Half Yearly Report

Maven Income and Growth VCT 2 PLC

Interim management report for the six months ended 31 July 2011 (unaudited)

The Directors announce the unaudited Interim Management Report for the six months ended 31 July 2011.

Market commentary

Global financial markets were relatively stable during the six months to 31 July 2011, albeit against a backdrop of political uncertainty in the Middle East and a fragile economic environment in Europe. However, in early August, markets experienced a period of significant correction in light of fresh concerns over levels of sovereign debt and the decision by Standard & Poor's to downgrade the USA's credit rating. It is expected that this renewed market volatility will further dampen investor confidence in what continues to be a low growth economy, with persistent concerns over stubbornly low interest rates and poor levels of consumer spending.

The UK small business sector is significantly exposed to the wider economic conditions and the threat of another recession, with businesses concerned about the continued risk of short to medium term increases in interest rates and inflation, and the resultant impact on consumers. However the majority of your Company's private company assets are trading well, operating cash generative business models and have only modest levels of external debt, factors which contribute significantly to mitigating the risk of corporate failure in a challenging business environment. The Manager retains a cautiously positive view of the medium term prospects for its target private equity market, and believes that well managed generalist VCTs will continue to benefit from attractive later-stage opportunities over the coming months.

Highlights for the six months:

·; net asset value (NAV) total return of 75.72p per share at 31 July 2011, up 4.0% over the period;

·; NAV of 57.6p per share as at 31 July 2011;

·; final dividend of 1.5p per share paid 24 June 2011;

·; interim dividend of 1.5p per share declared for payment on 11 November 2011;

·; three substantial new investments during the period; and

·; disposal of Walker Technical Resources for a gross return of 2.9x cost.

Dividends

The Board has declared an interim dividend of 1.5p per share, comprising 1.0p of revenue and 0.5p of capital, to be paid on 11 November 2011 to Shareholders on the Register at 14 October 2011. The Company paid dividends totalling 2.5p per share in respect of the year ended 31 January 2011 which represents a tax-free yield of 3.1% per annum on the net cost of investment after initial tax relief and is equivalent to receiving 4.2% gross from a taxable UK equity for a 40% tax payer. A dividend of 2.5p, based on the mid-market price of 43.12p at 31 July 2011, would give an annualised tax-free yield of 5.8% paid and is equivalent to 7.7% from a UK equity for a 40% rate tax payer.

Principal risks and uncertainties

The Board has reviewed the principal risks and uncertainties facing the Company for the second half of its financial year. These are unchanged from those it faced at the start of the year, which are set out in the Annual Report, and are the risks involved in investment in small and unquoted companies. In order to reduce the exposure to investment risk, the Company has invested in a broadly based portfolio of established UK private company investments.

The Company is also required to comply with the HMRC 70% qualifying test, and other tests, on a continuous basis. The Board regularly reviews the VCT qualifying status of the portfolio and is pleased to confirm that all criteria continue to be met.

Manager's strategy

The Manager's focus is on driving Shareholder value through the continued growth of a diversified portfolio of established and high yielding private companies with strong balance sheets and robust business models. The aim is to generate a sustainable income stream from these assets and ultimately achieve profitable exits. In tandem with the continued selective realisation of AIM assets, this strategy should continue to provide both a revenue base capable of supporting regular dividends and the liquidity required to fund further income generating later-stage investments.

Maven deal teams operate from regional offices in Glasgow, London, Aberdeen, Edinburgh, Manchester and Birmingham and continue to see a high level of attractive investment opportunities across the country, as growth businesses seek out alternative sources of funding in the face of the continued scarcity of bank finance. The Maven investment process is highly selective and employs strict quality and yield generation criteria in reviewing every potential investment. During 2010, Maven executives saw 382 private company transactions across the UK and invested ultimately in seven later-stage companies.

Investment activity

A total of £1,341,000 was invested during the six month period ended 31 July 2011, including three new private company assets and six follow-on investments where additional funding has helped to support the growth of existing portfolio companies.

The three new private company investments added to the portfolio during the period under review were:

·; Glacier Energy Services, an oil equipment services group with two specialist trading subsidiaries, Roberts Pipeline Machining and Wellclad. Roberts designs and manufactures on-site portable cutting machines for blue-chip oil & gas clients. Wellclad provides services to the European offshore and subsea equipment market. Glacier will focus on growth within its core UK market as well as promoting its technologies to the international energy services market.

·; Space Student Living, a provider of contracted management services across the student housing sector, offering a fully integrated accommodation solution covering a range of activities from the initial identification of sites, through overseeing the planning and development phases, to ultimately managing the accommodation under long term contract.

·; Tosca Penta Exodus, a new company established by Penta Capital to implement a buy-and-build strategy in the business telecommunications service sector based on the converging of mobile, fixed-line, broadband, internet and IT technology businesses. Penta is an established private equity firm with which Maven previously co-invested in the successful 2010 management buy-out of esure.

Details of all investments completed during the period are noted in the table below:

Maven Income and Growth VCT 2 has co-invested in the four new transactions with Maven Income and Growth VCT, Maven Income and Growth VCT 3, Maven Income and Growth VCT 4, Maven Income and Growth VCT 5 (formerly Bluehone AiM VCT2), Talisman First Venture Capital Trust and Ortus VCT, and is expected to continue to co-invest with these as well as other clients of the Manager. The advantage of this ability to co-invest with other VCTs is that the Company is able to underwrite a wider range and larger size of transaction than would be the case on a stand alone basis.

Portfolio developments

Most of the private companies in the portfolio have traded at or ahead of budget throughout the six month period, and in a number of cases it has been appropriate to increase valuations accordingly. At the period end, the portfolio held 41 private company and 17 AIM or PLUS quoted investments, at a total cost of £12.8 million and with a VCT qualifying level of 76%.

There was one notable private company exit completed during the period, with the investment in Dalglen 1150 (Walker Technical Resources) being realised during July. Total proceeds over the life of the investment were £630,000 representing an overall 2.9x gross return on the initial investment cost. The exit was via a secondary buy-out funded by Gresham Private Equity, just two years after Maven originally led the management buy-in in June 2009. Walker, which provides some of the most advanced composite repairs technology available for the global oil & gas industry, has consistently traded ahead of budget and has more than doubled earnings since the initial investment.

In line with the strategy of reducing exposure to the quoted markets in favour of profitable later-stage private companies, the Manager has continued to pursue the structured realisation of the AIM portfolio and has taken the opportunity to sell holdings where either there was limited future upside or sales were enforced by other corporate events.

The table below gives details of realisations during the reporting period:

Three AIM quoted securities were purchased by a closed ended investment company established to acquire investments which were underperforming or trading below entry price. These transactions incurred losses of £245,000 (cost £290,000). The overall net loss was incurred after the impact of disposals where Maven had lost confidence in a specific holding or a mandatory sale process or bid event was in evidence. One company was struck off the Register during the period, resulting in a loss of £350,000 being realised, but there was no related impact on the NAV as a full provision had been made in earlier periods.

Share capital

In the period to 29 April 2011 the Manager raised further funds for the Company through the second Maven Linked VCT Offer. The maximum amount which the Company could raise was restricted to 10% of its listed share capital, thereby avoiding the higher costs associated with issuing a full prospectus, and allows the Company to spread the annual running costs over a larger asset base. The net proceeds of the top-up offer can be used for a variety of purposes and effectively preserve an equivalent sum of the valuable 'old money' pool, which operates under more advantageous VCT regulations, for investment in new later-stage private company opportunities. An additional £656,000 was raised for the Company through the linked offer, at a cost of only 5.0% of total funds raised, and 1,244,988 new Ordinary Shares were issued. 

Also during the period under review, the Company bought back 311,000 shares for cancellation at an average price of 41.4p per share.

Outlook

The investee company portfolio has been considerably improved over the past few years, and significant diversification has been achieved by investing in a wide range of later-stage and income producing private companies. The Manager believes that continuing this strategy will optimise returns for VCT investors and is committed to maintaining and, where possible, improving the flow of tax-free dividends to Shareholders.

Maven Capital Partners UK LLP

Manager

23 September 2011

Maven Income and Growth VCT 2 PLC

Notes to the Financial Statements

1. Accounting policies

The financial information for the six months ended 31 July 2011 and the six months ended 31 July 2010 comprises non-statutory accounts within the meaning of the Companies Act 2006. The financial information contained in this report has been prepared on the basis of the accounting policies set out in the Annual Report and Financial Statements for the year ended 31 January 2011, which have been filed at Companies House and which contained an Auditor's Report which was not qualified and did not contain a statement under S498(2) or S498(3) of the Companies Act 2006.

2. Investment management fees

During the six month period ended 31 July 2010, the Board accepted an offer of £217,019 as part settlement of the refund of VAT paid on management fees during the period from 1 October 2005 to 1 October 2008. Further amounts may be recoverable, but these have not been recognised due to the uncertainty over the quantum and timing of receipt.

3. Movement in reserves

4. Returns per Ordinary Share

The returns per Ordinary Share are based on the following figures:

Directors' responsibility statement

The Directors confirm that, to the best of their knowledge:

·; the Financial Statements for the six months ended 31 July 2011 have been prepared in accordance with applicable accounting standards and with the Statement of Recommended Practice "Financial Statements of Investment Trust Companies" issued in January 2009;

·; the Interim Management Report includes a fair review of the information required by DTR 4.2.7R in relation to the indication of important events during the first six months, and of the principal risks and uncertainties facing the Company during the second six months, of the year ending 31 January 2012; and

·; the Interim Management Report includes adequate disclosure of the information required by DTR 4.2.8R in relation to related party transactions and any changes therein.

Other information

The NAV per Ordinary Share has been calculated using the number of Ordinary Shares in issue at 31 July 2011 of 24,768,282.

A summary of investment changes for the six months under review and an investment portfolio summary as at 31 July 2011 are included above.

A full copy of the Interim Report and Financial Statements will be printed and issued to Shareholders.

Copies of this announcement will be available to the public at the office of Maven Capital Partners UK LLP, 149 St Vincent Street, Glasgow G2 5NW and at the registered office of the Company, 9-13 St. Andrew Street, London EC4A 3AF.

By order of the Board

Maven Capital Partners UK LLP

Secretary

23 September 2011