financial instruments 43,104,900 8,124,383 26,259,504 77,488,787 Non-financial instruments 17,195 - - 17,195 Total net assets 43,122,095 8,124,383 26,259,504 77,505,982 Note: Weighted average interest rates above are derived by calculating the expected annual income that would be earned on each asset (but only for those sums that are currently regarded as collectible and would therefore be recognised), divided by the values for each asset class at the balance sheet date. Floating rate cash earns interest based on SONIA rates. The Company’s investments in equity shares and similar instruments have been excluded from the interest rate risk profile as they have no maturity date and would thus distort the weighted average period information. 74 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Notes to the Financial Statements for the year ended 31 March 2023 Financial Statements Cash flow interest rate sensitivity Although the Company holds investments in loan stocks that pay interest, the Board does not consider it appropriate to assess the impact of interest rate changes in isolation upon the value of the unquoted investment portfolio, as interest rate changes are only one factor affecting the market price movements that are discussed above under market price risk. However, as the Company has a substantial proportion of its assets in cash and money market funds, the table below shows the sensitivity of income earned to changes in interest rates in these instruments: 2023 £ Profit and net assets 2022 £ Profit and net assets If interest rates rose/fell by 5% (2022:2%), with all other variables held constant – increase/(decrease) 1,316,296 / (1,316,296) 425,404 / (425,404) Increase/(decrease) in earnings, and net asset value, per ordinary share (in pence) 1.34p / (1.34p) 0.53p / (0.53p) Currency risk All assets and liabilities are denominated in sterling and therefore there is no currency risk, although a number of investee companies do trade overseas, so do face some exposure to currency risk in their operations. Fair value hierarchy The tables below sets out fair value measurements using FRS 102 s11.27 fair value hierarchy. Financial assets at fair value through profit and loss At 31 March 2023 Level 1 Level 2 Level 3 Total £ £ £ £ Equity investments 1,169,663 - 31,691,968 32,861,631 Preference shares - - 1,744,337 1,744,337 Loan stock investments - - 3,409,371 3,409,371 Total 1,169,663 - 36,845,676 38,015,339 Financial assets at fair value through profit and loss At 31 March 2022 Level 1 Level 2 Level 3 Total £ £ £ £ Equity investments 4,062,854 - 39,973,885 44,036,739 Preference shares - - 1,777,239 1,777,239 Loan stock investments - - 6,347,144 6,347,144 Total 4,062,854 - 48,098,268 52,161,122 There are currently no financial liabilities at fair value through profit and loss. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows: Level 1 – valued using quoted prices in active markets for identical assets Level 2 – valued by reference to valuation techniques using observable inputs other than quoted prices included within Level 1. Level 3 – valued by reference to valuation techniques using inputs that are not based on observable market data. The valuation techniques used by the Company are explained in the accounting policies in Note 8. 75 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Financial Statements A reconciliation of fair value measurements is set out below: Equity investments Preference shares Loan stock investments Total £ £ £ £ Opening balance at 1 April 2022 39,973,885 1,777,239 6,347,144 48,098,268 Purchases 2,704,018 435,808 183,300 3,323,126 Sales (2,862,112) (3,672,961) (1,521,232) (8,056,305) Transfers into Level 3 215,280 - - 215,280 Reclassification at value 647,440 (553,090) (94,350) - Total gains included in Income Statement: - on assets sold (3,116,676) 3,671,205 (830,871) (276,342) - on assets held at the year-end (5,869,867) 86,136 (674,620) (6,458,351) Closing balance at 31 March 2023 31,691,968 1,744,337 3,409,371 36,845,676 As detailed in the accounting policy for Note 8, where investments are valued on an earnings-multiple basis, the main input used for this basis of valuation is a suitable price-earnings ratio taken from a comparable sector on the quoted market, which is then appropriately adjusted for points of difference. Thus any change in share prices can have a significant effect on the fair value measurements of the Level 3 investments, as they may not be wholly offset by the adjustment for points of difference. Level 3 unquoted equity and loan stock investments are valued in accordance with the IPEV guidelines as follows: 2023 2022 £ £ Investment methodology Multiple of earnings, revenues or gross margin, as appropriate 34,389,983 47,124,658 Recent investment price subsequently calculated as appropriate 1,623,662 936,500 Cost less amortisation 799,739 - Average price 32,292 - Estimated realisation proceeds - 37,110 36,845,676 48,098,268 The unquoted equity investments had the following movements between valuation methodologies between 31 March 2022 and 31 March 2023: Change in investment methodology (2022 to 2023) Carrying value as at 31 March 2023 £ Explanatory note Multiple basis to net cost less amortisation 799,739 Cost less amortisation is a more appropriate basis for determining fair value. The valuation will be the most appropriate valuation methodology for an investment within its market, with regard to the financial health of the investment and the December 2022 IPEV guidelines.The Directors believe that, within these parameters, these are the most appropriate methods of valuation which would be reasonable as at 31 March 2023. 76 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Notes to the Financial Statements for the year ended 31 March 2023 Financial Statements 16 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 80% (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 Board 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. 17 Segmental analysis The operations of the Company are wholly in the United Kingdom, from one class of business. 18 Post balance sheet events On 3 May 2023, a new investment of £0.39 million was made into Dayrize B.V. On 4 July 2023, a follow on investment of £0.30 million was made into Legatics Holdings Limited. On 20 June 2023 by order of the Court, the share premium account and capital redemption reserve of the Company was reduced (as approved at the General Meeting of the Company held on 12 October 2022) and has been transferred to a special distributable reserve. 77 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Shareholder Information Communication with Shareholders We aim to communicate regularly with our Shareholders. The annual general meetings provide a useful platform for the Board to meet Shareholders and exchange views and we are pleased to invite Shareholders to attend the Annual General Meeting of the Company in September to give you the opportunity to meet the Directors and representatives of the Investment Adviser. We will also offer a facility whereby you can view the Board, the Investment Adviser’s presentation and submit questions remotely via live stream. The Company releases Interim Management Statements in respect of those quarters where it does not publish interim or full year accounts via the London Stock Exchange RNS service. Gresham House was pleased present the Company’s second virtual Shareholder event on 23 March 2023. Shareholders wishing to follow the Company’s progress can visit its website at www.mig2vct.co.uk. The website includes up-to-date details on fund performance and dividends as well as publicly available information on the Company’s portfolio of investments and copies of company reports. There is also a link to the London Stock Exchange’s website at: www.londonstockexchange.com, where Shareholders can obtain details of the share price and latest NAV announcements, etc. Financial calendar 23 March 2023 Virtual Shareholder Event 12 July 2023 Announcement of Annual Results and circulation of Annual Report & Financial Statements for the year ended 31 March 2023 to Shareholders 13 September 2023 Annual General Meeting December 2023 Announcement of Interim Results and circulation of Interim Report for the six months ended 30 September 2023 to Shareholders 31 March 2024 Year-end TBC 2024 Shareholder Event Gresham House website Shareholders can check the performance of the VCT by visiting the Investment Adviser’s website at www.greshamhouse.com. This is regularly updated with information on your investment including case studies of portfolio companies. The website includes relevant Shareholder literature, including previous Annual and Interim Reports and the Company’s Key Information Document (“KID”) - Investors should note that the process for compiling the KID are prescribed by EU law and the Company has no discretion over the format or content of the document. The illustrated performance returns in the KID cannot be guaranteed and may not reflect figures for the Company derived using other methods. Accordingly, the Board recommends that investors also take account of information from other sources, including the Annual Reports. Annual General Meeting The Company’s next Annual General Meeting will be held on Wednesday, 13 September 2023 at 11.00 am at the offices of Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch Street, London EC3V 0HR. Shareholders will also be able to view the meeting remotely by registering for access to a web stream link which can be found on the Company’s website at www.mig2vct.co.uk. Shareholders will be able to vote on a show of hands and the meeting. Those Shareholders will also be able to submit questions to the Board in advance of the meeting using the AGM@greshamhouse.com email address. Shareholders attending virtually will not be able to vote at the meeting and therefore you are encouraged to lodge your proxy form, which is included with Shareholders’ copies of this Annual Report, or online at www.signalshares.com before 11 September 2023 at 11.00 am for your votes to be valid. A copy of the Notice of the Meeting is included on pages 82 to 84. Dividends Shareholders who wish to have dividends paid directly into their bank account, rather than sent by cheque to their registered address, can complete a mandate for this purpose. Mandates can be obtained by contacting the Company’s Registrar, Link Group, at the address given on page 86 or by completing the mandate form via www.mobeusvcts.co.uk under the ‘How can I update my address details/dividend bank mandate’ tab and returning the form to the Registrar. Shareholders are encouraged to ensure that the Registrar maintains up-to-date details for their account and to check whether they have received all dividend payments. This is particularly important if a Shareholder has recently changed address or changed their bank. We are aware that a number of dividends remain unclaimed by Shareholders and whilst we will endeavour to contact them if this is the case, we cannot guarantee that we will be able to do so if the Registrar does not have an up-to-date postal or email address. Information for Shareholders Information for Shareholders 78 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders Selling your shares The Company’s Shares are listed on the London Stock Exchange and as such they can be sold in the same way as any other quoted company through a stockbroker. Shareholders are also advised to discuss their individual tax position with their financial advisor before deciding to sell their shares. The Company is unable to buy back shares direct from Shareholders, so you will need to use a stockbroker to sell your shares. If you are considering selling your shares or trading in the secondary market, please contact the Company’s Corporate Broker, Panmure Gordon (UK) Limited (“Panmure”). Panmure is able to provide details of close periods (when the Company is prohibited from buying in shares) and details of the price at which the Company has bought in shares. Panmure can be contacted as follows: Chris Lloyd 0207 886 2716 chris.lloyd@panmure.com Paul Nolan 0207 886 2717 paul.nolan@panmure.com Common Reporting Standard (“CRS”) and Foreign Account Tax Compliance Act (“FATCA”) Tax legislation was introduced with effect from 1 January 2016 under the Organisation for Economic Co-operation and Development Common Reporting Standard for Automatic Exchange of Financial Account Information. The legislation requires investment trust companies to provide personal information to HMRC on certain investors who purchase shares. As an affected entity, the Company has to provide information annually to HMRC relating to a number of non-UK based certificated Shareholders who are deemed to be resident for tax purposes in any of the 90 plus countries who have joined CRS. All new Shareholders, excluding those whose shares are held in CREST, entered onto the share register from 1 January 2016 will be asked to provide the relevant information. Additionally, HMRC’s policy on FATCA now means that, as a result of the restricted secondary market in VCT shares, the Company’s shares are not considered to be “regularly traded”. The Company is therefore also an affected entity for the purposes of this legislation and so has to provide information annually to HMRC relating to Shareholders who are resident for tax purposes in the United States. For further information, please see HMRC’s Quick Guide: Automatic Exchange of Information – information for account holders: https://www.gov.uk/government /publications/exchange-of-information-account-holders. Managing your shareholding online For details on your individual shareholding and to manage your account online, Shareholders may log into or register with the Link Group Shareholder Portal at: www.signalshares.com. You can use the Shareholder Portal to change and update your preferences including changing your address details, check your holding balance and transactions, view the dividends you have received, add and amend your bank details and manage how you receive communications from the Company. Fraud Warning Boiler Room fraud and unsolicited communications to Shareholders We are aware of Shareholders being contacted in connection with sophisticated but fraudulent financial scams which purport to come from the Company or to be authorised by it. This is often by a phone call or an email usually originating from outside of the UK, often claiming or appearing to be from a corporate finance firm offering to buy your VCT shares at an inflated price. Further information on boiler room scams and fraud advice plus who to contact, can be found first in the answer to a question “What should I do if I receive an unsolicited offer for my shares?” within the VCT Investor area of the Investment Adviser’s website in the A Guide to VCTs section: www.mobeusvcts.co.uk and secondly, in a link to the FCA’s ScamSmart site: www.fca.org.uk/ scamsmart We strongly recommend that you seek financial advice before taking any action if you remain in any doubt. You can also contact the Investment Adviser on 0207 382 0999, or email mobeusvcts@greshamhouse.com to check whether any claims made by a caller are genuine. Shareholders are also encouraged to ensure their personal data is always held securely and that data held by the Registrar of the Company is up to date, to avoid cases of identity fraud. Shareholder enquiries For enquiries concerning the investment portfolio or the Company in general, please contact the Investment Adviser, Gresham House Asset Management Limited. To contact the Chair or any member of the Board, please contact the Company Secretary, also Gresham House, in the first instance. The Registrar, Link Group, may be contacted via their Shareholder portal, post or telephone for queries relating to your shareholding or dividend payments, dividend mandate forms, change of address etc. Full contact details for each of Gresham House and Link Group are included under Corporate Information on page 86 of this Annual Report. Shareholder Information 79 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders Performance Data at 31 March 2023 The two former ‘C’ and Ordinary classes of shares were merged on 10 September 2010, and the ‘C’ share class redesignated as Ordinary Shares. The following tables show, for all investors in the former share classes and in the more recent fundraisings, how their investments have performed since they were originally allotted shares in each fundraising. Total return data, which includes cumulative dividends paid to date, is shown on both a share price and NAV basis as at 31 March 2023. The NAV basis enables Shareholders to evaluate more clearly the performance of the Investment Adviser, as it reflects the underlying value of the portfolio at the reporting date. This is the most widely used measure of performance in the VCT sector. Ordinary Share Fund Share price as at 31 March 2023 68.50p 1 NAV per share as at 31 March 2023 71.54p Total return per share to Shareholders since allotment Allotment date(s) Allotment price Net allotment price 2 Cumulative dividends paid per share 3 % Change since 31 March 2022 (Share price basis) (NAV basis) (NAV basis) (p) (p) (p) (p) (p) Funds raised 2005/06 Between 5 January 2006 and 5 April 2006 100.00 60.00 147.00 215.50 218.54 (5.1)% Funds raised 2008/09 Between 3 April 2009 and 5 May 2009 92.39 64.67 143.00 211.50 214.54 (5.2)% Funds raised 2013/14 9 January 2014 117.92 4 82.54 129.00 197.50 200.54 (5.6)% 11 February 2014 118.22 4 82.75 129.00 197.50 200.54 (5.6)% 31 March 2014 119.28 4 83.49 124.00 192.50 195.54 (5.7)% 3 April 2014 119.82 4 83.87 124.00 192.50 195.54 (5.7)% 4 April 2014 119.08 4 83.36 124.00 192.50 195.54 (5.7)% 6 June 2014 118.66 4 83.06 124.00 192.50 195.54 (5.7)% Funds raised 2014/15 14 January 2015 118.44 4 82.91 110.00 178.50 181.54 (6.1)% 17 February 2015 124.35 4 87.05 110.00 178.50 181.54 (6.1)% 10 March 2015 120.18 4 84.13 105.00 173.50 176.54 (6.3)% Funds raised 2017/2018 28 September 2017 104.73 4 73.31 78.00 146.50 149.54 (7.3)% 20 October 2017 105.07 4 73.55 78.00 146.50 149.54 (7.3)% 09 November 2017 105.79 4 74.05 78.00 146.50 149.54 (7.3)% 20 November 2017 107.44 4 75.21 78.00 146.50 149.54 (7.3)% 21 November 2017 107.39 4 75.17 78.00 146.50 149.54 (7.3)% 24 January 2018 97.81 4 68.47 69.00 137.50 140.54 (7.8)% 13 March 2018 100.79 4 70.55 69.00 137.50 140.54 (7.8)% Funds raised 2019/20 8 January 2020 93.03 4 65.12 49.00 117.50 120.54 (8.9)% 2 April 2020 77.26 4 54.08 38.00 106.50 109.54 (9.7)% Funds raised 2021/2022 9 March 2022 95.01 4 66.51 13.00 81.50 84.54 (12.3)% Funds raised 2022/23 16 November 2022 82.54 4 57.78 7.00 75.50 78.54 - 8 February 2023 81.64 4 57.15 7.00 75.50 78.54 - 1 - Source: Panmure Gordon & Co (mid-price basis) based upon the latest NAV announced of 71.70p at 31 December 2022 adjusted for dividends paid since. 2 - Net allotment price is the allotment price less applicable income tax relief. The tax relief was 20% up to 5 April 2004, 40% from 6 April 2004 to 5 April 2006, and 30% thereafter. 3 - For derivation, see table on following page. 4 - Average effective offer price. 80 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders Former Ordinary Share Fund Share price as at 31 March 2023 56.65p NAV per share as at 31 March 2023 56.16p Shareholders in the former Ordinary Share Fund received 0.827 shares in the Company for each former Ordinary share that they held on 10 September 2010, when the two share classes merged. Both the share price and the NAV per share shown above have been adjusted using this merger ratio. Total return per share to Shareholders since allotment Allotment date(s) Allotment price Net allotment price 1 Cumulative dividends paid per share 2 % Change since 31 March 2022 (Share price basis) (NAV basis) (NAV basis) (p) (p) (p) (p) (p) Funds raised 2000/01 3 Between 30 May 2000 and 11 December 2000 100.00 80.00 143.43 200.08 202.59 (4.6)% 1 - Net allotment price is the allotment price less applicable income tax relief. The tax relief was 20% up to 5 April 2004, 40% from 6 April 2004 to 5 April 2006, and 30% thereafter. 2 - For derivation, see table below. 3 - Investors in this fundraising may also have enhanced returns if they had also deferred capital gains tax liabilities. Cumulative dividends paid per share Funds raised 2000/01 Funds raised 2005/06 Funds raised 2008/09 Funds raised 2013/14 Funds raised 2014/15 Funds raised 2017/18 Funds raised 2019/20 Funds raised 2020/21 Funds raised 2021/22 Funds raised 2022/23 (p) (p) (p) (p) (p) (p) (p) (p) (p) (p) 30 March 2023 5.79 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7.00 7 November 2022 4.96 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 7 January 2022 9.92 12.00 12.00 12.00 12.00 12.00 12.00 12.00 12.00 30 July 2021 4.96 6.00 6.00 6.00 6.00 6.00 6.00 6.00 19 June 2020 5.79 7.00 7.00 7.00 7.00 7.00 7.00 7.00 27 March 2020 9.10 1 11.00 11.00 11.00 11.00 11.00 11.00 20 September 2019 12.41 1 15.00 15.00 15.00 15.00 15.00 22 March 2019 4.14 1 5.00 5.00 5.00 5.00 5.00 22 January 2018 7.44 1 9.00 9.00 9.00 9.00 9.00 27 July 2017 5.79 1 7.00 7.00 7.00 7.00 31 March 2017 8.27 1 10.00 10.00 10.00 10.00 08 August 2016 4.14 1 5.00 5.00 5.00 5.00 18 March 2016 4.14 1 5.00 5.00 5.00 5.00 20 March 2015 4.14 1 5.00 5.00 5.00 5.00 20 October 2014 11.58 1 14.00 14.00 14.00 21 March 2014 4.14 1 5.00 5.00 5.00 19 April 2013 3.31 1 4.00 4.00 20 April 2012 3.31 1 4.00 4.00 20 April 2011 3.31 1 4.00 4.00 10 September 2010 - Merger of Ordinary Share Fund and C Share Fund 13 August 2010 - 1.00 1.00 19 September 2009 - 1.00 1.00 23 July 2008 6.00 2.50 19 September 2007 6.00 1.50 8 February 2006 6.00 20 October 2005 6.00 24 September 2003 0.51 16 September 2002 1.35 10 September 2001 0.93 Dividends Paid 2 143.43 147.00 143.00 129.00 110.00 78.00 49.00 38.00 25.00 13.00 1 - The dividends paid after the merger of the share classes on 10 September 2010 to former Ordinary Share Shareholders have been restated to reflect the merger conversion ratio of approximately 0.827. 2 - The above date relates to an investor in the first allotment of each fundraising. The precise amount of dividends paid to Shareholders by date of allotment is shown on page 79 and above. Performance Data at 31 March 2023 81 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders Taxation benefits VCTs provide investors with an attractive method of investing in small to medium-sized unquoted (including AIM listed) trading companies in the UK that would otherwise be difficult to invest in directly. The VCT is itself exempt from paying corporation tax on its chargeable gains. VCTs also offer substantial tax benefits to private investors. Personal taxation benefits The tax reliefs set out below are available to individuals aged 18 or over who subscribe for ordinary shares. Whilst there is no specific limit in the amount of an individual’s acquisitions of shares in a VCT, each of the following tax reliefs will only be given to the extent that the individual’s total acquisitions of shares in VCTs in any tax year do not exceed the specified limit, currently £200,000 (see below). Tax reliefs currently available to VCT investors: (1) Relief from income tax on investments An investor subscribing for new ordinary shares in a VCT is entitled to claim income tax relief on amounts subscribed up to a maximum of £200,000 in any tax year. The relief is given at 30% of the amount subscribed provided that the relief is limited to the amount which reduces the investor’s income tax liability to nil. Investments used as security for, or financed by, a loan may not qualify for relief depending on the circumstances. The income tax relief for investments in new VCT shares was decreased from 40% to 30% in relation to VCT shares issued on or after 6 April 2006. Tax relief on subscription for shares in a VCT is restricted where, within six months (before or after) that subscription, the investor disposes of shares in the same VCT, or a VCT which merges with that VCT at any time. (2) Capital gains tax reinvestment relief The ability to defer capital gains by reinvesting the gains in a VCT, where the VCT shares are issued in the two year period beginning twelve months before the gain arises, has been abolished in respect of shares issued on or after 6 April 2004. However, gains which were deferred by subscribing for VCT shares issued before 6 April 2004 remain deferred while the investor continues to hold those VCT shares. (3) Dividend relief An investor who acquires VCT shares within the specified limit (currently £200,000 per annum) will not be liable to income tax on dividends paid on those shares. (4) Relief from capital gains tax on disposal A disposal by an investor of ordinary shares in a VCT required within the annual limit of £200,000 will not be subject to UK capital gains tax. (5) Purchases in the market An individual purchaser of existing VCT shares in the market will be entitled to claim dividend relief but not relief from income tax on investment. (6) Withdrawal of relief Relief from income tax on subscription for shares in a VCT is withdrawn if the shares are disposed of (other than between spouses) within five years of issue or if the VCT loses its approval within this period. The above is only an outline of the tax reliefs available under current legislation. Investors are recommended to consult an independent professional adviser as to the taxation consequences of investing in a VCT. Company History The Company was launched in May 2000 as Matrix e-Ventures Fund VCT. In October 2001 the Company changed its name to Matrix Venture Fund VCT. In September 2005, the Company adopted a broader investment strategy, to invest in established, profitable and cash generative businesses across any sector. It also changed its name to Matrix Income & Growth 2 VCT plc. In June 2012 the Company changed its name to Mobeus Income & Growth 2 VCT plc to reflect the Investment Adviser’s change of name. In September 2016, the Company formally changed its investment strategy to invest in growth capital investments. On 30 September 2021, the Mobeus Equity Partners LLP VCT investment advisory business was acquired by Gresham House. VCT Tax Benefits for the Investor 82 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders Notice of the Annual General Meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting of Mobeus Income & Growth 2 VCT plc (“the Company”) will be held at 11.00 am on Wednesday, 13 September 2023, at the offices of Shakespeare Martineau LLP, 6th Floor, 60 Gracechurch Street, London, EC3V 0HR, for the purposes of considering and, if thought fit, passing the following resolutions of which resolutions 1 to 8 will be proposed as ordinary resolutions and resolutions 9 and 10 will be proposed as special resolutions. An explanation of the main business to be proposed is included in the Directors’ Report on pages 35 to 37 of this document: 1. To receive and adopt the annual report and financial statements of the Company for the year ended 31 March 2023 (“Annual Report”), together with the auditor’s report thereon. 2. To approve the directors’ annual remuneration report as set out in the Annual Report. 3. To approve the Company’s remuneration policy as set out in the Annual Report. 4. To re-elect Ian Blackburn as a director of the Company. 5. To re-elect Sally Duckworth as a director of the Company. 6. To elect Sarah Clark as a director of the Company. 7. To re-appoint BDO LLP of 55 Baker Street, London W1U 7EU, as auditor of the Company until the conclusion of the next general meeting at which accounts are laid before the Company and to authorise the directors to determine the remuneration of the auditor. 8. That, in substitution for any existing authorities, the directors of the Company be and hereby are generally and unconditionally authorised pursuant to section 551 of the Companies Act 2006 (“the Act”) to exercise all the powers of the Company to allot Ordinary shares of 1 penny each in the capital of the Company (“Shares”) and to grant rights to subscribe for, or convert, any security into Shares (“Rights”) up to an aggregate nominal value of £328,123, provided that the authority conferred by this resolution shall (unless renewed, varied or revoked by the Company in general meeting) expire on the date falling fifteen months after the passing of this resolution or, if earlier, at the conclusion of the annual general meeting of the Company to be held in 2024, but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements which would or might require Shares to be allotted or Rights to be granted after such expiry and the directors of the Company shall be entitled to allot Shares or grant Rights pursuant to any such offers or agreements as if the authority conferred by this resolution had not expired. 9. That, subject to the passing of resolution 8 set out in this notice and in substitution for any existing authorities, the Directors of the Company be and hereby are empowered in accordance with sections 570 and 573 of the Act to allot or make offers or agreements to allot equity securities (as defined in section 560(1) of the Act) for cash, pursuant to the authority conferred upon them by resolution 8 set out in this notice, or by way of a sale of treasury shares, as if section 561(1) of the Act did not apply to any such sale or allotment, provided that the power conferred by this resolution shall be limited to the allotment of equity securities: (i) with an aggregate nominal value of up to, but not exceeding, £98,437 of the issued share capital of the Company from time to time in connection with offer(s) for subscription; and (ii) otherwise than pursuant to sub-paragraph (i) above, with an aggregate nominal value of up to 10% of the issued share capital from time to time, in each case where the proceeds of the allotment may be used, in whole or in part, to purchase the Company’s Shares in the market and provided that this authority shall (unless renewed, varied or revoked by the Company in general meeting) expire on the date falling fifteen months after the passing of this resolution or, if earlier, on the conclusion of the annual general meeting of the Company to be held in 2024, except that the Company may, before the expiry of this authority, make offers or agreements which would or might require equity securities to be allotted after such expiry and the directors of the Company may allot equity securities in pursuance of such offers or agreements as if the power conferred by this resolution had not expired. 10. That, in substitution for any existing authorities, the Company be and hereby is authorised pursuant to and accordance with section 701 of the Act to make one or more market purchases (within the meaning of section 693(4) of the Act) of its own Shares provided that: (i) the aggregate number of Shares which may be purchased shall not exceed 14,755,712 or, if lower, such number of Shares (rounded down to the nearest whole Share) as shall equal 14.99% of the Shares in issue at the date of passing of this resolution; (ii) the minimum price which may be paid for a Share is 1 penny (the nominal value thereof); (iii) the maximum price which may be paid for a Share (excluding expenses) shall be the higher of (a) an amount equal to 5% above the average of the middle market quotations for a Share in the Company taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the Share is contracted to be purchased and (b) the amount stipulated in Article 5(6) of the Market Abuse Regulation (EU) 596/2014 (as such Regulation forms part of UK law and as amended); (iv) the authority conferred by this resolution shall (unless renewed, varied or revoked by the Company in general meeting) expire on the date falling fifteen months after the passing of this resolution or, if earlier, on the conclusion of the annual general meeting of the Company to be held in 2024; and (v) the Company may make a contract or contracts to purchase its own Shares under the authority hereby conferred prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such authority and may make a purchase of its own Shares in pursuance of any such contract. BY ORDER OF THE BOARD Registered Office Gresham House Asset Management Limited 5 New Street Square Company Secretary London EC4A 3TW Dated: 12 July 2023 83 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders Notes: The following Notes explain your general rights as a Shareholder and your right to attend and vote at this Meeting or to appoint someone else to vote on your behalf. A webcast of the Meeting will also be available and details of how to join the webcast will be shown on the Company’s website. If possible, Shareholders intending to join the Meeting by means of the webcast (which would be as an attendee only) are requested to join at least ten minutes prior to the commencement of the Meeting at 11.00 am on Wednesday, 13 September 2023. 1. A member is entitled to attend, speak and vote at the Meeting in person or to appoint one or more other persons as their proxy to exercise all or any of his rights on his behalf. Further details of how to appoint a proxy, and the rights of proxies, are given in the Notes below. Where a member intends to join the Meeting by means of the webcast, they shall be permitted to ask questions at the Meeting but shall not be entitled to vote on resolutions at the Meeting (and are, therefore, encouraged to submit their votes by way of proxy). Note 16 below will apply to those who join the meeting (which would be in attendance only) by means of the webcast. 2. To be entitled to attend the Meeting (and for the purpose of the determination by the Company of the number of votes they may cast) and to be able to lodge your proxy votes, Shareholders must be registered in the Register of Members of the Company at close of trading on 11 September 2023. Changes to the Register of Members after the relevant deadline shall be disregarded in determining the rights of any person to attend the Meeting and/or virtual meeting and vote by proxy. 3. In order for a proxy appointment to be valid it must be received by Link Group, Central Square, 29 Wellington Street, Leeds LS1 4DL by 11.00 am on 11 September 2023. 4. A Shareholder may appoint more than one proxy in relation to the Meeting provided that each proxy is appointed to exercise the rights attached to a different ordinary share or ordinary shares held by that Shareholder. A proxy need not be a Shareholder of the Company. 5. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Company’s Register of Members in respect of the joint holding (the first named being the most senior). 6. A form of proxy for use in connection with the Meeting is enclosed with the document of which this Notice forms part. If you do not have a form of proxy and would like a copy, please contact the Company’s registrar, Link Group at Central Square, 29 Wellington Street, Leeds LS1 4DL (“Registrar”), or on 0371 664 0391. Completion and return of a form of proxy form will not legally prevent a Shareholder from attending and voting at the Meeting in person, or from joining the Meeting (which would be as an attendee only) by means of the webcast. The Company requests all Shareholders to vote by proxy on the resolutions set out in this Notice as soon as possible. 7. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at their discretion. Your proxy will vote (or abstain from voting) as they think fits in relation to any other matter which is put before the Meeting. 8. You can also vote either: • by logging on to www.signalshares.com and following the instructions; • if you need help with voting online, please contact our Registrar, Link Group, on 0371 664 0391 if calling from the UK, or +44 (0) 371 664 0391 if calling from outside of the UK, or email Link at shareholderenquiries@linkgroup.co.uk. • in the case of CREST members, by utilising the CREST electronic proxy appointment service in accordance with the procedures set out below. We strongly recommend voting electronically at www.signalshares.com as your vote will automatically be counted. Given the current situation, with many people working from home and delays in the postal system, there is a risk that your vote may not be counted if you send a paper proxy. 9. If you return more than one proxy appointment, the appointment received last by the Registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of use carefully. Electronic communication facilities are open to all Shareholders and those who use them will not be disadvantaged. 10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the Meeting (and any adjournment of the Meeting) by using the procedures described in the CREST Manual (available from www.euroclear.com/site/ public/EUI). CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf. 11. In order for a proxy appointment or instruction made by means of CREST to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’) must be properly authenticated in accordance with Euroclear UK & International Limited’s specifications and must contain the information required for such instructions, as described in the CREST Manual. The message must be transmitted so as to be received by the issuer’s agent (ID RA10) by 11.00 am on 11 September 2023. For this purpose, the time of receipt will be taken to mean the time (as determined by the timestamp applied to the message by the CREST application host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time, any change of instructions to proxies appointed through CREST should be communicated to the appointee through other means. 12. CREST members and, where applicable, their CREST sponsors or voting service providers should note that Euroclear UK & International Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider(s), to procure that their CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. 84 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders 13. Any corporation which is a Shareholder can appoint one or more corporate representatives who may exercise on its behalf all of its powers as a Shareholder provided that no more than one corporate representative exercises powers in relation to the same shares. 14. As at 11 July 2023 (being the latest practicable business day prior to the publication of this Notice), the Company’s ordinary issued share capital consists of 98,437,045 ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 11 July 2023 are 98,437,045. 15. Under Section 527 of the Companies Act 2006, Shareholders meeting the threshold requirements set out in that section have the right to require the Company to publish on a website a statement setting out any matter relating to: (i) the audit of the Company’s Financial Statements (including the Auditor’s Report and the conduct of the audit) that are to be laid before the Meeting; or (ii) any circumstances connected with an auditor of the Company ceasing to hold office since the previous meeting at which annual Financial Statements and reports were laid in accordance with Section 437 of the Companies Act 2006 (in each case) that the Shareholders propose to raise at the relevant meeting. The Company may not require the Shareholders requesting any such website publication to pay its expenses in complying with Sections 527 or 528 of the Companies Act 2006. Where the Company is required to place a statement on a website under Section 527 of the Companies Act 2006, it must forward the statement to the Company’s auditor not later than the time when it makes the statement available on the website. The business which may be dealt with at the Meeting for the relevant financial year includes any statement that the Company has been required under Section 527 of the Companies Act 2006 to publish on a website. 16. Any Shareholder attending the Meeting has the right to ask questions. Any Shareholder may submit questions in relation to the business to be transacted at the Meeting via email to: AGM@greshamhouse.com by 11 September 2023. The Company must cause to be answered any such question relating to the business being dealt with at the Meeting but no such answer need be given if: (a) to do so would interfere unduly with the preparation for the Meeting or involve the disclosure of confidential information; (b) the answer has already been given on a website in the form of an answer to a question; or (c) it is undesirable in the interests of the Company or the good order of the Meeting that the question be answered. 17. Copies of the directors’ letters of appointment will be available for inspection at the Company’s registered office during normal business hours on any weekday (excluding Saturdays, Sundays and public holidays) and will also be available for inspection at the place of the Meeting for at least 15 minutes before and during the Meeting. 18. You may not use any electronic address (within the meaning of Section 333(4) of the Companies Act 2006) provided in either this Notice or any related documents to communicate with the Company for any purposes other than those expressly stated. A copy of this Notice, and other information required by Section 311A of the Companies Act 2006, can be found on the Company’s website at www.mig2vct.co.uk Notice of the Annual General Meeting 85 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders Glossary of terms Alternative performance measure (“APM”) A financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the Company’s financial reporting framework. These APMs tend to be industry specific terms which help Shareholders to understand and assess the Company’s progress. A number of terms contained within this Glossary have been identified as APMs. Cumulative dividends paid (APM) The total amount of dividend distributions by the Company over the time period specified. A list of all dividends paid since launch of the Company is shown on the Company’s website www.mig2vct.co.uk. Dividends paid in the year and dividends paid/payable in respect of the year are shown in Note 6. Cumulative total return (APM) Cumulative total return per share comprises the NAV per share (NAV basis) or the mid-market price per share (Share price basis), plus cumulative dividends paid since launch of the existing share class in 2005. Internal Rate of Return (“IRR”) The internal rate of return is the annual discount rate that equates the original investment cost with the value of subsequent cash flows (such as receipts/dividends or further investment) and the latest valuation/exit proceeds or net asset value. Generally speaking, the higher an investment’s IRR, the more successful it is. Net asset value or NAV The value of the VCT’s total assets less its total liabilities. It is equal to the total equity Shareholders’ funds. Net asset value per share or NAV per share The net asset value per share is calculated as total equity Shareholders’ funds divided by the number of Ordinary shares in issue at the year-end. NAV Total Return (APM) This measure combines two types of returns received by Shareholders. Firstly, as income in the form of dividends and secondly, as capital movements (net asset value) of the value of the Fund. It is a performance measure that adjusts for dividends that have been paid in a period or year. This allows Shareholders to assess the returns they have received both in terms of the performance of the Company but also including dividends they have received from the Company which no longer form part of the Company’s assets. It is calculated as the percentage return achieved after taking the closing NAV per share and adding dividends paid in the year and dividing the total by the opening NAV per share. The Directors feel that this is the most meaningful method for Shareholders to assess the performance of the Company. Ongoing charges ratio (APM) This figure, calculated using the AIC recommended methodology, shows Shareholders the annual percentage reduction in shareholder returns as a result of recurring operational expenses, assuming markets remain static and the portfolio is not traded. Although the Ongoing Charges figure primarily is based upon historic information, it provides Shareholders with an indication of the likely level of costs that will be incurred in managing the Company in the future. This is calculated by dividing the Investment Adviser’s fees of £1,582,438 and running costs of £485,231 (per Notes 4a and 4d on pages 59 and 61), the latter being reduced by IFA trail commission and one-off fees, by the average net assets throughout the year of £70,272,290. Realised gains/(losses) in the year This is the profit or loss that arises following the full or partial disposal of a holding in a portfolio company. It is calculated by deducting the value of the holding as at the previous year-end from the proceeds received in respect of such disposal. Share Price Total Return (APM) As NAV Total Return, but the Company’s mid-market share price is used in place of NAV. This measure more accurately reflects the actual return a Shareholder will have earned, were they to sell their shares at the year/period end date. It includes the impact of any discounts or premiums at which the share price trades compared to the underlying net asset values of the Company. If the shares trade at a discount, the returns could be less than the NAV Total Return, but if trading at a premium, returns could be higher than the NAV Total Return. 86 Mobeus Income & Growth 2 VCT plc Annual Report & Financial Statements 2023 Information for Shareholders Corporate Information Directors (Non-executive) Ian Blackburn Sally Duckworth Sarah Clark Investment Adviser, Company Secretary and Administrator Gresham House Asset Management Limited 80 Cheapside London EC2V 6EE Tel: +44(0) 20 7382 0999 info@greshamhouse.com www.greshamhouse.com Company’s Registered Office and Head Office 5 New Street Square London EC4A 3TW Company Registration Number 03946235 LEI No: 213000LY62XLI1B4VX35 Website www.mig2vct.co.uk E-mail mobeusvcts@greshamhouse.com Independent Auditor BDO LLP 55 Baker Street London W1U 7EU Solicitors Shakespeare Martineau LLP 60 Gracechurch Street London EC3V 0HR Corporate Brokers Panmure Gordon (UK) Limited 40 Gracechurch Street London EC3V 0BT Receiving Agent The City Partnership (UK) Limited The Mending Rooms Park Valley Mills Meltham Road Huddersfield HD4 7BH Registrar Link Group plc Central Square 29 Wellington Street Leeds LS1 4DL VCT Status Adviser Philip Hare & Associates LLP 6 Snow Hill London EC1A 2AY Sponsor Howard Kennedy Corporate Services LLP 1 London Bridge Walk London SE1 9BG Shareholder Portal: www.signalshares.com Tel: +44 (0)371 664 0324 Bankers National Westminster Bank plc City of London Office PO Box 12258 1 Princes Street London EC2R 8PA Mobeus Income & Growth 2 VCT plc