Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Annual report and

accounts for the

year ended

30 November 2022

Company number: 05528235

For UK investors only

Octopus AIM VCT 2 plc

Contents

Financial summary and key dates 1

Strategic report

• Chair’s statement 2

• Investment Manager’s review 4

• The Investment Manager 17

• Section 172(1) statement 19

• Business review 21

• Risk and risk management 25

Details of Directors 28

Directors’ report 29

Corporate governance report 33

Audit Committee report 37

Directors’ remuneration report 39

Directors’ responsibility statement 42

Independent auditor’s report 43

Income statement 49

Balance sheet 50

Statement of changes in equity 51

Cash flow statement 52

Notes to the financial statements 53

Information and contact details 68

Glossary of terms 72

Directors and advisers 73

Notice of Annual General Meeting 74

Octopus AIM VCT 2 plc (the ‘Company’) is a venture capital

trust (‘VCT’) which aims to provide shareholders with attractive

tax-free dividends and long-term capital growth by investing

in a diverse portfolio of predominantly AIM-traded companies.

The Company is managed by Octopus Investments Limited

(‘Octopus’ or the ‘Investment Manager’).

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

30 November 2022

30 November 2021

Net assets (£’000)

101,794

134,854

(Loss)/profit after tax (£’000)

(36,695)

18,088

Net asset value (NAV) per share (p)

61.6

90.8

Dividends per share paid in year (p)

4.2

5.9

Total return (%)

(27.5)

16.6

Final dividend proposed (p)

2.3

2.1

Ongoing Charges (%)

2.2

1.8

Total return is an alternative performance measure calculated as movement in NAV per share in the period plus dividends paid in the period, divided by the NAV per share

at the beginning of the period.

Subject to shareholder approval at the Annual General Meeting, the proposed final dividend will be paid on 25 May 2023 to shareholders on the register on 5 May 2023.

Ongoing Charges is an alternative performance measure calculated using the AIC recommended methodology, refer to page 24 for commentary on the movement.

Definitions of key terms and alternative performance measures shown above and throughout this report are shown in the Glossary

of Terms on page 72.

Financial summary

Key dates

Shareholder event 19 April 2023

Annual General Meeting 26 April 2023

Final dividend payment date 25 May 2023

Half-yearly results to 31 May 2023 announced August 2023

Annual results to 30 November 2023 announced March 2024

Octopus AIM VCT 2 plc Annual report 2022

Chair’s statement

Introduction

Firstly, I would like to welcome all new shareholders who have

joined us in the past year.

The year to 30 November 2022 has been an extremely challenging

period for stock markets in general, and smaller companies in

particular, with the AIM Index recording its worst performance

since the financial crisis of 2008. Further, while the portfolio

benefited during the pandemic from its substantial exposure to

technology and healthcare stocks, the period under review saw a

significant reversal of these trends.

The year started nervously as the Omicron variant stalled the

opening up of the economy both here and abroad, intensifying

existing pressures on supply chains and the labour market which

had started to emerge in 2021. Inflation, already perceived as

a problem, was stoked by the dramatic increase in European

energy prices as a result of the Russian invasion of Ukraine in

February. Interest rates, which started the period at 0.1%, had

risen to 3% by the end of November. Political upheaval which

resulted in two changes of Prime Minister did not help, with the

autumn mini-budget pushing the market to new lows in October

before it started to recover towards the end of 2022. Against

this background, the net asset value (NAV), which had already

fallen by 20.0% on a total return basis in the first half of the year,

declined further, ending the year 27.5% behind on a total return

basis, in line with the AIM Index.

In the year under review AIM raised £2.3 billion of new capital,

a substantial decrease on the £8.7 billion raised in the previous

year, reflecting volatile market conditions. After the previous year,

when the number of new issues had recovered very strongly, the

majority of fundraisings in 2022 were for existing AIM companies

seeking further capital. Your Investment Manager made

£6.3 million of new qualifying investments, down from a record

£11.5 million the previous year. Although both economic and

geo-political risks remain, market sentiment has improved more

recently, with market commentators and economists taking

a more optimistic stance on inflation and interest rates. Your

Investment Manager reports a pipeline of potential new issues

expected to come to the market in 2023.

Performance

The NAV on 30 November 2022 was 61.6p per share, a sharp

decline from the NAV of 90.8p per share reported at 30 November

2021. Adding back the 4.2p of dividends paid in the year, to adjust

the year-end NAV to 65.8p, gives a total return decrease of 27.5%.

In the same year, the FTSE AIM All-Share Index fell by 27.5%, the

FTSE SmallCap (excluding investment companies) Index fell by

13.5% and the FTSE All-Share Index rose by 6.5%, all on a total

return basis.

Once again stock-specific factors had a significant impact

on performance, and these are covered in more detail in the

Investment Manager’s Review. In addition, as inflation and

interest rates rose, stock market volatility increased with a

marked rotation away from more highly rated growth stocks. This

favoured larger companies with the FTSE All-Share Index helped

to a positive return by its concentration of large energy stocks

and pharmaceutical companies at the top of the index. Appetite

for risk waned still further with the result that some of the earlier

stage companies exposed to the new economy (emerging,

high-growth industries expected to boost economic growth and

productivity), saw their share prices collapse regardless of any

positive news flow. The purpose of a VCT is to provide capital for

small growth companies and those companies exposed to the

new economy make up a significant proportion of our investment

portfolio and so these trends worked against us in the year

under review.

Dividends

In November 2022 an interim dividend of 2.1p was paid to all

shareholders. The Board is recommending a final dividend

in respect of the year to 30 November 2022 of 2.3p per share,

totalling 4.4p in respect of the year, which is a 5% yield on the

prior year closing share price of 88.0p, all paid from special

distributable reserves. Subject to the approval of shareholders at

the AGM, the dividend will be paid on 25 May 2023 to shareholders

on the register on 5 May 2023. It remains the Board’s intention to

maintain a minimum annual dividend payment of 3.6p per share

or a 5% yield based on the prior year-end share price, whichever

is greater. This will usually be paid in two instalments during

each year.

Shareholders are encouraged to ensure that the details held for

them by the registrar remain accurate and to check whether they

have received all dividends payable to them. This is particularly

important for those who move house or change their bank

account or email address. We are aware that some dividends

remain unclaimed by shareholders, so if you believe you are

impacted by this, please contact our registrar, Computershare,

at the details provided on page 73.

Cancellation of share premium account

At the last Annual General Meeting, shareholders voted to cancel

share premium to increase the pool of distributable reserves by

the amount of £54.6 million. This is a regular occurrence to enable

the continued payment of dividends and buyback of shares.

Board changes

During the year we welcomed Brad Ormsby to the Board and said

goodbye to Alastair Ritchie. We thank him for his years of service

to the Board, and wish him well in his retirement.

Dividend reinvestment scheme

In common with a number of other VCTs, the Company has

established a dividend reinvestment scheme (DRIS) following

approval at the AGM in 2014. Some shareholders have already

taken advantage of this opportunity. For investors who do

not need income, but value the additional tax relief on their

reinvested dividends, this is an attractive scheme and I hope

that more shareholders will find it useful. Over the course of the

year 1,829,150 new shares have been issued under this scheme,

returning £1.2 million to the Company. The final dividend referred

to above will be eligible for the DRIS.

Octopus AIM VCT 2 plc Annual report 2022

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Share buybacks

During the year to 30 November 2022 the Company continued

to buy back shares in the market from selling shareholders and

purchased 4,494,597 Ordinary shares for a total consideration of

£3.1 million. We have maintained a discount of approximately

4.5% to NAV (equating to up to a 5% discount to the selling

shareholder after costs), which the Board monitors and intends

to retain as a policy which fairly balances the interests of both

remaining and selling shareholders. Buybacks remain an

essential practice for VCTs, as providing a means of selling is an

important part of the initial investment decision and has enabled

the Company to grow. As such, I hope you will all support the

appropriate resolution at the AGM.

Share issues

During the year the remaining balance of the fundraise launched

in September 2021 was allotted in April 2022 for a post tax year

end allotment when a further 106,610 shares were issued, raising

£0.1 million after costs.

On 22 September 2022, a prospectus offer was launched

alongside Octopus AIM VCT plc to raise a combined total of

up to £20 million, with a £10 million over-allotment facility. This

prospectus closed to further applications on 13 October 2022.

19,104,227 shares were issued under that fundraise, raising

£11.6 million after costs. During the current year a total of

21,086,872 shares were issued, raising £12.9 million after costs.

Liquidity

The issue of liquidity within investment funds has remained a

topic of discussion this year. Shareholders may be interested to

know that at the year end 29.6% of the Company’s net assets

were held in cash or collective investment funds, providing short-

term liquidity, 63.1% in individual quoted shares and 7.9% was

held in unquoted single company investments. Shareholders

should be aware that a proportion of the quoted securities may

have limited liquidity owing to the size of the portfolio company

and the overall proportion held by the Company.

VCT status

Shoosmiths LLP provide the Board and Investment Manager with

advice concerning continuing compliance with HMRC regulations

for VCTs. The Board has been advised that the Company is

in compliance with the conditions laid down by HMRC for

maintaining approval as a VCT. From 1 December 2020 a key

requirement is to maintain at least an 80% qualifying investment

level, up from the previous level of 70%. As at 30 November 2022,

87.3% of the Company’s portfolio was in qualifying investments.

Annual General Meeting and shareholder event

The Annual General Meeting (‘AGM’) will take place on 26 April

2023 at 12.00pm. Further information can be found in the Notice

of Annual General Meeting on pages 74 and 75. We will also be

hosting a virtual shareholder event prior to the AGM, on 19 April

2023 at 1.00pm. This will enable shareholders to receive an update

from the Investment Manager and provide an opportunity for

questions to the Board and the Investment Manager.

There will not be a presentation from the Investment Manager at

the AGM itself. Formal notices will be sent to shareholders by their

preferred method (email or post) and shareholders are encouraged

to submit their votes by proxy. We always welcome questions

from our shareholders at the AGM. Please send these via email

to AIMVCT2AGM@octopusinvestments.com by 5.00pm on

21 April 2023. At the AGM a resolution will be proposed to extend

the life of the Company.

If your shares are held through a nominee account, formal

notices will be sent to your nominee. However, further details on

any shareholder event, including how to register can be found at

www.octopusinvestments.com.

Outlook

There has been a noticeable shift in investor risk appetite as

we have moved into 2023 and share prices are now reacting

more positively to encouraging news flow. Recession fears have

eased, with most economists suggesting a shorter and shallower

downturn than was being predicted three months ago. The labour

market remains relatively tight, but corporate earnings continue

to hold up better than many analysts were predicting, reinforcing

the Investment Manager’s belief that any further impact on

corporate earnings is largely reflected in current depressed share

prices. Central to the recovery in share prices is the expectation

that the interest rate cycle will peak during the first half of 2023,

with two further increases likely before the summer.

The portfolio contains 87 holdings across a range of sectors with

exposure to some exciting new technologies in the environmental

and healthcare sectors. Many of these are still well funded,

although the challenge of raising further capital in the current

market environment cannot be dismissed. The balance of

the portfolio towards profitable companies remains, and the

Investment Manager expects to find good opportunities to invest

newly raised cash at attractive valuations.

Keith Mullins

Chair

10 March 2023

Octopus AIM VCT 2 plc Annual report 2022

Introduction

The increased stock market volatility that we had begun to see this time last year intensified as the year under review progressed. After

a long period when markets had been driven by growth and momentum, this was the year that investors rotated into less highly rated

sectors such as banks and energy as protection against rising inflation and the prospect of rather higher interest rates and energy

costs. This caused the retreat of AIM growth stocks which was a key factor in the underperformance against the wider stock market

both of the AIM Index and the Company’s net asset value (NAV) after a very positive two years during the pandemic. In addition,

as appetite for risk faded, some of the earlier stage investments in the VCTs suffered de-ratings. By the end of the period AIM shares

were valued at levels previously visited around the time of the financial crisis. Since the period end some confidence has been restored,

helped by some encouraging January trading updates.

Against this background, AIM fundraisings slowed from previously high levels as companies looking to float paused in response to lower

valuation expectations for their businesses. However, AIM continued to raise capital for its existing members which enabled many

early-stage companies to fund the next stage of their development.

The Alternative Investment Market

AIM was by far the worst performing UK index in 2022. In the 12 months to November 2022 the AIM Index fell by 27.5% compared with

a decrease of 13.5% for the FTSE SmallCap index (excluding investment companies) and a rise of 6.5% for the FTSE All-Share Index all

on a total return basis. Part of the reason for this was the very small number of stocks that contributed to the positive performance of

the larger company indices – without the top ten holdings in the market by size the return of the rest of the market would have been

a 10.4% fall and those ten holdings were mostly large pharmaceutical companies and energy stocks. AIM has no natural exposure

to those types of stocks but it does have a high exposure to growth stocks in the software, technology and healthcare sectors. This

counted against it as sentiment moved against highly rated growth stocks as inflationary pressures intensified. The effect was more

pronounced at the larger end of AIM where a narrow band of around 12 large and established growth stocks suffered savage de-ratings.

Although VCTs have additional constraints on what they can invest in, the AIM Index is considered to be the most appropriate broad

equity market index for comparative purposes, given the nature of the underlying investments. The FTSE SmallCap and All-Share

indexes provide wider market context. There were some quite sharp movements away from growth and momentum-driven shares as

investors sought value in more traditional sectors.

The graph below shows total fundraising by AIM companies each month throughout the year to 30 November 2022.

Funds raised on AIM (£m): December 2021-November 2022

200

400

600

800

1,000

1,200

1,400

1,600

NovemberOctoberSeptemberAugustJulyJuneMayAprilMarchFebruaryJanuaryDecember

Year Ended Nov 2022

Year Ended Nov 2021

Source: London Stock Exchange.

Investment Manager’s

review

Octopus AIM VCT 2 plc Annual report 2022

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In the half yearly report we highlighted the success of AIM in

raising new capital for its existing members while highlighting

a more recent drop in activity, particularly new flotations, as a

result of market volatility. The bar chart shows this lull did not

improve in the second half of the year. In the year to 30 November

2022 AIM raised £2.7 billion of new capital for existing companies,

which compares to a figure of £6.8 billion the previous year.

It was disappointing to see AIM raise only £0.3 billion for new

listings, a significant decrease from the figure of £1.9 billion in the

previous year. Anecdotally we are still hearing about a healthy

pipeline of new issues from brokers and we hope that the current

more settled feel to the market gives them confidence to float.

VCTs play a significant part in the funding process and we identify

below the companies we have invested in during the year, which

include many that are developing technologies to help solve the

climate and healthcare problems that face us.

Performance

Adding back the 4.2p of dividends paid in the year, the NAV

total return decreased by 27.5%. This compares with a fall in the

FTSE AIM All-Share Index of 27.5%, a fall in the FTSE SmallCap

(excluding investment companies) of 13.5% and a rise in the FTSE

All-Share Index of 6.5% on a total return basis. It was another year

characterised by individual months of significant market volatility

as investors reacted to unfolding events. The year started with

investors having to confront rising inflationary and interest rate

expectations as global economies responded to unprecedented

growth in demand with all the resulting pressures on supply

chains and labour markets. The invasion of Ukraine by Russia in

February added a steep rise in energy costs with the result that

consensus moved from inflation being transitory to a longer-term

issue. As a consequence, interest rate expectations rose more

rapidly than had previously been anticipated, culminating in a

further spike in rate predictions to levels above 6%, exacerbated

by the political turmoil resulting from the autumn mini-budget.

Against this background, performance in the FTSE All-Share

Index was confined mainly to a very narrow cohort of the largest

energy and pharmaceutical stocks with smaller companies

lagging significantly in contrast to the well-established long-

term trend. This goes some way to explain the extent of the fall

in the NAV in the year as some of the higher-rated growth shares

in the portfolio came under pressure even though the tone of

statements continued to be positive. The earlier stage and very

small companies were also affected by a general reduction in the

risk appetite of investors.

Among the larger, profitable holdings in the portfolio several

were caught by the very savage de-rating of larger AIM growth

stocks in the period caused by poor market sentiment in the face

of sharp rises in interest rates and inflation. GB Group (GBG),

Breedon and Learning Technologies Group were all affected, as

were others such as RWS, Craneware and Next Fifteen although

the impact on the performance of the fund was less for these

and other similarly affected smaller holdings.

The biggest contributor to the negative return in the year was

GBG, a leading global player in identity verification. GBG has

been a long-term successful investment where we have taken

profits in the past and continue to believe it will deliver growth

and positive returns for the VCT in the future. Its share price was

impacted, partly by slower than hoped for growth as some of

the froth came off the digital economy as the Covid effect of

lockdowns waned and partly in reaction to the acquisition of

US-based Acuant, an expensive acquisition albeit with good

long-term strategic benefits. It ended the period on a valuation

multiple well below its historic average and at a level not seen

since the financial crisis. Breedon suffered from worries about the

cost of energy for its cement works and some concerns about

the depth of a recession on its revenues. Fears that Learning

Technologies would see its customers cut back on spending on

employees in the event of a recession also weighed on its share

price. Both of the latter companies produced upgrades to 2022

forecasts as the year progressed, leaving their shares trading

at the bottom end of the longer-term valuation range. EKF

Diagnostics and Animalcare were also significant contributors to

negative returns in the year. EKF’s profits are shrinking back to

pre-Covid levels after a period of significant revenues and profits

from Covid test kits, but it remains a profitable provider of point

of care tests and we expect its shares to recover as profits start to

grow again. Animalcare has found the development and launch

of new animal drugs less easy during lockdowns but remains

focused on invigorating its growth.

The portfolio has very little exposure to the consumer, but where

it does this has hurt performance in the year. Gear4Music had

enjoyed a very strong period of trading during the pandemic

when demand for musical instruments soared and high street

competitors were closed. This masked some of the underlying

challenges posed by Brexit and supply problems in China, which

impacted profits and margins that the management has spent

the past two years working through. It should be able to show

some of the benefits of this process in 2023. Sosandar has

continued to achieve successive profitable months in 2023 as

well as significant growth in its sales through Next, M&S and

John Lewis. None of this progress was reflected in the share

price performance.

TPX Impact and Trackwise Designs were two very disappointing

performers in the year. TPX Impact had been growing strongly

as a result of demand from various government departments

for its digital transformation expertise and the efficiencies to be

gained from it. However, it was caught by a shortage of skilled

technical labour which delayed contract delivery and eroded

margins as it had to fill the gap with outside contractors. A new

chief executive is now in charge and some of the labour pressures

have eased, giving us confidence that the business can recover.

Demand from customers remains good and the business is well

funded. The situation at Trackwise Designs was more serious. It

had built a new factory to fulfil a very large contract from electric

vehicle manufacturer Arrival. There were delays to the contract

Octopus AIM VCT 2 plc Annual report 2022

which now is unlikely to be drawn down in a meaningful way

in the foreseeable future. This has affected the funding of the

factory and forced the company to raise money at a moment

when stock market sentiment towards early-stage businesses

was very poor. This resulted in significant dilution for us as existing

shareholders although it does now give the company the chance

to win other customer business for its facility.

As appetite for risk diminished during the year, the early-stage

companies in the portfolio tended to see their share prices

suffer, regardless of any progress made with technology or

commercialisation. We recognise that many of them will take

time to demonstrate progress and will only be rewarded by share

price gains when they do so. The majority are still well funded

and so will have the chance to develop their technologies, many

of which aim to solve climate and healthcare challenges. Two

big fallers in the year were Ilika, which is in the early stages of

commercialising its efficient solid state battery technology, and

Renalytix, which is awaiting FDA approval for its KidneyIntelX

AI test and which has already received breakthrough device

designation from the FDA. There are others in diagnostics such

as Verici Dx, GENinCode, Lunglife AI; Creo Medical in medical

instruments; and Maxcyte in cell therapy.

Investing for a VCT involves backing companies when they are

small and still at an early stage of development and share price

progress depends on them being noticed by a wider circle of

investors as they produce results and develop their businesses

over time. This quite often takes longer than expected and they

remain potentially vulnerable until they achieve profitability.

There have been some instances of more resilient performance

despite the market conditions outlined above. The share price of

Ergomed has been volatile over the year but it has broadly held

its value as profits have been upgraded. We have taken some

profits to manage the size of the holding although we still see

plenty of scope for organic growth to continue and build further

value for shareholders. Netcall, Quixant and Judges Scientific

have all maintained good momentum in their businesses and

been rewarded with higher share prices. In our private company

holdings both Popsa and Hasgrove had their valuations increased

over the year; Popsa was valued upwards during the period due

to the removal of a liquidity discount which had been applied in

the prior year. This discount was removed following third party

validation of this price, with money raised at this level in the

current period. Hasgrove as it has added to its recurring revenues

and increased the amount of cash on its balance sheet which

outweighed the fall in comparables. This, coupled with general

market weakness that impacted quoted company share price

performance, resulted in an increased proportion of unquoted

investments in the portfolio. The bases of valuation of unquoted

holdings and movements subsequent to the year end is set out in

note 10 to the financial statements.

Portfolio activity

Having made seven qualifying investments at a total cost of

£4.6 million in the first half of the year, we added two new

qualifying investments totalling £1.5 million as well as one

follow-on investment totalling £0.2 million in the second half of

the year. This made a total investment of £6.3 million in qualifying

investments for the year, a decrease on last year’s £11.5 million,

reflecting a slower AIM market for both fundraisings and new

issues. Post the year end, we have invested a further £1.2 million

in two qualifying investments.

Of the seven first half investments, three were follow-on

investments in The British Honey Company, Verici Dx and Oberon

Investments Group and three were new entrants to AIM, Libertine

Holdings, Strip Tinning Holdings and Clean Power Hydrogen. In

addition, we made a new qualifying investment in Velocys,

which is an existing AIM company whose progress we have been

watching for some time.

We invested in two new issues in the second half of the year. In

July, we made a £1.2 million investment in Equipmake Holdings,

the electrification specialists focusing on retrofitting diesel buses

with electric drivetrains and a new entrant to AIM. In November,

we invested £0.3 million in Northcoders Group, a market-leading

provider of training programmes for software coding and an

existing AIM-listed company. Additionally, we made one further

issue in the second half of the year, which was a £0.2 million

investment in Intelligent Ultrasound Group.

During the year we took profits into rising share prices, selling

part of our holdings in Advanced Medical Solutions Group and

Next Fifteen Communications. We also sold our entire holdings

in Diurnal Group, Midatech Pharma, Synairgen and Trellus Health.

As a result of takeover bids, we sold our holdings in both Clinigen

Group and Cloudcall Group in the first half of the year. All disposals

made a £0.1 million profit over original cost and generated

£2.2 million of cash proceeds.

Non-qualifying investments are used to manage liquidity while

awaiting new qualifying investment opportunities. Although we

still hold some existing non-qualifying AIM holdings where we see

the opportunity for further share price progress, we continued to

reduce some of these holdings in the year under review. During

the year we increased our holdings in the FP Octopus Micro-Cap

Fund and the FP Octopus Future Generation Fund, investing a

total of £0.3 million over the period.

VCT regulations

There have been no further changes to the VCT regulations since

publication of the previous set of audited accounts. As a reminder,

the current requirements are that 30% of any funds raised should

be invested in qualifying holdings within 12 months of the end of

the accounting period in which the shares were issued, and the

Company has to maintain a minimum of 80% of the portfolio

Investment Manager’s review continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

(at cost) invested in qualifying holdings. We are determined to

maintain a threshold of quality and to invest where we see the

potential for returns from growth. At present there has been only

gradual change to the profile of the portfolio, as we continue

to hold the larger market capitalisation companies, in which we

invested several years ago as qualifying companies, or which we

bought in the market prior to the rule changes where we see the

potential for them to continue to grow.

In order to qualify, companies must:

• have fewer than 250 full time equivalent employees; and

• have less than £15 million of gross assets at the time of

investment and no more than £16 million immediately post

investment; and

• be less than seven years old from the date of its first

commercial sale (or ten years if a knowledge intensive

company) if raising state aided (i.e. VCT) funds for the first

time; and

• have raised no more than £5 million of state aided funds in

the previous 12 months and less than the lifetime limit of

£12 million (or since 6 April 2018 £10 million in 12 months,

£20 million lifetime limit if a knowledge intensive company);

and

• produce a business plan to show that the funds are being

raised for growth and development.

Outlook and future prospects

Sentiment has improved since the November year end, helped

by a restoration of political stability, a re-assessment of the level

of peak interest rates and early signs that inflation is going to

fall from here, although it remains well above the long-term 2%

target. Energy costs remain high but the worst fears of power

shortages have not been realised. More than half the companies

in the portfolio have updated us on trading since the period

end, with many of these reassuring. Meanwhile we are starting

to see companies considering floating on AIM in the short to

medium term as well as VCT qualifying opportunities to invest in

existing AIM companies. We believe the current cautious market

conditions will provide opportunities to invest the VCT’s cash at

attractive valuations.

The portfolio now contains 87 holdings with investments across

a range of sectors including both domestic and international

exposure. The balance towards profitable companies remains

and many of these are still trading well and are valued towards

the bottom of their long-term average therefore we still see good

growth potential when the market recovers.

The Octopus Quoted Companies team

Octopus Investments Limited

10 March 2023

Octopus AIM VCT 2 plc Annual report 2022

Investment portfolio

Portfolio company Sector

Book cost

as at

30 November

2022

£’000

Cumulative

change in

fair value

£’000

Fair value

as at

30 November

2022

£’000

Movement

in year

£’000

% equity

held by

Octopus

AIM VCT 2

% equity

held by

all funds

managed

by Octopus

Fair value as

a % of

Octopus

AIM VCT 2

NAV

Quoted investments

Ergomed plc Pharmaceuticals &

Biotechnology

784 5,640 6,424 117 0.97% 7.78% 6.31%

Learning Technologies

Group plc

Software & Computer

Services

701 3,323 4,024 (1,149) 0.39% 6.24% 3.95%

Craneware plc Health Care Providers 479 2,804 3,283 (718) 0.44% 1.47% 3.23%

Breedon Group plc Construction & Materials 573 2,316 2,889 (1,746) 0.28% 5.41% 2.84%

Judges Scientific plc Electronic & Electrical

Equipment

209 2,413 2,622 68 0.53% 1.32% 2.58%

SDI Group plc Electronic & Electrical

Equipment

119 2,396 2,515 (535) 1.45% 3.62% 2.47%

IDOX plc Software & Computer

Services

356 2,096 2,452 (126) 0.83% 1.89% 2.41%

Animalcare Group plc Pharmaceuticals &

Biotechnology

824 1,058 1,882 (1,040) 1.46% 3.60% 1.85%

EKF Diagnostics Holdings

plc

Medical Equipment &

Services

864 1,001 1,865 (1,420) 0.97% 2.74% 1.83%

Equipmake Holdings plc Industrial Engineering 1,200 635 1,835 635 3.43% 8.74% 1.80%

Netcall plc Software & Computer

Services

356 1,437 1,793 259 1.37% 3.34% 1.76%

GB Group plc Software & Computer

Services

337 1,444 1,781 (2,432) 0.22% 5.74% 1.75%

Sosandar plc Retailers 1,235 415 1,650 (1,086) 3.64% 12.66% 1.62%

Maxcyte Inc. Pharmaceuticals &

Biotechnology

689 859 1,548 (790) 0.32% 1.33% 1.52%

Brooks Macdonald Group

plc

Investment Banking &

Brokerage Services

610 912 1,522 (441) 0.45% 16.72% 1.50%

Next Fifteen

Communications Group

plc

Media 302 1,215 1,517 (298) 0.15% 12.34% 1.49%

Libertine Holdings plc Industrial Engineering 2,000 (500) 1,500 (500) 7.18% 18.14% 1.47%

Quixant plc Technology Hardware &

Equipment

391 1,027 1,418 187 1.28% 3.19% 1.39%

ENGAGE XR Holdings plc Software & Computer

Services

1,253 32 1,285 (360) 3.54% 14.70% 1.26%

Intelligent Ultrasound

Group plc

Medical Equipment &

Services

1,445 (201) 1,244 (733) 3.67% 9.16% 1.22%

PCI-Pal plc Software & Computer

Services

732 301 1,033 (264) 3.10% 7.74% 1.01%

Access Intelligence plc Software & Computer

Services

501 483 984 (634) 0.89% 2.13% 0.97%

Vertu Motors plc Retailers 777 105 882 (254) 0.54% 1.73% 0.87%

Clean Power Hydrogen plc Alternative Energy 1,200 (347) 853 (347) 0.99% 2.52% 0.84%

Beeks Financial Cloud

Group plc

Software & Computer

Services

302 542 844 (109) 0.92% 5.35% 0.83%

LungLife AI Inc. Pharmaceuticals &

Biotechnology

1,386 (559) 827 (669) 3.09% 7.72% 0.81%

Spectral MD Holdings Ltd Health Care Providers 1,410 (693) 717 (191) 1.75% 7. 69% 0.70%

Ixico plc Pharmaceuticals &

Biotechnology

697 – 697 (573) 5.15% 12.87% 0.68%

Cambridge Cognition

Holdings plc

Health Care Providers 400 269 669 (28) 1.83% 4.59% 0.66%

Diaceutics plc Health Care Providers 620 (8) 612 (245) 0.97% 2.51% 0.60%

Investment Manager’s review continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Portfolio company Sector

Book cost

as at

30 November

2022

£’000

Cumulative

change in

fair value

£’000

Fair value

as at

30 November

2022

£’000

Movement

in year

£’000

% equity

held by

Octopus

AIM VCT 2

% equity

held by

all funds

managed

by Octopus

Fair value as

a % of

Octopus

AIM VCT 2

NAV

Evgen Pharma plc Pharmaceuticals &

Biotechnology

700 (114) 586 96 3.18% 7.96% 0.58%

RWS Holdings plc Industrial Support Services 99 459 558 (497) 0.04% 4.53% 0.55%

Feedback plc Medical Equipment &

Services

1,000 (449) 551 (523) 5.04% 12.75% 0.54%

Gamma Communications

plc

Telecommunications

Service Providers

183 339 522 (289) 0.05% 6.68% 0.51%

Oberon Investments Group

plc

Investment Banking &

Brokerage Services

576 (134) 442 (38) 2.61% 9.75% 0.43%

Restore plc Industrial Support Services 171 256 427 (194) 0.09% 12.27% 0.42%

llika plc Electronic & Electrical

Equipment

706 (284) 422 (1,590) 0.89% 2.23% 0.41%

Polarean Imaging plc Medical Equipment &

Services

458 (38) 420 – 0.36% 0.90% 0.41%

Adept Technology Group

plc

Software & Computer

Services

502 (108) 394 (273) 1.43% 3.14% 0.39%

TPXimpact Holdings plc Software & Computer

Services

653 (274) 379 (1,915) 0.97% 4.53% 0.37%

Velocys plc Alternative Energy 664 (299) 365 (299) 0.59% 1.52% 0.36%

WANdisco plc Software & Computer

Services

96 250 346 199 0.08% 0.20% 0.34%

Advanced Medical

Solutions Group plc

Medical Equipment &

Services

190 128 318 (636) 0.05% 12.60% 0.31%

Gooch & Housego plc Technology Hardware &

Equipment

281 33 314 (428) 0.28% 12.33% 0.31%

Creo Medical Group plc Medical Equipment &

Services

981 (683) 298 (761) 0.43% 1.98% 0.29%

Mattioli Woods plc Investment Banking &

Brokerage Services

101 191 292 (111) 0.09% 9.90% 0.29%

The British Honey

Company plc

General Retailers 880 (603) 277 (594) 4.74% 11.86% 0.27%

Gelion plc Electronic & Electrical

Equipment

760 (493) 267 (509) 0.48% 1.23% 0.26%

ReNeuron Group plc Pharmaceuticals &

Biotechnology

990 (724) 266 (820) 2.02% 5.23% 0.26%

Crimson Tide plc Software & Computer

Services

378 (113) 265 (63) 1.92% 4.79% 0.26%

DP Poland plc Travel & Leisure 677 (415) 262 56 0.44% 1.11% 0.26%

Fusion Antibodies plc Health Care Providers 497 (242) 255 (428) 2.28% 5.71% 0.25%

Northcoders Group plc Software & Computer

Services

253 – 253 – 1.10% 2.74% 0.25%

Gear4music Holdings plc Leisure Goods 352 (103) 249 (1,451) 1.21% 3.02% 0.24%

Verici Dx plc Pharmaceuticals &

Biotechnology

444 (220) 224 (751) 1.10% 2.78% 0.22%

Trackwise Designs plc Technology Hardware &

Equipment

1,289 (1,072) 217 (1,732) 3.85% 9.63% 0.21%

KRM22 plc Closed End Investments 453 (244) 209 27 1.27% 3.18% 0.21%

GENinCode plc Medical Equipment &

Services

800 (600) 200 (445) 1.90% 4.74% 0.20%

Velocity Composites plc Aerospace & Defense 533 (376) 157 – 1.72% 4.30% 0.15%

MyCelx Technologies

Corporation

Oil, Gas & Coal 980 (839) 141 (228) 2.79% 15.82% 0.14%

Investment portfolio continued

Octopus AIM VCT 2 plc Annual report 2022

Portfolio company Sector

Book cost

as at

30 November

2022

£’000

Cumulative

change in

fair value

£’000

Fair value

as at

30 November

2022

£’000

Movement

in year

£’000

% equity

held by

Octopus

AIM VCT 2

% equity

held by

all funds

managed

by Octopus

Fair value as

a % of

Octopus

AIM VCT 2

NAV

Cordel Group Software & Computer

Services

296 (158) 138 (99) 1.16% 2.89% 0.14%

Renalytix plc Health Care Providers 228 (93) 135 (1,074) 0.24% 0.70% 0.13%

Falanx Cyber Security

Limited

Industrial Support Services 600 (480) 120 (100) 3.80% 9.50% 0.12%

Strip Tinning Holdings plc Electronic & Electrical

Equipment

337 (219) 118 (219) 1.18% 2.95% 0.12%

DXS International plc Software & Computer

Services

200 (87) 113 (200) 5.18% 12.95% 0.11%

Glantus Holdings plc Industrial Support Services 1,200 (1,094) 106 (906) 3.11% 7. 77% 0.10%

XP Factory plc Travel & Leisure 659 (576) 83 (64) 0.32% 0.81% 0.08%

TP Group plc Aerospace & Defense 452 (375) 77 (59) 0.47% 1.15% 0.08%

Enteq Upstream plc Oil, Gas & Coal 687 (618) 69 (30) 0.99% 2.47% 0.07%

Rosslyn Data Technologies

plc

Software & Computer

Services

286 (235) 51 (166) 1.68% 4.21% 0.05%

In The Style plc Retailers 667 (623) 44 (293) 0.63% 6.89% 0.04%

Mears Group plc Industrial Support Services 51 (16) 35 1 0.02% 0.53% 0.03%

Tasty plc Travel & Leisure 336 (303) 33 (25) 0.76% 1.78% 0.03%

1Spatial plc Software & Computer

Services

200 (171) 29 1 0.06% 3.76% 0.03%

Genedrive plc Pharmaceuticals &

Biotechnology

241 (215) 26 (84) 0.33% 0.81% 0.03%

Osirium Technologies plc Software & Computer

Services

900 (885) 15 (87) 0.51% 1.26% 0.01%

Abingdon Health plc Medical Equipment &

Services

347 (333) 14 (120) 0.30% 0.74% 0.01%

LoopUp Group plc Software & Computer

Services

197 (187) 10 (29) 0.17% 0.42% 0.01%

Microsaic Systems plc Electronic & Electrical

Equipment

922 (915) 7 (17) 0.27% 0.68% 0.01%

Haydale Graphene

Industries plc

Industrial Materials 399 (394) 5 (3) 0.03% 0.08% 0.00%

Location Sciences Group plc Software & Computer

Services

509 (508) 1 – 0.01% 0.02% 0.00%

Total quoted investments 49,113 15,159 64,272 (33,192)

Unquoted equity investments

Hasgrove plc 153 3,483 3,636 585 2.54% 14.31% 3.57%

Popsa Holdings Limited 1,060 2,525 3,585 717 4.30% 10.74% 3.52%

The Food Marketplace Ltd 200 (40) 160 – 4.40% 10.99% 0.16%

Eluceda Limited 200 (27) 173 (27) 1.60% 4.01% 0.17%

Rated People Limited 236 (213) 23 (8) 0.07% 0.32% 0.02%

Airnow plc 838 (838) – – 0.28% 0.73% 0.00%

Total unquoted equity investments 2,687 4,890 7,577 1,267

Investment portfolio continued

Investment Manager’s review continued

Octopus AIM VCT 2 plc Annual report 2022

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Portfolio company Sector

Book cost

as at

30 November

2022

£’000

Cumulative

change in

fair value

£’000

Fair value

as at

30 November

2022

£’000

Movement

in year

£’000

% equity

held by

Octopus

AIM VCT 2

% equity

held by

all funds

managed

by Octopus

Fair value as

a % of

Octopus

AIM VCT 2

NAV

Loan notes

Osirium Technologies plc

(Loan)

Software & Computer

Services

400 – 400 – n/a n/a 0.39%

Total loan notes 400 – 400 –

Current asset investments

FP Octopus UK Micro Cap

Growth Fund P Class

3,756 1,012 4,768 (765) n/a n/a 4.68%

FP Octopus UK Multi Cap

Income S Acc

3,926 220 4,146 (390) n/a n/a 4.07%

FP Octopus UK Future

Generations Fund

580 (95) 485 70 n/a n/a 0.48%

Total current asset investments 8,262 1,137 9,399 (1,085)

Total fixed and current asset investments

81,648

Money market funds 3,515

Cash at bank 17,217

Debtors less creditors (586)

Total net assets 101,794

Investment portfolio continued

Octopus AIM VCT 2 plc Annual report 2022

Top ten holdings

Listed below are the ten largest investments by value, which comprise of eight quoted level 1 investments which are valued at bid price

and two level 3 investments which are valued in accordance with International Private Equity and Venture Capital Valuation (IPEV)

guidelines and approach set out in note 10 on pages 59 to 61, as at 30 November 2022:

Ergomed plc

Ergomed provide highly specialised services to the pharmaceutical industry, operating in over 65 countries.

Initial investment date:

Cost:

Valuation at bid price:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

July 2014

£784,000

£6,424,000

0.97%

6.31%

31 December 2021

£118.6 million

£14.3 million

£67.2 million

£nil

Learning Technologies Group plc

Learning Technologies provide a comprehensive and integrated range of e-learning services and technologies to corporate and

government clients.

Initial investment date:

Cost:

Valuation at bid price:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

June 2011

£701,000

£4,024,000

0.39%

3.95%

31 December 2021

£258.2 million

£9.3 million

£371.3 million

£0.04 million

learning

technologies

group

Hasgrove plc (unquoted)

Hasgrove is the holding company for Interact, a SaaS business which provides an intranet product which focuses on the

communication and collaboration requirements of large organisations.

Initial investment date:

Cost:

Valuation – see note 10 to the financial

statements:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

November 2008

£153,000

£3,636,000

2.54%

3.57%

31 December 2021

£23.0 million

£6.2 million

£6.1 million

£nil

Investment Manager’s review continued

Octopus AIM VCT 2 plc Annual report 2022

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Craneware plc

Craneware is the market leader in software and supporting services to US hospitals so they can invest in quality patient outcomes.

Initial investment date:

Cost:

Valuation at bid price:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

September 2007

£479,000

£3,283,000

0.44%

3.23%

30 June 2022

$165.5 million

$13.1 million

$333.0 million

£0.02 million

Breedon Group plc

Breedon Group is a leading construction materials group operating in Great Britain and Ireland.

Initial investment date:

Cost:

Valuation at bid price:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

August 2010

£573,000

£2,889,000

0.28%

2.84%

31 December 2021

£1,232.5 million

£114.3 million

£949.8 million

£0.11 million

Judges Scientific plc

Judges Scientific is a UK-based company focused on acquiring and developing companies within the scientific instrument sector.

Its companies are primarily United Kingdom-based with products sold worldwide to a diverse range of markets, including higher

education institutions, the scientific communities, manufacturers and regulatory authorities.

Initial investment date:

Cost:

Valuation at bid price:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

May 2012

£209,000

£2,622,000

0.53%

2.58%

31 December 2021

£91.3 million

£14.9 million

£43.4 million

£0.02 million

Top ten holdings continued

Octopus AIM VCT 2 plc Annual report 2022

Popsa Holdings Ltd (unquoted)

Popsa is a software technology company enabling consumers to create photo books on mobile devices from various sources.

Initial investment date:

Cost:

Valuation – see note 10 to the financial

statements:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Loss before tax:

Net assets:

Dividends received in year:

February 2018

£1,060,000

£3,585,000

4.30%

3.52%

31 December 2021

£25.4 million

£3.7 million

£10.7 million

£nil

SDI Group plc

SDI Group plc (formerly known as Scientific Digital Imaging plc) designs and manufactures scientific and technology products

for use by the life science, healthcare, astronomy, consumer manufacturing and art conservation markets through the

Synoptics brands.

Initial investment date:

Cost:

Valuation at bid price:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

November 2015

£119,000

£2,515,000

1.45%

2.47%

30 April 2022

£49.7 million

£9.9 million

£35.8 million

£nil

IDOX plc

IDOX plc is a leading supplier of specialist information management software and solutions to the public and asset intensive sectors.

Initial investment date:

Cost:

Valuation at bid price:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last published accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

May 2008

£356,000

£2,452,000

0.83%

2.41%

31 October 2022

£66.2 million

£6.6 million

£67.4 million

£0.02 million

Top ten holdings continued

Investment Manager’s review continued

Octopus AIM VCT 2 plc Annual report 2022

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Animalcare Group plc

Animalcare Group plc is an international veterinary pharmaceutical and services business driven by a collective belief that healthy

animals can have a hugely beneficial effect on their owners and society.

Initial investment date:

Cost:

Valuation at bid price:

Equity held by Octopus AIM VCT 2 plc:

Fair value as a % of NAV:

Last audited accounts:

Revenue:

Profit before tax:

Net assets:

Dividends received in year:

December 2007

£824,000

£1,882,000

1.46%

1.85%

31 December 2021

£74.0 million

£0.9 million

£78.8 million

£0.04 million

Top ten holdings continued

Octopus AIM VCT 2 plc Annual report 2022

Sector analysis

The graph below shows the top ten sectors the equity portfolio was invested in by value as at 30 November 2022. It also shows the

sectors of the AIM market as a whole as at 30 November 2022:

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

AIM VCT 2 plc

AIM market

Other

Technology Hardware

and Equipment

Investment Banking and

Brokerage Services

Retailers

Construction and

Materials

Industrial Support

Services

Medical Equipment

and Services

Health Care Providers

Electronic and

Electrical Equipment

Pharmaceuticals

and Biotechnology

Software and

Computer Services

The graph below shows the top ten sectors the equity portfolio was invested in by value as at 30 November 2021. It also shows the

sectors of the AIM market as a whole as at 30 November 2021:

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

AIM VCT 2 plc

AIM market

Other

Industrial Support

Services

Technology Hardware

and Equipment

Construction and

Materials

Media

Retailers

Electronic and

Electrical Equipment

Health Care Providers

Medical Equipment

and Services

Pharmaceuticals

and Biotechnology

Software and

Computer Services

Other sectors include Industrial Engineering, Media, Alternative Energy, Telecommunications Service Providers, Travel & Leisure, General Retailers, Leisure Goods, Aerospace

& Defense, Oil, Gas & Coal, Closed End Investments, and Industrial Materials.

Investment Manager’s review continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

The Investment Manager

Personal service

Octopus was established in 2000 and has a strong commitment

to both smaller companies and to VCTs. Octopus also acts as

Investment Manager to four other listed investment companies

and has a total of over £12.4 billion of funds under management.

If you have any questions about this report, or if it would help to

speak to one of the fund managers, please do not hesitate to

The Quoted Companies team of Octopus comprises:

Kate Tidbury

Kate is the lead manager of the Octopus AIM VCTs and has over

35 years’ experience within the UK quoted smaller companies

market. Kate started her City career in 1986 as a research analyst

with Sheppards and Chase followed by Panmure Gordon. From

1993 she was an Investment Manager responsible for managing

ethical and smaller companies’ funds with the Co-operative

Bank and Colonial First State Investments. In 2000, she joined

the AIM team at Close Brothers Group and was involved in

the management of multiple AIM portfolios including the AIM

VCTs. In 2008, she joined Octopus and is focused primarily on

the management of the AIM VCT portfolios. Kate provides

investment management support across all the Quoted

Companies team portfolios.

Mark Symington

Mark is a fund manager on the Quoted Companies team, focusing

predominantly on the Octopus AIM VCTs. Mark joined Octopus

in 2012, having worked previously at asset manager Warwick

Wealth in South Africa. He graduated from the University of Cape

Town in 2010 with a Bcom in Economics and Finance. In addition,

Mark provides analytical and investment management support

across all the Quoted Companies team portfolios.

Dominic Weller

Dominic is a fund manager on the Quoted Companies team. He

provides analytical and investment support across all the Quoted

Companies team portfolios and co-manages the FP Octopus UK

Future Generations Fund, FP Octopus UK Micro Cap Growth Fund,

FP Octopus UK Multi Cap Income Fund and the Octopus AIM

VCTs. He is a member of the Octopus Investments Responsible

Investment Committee and leads the team’s stewardship efforts.

He is a CFA charter holder.

Freda Isingoma

Freda started her career as an investment analyst at

Charterhouse CCF before joining the AIM team at Close Brothers

in 2001, focused on managing the AIM VCT, inheritance tax and

smaller companies portfolios. In 2008 she moved to South Africa

to join Investec Asset Management, where she co-managed

the Africa Fund (a listed equity portfolio investing across Africa).

In 2010 she ventured into entrepreneurship launching a beauty

service brand in South Africa, and more recently a UK based art

investment business specialising in providing ecosystem impact

solutions for the African art market. She joined Octopus in

January 2022 and is focused primarily on the AIM VCT portfolios

and provides investment management support across all the

Quoted Companies team portfolios.

Richard Power

With overall responsibility for the Quoted Companies team

at Octopus, Richard has over 25 years’ experience of smaller

company investing. He is lead manager of the FP Octopus UK

Micro Cap Growth Fund and also oversees the investment process

within the team which includes the AIM IHT portfolios, and AIM

VCTs. Richard is also co-manager on the FP Octopus UK Multi Cap

Income and FP Octopus UK Future Generation Funds. Richard

started his career in 1995 at Duncan Lawrie, where he managed

a successful small companies fund. He subsequently joined Close

Brothers to manage a smaller companies investment trust before

moving to Octopus to head up the Quoted Companies team

in 2004.

Chris McVey

Chris is the lead manager of the Octopus Multi Cap Income

Fund and has been a specialist within the quoted UK smaller

companies market for over 20 years. In 2016, he joined Octopus

from Citigroup where he was most recently a UK Small and

Mid-Cap Equity research analyst focusing across a variety of

sectors. Prior to this he spent almost seven years on the Smaller

Companies team at Gartmore Investment Management as an

investment manager and analyst. Chris works across all the

Quoted Company portfolios. He is lead manager on the FP

Octopus UK Multi Cap Income Fund, and a co-manager on the

FP Octopus UK Micro Cap Growth and FP Octopus UK Future

Generation Funds.

Edward Griffiths

Edward is an experienced portfolio manager, with a City career

spanning over 21 years. Having previously worked at Schroders

Investment Management Pension Funds and State Street, he

joined Octopus in 2004 to launch the company’s AIM Inheritance

Tax Service. Edward is involved primarily in the management of

the AIM Inheritance Tax Service portfolios for private individuals

and provides investment management and trading support

across all the Quoted Companies team portfolios.

Stephen Henderson

Steve is an experienced portfolio manager, with over 14 years in

the City. He joined Octopus in 2008 as a graduate trainee and

moved to the Quoted Companies team in 2011. Steve is involved

primarily in the management of the Octopus AIM Inheritance

Tax Service and Octopus AIM Inheritance Tax ISA portfolios. He

conducts analysis across AIM with a particular interest in the legal

sector, having graduated with a law degree from the University

of Nottingham. Steve provides investment and trading support

across all the Quoted Companies team portfolios.

Jessica Sweeney

Jessica joined Octopus in 2014 having graduated from the

University of Liverpool the same year, where she studied

International Business. She worked in multiple operations

functions across Octopus, before moving to the Quoted

Companies team in 2018 to co-manage the AIM Inheritance

Tax portfolios. Jessica provides investment and trading support

across all the Quoted Companies team mandates.

Octopus AIM VCT 2 plc Annual report 2022

Charles Lucas

Charles joined Octopus in 2011 from LV= Asset Management,

having previously worked in the Personal Pensions and SIPP space

for GE Life and LV=. Charles initially joined Octopus as a member

of the operations team, later working as a Project Manager for

MiFID II. He joined the Quoted Companies team in 2018 as a

Product Development Analyst and is focused on strengthening

the team’s trading capabilities and performance analytics.

The Investment Manager and Responsible

Investment

Octopus is an accredited B Corp and signatory to the

internationally recognised Principles for Responsible Investment,

demonstrating Octopus’ commitment to responsible investment

and to creating a more sustainable financial system.

The investment team make investments that can be a catalyst

for positive, meaningful change. The team believes that in the

future, some of the most successful companies will be a force

for good, and that in today’s hyperconnected transparent world,

how a company behaves is just as important as what it does.

Mission

While the Company doesn’t target specific sustainability goals

or objectives, the team looks for companies which will play an

integral role in our future. The purpose of a VCT is to provide

capital for small growth companies. Companies exposed to the

new economy and technologies make up a significant proportion

of the portfolio which includes those focused on building a

sustainable planet, revitalising healthcare and empowering

people. Examples of this include:

• Ergomed – helping to develop treatments for some of the

world’s rarest diseases.

• Ilika – a pioneer in a ground-breaking solid state battery

technology designed to meet the specific demands of a wide

range of applications.

• Feedback – a specialist medical imaging technology

company providing innovative software and systems.

• Learning Technology – a group of businesses who provide

innovative learning technology solutions.

Materiality of risks to investments

As part of the investment process, the team incorporate a

material risk review of sustainability issues. These risks include:

• Environmental: emissions, energy management, waste,

ecological impact;

• Social: privacy, security, product quality, selling practices;

• Human: labour, health and safety, diversity;

• Business model: product design, supply chain, material

sourcing;

• Leadership: ethics, competitive behaviour, regulatory, critical

incidents, and risk management.

The team considers the exposure to these risks and how well

portfolio companies are managing them.

Disclosures relating to climate risks are set out in ‘climate-related

matters’ on page 27.

Responsibility

As part of the investment management approach, the

team discusses the portfolio companies’ strategy, financial

performance, data disclosures, capital structure and corporate

governance with the management teams. Existing governance

structures may not be mature (given the small size of portfolio

companies), so the team assesses whether weaknesses exist and

if the company management can address these weaknesses.

The team takes part in consultations on remuneration and

challenges non-executive directors to align with company

objectives, aiming to influence by giving feedback to corporate

advisers and meeting with non-executive directors and voting on

resolutions at general meetings.

When it comes to voting, all holdings are covered by Institutional

Shareholder Services (ISS), a leading global advisory firm. The

team considers the independent research ISS provides and discuss

votes as a team to create long-term shareholder value.

The Investment Manager continued

Octopus AIM VCT 2 plc Annual report 2022

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Introduction

The purpose of the report is to provide shareholders with sufficient

information to enable them to assess the extent to which the

Directors have performed their legal duty to act in good faith

and to promote the success of the Company in accordance

with Section 172 of the Companies Act 2006 for the benefit of

shareholders as a whole, as set out in the strategic report. KPIs

on performance are on pages 23 and 24.

The Directors of a company are required to act in the way they

consider will most likely promote the success of the company for

the benefit of its members as a whole. In doing this, Section 172(1)

requires a director to have regard, amongst other matters, to the:

• likely consequences of any decisions in the long term;

• need to act fairly as between members of the company;

• need to foster the company’s business relationships with

suppliers, customers and others;

• impact of the company’s operations on the community and

environment;

• desirability of the company maintaining a reputation for high

standards of business conduct; and

• interests of the company’s employees.

In discharging the Board’s Section 172 duties regard has been

given to the above factors. The Board also has regard to other

factors where relevant. By considering the Company’s purpose

and objectives together with its strategic priorities and having a

process in place for decision-making, the Board aims to ensure

that decision making is consistent and predictable.

As a Venture Capital Trust, Octopus AIM VCT 2 plc has no

employees. However, the Directors also assessed the impact of

the Company’s activities on other stakeholders. The Company

considers its shareholders, the Investment Manager, portfolio

companies and other service providers to be its key stakeholders.

Shareholder engagement

Shareholder engagement is given high priority by the Board.

The Company engages with its shareholders via various media

including, but not limited to, the Annual General Meeting (AGM),

the shareholder event held prior to the AGM, the annual report

and accounts and market announcements.

The AGM gives shareholders the opportunity to exercise their

right to vote on resolutions and engage with the Board and the

Investment Manager. Last year, an 20 April 2022 the Company

held an online shareholder event that was well attended by over

45 shareholders. The event gave shareholders the opportunity to

hear directly from the Investment Manager and the Board, prior

to the AGM which was held on 28 April 2022 at the Company’s

registered office. The voting results from all General Meetings

are published on the Company’s website. There will be a

shareholder event held on 19 April 2023, in advance of the AGM

on 26 April 2023.

The Board regularly disseminates information to shareholders,

including a weekly NAV and through RNS releases on

the London Stock Exchange. Shareholders receive the

annual report and accounts which aims to provide a full

understanding of the Company’s activities and results. This

information, together with the half yearly reports, prospectus

and other shareholder information, is published via the

London Stock Exchange and on the Octopus website at

www.octopusinvestments.com.

The Board always welcome questions from our shareholders at

the AGM. To ensure we are able to respond to any questions

you may have, for either the Investment Manager or the

Board, we would request that you please send these via email

to AIMVCT2AGM@octopusinvestments.com by 5.00pm on

21 April 2023.

Provision 4 of the 2018 UK Corporate Governance Code requires a

company which has received 20% or more of votes cast against

a resolution to explain, when announcing the voting results,

what actions it intends to take to consult shareholders in order

to understand the reasons behind the result. The Company

continues to monitor the 20% threshold for votes cast against

Board recommendations for a resolution, but has not yet been

required to take any actions in this regard.

Engagement with the Investment Manager

It is normal practice for Venture Capital Trusts to delegate

authority for day-to-day management of the Company to an

Investment Manager and then to engage with the Investment

Manager in setting, approving and overseeing the execution of

the business strategy and related policies and all administration

and control functions. The Investment Manager attends the

scheduled quarterly Board meetings, and other ad-hoc meetings

as appropriate, of the Company, ensuring an open dialogue.

At every Board meeting a review of financial and operational

performance, as well as legal and regulatory compliance, is

undertaken. The Board also reviews other areas over the course

of the financial year, including: the Company’s business strategy;

key risks; stakeholder-related matters; diversity and inclusivity;

environmental matters; corporate responsibility and governance.

The Board formally reviews the performance of the Investment

Manager on an annual basis. All Board members complete

a questionnaire and discuss the findings before concluding

on an outcome.

Engagement with portfolio companies

The Company’s performance is directly linked to the performance

of its underlying portfolio companies. The Board has delegated the

monitoring of its portfolio companies to the Investment Manager

which engages with portfolio companies through a programme

of regular company meetings as part of its investment process.

The Board has also given the Investment Manager discretionary

authority to vote on portfolio company resolutions on its behalf

as part of its approach to corporate governance.

Section 172(1) statement

Octopus AIM VCT 2 plc Annual report 2022

Engagement with other key stakeholders

and environment

The Investment Manager is a key business partner with

responsibility for the provision of investment management,

administration, custody and company secretarial services.

During the period the Board received sufficient information to

assist in understanding the interests and views of the Company’s

key stakeholders, investors, portfolio companies and service

providers to the Company, including the auditor, lawyers and

registrar.

The Board recognises the importance of ESG (environmental,

social and governance matters) and the Octopus Group, of

which the Investment Manager forms a part, was certified as a B

Corp in February 2021. B Corp certification is a designation that

a business is meeting high standards of verified performance,

accountability and transparency on factors from employee

benefits and charitable giving to supply chain practices and

input materials. Certified B Corps are recognised as leaders

in the global movement for an inclusive, equitable and

regenerative economy.

The Investment Manager is continuing to develop processes

and practices that deliver on ESG principles. This includes the

development and implementation of internal processes and

checks in line with the UN Principles of Responsible Investing

and working towards meeting the requirements of the UK

Stewardship Code managed by the Financial Reporting Council.

The Investment Manager will continue to monitor the ESG

practices of existing portfolio companies and over the coming

year we will review our portfolio to confirm our compliance

with these expectations. An example of this is the ongoing

assessment of the carbon emission levels of companies within

the portfolio, and their progression towards furthering

sustainability and environmental goals regarding net zero

ambition and decarbonisation.

The Board has moved to a largely paperless operation over the

past 36 months, and the increasing use of conferencing platforms

has reduced travel in relation to the Company’s activities.

Key decisions made during the year

Some of the key decisions made by the Company during the year

that required the Board to take into consideration Section 172(1)

factors include:

• In line with the Company’s objectives, on 22 September 2022,

the Board issued an offer for subscription of shares. This was

discussed with the Investment Manager, and allowed new

and existing shareholders to invest in the Company.

• The Company continued to buy back shares, providing

liquidity to shareholders who wished to sell their shares. The

Board maintained a discount of approximately 4.5% to NAV,

therefore balancing the interests of both remaining and

selling shareholders.

• The Board looks to create shareholder value. During the

year, following targets agreed with the Investment Manager,

dividends totalling 4.2p were paid to shareholders (comprising

a final dividend, in respect of the previous financial year, and

an interim dividend of 2.1p each).

Section 172(1) statement continued

Octopus AIM VCT 2 plc Annual report 2022

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The Company’s objective

The objective of the Company is to invest in a broad range of

Alternative Investment Market (AIM) or Aquis Stock Exchange

(AQSE) traded companies in order to provide shareholders with

attractive tax-free dividends and long-term capital growth.

Investments are made selectively across a range of sectors

in companies that have the potential to grow and enhance

their value.

The Company has been approved as a Venture Capital Trust by

HMRC under Section 259 of the Income Taxes Act 2007. The shares

of the Company were first admitted to the Official List of the

UK Listing Authority and trading on the London Stock Exchange

on 25 January 2006 and can be found under the TIDM code

‘OSEC’. The Company is main market premium listed.

Investment policy

The Company’s investment policy has been designed to enable

it to comply with the VCT qualifying conditions. The Board

intends that the long-term disposition of the Company’s assets

will be not less than 85% in a portfolio of qualifying AIM, AQSE

exchange traded investments or unquoted companies where in

the short to medium term, the management is planning an initial

public offering (IPO) on AIM or AQSE. Investments in unquoted

companies are not expected to exceed 10% of the Company’s

invested portfolio.

The non-qualifying balance will be invested in permitted

investments held for short-term liquidity, generally comprising

short-term cash or money market deposits with a minimum

Moody’s long-term debt rating of ‘A’, authorised funds, including

those managed by Octopus, or directly in equity investments and

bonds. This provides a reserve of liquidity which should maximise

the Company’s flexibility as to the timing of investments,

disposals, dividend payments and share buybacks.

Risk is spread by investing in a number of different businesses

across a range of industry sectors using a mixture of securities.

The maximum amount invested in any one company is limited to

the amount permitted pursuant to VCT legislation in a fiscal year

and no more than 15% of the value of its investment at the time

of investment. The value of an individual investment is expected

to increase over time as a result of trading progress and a

continuous assessment is made of its suitability for sale. However,

shareholders should be aware that the Company’s qualifying

investments are held with a view to long-term capital growth as

well as income and will often have limited marketability; as a

result it is possible that individual holdings may grow in value to

the point where they represent a significantly higher proportion

of total assets prior to a realisation opportunity being available.

The Company’s Articles permit borrowings of amounts up to

10% of the adjusted share capital and reserves (as defined in

the Company’s Articles). However, investments will normally be

made using the Company’s equity shareholders’ funds and it is

not intended that the Company will take on any borrowings.

No material changes may be made to the Company’s

investment policy described above without the prior approval

of shareholders by the passing of an Ordinary Resolution. The

Directors will continually monitor the investment process and

ensure compliance with the investment policy.

Future prospects

The Company’s longer-term performance record has allowed the

Company to maintain the dividend payments to shareholders in

line with the dividend policy set out on page 2. The Board believes

the Company’s business model will enable it to continue to deliver

the targeted regular tax-free annual dividends referred to in the

Chair’s Statement. The Company has a strong cash position

which enables investment in new companies and support for

existing companies. The outlook statements in both the Chair’s

Statement and the Investment Manager’s Review, on pages 3

and 7 respectively, provide further details on the more immediate

prospects of the Company.

Performance

The Board is responsible for the Company’s investment strategy

and performance, although the management of the Company’s

investment portfolio is delegated to Octopus through the

investment management agreement, as referred to in the

Directors’ Report.

The graph on page 22 compares the total return of the Company

over the period from 1 March 2006 to 30 November 2022 with

the total return from notional investments in the FTSE AIM All-

Share Index and FTSE SmallCap (ex-investment companies)

Index over the same period. The FTSE AIM All-Share Index is a

stock market index consisting of all companies quoted on the

Alternative Investment Market and the FTSE SmallCap Index is

an index of small market capitalisation companies. The Directors

consider these to be the most appropriate in helping shareholders

benchmark returns from the Company but would remind

investors that approximately 12.9% of the FTSE AIM All-Share

Index is attributable to resources, mining, investment companies

and property stocks which VCTs cannot invest in. VCTs are also

limited to investing into companies with certain size and age

restrictions. The inclusion of the FTSE All-Share Index is to provide

a wider stock market context. Investors should be reminded that

shares in VCTs generally continue to trade at a discount to the

NAV of the company.

Business review

Octopus AIM VCT 2 plc Annual report 2022

Comparative portfolio performance

310

290

270

250

230

210

190

170

150

130

110

Value of £100 investment (£)

FTSE All-Share total return, based on £100 notional investment on 1 March 2006 and the reinvestment

of all income

FTSE SmallCap ex investment trusts total return, based on £100 notional investment on 1 March 2006

and the reinvestment of all income

FTSE AIM All-Share total return, based on £100 notional investment on 1 March 2006 and the

reinvestment of all income

NAV return plus reinvestment of all dividends (excluding up-front tax relief), based on notional investment of

£100 on 1 March 2006

Nov 06

Nov 07

Nov 08

Nov 09

Nov 10

Nov 11

Nov 12

Nov 13

Nov 14

Nov 15

Nov 16

Nov 17

Nov 18

Nov 19

Nov 20

Nov 21

Nov 22

–

Results and dividends

Year ended

30 November 2022

£’000

Year ended

30 November 2021

£’000

(Loss)/profit attributable to shareholders

(36,695)

18,088

Distributions:

Interim dividend paid 2.1p (2021 – 2.1p)

3,075

3,121

Special dividend paid nil (2021 – 1.7p)

–

2,527

Final dividend proposed 2.3p (2021 – 2.1p)

3,773

3,080

The proposed final dividend of 2.3p for the year ended 30 November 2022 will be paid on 25 May 2023 to shareholders on the register

on 5 May 2023 subject to approval at the AGM being held on 26 April 2023.

Business review continued

Octopus AIM VCT 2 plc Annual report 2022

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Key performance indicators (KPIs)

As a VCT, the Company’s objective is to provide shareholders with attractive dividends and capital return by investing its funds in a

broad spread of predominantly quoted UK companies which meet the relevant criteria for VCTs.

The Board has identified five key performance measures to assess the Company’s success in meeting these objectives. Some of these

are classified as alternative performance measures (APMs

) in line with Financial Reporting Council (FRC) guidance. The Glossary of

terms on page 72 has further details:

1. NAV per share

;

2. Total return per share

;

3. Dividends per share paid in the year;

4. Total ongoing charges

; and

5. Qualifying % under VCT rules.

1. NAV per share

The NAV per share of the Company is the sum of the underlying assets less the liabilities of the Company divided by the total

number of shares in issue.

Current year

(pence per share)

Prior year

(pence per share) Reason for movement

61.6 90.8 The NAV per share has decreased from last year’s value of 90.8p to 61.6p.

This decrease of 32.2% is the result of a market-driven fall in valuations.

2. Total return per share

Total return is calculated as movement in NAV per share in the period plus dividends paid in the period, divided by the NAV

per share at the beginning of the period. Total return on the NAV per share enables shareholders to evaluate more clearly the

performance of the Company, 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.

Current year % Prior year % Reason for movement

(27. 5) 16.6 As previously considered, the NAV per share has decreased from last

year’s value of 90.8p to 61.6p. This gave a total return of -27.5% or -25.0p

per share, after adding back dividends of 4.2p paid in the year.

The Board notes that for the year under review this was the same as the FTSE AIM All-Share Index total return figure of a negative

27.5%. The Board remains confident about achieving the long-term objective of the Company. Performance is also measured

against the FTSE SmallCap Index and the FTSE All-Share Index, with the latter being provided for wider stock market context. This

is also shown on the graph on the previous page. In the year under review the FTSE SmallCap Index fell by 13.5% and the FTSE All-

Share Index rose by 6.5%, all on a total return basis. These indices have been adopted as comparative indices. Further details on

performance can be found within the Investment Manager’s Review on pages 4 to 7.

3. Dividends per share paid in the year

The Company has a target of paying an annual dividend of 3.6p per share or a 5% yield based on the prior year-end share price,

whichever is greater at the time.

Current year

(pence per share)

Prior year

(pence per share) Reason for movement

4.2 5.9 This year the dividends paid were lower due to a special dividend of 1.7p

made in the prior year following a number of partial and total sales

of holdings from the portfolio in the year. The ordinary dividend was

maintained at the previous level.

These KPIs are defined as alternative performance measures (APMs) and are defined in more detail on the Glossary of terms on page 72.

Octopus AIM VCT 2 plc Annual report 2022

The 4.2p of dividends paid in the year maintains the ordinary dividend paid in the prior year. The proposed final dividend of 2.3p

gives a total dividend in respect of the year of 4.4p, which is a yield of 5.0% based on the share price of 88.0p at the prior year end,

in line with the Board’s policy of paying the higher of a 5% yield or 3.6p of dividends in the year. Dividends are paid semi-annually.

It remains the intention of the Board to continue this policy, subject to available cash and distributable reserves. However, this is

not a guarantee, and no projection or forecast is expressed or implied. A full list of dividends paid can be found in the table on

page 69.

4. Ongoing charges

The ongoing charges ratio has been calculated using the AIC recommended methodology and excludes exceptional costs and trail

commission.

Current year % Prior year % Reason for movement

2.2 1.8 The ongoing charges ratio has increased slightly from last year primarily

due to a decrease in average net assets over the year combined with

some expenses remaining static despite the decrease in net assets.

There are a number of costs involved in operating a VCT, these expenses are outlined in note 4 on page 56. The Company has an

expense cap of 3.5%. The ongoing charges have been lower than the expense cap for the current and prior year, which is in line

with the Board’s expectations.

5. Qualifying % under VCT rules

The Company must comply with VCT legislation laid down by HMRC. A key requirement is to maintain at least an 80% qualifying

investment level. This percentage is calculated using a formula based on HMRC rules.

Current year % Prior year % Reason for movement

87.3 93.8 87.3% (as measured by HMRC rules) by value of the Company’s

investments has been represented throughout the period by shares

or securities comprised in qualifying holdings of the Company. The

qualification level has decreased by 6.5% due to lower deployment in the

current year, so fewer investments are contributing to the 80% qualifying

investment level. Further details on VCT regulations can be found within

the Investment Manager’s Review on pages 6 and 7.

The Company has continued to meet the 80% qualification investment level. There continues to be sufficient investment

opportunities to enable the Investment Manager to comply with these ratios.

The Chair’s Statement, on pages 2 and 3, includes a review of the Company’s activities and future prospects; further details are

also provided within the Investment Manager’s Review on pages 4 to 16.

These KPIs are defined as alternative performance measures (APMs) and are defined in more detail on the Glossary of terms on page 72.

Viability statement

As part of their continuing programme of monitoring risk the Directors have assessed the prospects of the Company over a longer

period than the 12 months required by the ‘going concern’ provision. The Board conducted this review for a period of five years, which

was considered to be a reasonable time horizon given that the Company has raised funds under an offer for subscription which closed

to new applications on 22 September 2022 and, under VCT rules, subscribing investors are required to hold their investment for a five

-year period in order to benefit from the associated tax reliefs. The Board regularly considers the Company’s strategy, including investor

demand for the Company’s shares, and a five-year period is considered to be a reasonable time horizon for this.

The Board carried out a robust assessment of the emerging and principal risks facing the Company and its current position. This

includes the impact of the cost of living crisis, the unstable economic environment and any other risks which may adversely impact

its business model such as future performance, solvency or liquidity. Particular consideration was given to the Company’s reliance on,

and close working relationship with, the Investment Manager. The principal risks faced by the Company and the procedures in place

to monitor and mitigate them are set out on the following pages.

The Board has also considered the liquidity of the underlying investments and the Company’s cash flow projections and found these

to be realistic and reasonable. The Company’s cash flow includes cash equivalents which are short-term, highly liquid investments.

Based on the above assessment the Board confirms that it has a reasonable expectation that the Company will be able to continue

in operation and meet its liabilities as they fall due over the five-year period to 30 November 2027.

Business review continued

Octopus AIM VCT 2 plc Annual report 2022

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Principal risks, risk management and regulatory environment

The Board carries out a regular review of the risk environment in which the Company operates. The Board seeks to mitigate risks by

setting policy, reviewing performance and monitoring progress and compliance. In the mitigation and management of these risks,

the Board applies the principles detailed in the Financial Reporting Council’s Guidance on Risk Management, Internal Control and

Related Financial and Business reporting. Detailed below are what the Board deems to be the principal risks of the Company and the

mitigating actions in relation to those risks.

Risk Mitigation

Investment risk: The focus of the Company’s

investments is into VCT qualifying companies

quoted on AIM and the AQSE exchange, which

by their nature entail a higher level of risk and

lower liquidity than investments in larger quoted

companies.

The Investment Manager has significant experience and a strong track record

of investing in AIM and AQSE companies, and appropriate due diligence is

undertaken on every new investment. The overall risk in the portfolio is mitigated

by maintaining a wide spread of holdings in terms of financing stage, age,

industry sector and business models. The Board reviews the investment portfolio

with the Investment Manager on a regular basis.

VCT qualifying status risk: The Company is

required at all times to observe the conditions

for the maintenance of HMRC approved VCT

status. The loss of such approval could lead to the

Company and its investors losing access to the tax

benefits associated with VCT status and, in certain

circumstances, to investors being required to repay

the initial income tax relief on their investment.

Prior to investment, the Investment Manager seeks assurance from the Company’s

VCT status adviser that the investment will meet the legislative requirements for

VCT investments.

On an ongoing basis, the Investment Manager monitors the Company’s

compliance with VCT regulations on a current and forecast basis to ensure

ongoing compliance with VCT legislation. Regular updates are provided to the

Board throughout the year.

The VCT status adviser formally reviews the Company’s compliance with VCT

regulations on a bi-annual basis and reports its results to the Board.

Operational risk: The Board is reliant on the

Investment Manager to manage investments

effectively, and manage the services of a number

of third parties, in particular the registrar and tax

advisors. A failure of the systems or controls at

the Investment Manager or third-party providers

could lead to an inability to provide accurate

reporting and to ensure adherence to VCT and

other regulatory rules.

The Board reviews the system of internal control, both financial and non-financial,

operated by the Investment Manager (to the extent the latter are relevant to the

Company’s internal controls). These include controls that are designed to ensure

that the Company’s assets are safeguarded and that proper accounting records

are maintained, as well as any regulatory reporting. Feedback on other third

parties is reported to the Board on at least an annual basis, including adherence

to service level agreements where relevant.

Information security: A loss of key data could

result in a data breach and fines. The Board is

reliant on the Investment Manager and third

parties to take appropriate measures to prevent a

loss of confidential customer information.

Annual due diligence is conducted on third parties which includes a review of

their controls for information security. The Investment Manager has a dedicated

information security team and a third party is engaged to provide continual

protection in this area. A security framework is in place to help prevent malicious

events. The Investment Manager reports to the Board on an annual basis

to update them on relevant information security arrangements. Significant

and relevant information security breaches are escalated to the Board when

they occur.

Economic: Events such as an economic recession,

movement in interest rates, inflation, political

instability and rising living costs could cause

volatility in the market, adversely impacting the

valuation of investments. This could result in a

reduction in the value of the Company’s assets.

The Company invests in a diverse portfolio of companies across a range of sectors,

which helps to mitigate against the impact of performance in any one sector. The

Company also maintains adequate liquidity to ensure that it can continue to

provide follow-on investment to those portfolio companies which require it and

which is supported by the individual investment case.

The Investment Manager monitors the impact of macroeconomic conditions on

an ongoing basis and provides updates to the Board at least quarterly.

Risk and risk management

Octopus AIM VCT 2 plc Annual report 2022

Legislative: A change to the VCT regulations could

adversely impact the Company by restricting the

companies the Company can invest in under

its current strategy. Similarly, changes to VCT

tax reliefs for investors could make VCTs less

attractive and impact the Company’s ability to

raise further funds. Failure to adhere with other

relevant legislation and regulation could result in

reputational damage and/or fines.

The Investment Manager engages with HM Treasury and industry bodies to

demonstrate the positive benefits of VCTs in terms of growing UK companies,

creating jobs and increasing tax revenue, and to help shape any change to VCT

legislation.

The Investment Manager employs individuals with expertise across the legislation

and regulation relevant to the Company. Individuals receive ongoing training and

external experts are engaged where required.

Liquidity: The risk that the Company’s available

cash will not be sufficient to meet its financial

obligations. The Company invests into smaller

companies, which are inherently less liquid than

stocks on the main market. Therefore, these may

be difficult to realise for their fair market value at

short notice.

The Investment Manager prepares cash flow forecasts to ensure cash levels are

maintained in accordance with policies agreed with the Board. The Company’s

overall liquidity levels are monitored on a quarterly basis by the Board, with close

monitoring of available cash resources. The Company maintains sufficient cash

and readily realisable securities, including money market funds and OEICs, which

can be accessed at short notice. At 30 November 2022, 20.4% of net assets was

held in cash and cash equivalents, realisable within one business day, and 9.2% in

OEICs, realisable in four business days.

Valuation: For smaller companies or illiquid shares,

establishing a fair value can be difficult due to the

lack of readily available market data for similar

shares, resulting in limited number of external

reference points.

Investments in companies traded on AIM and AQSE exchange are valued by the

Investment Manager using closing bid prices as reported on Bloomberg. Where

investments are in unquoted companies or where there are indicators the bid

price is not appropriate, alternative valuation techniques are used in accordance

with the IPEV guidelines.

Valuations of unquoted portfolio companies are performed by appropriately

experienced staff, with detailed knowledge of both the portfolio company and

the market in which it operates. These valuations are then subject to review and

approval by the Octopus Valuations Committee, comprised of staff who are

independent of the Investment team and with relevant knowledge of unquoted

company valuations. The Board reviews valuations after they have been agreed

by the Octopus Valuations Committee.

Emerging risks

The Board has considered emerging risks. The Board seeks to mitigate emerging risks and those noted below by setting policy, regular

review of performance and monitoring progress and compliance.

The following are some of the potential emerging risks management and the Board are currently monitoring:

• Adverse changes in global macroeconomic environment

• Rising cost of living

• Geo-political protectionism

• Climate change

Gender and diversity

The Board of Directors currently comprises one female and three male Non-Executive Directors with considerable experience of the VCT

industry and a broad range of skills and backgrounds. All appointments to the Board are made on the basis of ability and knowledge.

The composition of the Board, including gender and diversity, is reviewed on an annual basis.

Employee, human rights, social and community issues, environment policy and greenhouse gas

emissions

The Board’s policy on employee, human rights, social and community issues, environment policy and greenhouse gas emissions is

discussed in the Directors’ Report on page 30.

Risk and risk management continued

Octopus AIM VCT 2 plc Annual report 2022

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Climate-related matters

Whilst not a requirement, the Board has chosen to continue

evolving its disclosures in line with the recommendations of the

Task Force on Climate-related Financial Disclosures (TCFD) and

has given some initial disclosure under the main headings below,

which will continue to evolve over future periods:

• Governance: Day-to-day management of the portfolio,

and oversight over investment decisions, sits within the

Investment Manager’s governance structures. On an annual

basis the Octopus Responsible Investment Committee

(ORIC) (comprised of an Octopus Founder, the Chief

Investment Officer, the Heads of the Investment Teams and

Head of Impact and Sustainability) reviews climate-related

risks and opportunities that have been identified as being

financially material to the management of the Company.

The prior review highlighted that whilst the Company must

consider physical risks, transition risk would be the focus,

given the potential for the Company to influence legal,

technology and market changes through its decision-making

powers over which investments to make.

• Strategy: The Company makes investments into a range

of sectors but the companies receiving funding are small

companies specifically listed on the AIM market. Exposure

to climate-related risks is assessed on a deal-by-deal basis

by the investment team. The analysis considers transition

risks and the physical risks and impacts of climate change

for industries and sectors where this has been identified as

a material issue. The team are also focused on identifying

investment opportunities in companies that are well

positioned to benefit from the transition to a lower carbon

economy.

• Risk management: The investment team use guidance

from the Sustainability Accounting Standards Board (SASB)

to identify climate-related risks. Where potential material

climate-related risks have been identified, the investment

team assesses how well the risk is managed by the company

through further due diligence. This is raised to the Investment

Committee, where appropriate, as part of the investment

process and is continually monitored.

• Metrics and targets: Where relevant for the industry and

sector, the team reviews metrics reported by the portfolio

company to understand material exposures, how they

are being managed and performance. This includes areas

such as energy management, energy use, carbon footprint

disclosures and commitments to appropriate carbon

reduction pathways for the sector and industry.

On an aggregated level, the Company’s most material

climate risk relates to carbon emission; this is due to the

underlying portfolio companies having to adapt their

business models to successfully transition to a lower/

zero carbon footprint. As such, the team has taken steps

to measure Scope 1 and 2 greenhouse gas emissions.

Scope 1 emissions are those directly from company-owned

and controlled resources. Scope 2 emissions are indirect

emissions from the generation of purchased energy, from a

utility provider.

While the ultimate goal is to reduce portfolio emissions

to minimise these risks, the immediate goal is to increase

data coverage to 100% (currently 44% of portfolio

companies have been measured) within the next two years.

Current greenhouse gas (GHG) emissions:

• Scope 1 GHG emissions (tonnes CO

e): 1,551,312,

• Scope 2 GHG emissions (tonnes CO

e): 17 7,309.

The Responsible Investment approach of the Investment Manager

is detailed on page 18.

Consumer Duty

The Directors are cognisant of the Investment Manager’s

obligations to comply with the FCA’s Consumer Duty rules and

principles introduced in 2022 and coming into force in 2023.

Firms subject to Consumer Duty must ensure they are acting

to deliver good outcomes and that this is reflected in their

strategies, governance, leadership and policies. The Investment

Manager is currently undergoing a review of its existing practices

to identify areas in which it must update to bring in line with the

Consumer Duty principles. The Company is not directly captured

by Consumer Duty, however the Directors will receive updates

from the Investment Manager on how the Investment Manager

is meeting its obligations.

The Strategic Report was approved on behalf of the Board by:

Keith Mullins

Chair

10 March 2023

Octopus AIM VCT 2 plc Annual report 2022

The Board comprises four Directors, all of whom are independent

of the Investment Manager. The Directors operate in a

non-executive capacity and are responsible for overseeing

the investment strategy of the Company. The Board has wide

experience of investment in both smaller growing companies

and larger quoted companies. All Directors are members of the

Audit Committee.

Keith Mullins (Chair)

Keith Mullins joined SG Warburg’s investment management

division in 1978. The division later developed into Mercury

Asset Management and subsequently became Merrill Lynch

Investment Managers upon its acquisition by Merrill Lynch in

1998. He therefore has many years’ experience as a specialist UK

equity fund manager. During this time he was responsible for

establishing and managing the team specialising in small and

medium-sized pension fund portfolios, and from 2000 he was

head of pension fund asset allocation. He left as a managing

director of Merrill Lynch Investment Managers in 2001. Keith

became a Director of the Company on 14 September 2005.

Andrew Raynor FCA

Andy is the non-executive Chair of Potter Clarkson LLP, a leading

full-service intellectual property law firm based in the UK and

Europe. Andy retired from the position of Chief Executive of

Shakespeare Martineau LLP in January 2019, an expanding

Midlands and London law firm that he led from 2015 through a

period of significant growth in turnover and profits. In addition to

Potter Clarkson he also has a portfolio of senior advisory roles in

the professional and financial services sector and has held other

corporate non-executive roles over many years. Andy joined RSM

Tenon Group PLC (‘RSM Tenon’) in 2001 after its acquisition of the

independent partnership formerly known as BDO Stoy Hayward

– East Midlands. Andy led the company to win National Firm of

the Year 2011 in the British Accountancy Awards. Prior to joining

RSM Tenon, he spent almost 20 years with BDO Stoy Hayward –

East Midlands, where he was managing partner. Andy became a

Director of the Company on 14 September 2005.

Elizabeth Kennedy LLB (Hons)

Elizabeth Kennedy worked for 30 years in corporate finance,

principally with Brewin Dolphin Limited, specialising in IPO,

secondary issue, takeover code, FCA sponsor and AIM nominated

adviser work. She has been a member of the London Stock

Exchange’s AIM Advisory Group since 1995. She is currently a

non-executive Director of a number of companies and a charity

including CT Private Equity Trust plc and is a consultant with

Davidson Chalmers Stewart LLP. Elizabeth became a Director of

the Company on 12 August 2010 when Octopus AIM 2 merged

with Octopus Second AIM VCT plc.

Brad Ormsby CA

Brad Ormsby has been Group Finance Director at Judges

Scientific plc, the AIM-listed buy and build scientific instruments

group, since 2015. He is a Chartered Accountant with significant

senior financial and operational experience acquired during his

time at PwC and Eurovestech plc, a technology venture capital

fund. Prior to joining Judges he was CFO at Kalibrate Technologies

plc where he led the company’s IPO onto AIM. Brad became a

Director of the Company on 1 January 2022.

Details of Directors

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

The Directors present their report and the audited financial

statements for the year ended 30 November 2022. The Corporate

Governance Report on pages 33 to 36 and the Audit Committee

Report on pages 37 and 38 form part of this Directors’ Report.

The Directors consider that the annual report and accounts, taken

as a whole, is fair, balanced and understandable and provides the

information necessary for shareholders to assess the Company’s

position, performance, business model and strategy.

Directors

Brief biographical notes on the Directors are given on page 28.

In accordance with the Articles of Association of the Company,

Elizabeth Kennedy will retire as Director at the AGM and,

being eligible, offer herself for re-election. Following a formal

performance evaluation as part of the Board evaluation, the

Board believes that all the Directors continue to be effective

non-executive Directors, providing considerable experience and

continuity to the Company and demonstrating commitment

to their roles. In addition the Board has discussed succession

planning, and further details of both of these matters can be

found on page 34.

Directors’ and officers’ liability insurance

The Company has, as permitted by s236 of the Companies

Act 2006, maintained insurance cover on behalf of the Directors

and Secretary indemnifying them against certain liabilities which

may be incurred by them in relation to the Company.

VCT regulations

Compliance with required rules and regulations is considered

when all investment decisions are made. The Company is further

monitored on a continual basis to ensure compliance. The main

criteria which the Company must adhere to are outlined below:

The Company is required at all times to hold at least 80% of

its investments (as defined in the legislation) in VCT qualifying

holdings, of which at least 70% must comprise eligible

Ordinary shares.

For this purpose, a ‘VCT qualifying holding’ consists of up to

£5 million invested in any one year in new shares or securities

of a UK AIM traded company or an unquoted company which

is carrying on a qualifying trade, and whose gross assets and

number of employees at the time of investment do not exceed

prescribed limits. The definition of ‘qualifying trade’ excludes

certain activities such as property investment and development,

some financial services and asset leasing.

The Finance Act 2014 amended the VCT rules in respect of VCT

shares issued on or after 6 April 2014, such that VCT status will

be withdrawn if a dividend is paid (or other forms of distribution

or payments are made to investors) from the capital received

by the VCT from that issue within three years of the end of the

accounting period in which shares were issued to investors. This

may reduce the amount of distributable reserves available to

the Company to fund dividends and share buybacks. However,

with share premium cancellations when necessary, the Company

currently has sufficient distributable reserves to allow dividends to

continue to be paid at a level in line with the Company’s current

dividend policy.

The Finance Act 2016 introduced a number of changes to VCT

rules to bring the legislation into line with EU State Aid Risk Finance

Guidelines. The legislation introduced new criteria which stipulate

a lifetime cap on the total amount of State Aid investment a

company can receive, the age of companies which are eligible for

investment and specific requirements relating to the use of the

funds raised. See page 7 of the Investment Managers Review for

a summary of the requirements.

The Finance Act 2018 made further changes to VCT rules. As

referred to earlier on pages 6 and 7, the Company is required to

hold at least 80% of its investments in VCT qualifying holdings

as of the last accounting period. The legislation also introduced a

new deadline by which the Company must invest at least 30% of

the money raised from the issue of shares in qualifying holdings

within 12 months of the accounting period in which the shares

were issued.

The Company has maintained compliance with VCT legislation

for the year under review and intends to continue to do so for

future periods

Going concern

The Company’s business activities and the factors likely to

affect its future development, performance and position are

set out in the Chair’s Statement and Investment Manager’s

Review on pages 2 and 3 and pages 4 to 16. Further details on

the management of financial risk may be found in the Business

Review on page 21 and in note 17 to the financial statements.

The Board receives regular reports from the Investment

Manager and the Directors have a reasonable expectation

that the Company has adequate resources to continue in

operational existence for a period at least 12 months from the

date of approval of the financial statements. As discussed in the

Viability Statement on page 24, the Directors have considered

the Company’s cash flow projections in a range of scenarios,

including both continuation of normal levels of fundraising as well

as potential ‘no fundraise’ scenarios. In all scenarios the Board is

confident in the ability of the Company to maintain its VCT status

and meet its liabilities as they fall due. Some of the ways in which

the Board could manage the operations of the Company include

adjusting investment strategy and careful consideration of non-

committed cash outflows, including dividends and buybacks.

They are satisfied that no material uncertainties leading to

significant doubt about going concern have been identified. It

is appropriate to continue to adopt the going concern basis in

preparing the financial statements.

Directors’ report

Octopus AIM VCT 2 plc Annual report 2022

The assets of the Company include securities, a large proportion

of which are readily realisable and, accordingly, the Company

has adequate financial resources to continue to satisfy the

expenses of commitments under share buybacks and to remain

in operational existence for a period of at least 12 months.

A resolution will be put to the Company’s AGM, details on page 75,

to approve the Company continuing as a venture capital trust. A

continuation vote has been approved by shareholders annually

since 2009.

Dividend

The proposed final dividend of 2.3p for the year ended

30 November 2022 will be paid on 25 May 2023 to shareholders on

the register on 5 May 2023 subject to approval at the AGM being

held on 26 April 2023, as set out in the Strategic Report.

Management

The Company has in place an agreement with Octopus to act

as Investment Manager which is central to the ability of the

Company to continue in business. The principal terms of the

Company’s management agreement with Octopus are set out

in note 3 to the financial statements. The Investment Manager

also provides secretarial, administrative and custodian services

to the Company.

There are no other contracts which are deemed to be essential to

the business of the Company.

As required by the Listing Rules, the Directors confirm that, in their

opinion, the continuing appointment of Octopus as Investment

Manager is in the best interest of the shareholders as a whole. In

reaching this conclusion the Directors have taken into account

the performance of the investment portfolio and the ability of

the Investment Manager to produce satisfactory investment

performance in the future. No Director has an interest in any

contract to which the Company is a party.

The Board has delegated the routine management decisions

such as the payment of standard running costs to Octopus.

Investment decisions are discussed with the Board.

Whistleblowing

The Board has considered the arrangements implemented by

the Investment Manager to encourage staff of the Investment

Manager or Company Secretary of the Company to raise

concerns, in confidence, within their organisation about possible

improprieties in matters of financial reporting or other matters.

It is satisfied that adequate arrangements are in place to allow

an independent investigation, and follow-on action where

necessary, to take place within the organisation.

Employee, human rights, social and community

issues

The Board seeks to conduct the Company’s affairs responsibly.

The Company is required by company law to provide details of

employee, human rights, social and community issues, including

information about any policies it has in relation to these matters

and the effectiveness of such policies. As an externally managed

investment company with no employees the Company does not

maintain specific policies in relation to these matters.

Environment policy and greenhouse gas

emissions

The Board has no specific environmental policy; however, the

Company recognises the need to conduct its business, including

investment decisions, in a manner that is environmentally

responsible wherever possible. The Company does not produce

any reportable emissions as the fund management is outsourced

to the Investment Manager with no physical assets or property

held by the Company. As the Company has no employees or

operations, it is not responsible for any direct emissions, and as it

uses less than 40,000 kWh of energy during the reporting year it

is exempt from SECR reporting requirements.

Financial risk management

The most significant financial risks arising from the Company’s

financial instruments are market risk, interest rate risk, credit

risk and liquidity risk. The policies for managing these risks are

regularly reviewed by the Board and full details can be found in

note 17 to the financial statements.

Bribery Act

Octopus have an Anti-Bribery Policy which includes robust

procedures to ensure full compliance with the Bribery Act 2010

and to ensure that the highest standards of professional ethical

conduct are maintained. All employees and those working for, or

on behalf of, the firm are aware of their legal obligations when

conducting Company business.

Share capital

The Company’s Ordinary share capital as at 30 November 2022

comprised 165,172,844 Ordinary shares of 0.01p each.

The voting rights of the Ordinary shares on a show of hands are

one vote for each member present or represented, the voting

rights on a poll are one vote for each share held. There are no

restrictions on the transfer of the Ordinary shares and there are

no shares that carry special rights with regard to the control of

the Company.

Directors’ report continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Share issues

During the year the remaining balance of the fundraise launched

in September 2021 was allotted in April 2022 for a post tax year

end allotment when a further 106,610 shares were issued, raising

£0.1 million after costs.

On 22 September 2022, a prospectus offer was launched

alongside Octopus AIM VCT plc to raise a combined total of

up to £20 million with a £10 million over-allotment facility. This

prospectus closed to further applications on 13 October 2022

being fully subscribed.

In the period, 21,086,872 shares were issued, raising £12.9 million

after costs.

During the year 19,104,227 shares were issued under the fundraise

that launched on 22 September 2022, raising £11.6 million after

costs.

During the year 1,829,150 shares were issued to those

shareholders who elected to receive shares under the Dividend

Reinvestment Scheme as an alternative to dividends. This raised

£1.2 million.

An additional 46,885 shares were issued to shareholders as a

result of reduced adviser charges, and to Octopus employee

shareholders as a result of a rebate of part of the annual

management fee. These shares were issued to those investors

who, in accordance with the adviser charging terms contained in

each fundraising document offered to the public and published

since 31 December 2012 following the introduction of the retail

distribution, had chosen to pay their adviser less than the 0.5%

ongoing adviser charge; and to employees, who have been

rebated the annual management charge.

Share buybacks and redemptions

During the year, the Company purchased 4,494,597 Ordinary

shares with a nominal value of 0.01p for cancellation at a

weighted average price of 69.4p per share (2021: 5,472,527

shares at a weighted average price of 90.9p per share) for a total

consideration of £3.1 million (2021: £5.0 million). This represents

2.7% of the closing share capital. These were repurchased in

accordance with the Company’s share buyback facility in an

attempt to assist the marketability of the shares and prevent the

shares trading at a wide discount to the NAV.

Post balance sheet events

A full list of post balance sheet events since 30 November 2022

can be found in note 18 to the financial statements on page 66

and 67.

Rights attaching to the shares and restrictions

on voting and transfer

Subject to any suspension or abrogation of rights pursuant

to relevant law or the Company’s Articles of Association, the

Ordinary shares confer on their holders (other than the Company

in respect of any Treasury shares) the following principal rights:

(a) the right to receive profits available for distribution, such

dividends as may be agreed to be paid (in the case of a

final dividend in an amount not exceeding the amount

recommended by the Board as approved by shareholders in

a general meeting or in the case of an interim dividend in an

amount determined by the Board). All dividends unclaimed

for a period of 12 years after having become due for payment

are forfeited automatically and cease to remain owing by

the Company;

(b) the right, on a return of assets on a liquidation, reduction

of capital or otherwise, to share in the surplus assets of the

Company remaining after payment of its liabilities pari passu

with the other holders of Ordinary shares; and

vote in person or by proxy at any general meeting of the

Company. On a show of hands, every member present or

represented and voting has one vote, and on a poll, every

member present or represented and voting has one vote

for every share of which that member is the holder. The

appointment of a proxy must be received not less than

48 hours before the time of the holding of the relevant

meeting or adjourned meeting or, in the case of a poll

taken otherwise than at or on the same day as the relevant

meeting or adjourned meeting, be received after the poll has

been demanded and not less than 24 hours before the time

appointed for the taking of the poll.

These rights can be suspended. If a member, or any other person

appearing to be interested in shares held by that member,

has failed to comply within the time limits specified in the

Company’s Articles of Association with a notice pursuant to s793

of the Companies Act 2006 (notice by the Company requiring

information about interests in its shares), the Company can,

until the default ceases, suspend the right to attend and speak

and vote at a general meeting. If the shares represent at least

0.25% of their class the Company can also withhold any dividend

or other money payable in respect of the shares (without any

obligation to pay interest) and refuse to accept certain transfers

of the relevant shares. Shareholders, either alone or with other

shareholders, have other rights as set out in the Company’s

Articles of Association and in company law (principally the

Companies Act 2006).

A member may choose whether their shares are evidenced

by share certificates (certificated shares) or held in electronic

(uncertificated) form in CREST (the UK electronic settlement

system). Any member may transfer all or any of their shares,

subject in the case of certificated shares to the rules set out in the

Company’s Articles of Association or in the case of uncertificated

shares to the regulations governing the operation of CREST (which

allow the Directors to refuse to register a transfer as therein set

out); the transferor remains the holder of the shares until the

name of the transferee is entered in the Register of Members.

The Directors may refuse to register a transfer of certificated

Octopus AIM VCT 2 plc Annual report 2022

shares in favour of more than four persons jointly or where there

is no adequate evidence of ownership or the transfer is not duly

stamped (if so required). The Directors may also refuse to register

an Ordinary share transfer if it is in respect of a certificated

share which is not fully paid up or on which the Company has a

lien provided that, where the share transfer is in respect of any

share admitted to the Official List maintained by the UK Listing

Authority, any such discretion may not be exercised so as to

prevent dealings taking place on an open and proper basis, or

if, in the opinion of the Directors (and with the concurrence of

the UK Listing Authority), exceptional circumstances so warrant,

provided that the exercise of such power will not disturb the

market in those shares. Whilst there are no squeeze-out and

sell-out rules relating to the shares in the Company’s Articles

of Association, shareholders are subject to the compulsory

acquisition provisions in s974 to s991 of the Companies Act 2006.

Independent auditor and disclosure of

information to auditor

BDO LLP is the appointed auditor of the Company and offer

themselves for re-appointment. A resolution to re-appoint

BDO LLP as auditor and authorise the Directors to determine

their remuneration will be proposed at the forthcoming AGM.

As far as the Directors are aware, there is no relevant audit

information of which the auditor is unaware and the Directors

have taken all the steps they ought to have taken as Directors

in order to make them aware of any relevant audit information

and to establish that the Company’s auditor is aware of that

information.

Resolutions being put to shareholders in 2023

Directors’ authority to allot shares, to disapply

pre-emption rights

The authority proposed under Resolution 7 is required so that

the Directors may issue shares in connection with offers, if the

Directors believe this to be in the best interests of the Company

and the shareholders as a whole. Any issue proceeds will be

available for investment in line with the Company’s investment

policy and may be used, in whole or part, to purchase Ordinary

shares in the market. Resolution 7 renews the Directors’ authority

to allot Ordinary shares (representing approximately 20% of the

Company’s issued share capital at the date of the Notice of AGM).

The authority conferred by this Resolution will expire on the date

falling 15 months after the date of the passing of the Resolution

or, if earlier, at the conclusion of the next AGM of the Company.

Any shares allotted under this authority would be issued at prices

at or above NAV.

Resolution 8 authorises the Directors to allot Ordinary shares in

connection with the Dividend Re-investment Scheme (‘DRIS’), up

to 3% of the Company’s issued share capital at the date of the

Notice of AGM. Such authority will expire 15 months after the

passing of the Resolution or, if earlier, the conclusion of the next

AGM of the Company.

Resolutions 9 and 10 renew and extend the Directors’ authority

to allot equity securities for cash without pre-emption rights

applying in certain circumstances. The Resolutions will authorise

the Directors, until the date falling 15 months after the date of

the passing of the Resolutions or, if earlier, the conclusion of the

next AGM of the Company, to issue Ordinary shares for cash

without pre-emption rights applying by way of an offer to existing

shareholders. These powers will be exercised only if, in the opinion

of the Directors, it would be in the interests of shareholders as a

whole. Any shares allotted under this authority would be issued

at prices at or above NAV.

Directors’ authority to make market purchases

of its own shares

The authority proposed under Resolution 11 is required so that

the Directors may make purchases of up to 24,588,129 Ordinary

shares (representing approximately 14.99% of the Company’s

issued share capital at the date of the Notice of AGM) and the

Resolution seeks renewal of such authority until the next AGM (or

the expiry of 15 months, if earlier). Any shares bought back under

this authority will be at a price determined by the Board, (subject

to a minimum of 0.01p (being the nominal value of such shares)

and a maximum of 5% above the average mid-market quotation

for such shares on the London Stock Exchange and the applicable

regulations thereunder). This power will be exercised only if, in

the opinion of the Directors, a repurchase would be in the best

interests of shareholders as a whole. Any shares repurchased

under this authority will either be cancelled or held in Treasury for

future re-sale in appropriate market conditions.

Cancellation of share premium account

The Board considers it appropriate to obtain shareholders’

approval for the cancellation of the remaining amount standing

to the share premium account of the Company to create (subject

to Court approval) a pool of distributable reserves. A Special

Resolution to this effect is being proposed at Resolution 12.

Substantial shareholdings

As at the date of this report, no disclosures of major shareholdings

had been made to the Company under Disclosure Guidance and

Transparency Rule 5 (Vote Holder and Issuer Notification Rules).

On behalf of the Board

Keith Mullins

Chair

10 March 2023

Directors’ report continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

The Board of the Company has considered the principles and

recommendations of the Association of Investment Companies

Code of Corporate Governance (‘AIC Code’). The AIC Code

addresses the Principles and Provisions set out in the UK

Corporate Governance Code (‘UK Code’), as well as setting out

additional Provisions on issues that are of specific relevance to

the Company.

The Board considers that reporting against the principles and

provisions of the AIC Code, which has been endorsed by the

Financial Reporting Council, provides more relevant information

to shareholders.

Corporate governance within the closed-ended investment

company industry differs from that of other companies. In

addition, VCTs differ from most other investment companies in

that they have, developed over many years, a complex range of

additional legal, tax and regulatory requirements.

Octopus AIM VCT 2 plc, as a VCT and closed-ended investment

company, has particular factors which have an impact on its

governance arrangements. The Company:

• outsources all day-to-day activities (such as portfolio

management, administration, accounting, custody and

company secretarial). This means that it is governed

entirely by a Board of non-executive Directors. In these

circumstances, the proper oversight of these relationships is

the key aspect of achieving good corporate governance;

• does not have executive directors or employees. As a

consequence, the only ‘corporate memory’ is that of the

non-executive Directors; and

• does not have customers, only shareholders.

The AIC Code deals with matters such as the relationship with

the Investment Manager and other service providers. In practice,

most of the time spent by the Board of a well-functioning

investment company should be spent on matters of general

corporate governance (e.g. the investment strategy, policy and

performance) which is what we do.1

The Company is committed to maintaining high standards in

corporate governance. The Directors consider that the Company

has, throughout the year under review, complied with the

provisions set out in the AIC Code with the exceptions set out in

the Compliance Statement on page 36.

1Please see the AIC Code at www.theaic.co.uk.

Board of Directors

The Company has a Board of four non-executive Directors, all

of whom are considered by the Board to be independent. The

Board meets at least four times a year, and on other occasions

as required, to review the investment performance and monitor

compliance with the investment policy laid down by the Board.

The Board has a formal schedule of matters specifically reserved

for its decision which include:

• the consideration and approval of future developments or

changes to the investment policy, including risk and asset

allocation;

• consideration of corporate strategy;

• approval of the appropriate dividend to be paid to the

shareholders;

• the appointment, evaluation, removal and remuneration of

the Investment Manager;

• the performance of the Company, including monitoring of

the discount of the NAV to the share price; and

• monitoring shareholder profiles and considering shareholder

communications.

The Chair leads the Board in the determination of its strategy and

in the achievement of its objectives. The Chair is responsible for

organising the business of the Board, ensuring its effectiveness

and setting its agenda, and has no involvement in the day-to-day

business of the Company. He facilitates the effective contribution

of the Directors and make sure that they receive accurate, timely

and clear information and that they communicate effectively

with shareholders.

The Company Secretarial function is discharged by Octopus

Company Secretarial Services Limited which is responsible

for advising the Board, through the Chair, on all governance

matters. All of the Directors have access to the advice and

services of the Company Secretary, which has administrative

responsibility for the meetings of the Board and its committees.

Directors may also take independent professional advice at the

Company’s expense where necessary in the performance of

their duties.

As all of the Directors are non-executive, it is not considered

necessary to identify a member of the Board as the senior

independent director of the Company.

The Company’s Articles of Association and the schedule of

matters reserved for the Board for decision provide that the

appointment and removal of the Company Secretary is a matter

for the full Board.

Corporate governance

report

Octopus AIM VCT 2 plc Annual report 2022

During the year the following meetings were held as part of the regular programme of meetings:

Full Board meetings

held

No. of meetings

attended

Audit Committee

meetings held

Audit Committee

meetings attended

Keith Mullins 6 6 2 2

Elizabeth Kennedy 6 6 2 2

Andy Raynor 6 6 2 2

Alastair Ritchie1 6 2 2 1

Brad Ormsby2 6 6 2 2

Retired from the Board on 28 April 2022.

Appointed to the Board on 1 January 2022.

Additional meetings were held as required to address specific issues, including approval of the Company’s annual report and accounts

and half yearly results.

Performance evaluation and independence of Directors

Each year a formal performance evaluation is undertaken of the Board, its Committees and the Directors in the form of a questionnaire

completed by each Director. The Chair provides a summary of the findings to the Board, which is discussed and an action plan agreed.

During the year no issues were identified requiring an action plan. The performance of the Chair is evaluated by the other Directors.

Brad Ormsby is the Group Finance Director and a shareholder of Judges Scientific plc, in which the Company has an investment, and

so absents himself from any Board decisions relating to that investment. We believe that, in line with the AIC Code, all members of

the Board are independent in character and judgement with respect to their duties to the shareholders. Keith Mullins, Chair of the

Company, has served on the Board for 17 years since his initial appointment. He is still considered to be independent in the absence of

a connection with the Investment Manager or any of the Company’s advisers.

Length of service

Date of original Appointment Due date for re-election

Keith Mullins 14 September 2005 AGM 2024

Elizabeth Kennedy 12 August 2010 AGM 2023

Andy Raynor 14 September 2005 AGM 2023

Brad Ormsby 1 January 2022 AGM 2024

Length of service of the Chair and other Directors is one of a number of factors taken into account when considering the contribution

and ongoing independence of the Board, both individually and in terms of overall composition. The Board considers the experience,

range of skills, knowledge of the Company and its operating environment and diversity of the Directors. Accordingly, the Board’s

policy on tenure is that the term the Chair and other Directors serve on the Board should not be restricted to a fixed time limit in order

to ensure sufficient corporate memory and consistent adherence to strategy. The Board has discussed succession, and following the

retirement of Alastair Ritchie and the appointment of Brad Ormsby, Elizabeth Kennedy has announced her intention to retire from

the Board at the conclusion of the Company’s 2024 AM. Accordingly, the Board expects to start recruitment for a new Director later

this year.

Powers of the Directors

Subject to the provisions of the Companies Act 2006, the Memorandum and Articles of Association of the Company and any directions

given by shareholders by Special Resolution, the Articles of Association specify that the business of the Company is to be managed

by the Directors, who may exercise all the powers of the Company, whether relating to the management of the business or not. In

particular the Directors may exercise on behalf of the Company its powers to purchase its own shares to the extent permitted by

shareholders. Authority was given at the Company’s 2021 AGM to make market purchases of up to 14.99% of the issued Ordinary share

capital at any time up to the 2023 AGM and otherwise on the terms set out in the relevant resolution and renewed authority is being

sought at the 2023 AGM as set out in the notice of meeting.

Corporate governance report continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Board committees

It should be noted that there is no formal Management

Engagement Committee as matters of this nature are dealt with

by the independent non-executive Directors. The Board does not

have a separate Remuneration Committee as the Company

has no employees or executive directors. Detailed information

relating to the remuneration of Directors is given in the Directors’

Remuneration Report on pages 39 to 41. The Board does not

have a separate Nomination Committee as there has not been

a requirement for a Committee. Whilst diversity considerations

would normally be a function of a Nomination Committee,

these are dealt with by the Board as a whole on an annual basis.

The Board considers its composition to be appropriate with due

regard for the benefits of diversity and gender.

Audit committee

Andy Raynor is Chair of the Audit Committee and all Directors

are members of this Committee. The Board confirms that, in

accordance with the recommendation of the AIC Code, at least

one member of the Audit Committee has recent and relevant

financial experience. Both Andy Raynor, as Chair, and Brad

Ormsby are Chartered Accountants and the Board is confident

that the Committee as a whole has competence relevant to the

sector in which the Company operates.

The Audit Committee Report is given on pages 37 and 38.

Internal control

The purpose of these controls is to ensure that proper accounting

records are maintained, the Company’s assets are safeguarded

and the financial information used within the business and for

publication is accurate and reliable; such a system can only

provide reasonable and not absolute assurance against material

misstatement or loss. The system of internal controls is designed

to manage rather than eliminate the risk of failure to achieve the

business objectives. The Board regularly reviews financial results

and investment performance with its Investment Manager.

The Board delegates the identification of appropriate

opportunities and the investment of funds to the Investment

Manager. The Board regularly review reports upon the

investments made and on the status of existing investments.

The Investment Manager is also engaged to carry out the

accounting and custodian functions of the Company.

All quoted investments are held in CREST. Unquoted investments

are held in certificated form.

The Directors confirm that they have established a continuing

process throughout the year and up to the date of this report for

identifying, evaluating and managing the significant potential

risks faced by the Company and have reviewed and were

satisfied with the effectiveness of the internal control systems.

As part of this process, an annual review of the internal control

systems is carried out, by Octopus, in accordance with the

Financial Reporting Council’s Guidance on Risk Management,

Internal Control and Related Financial and Business Reporting.

As explained in the Audit Committee Report, the Board does not

consider it necessary to maintain an internal audit function.

Internal control systems include the production and review of

monthly bank reconciliations and management accounts. All

outflows made from the VCT’s accounts require the authority of

two signatories from Octopus. The Investment Manager is subject

to ongoing review by the Octopus Compliance Department.

Financial risk management objectives

and policies

The Company is exposed to the risks arising from its operational

and investment activities. Further details can be found in note 17

to the financial statements.

Statement of voting at the Annual General

Meeting

The most significant portion of the votes cast against a resolution

at the 2022 AGM were for the resolutions relating to the approval

of the Directors’ Remuneration Report (4.45% of votes cast)

and the re-appointment of BDO LLP as auditor (3.06% of votes

cast). No communication was received from shareholders giving

reasons for the votes against the resolutions.

Shareholders’ views are always welcomed and considered by the

Board. The methods of contacting the Board are set out below.

Relations with shareholders

The Board will be holding a virtual shareholder event on

19 April 2023 at 1.00pm to enable shareholders to receive an

update from the Investment Manager. This will also provide

an opportunity for shareholders to ask questions of the Board

relating to the AGM resolutions and annual report and accounts.

We always welcome questions from our shareholders at the AGM,

which will take place on 26 April 2023 at 12.00pm. To ensure we

are able to respond to any questions you may have for either

the Investment Manager or AIM VCT 2 Board, please send

these via email to AIMVCT2AGM@octopusinvestments.com

by 5.00pm on 21 April 2023. Alternatively, please contact the

team at Octopus to answer any queries. They can be contacted

on 0800 316 2295.

Octopus AIM VCT 2 plc Annual report 2022

Compliance statement

The Board recognises the importance of good governance.

With the exception of the limited items outlined below, the

Board believes, for the year ended 30 November 2022, the

Company has complied with the principles and provisions of the

AIC Code:

1. The Company does not have a senior independent director.

The Board does not consider this necessary for the size of

the Company.

2. The Company does not have a separate Nomination

Committee due to the relatively small size and structure of

the Company. Appointments are dealt with by the full Board

as and when appropriate.

3. The Company does not have a Remuneration Committee

given the size of the Company and as it does not have any

executive directors. The whole Board deals with any matters

pertaining to remuneration.

4. The Company has no major shareholders therefore

shareholders are not given the opportunity to meet any

non-executive Directors at a specific meeting other than

the AGM, or other designated shareholder events, but are

welcome to contact the Board or Octopus at any time.

5. The Directors are not subject to annual re-election.

This is to ensure experience is retained on the Board. As

highlighted earlier, the Board considers all the Directors to

be independent.

By Order of the Board

Keith Mullins

Chair

10 March 2023

Corporate governance report continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

This report is submitted in accordance with The AIC Code in

respect of the year ended 30 November 2022 and describes the

work of the Audit Committee in discharging its responsibilities.

The Committee’s key objective is the provision of effective

governance of the appropriateness of the Company’s financial

reporting, the performance of the auditor and the management

of the internal control and business risks systems. The Directors

forming the Audit Committee can be found on page 28.

Matters considered by the Audit Committee in

the year

The Audit Committee’s terms of reference include the following

responsibilities:

• reviewing and making recommendations to the Board in

relation to the Company’s published financial statements

and other formal announcements relating to the Company’s

financial performance;

• reviewing and making recommendations to the Board in

relation to the Octopus internal controls (including internal

financial control) and risk management systems to the

extent they are relevant to the Company’s internal controls;

• periodically considering the need for an internal audit

function;

• making recommendations to the Board in relation to the

appointment, re-appointment and removal of the external

auditor and approving the remuneration and terms of

engagement of the external auditor;

• reviewing and monitoring the external auditor’s independence

and objectivity and the effectiveness of the audit process,

taking into consideration relevant UK professional regulatory

requirements;

• monitoring the extent to which the external auditor is

engaged to supply non-audit services; and

• ensuring that the Investment Manager has arrangements

in place for the investigation and follow-up of any concerns

raised confidentially by staff in relation to propriety of

financial reporting or other matters.

The Committee reviews its terms of reference and its effectiveness

annually and recommends to the Board any changes required as

a result of the review. The terms of reference are available on

request from the Company Secretary.

The Committee meets at least twice per year and has direct

access to BDO LLP, the Company’s external auditor.

Auditor appointment

The Audit Committee undertook a competitive audit tender

process in 2018 as required for all Public Interest Entities who

have had the same auditor for ten years, following which BDO

were re-appointed. When considering whether to recommend

the re-appointment of the external auditor, the Committee

take into account the tenure of the current auditor in addition

to comparing the fees charged to similar sized VCTs. The current

auditor was appointed in 2008 under the name of PKF (UK) LLP,

which subsequently merged with BDO LLP, and has held the

position for fourteen years. Peter Smith, the current Audit Partner,

has been involved for 5 years and therefore this is his final year.

Independence and objectivity of the auditor

Non-audit services were not provided by the external auditor

during the period and therefore the Audit Committee does

not believe there are any influences on their independence

or objectivity.

When considering the effectiveness of the external audit, the

Board considered the quality and content of the Audit Plan

and Report provided to the Committee by the auditor and the

resultant reporting and discussions on topics raised. Further

consideration is also given as part of the annual Board evaluation.

Auditor evaluation

The effectiveness of the external audit is assessed as part of the

Board evaluation conducted annually and by the quality and

content of the Audit Plan and Report provided to the Committee

by the Auditor and the resultant discussions on topics raised.

The Committee also engages with the Auditor when present at

a Committee meeting, if appropriate. The Audit Committee is

satisfied that BDO LLP provided effective challenge in carrying

out its responsibilities.

Once the Committee has made a recommendation to the Board,

in relation to the appointment of the external auditor, this is then

ratified at the AGM through an Ordinary Resolution.

Internal audit

The Company does not have an independent internal audit

function as it is not deemed appropriate given the size of the

Company and the nature of the Company’s business. However,

the Committee considers annually whether there is a need for such

a function and if so would recommend this to the Board. Octopus

has an internal audit team, which is supported as required by

external consultants. The Octopus Compliance Department

reports to the Board on the outcome of the internal audits that

have taken place insofar as these relate to the Company and

confirms the absence of any issues relating to internal audit

of which the Board should be aware. Octopus undertakes to

immediately raise to the Committee any significant issues arising

from the Octopus internal audit that affect the Company.

The Committee will monitor the significant risks at each meeting

and Octopus will work closely with the internal auditor to mitigate

the risks and the resultant impact.

Audit Committee report

Octopus AIM VCT 2 plc Annual report 2022

Significant risks

The Audit Committee is responsible for considering significant

issues in relation to the financial statements. The Committee has

identified the most significant risks for the Company as:

• Valuation and ownership of investments: The Committee

gives special audit consideration to the valuation of

investments and supporting data provided by Octopus.

The impact of this risk would be a large gain or loss in the

Company’s results. The valuations are supported variously

by stock market quotations, portfolio company audited

accounts and third party evidence (where relevant). These,

together with reconciliations and independent confirmations

performed by the auditor give comfort to the Audit

Committee.

• Management override of financial controls: The

Committee specifically review all significant accounting

estimates that form part of the financial statements and

consider any material judgements applied by management

during the completion of the financial statements.

• Recognition and categorisation of revenue from

investments: Investment income is the Company’s main

source of revenue. The revenue return is recognised when the

Company’s right to the return is established in accordance

with the Statement of Recommended Practice, as either

revenue or capital income. Octopus confirms to the Audit

Committee that the revenues are recognised appropriately

In addition to the above, the Committee has also considered the

implications of inflation and high interest rates. As at the date

of issuing this Report, whilst the Committee anticipates further

market volatility affecting the underlying investments, it does

not consider that this will have an impact upon the long-term

viability of the Company. This is discussed further in the Viability

Statement on page 24.

These issues were discussed with Octopus and the auditor at the

conclusion of the audit of the financial statements.

The Committee has considered the Annual Report and Accounts

for the year ended 30 November 2022 and has reported to

the Board that it considers them to be fair, balanced and

understandable, providing the information necessary for

shareholders to assess the Company’s position, performance,

business model and strategy.

The Audit Committee is also responsible for considering and

reporting on any significant issues that arise in relation to the

audit of the financial statements. The Audit Committee can

confirm that there were no significant issues to report to the

shareholders in respect of the audit of the financial statements

to 30 November 2022.

Andrew Raynor

Audit Committee Chair

10 March 2023

Audit Committee report continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Introduction

This report is submitted in accordance with Regulation 3 of the

Large and Medium-sized Companies and Groups (Accounts

and Reports) (Amendment) Regulations 2013 (‘Regulations’) in

respect of the year ended 30 November 2022.

The Company’s auditor, BDO LLP, is required to give their opinion

on certain information included in this report; comprising the

Directors’ emoluments section and the Directors’ interest in

shares below as set out on page 40.

Consideration by the Directors of matters

relating to Directors’ remuneration

The Board as a whole considers Directors’ remuneration and has

not appointed a separate committee in this respect.

The Board has not sought advice or services from any external

person in respect of its consideration of Directors’ remuneration

during the year although the Directors expect from time to time

to review the fees against those paid to the boards of directors of

other VCTs. The Company does not have a chief executive officer,

senior management or any employees.

Directors’ remuneration policy report

The Board consists entirely of non-executive Directors, who

meet at least quarterly and on other occasions as necessary,

to deal with the important aspects of the Company’s affairs.

Directors are appointed with the expectation that they will serve

for a period of at least three years. All Directors are subject to

election at the first AGM after their appointment and one third

of all Directors are subject to retirement by rotation at the AGMs.

Re-election will be recommended by the Board but is dependent

upon shareholder votes.

Each Director receives a letter of appointment. A Director

may resign by notice in writing to the Board at any time giving

three months’ notice. None of the Directors are entitled to

compensation payable upon early termination of their contract

other than in respect of any unexpired notice period.

The Company’s policy is that the fees payable to the Directors

should reflect the time spent by the Board on the Company’s

affairs and the responsibilities borne by the Directors. They should

be sufficient to attract candidates of high calibre to be recruited.

The policy is for the Chair of the Board and the Chair of the Audit

Committee to be paid higher fees than the other Directors in

recognition of their more onerous roles. The Remuneration policy

is to review the Directors’ fees from time to time, benchmarking

the fees against other VCT boards, although such review will

not necessarily result in any changes. Due to the nature of the

Company, there are no employees other than the Directors

and therefore no such issues to consider when determining the

Directors’ remuneration.

The Company’s policy is for the Directors to be remunerated

in the form of fees, payable monthly in arrears. The fees are

not specifically related to the Directors’ performance, either

individually or collectively. There are no long-term incentive

schemes, share option schemes or pension schemes in place.

The Board is also entitled to be repaid all reasonable travelling,

subsistence and other expenses incurred by them respectively

whilst conducting their duties as Directors. No other remuneration

or compensation was paid or payable by the Company

during the year to any of the current Directors. There will be

no payment for loss of office unless approved by a separate

shareholder resolution.

An Ordinary Resolution to approve the remuneration policy of

the Company was put to, and approved by, shareholders at the

2020 AGM and will remain in force for a three year period. The

Board will review the remuneration of the Directors if thought

appropriate and monitors competitors in the VCT industry on

an annual basis.

Annual remuneration report

This section of the report is subject to approval by a simple

majority of shareholders at the AGM in April 2023, as in

previous years.

Statement of voting at the Annual General

Meeting

The 2021 Remuneration Report was presented to the AGM in

April 2022 and received shareholder approval following voting

by way of a poll. 89.77% of the votes cast were in favour of the

Remuneration Report or at the Chair’s discretion, 4.45% were

against the resolution and 21,505 votes were withheld. The proxy

forms returned to the Registrars contained no explanation for the

votes against the resolution.

Shareholders’ views are always considered by the Board, and the

methods of contacting the Board are set out on page 35.

Company performance

The Board is responsible for the Company’s investment strategy

and performance, although the management of the Company’s

investment portfolio is delegated to Octopus through the

investment management agreement, as referred to in the

Directors’ Report. The performance graph on page 22 also shows

the performance of the Company on a total return basis,

compared to the performance of the FTSE AIM All Share Index,

the FTSE SmallCap (excluding investment companies) Index rose

and the FTSE All Share Index.

Directors’ remuneration

report

Octopus AIM VCT 2 plc Annual report 2022

Directors’ emoluments (audited)

The amount of each Director’s fees for the year were:

Year ended

30 November

2022

£’000

Year ended

30 November

2021

£’000

2022

% Increase/

(Decrease)

2021

% Increase

(Decrease)

2020

% Increase/

(Decrease)

Keith Mullins

26 7.7 4.0 0.0

Andy Raynor

24 4.2 4.3 0.0

Elizabeth Kennedy

21 4.8 5.0 0.0

Alastair Ritchie1

21 (52.4) 5.0 0.0

Brad Ormsby2

– n/a n/a n/a

Total

106

92 15.2 4.5 0.0

Retired from the Board on 28 April 2022.

Appointed to the Board on 1 January 2022.

The Directors do not receive any other form of emoluments in addition to the Directors’ fees, their total remuneration is not linked to

the performance of the Company and no bonuses were or will be paid to the Directors.

The Chair of the Company and Audit Committee Chair receive additional remuneration over the basic Directors’ fee in recognition of

the additional responsibilities and time commitment, and additionally, to be fair and comparable to similar VCTs.

Relative importance of spend on pay

The actual expenditure in the current year is as follows:

Year ended

30 November 2022

£’000

Year ended

30 November 2021

£’000

Total dividends paid

6,155

8,452

Total buybacks

3,117

4,973

Total directors’ fees

106

The Directors do not consider there to be any other significant distributions during the year relevant to understanding the relative

importance of spend on pay.

Directors’ interest in shares (audited)

There are no guidelines or requirements for Directors to own shares in the Company. The interests of the Directors, and their connected

persons, in shares of the Company during the year (in respect of which transactions are notifiable under Disclosure Guidance and

Transparency Rule 3.1.2) in the issued Ordinary shares of 0.01p are shown in the table below:

Ordinary shares of 0.01p each

30 November 2022

Ordinary shares of 0.01p each

30 November 2021

Keith Mullins

308,563

Andy Raynor

21,080

Alastair Ritchie1

n/a

31,809

Elizabeth Kennedy

37,380

Brad Ormsby2

–

Retired from the Board on 28 April 2022.

Appointed to the Board on 1 January 2022.

All of the shares held by the Directors, or their connected persons, were held beneficially, either in their own name or through a nominee

company. There have been no changes in the Directors’ share interests between 30 November 2022 and the date of this report.

Directors’ remuneration report continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Shareholders proxy voting information

As required by Schedule 8:23 of the Regulations, the votes received for the AGM in 2022 were as follows:

For (including discretionary) Against

No. of Shares % No. of Shares %

Approval of Directors’

Remuneration Report

3,507,60 0 89.55 163,516 4.45

By Order of the Board

Keith Mullins

Chair

10 March 2023

Octopus AIM VCT 2 plc Annual report 2022

The Directors are responsible for preparing the Strategic Report,

the Directors’ Report, the Directors’ Remuneration Report and

the financial statements in accordance with applicable law and

regulations. They are also responsible for ensuring that the annual

report and accounts include information required by the Listing

Rules of the Financial Conduct Authority.

Company law requires the Directors to prepare financial

statements for each financial year. Under that law the Directors

have elected to prepare the financial statements in accordance

with United Kingdom Generally Accepted Accounting Practice

(GAAP), including Financial Reporting Standard 102 – ‘The

Financial Reporting Standard Applicable in the United Kingdom

and Republic of Ireland’ (FRS 102), (United Kingdom accounting

standards 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

and profit or loss of 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 applicable UK accounting standards have

been followed, 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, to disclose with reasonable accuracy at any time

the financial position of the Company and to 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.

The Directors are responsible for ensuring that the annual

report and accounts, taken as a whole, are fair, balanced and

understandable and provides the information necessary for

shareholders to assess the Company’s performance, business

model and strategy.

In so far as each of the Directors is aware:

• there is no relevant audit information of which the Company’s

auditor is unaware; and

• the Directors have taken all steps that they ought to have

taken to make themselves aware of any relevant audit

information and to establish that the auditor is aware of

that information.

The Directors are responsible for preparing the annual report and

accounts in accordance with applicable law and regulations.

Having taken advice from the Audit Committee, the Directors are

of the opinion that this report as a whole provides the necessary

information to assess the Company’s performance, business

model and strategy and is fair, balanced and understandable.

The Directors are responsible for the maintenance and integrity

of the corporate and financial information included on the

Company’s website. Legislation in the United Kingdom governing

the preparation and dissemination of financial statements may

differ from legislation in other jurisdictions.

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

• the financial statements, prepared in accordance with United

Kingdom Generally Accepted Accounting Practice, including

FRS 102, give a true and fair view of the assets, liabilities,

financial position and profit or loss of the Company; and

• the annual report and accounts (including the Strategic

Report), give 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.

On behalf of the Board

Keith Mullins

Chair

10 March 2023

Directors’ responsibility

statement

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Opinion on the financial statements

In our opinion the financial statements:

• give a true and fair view of the state of the Company’s affairs

as at 30 November 2022 and of its loss for the year then

ended;

• have been properly prepared in accordance with United

Kingdom Generally Accepted Accounting Practice;

• have been prepared in accordance with the requirements of

the Companies Act 2006.

We have audited the financial statements of Octopus AIM VCT

2 plc (the ‘Company’) for the year ended 30 November 2022

which comprise the Income Statement, the Balance Sheet, the

Statement of Changes in Equity, the Cashflow Statement 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 to audit the

financial statements for the year ended 30 November 2008

and subsequent financial periods. We were reappointed as

auditors in respect of the year ended 30 November 2018. The

period of total uninterrupted engagement including retenders

and reappointments is 14 years, covering the years ended

30 November 2008 to 30 November 2022. 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 their calculations to check

that the Company was meeting its requirements to retain

VCT status

• Reviewing and challenging the forecasted cash flows that

support the Directors’ assessment of going concern.

• Evaluating management’s method of assessing going

concern in light of market volatility having regard to the

liquidity of the investment portfolio;

• Calculating financial ratios to consider 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.

Independent auditor’s report

to the members of Octopus

AIM VCT 2 plc

Octopus AIM VCT 2 plc Annual report 2022

Overview

2022 2021

Key audit matters Valuation and ownership of investments 3 3

Materiality

£1,017,000 (2021: £1,200,000) based on 1% (2021: 1%) of Net assets.

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 were 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.

Key audit matter How the scope of our audit addressed the key audit matter

Valuation and ownership of investments

(Notes 1 and 10 to the financial

statements)

The investment portfolio comprises of quoted

and unquoted investments.

The Investment Manager’s fee is based on

of the value of the net assets of the fund, as

shown in note 3.

As the Investment Manager is also responsible

for preparing the valuation of investments for

the financial statements, there is a potential

risk of misstatement in the investment

valuations.

There is a risk that the investment balance

includes investments which are no longer

owned by the Company or that the bid price

or last price used to value the investment is

incorrect.

There is a high level of estimation uncertainty

involved in determining the unquoted

investment valuations.

There is an inherent risk of management

override arising from the unquoted investment

valuations being prepared by the Investment

Manager, who is remunerated based on a

percentage of the value of the net assets of

the fund, as shown in note 3.

In respect of 100% of quoted equity, we responded to this matter by testing

the valuation and ownership of the whole portfolio of quoted investments. We

performed the following procedures:

• Confirmed the year-end bid price was used by agreeing to externally quoted

prices;

• Assessing if there were contra indicators, such as liquidity considerations,

to suggest bid price is not the most appropriate indication of fair value by

considering the realisation period for individual holdings;

• Recalculating the valuation by multiplying the number of shares held per the

statement obtained from the custodian by the valuation per share;

• Obtained direct confirmation of the number of shares held per equity

investment from the custodian regarding all investments held at the balance

sheet date. Agreed shares to reconciliation performed by the investment

manager.

In respect of a sample of unquoted investments we have:

• Challenged and corroborated the inputs to the valuation with reference

to management information of investee companies, market data and our

own understanding and assessed the impact of the 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,

earnings or cash flows used in the valuations;

• Considered the revenue or earnings multiples applied and the discounts

applied by reference to observable listed company market data; and

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Quoted Investments: £64 million (89%) of

the Company’s investments held at fair

value through profit and loss are quoted

investments.

Unquoted investments: £8 million (11%) of

the Company’s investments held at fair value

through profit and loss are unquoted and

are valued using more subjective techniques

(level 3).

• Challenged the consistency and appropriateness of adjustments made to

such market data in establishing the revenue, cash flow or earnings multiple

applied in arriving at the valuations adopted by considering the individual

performance of investee companies against plan and relative to the peer

group, the market and sector in which the investee company operates and

other factors as appropriate.

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 and

ownership to be appropriate considering the level of estimation uncertainty.

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

2022 2021

Materiality

£1,017,000 £1,200,000

Basis for determining materiality

1% of net assets adjusted to exclude fund raising during the year.

Rationale for the benchmark applied

Net asset value is the primary measure used by the users in assessing

the performance of the Company as an investment entity. In setting

materiality, we have had regard to the nature and disposition of the

investment portfolio. Given that the VCT’s portfolio is comprised primarily

of quoted investments, we have applied a percentage of 1% of adjusted net

assets value. The benchmark used is lower than the net asset value to take

into account cash that has been recently raised from fund raising during

the year.

Performance materiality

£762,000 £900,000

Basis for determining performance materiality

75% of 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.

Octopus AIM VCT 2 plc Annual report 2022

Lower Testing Threshold

Whilst the majority of long term returns are expected to arise from capital, we note that on-going costs and revenue returns are still

important to users of the financial statements, despite being considerably smaller in magnitude. Thus, we have set a lower testing

threshold for those items impacting revenue return of £284,000 which is based on 10% of gross expenditure. (2021: £260,000).

Reporting threshold

We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £50,000 (2021: £65,000).

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 accounts, 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

Statement 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 the appropriateness of adopting the going concern

basis of accounting and any material uncertainties; and

• The Directors’ explanation as to its assessment of the entity’s prospects, the period this

assessment covers and why they 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.

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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:

• 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.

Corporate governance

statement

In our opinion, based on the work undertaken in the course of the audit the information about

internal control and risk management systems in relation to financial reporting processes and

about share capital structures, given in compliance with rules 7.2.5 and 7.2.6 in the Disclosure

Guidance and Transparency Rules sourcebook made by the Financial Conduct Authority (the

FCA Rules), is consistent with the financial statements and has 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 this information.

In our opinion, based on the work undertaken in the course of the audit information about

the Company’s corporate governance code and practices and about its administrative,

management and supervisory bodies and their committees complies with rules 7.2.2, 7.2.3 and

7.2.7 of the FCA Rules.

We have nothing to report arising from our responsibility to report if a corporate governance

statement has not been prepared by the Company.

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 Directors’ responsibility statement, 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.

Octopus AIM VCT 2 plc Annual report 2022

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:

We gained an understanding of the legal and regulatory

framework applicable to the Company and the industry in which

it operates, and considered the risk of acts by the Company

which were contrary to applicable laws and regulations, including

fraud. These included but were not limited to compliance with

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”) issued in November 2014 and

updated in February 2018 with consequential amendments and

FRS 102. We also considered the Company’s qualification as a VCT

under UK tax legislation.

We considered areas where the financial statements could be

susceptible to material misstatement. Our audit work focussed

on the valuation of unquoted investments as described in the key

audit matters section of this report, where the risk of material

misstatement due to fraud is the greatest. We also:

• Obtained independent evidence to support the ownership

of investments;

• Recalculated investment management fees in total;

• Obtained independent confirmation of bank balances.

We focused on laws and regulations that could give rise to a

material misstatement in the Company financial statements.

Our tests included, but were not limited to:

• Obtaining an understanding of the control environment in

monitoring compliance with laws and regulations;

• Agreement of the financial statement disclosures to

underlying supporting documentation;

• Enquiries of management;

• Review of minutes of board meetings throughout the period;

• Obtaining and reviewing independent reports prepared for

the Company on compliance with the relevant tests in order

to maintain its qualifying status as a VCT.

We addressed the risk of management override of internal

controls, including testing journals and evaluating whether there

was evidence of bias by the Directors that represented a risk of

material misstatement due to fraud.

Our tests included, but were not limited to:

• The procedures set out in the Key Audit Matters section

above;

• Obtaining evidence to support the ownership of investments;

• Recalculating investment management fees in total;

• Obtaining independent confirmation of bank balances; and

• Testing journals which met a defined risk criteria by agreeing

to supporting documentation and evaluating whether

there was evidence of bias by the Investment Manager 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 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.

Peter Smith (Senior Statutory Auditor)

For and on behalf of BDO LLP, Statutory Auditor

London, UK

10 March 2023

BDO LLP is a limited liability partnership registered in England and

Wales (with registered number OC305127).

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Octopus AIM VCT 2 plc Annual report 2022

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Income statement

Year to 30 November 2022

Year to 30 November 2021

Notes

Revenue

£’000

Capital

£’000

Total

£’000

Revenue

£’000

Capital

£’000

Total

£’000

(Loss)/gain on disposal of fixed asset

investments

– (32) (32)

– 2,123 2,123

Gain on disposal of current asset

investments

– – –

– 33 33

(Loss)/gain on valuation of fixed

asset investments

– (31,821) (31,821)

– 15,662 15,662

(Loss)/gain on valuation of current

asset investments

– (2,946) (2,946)

– 2,304 2,304

Investment income 2

589 19 608

481 109 590

Investment management fees 3

(481) (1,443) (1,924)

(493) (1,478) (1,971)

Other expenses 4

(580) – (580)

(653) – (653)

(Loss)/profit before tax (472) (36,223) (36,695)

(665) 18,753 18,088

Tax 6

– – –

Total comprehensive (loss)/

income after tax

(472) (36,223) (36,695)

(665) 18,753 18,088

Earnings per share – basic and

diluted

(0.3p) (24.5p) (24.8p)

(0.5p) 13.8p 13.3p

• The ‘Total’ column of this statement represents the statutory income statement of the Company; the supplementary revenue

return and capital return columns have been prepared in accordance with the AIC Statement of Recommended Practice.

• All revenue and capital items in the above statement derive from continuing operations.

• The Company has only one class of business and derives its income from investments made in shares and securities and from bank

and money market funds, as well as OEIC funds.

The Company has no recognised gains or losses other than the results for the period as set out above. Accordingly, a statement of

comprehensive income is not required.

The accompanying notes on pages 53 to 67 form an integral part of the financial statements.

Octopus AIM VCT 2 plc Annual report 2022

As at 30 November 2022

As at 30 November 2021

Notes £’000 £’000 £’000 £’000

Fixed asset investments 10

72,249

100,036

Current assets:

Investments 11

9,399

11,993

Money market funds 11

3,515

3,487

Debtors 12

205

185

Cash at bank 11

17,217

19,915

30,336

35,580

Creditors: amounts falling due within

one year

(791)

(762)

Net current assets

29,545

34,818

Total assets less current liabilities 101,794

134,854

Called up equity share capital 14

Share premium

12,904

54,600

Capital redemption reserve

Special distributable reserve

76,154

30,826

Capital reserve realised

(5,843)

(4,533)

Capital reserve unrealised

21,190

56,103

Revenue reserve

(2,631)

(2,159)

Total equity shareholders’ funds 101,794

134,854

NAV per share – basic and diluted

61.6p

90.8p

The statements were approved by the Directors and authorised for issue on 10 March 2023 and are signed on their behalf by:

Keith Mullins

Chair

Company No: 05528235

The accompanying notes on pages 53 to 67 form an integral part of the financial statements.

Balance sheet

Octopus AIM VCT 2 plc Annual report 2022

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capital

£’000

premium

£’000

Capital

redemption

reserve

£’000

Special

distributable

reserves

£’000

Capital

reserve –

realised

£’000

Capital

reserve –

unrealised

£’000

Revenue

reserve

£’000

Total

£’000

As at 1 December 2021 15 54,600 2 30,826 (4,533) 56,103 (2,159) 134,854

Comprehensive income for the year:

Management fee allocated as capital

expenditure

– – – – (1,443) – – (1,443)

Current year loss on disposal – – – – (32) – – (32)

Current year loss on fair value of

investments

– – – – – (34,767) – (34,767)

Capital investment income – – – – 19 – – 19

Loss after tax – – – – – – (472) (472)

Total comprehensive loss for the year – – – – (1,456) (34,767) (472) (36,695)

Contributions by and distributions to

owners:

– – – – – – – –

Repurchase and cancellation of own shares (1) – 1 (3,117) – – – (3,117)

Issue of shares 3 13,698 – – – – – 13,701

Share issue costs – (794) – – – – – (794)

Dividends paid – – – (6,155) – – – (6,155)

Total contributions by and distributions to

owners

2 12,904 1 (9,272) – – – 3,635

Other movements:

Cancellation of share premium – (54,600) – 54,600 – – – –

Prior years’ holding gains now realised – – – – 146 (146) – –

Total other movements – (54,600) – 54,600 146 (146) – –

Balance as at 30 November 2022 17 12,904 3 76,154 (5,843) 21,190 (2,631) 101,794

capital

£’000

premium

£’000

Capital

redemption

reserve

£’000

Special

distributable

reserves

£’000

Capital

reserve –

realised

£’000

Capital

reserve –

unrealised

£’000

Revenue

reserve

£’000

Total

£’000

As at 1 December 2020 13 37,758 1 35,051 (7,492) 40,309 (1,494) 104,146

Comprehensive income for the year:

Management fee allocated as capital

expenditure

– – – – (1,478) – – (1,478)

Current year gains on disposal – – – – 2,156 – – 2,156

Current year gains on fair value of

investments

– – – – – 17,966 – 17,966

Capital investment income – – – – 109 – – 109

Loss after tax – – – – – – (665) (665)

Total comprehensive income for the year – – – – 787 17,966 (665) 18,088

Contributions by and distributions to

owners:

Repurchase and cancellation of own shares (1) – 1 (4,973) – – – (4,973)

Issue of shares 3 27,725 – – – – – 27,728

Share issue costs – (1,683) – – – – – (1,683)

Dividends paid – – – (8,452) – – – (8,452)

Total contributions by and distributions to

owners

2 26,042 1 (13,425) – – – 12,620

Other movements:

Cancellation of share premium – (9,200) – 9,200 – – – –

Prior years’ holding gains now realised – – – – 2,172 (2,172) – –

Total other movements – (9,200) – 9,200 2,172 (2,172) – –

Balance as at 30 November 2021 15 54,600 2 30,826 (4,533) 56,103 (2,159) 134,854

Included within these reserves is an amount of £67,680,000 (2021: £24,134,000) which is considered distributable to shareholders.

Statement of changes

in equity

Octopus AIM VCT 2 plc Annual report 2022

Notes

Year to 30 November 2022

£’000

Year to 30 November 2021

£’000

Cash flows from operating activities

Profit/(loss) on ordinary activities before tax

(36,695)

18,088

Adjustments for:

(Increase) in debtors 12

(20)

(65)

(Decrease)/increase in creditors

(196)

173

Loss/(gain) on disposal of fixed assets 10

(2,123)

(Gain) on disposal of current asset investments

–

(33)

Loss/(gain) on valuation of fixed asset investments 10

31,821

(15,662)

Loss/(gain) on valuation of current asset investments

2,946

(2,304)

Non-cash distributions 2

(19)

(109)

Cash used in operations (2,131)

(2,035)

Income taxes paid

–

Net cash used in operating activities (2,131)

(2,035)

Cash flows from investing activities

Purchase of fixed asset investments 10

(6,071)

(12,332)

Proceeds from sale of fixed asset investments 10

2,249

6,085

Purchase of current asset investments

(352)

(2,620)

Proceeds from sale of current asset investments

–

3,360

Total cash flows used in investing activities (4,174)

(5,507)

Cash flows from financing activities

Purchase of own shares 14

(3,117)

(4,973)

Share issues 14

12,502

26,086

Share issue costs 14

(794)

(1,683)

Dividends paid net of DRIS

(4,956)

(6,810)

Total cash flows from financing activities 3,635

12,620

(Decrease)/increase in cash and cash equivalents (2,670)

5,078

Opening cash and cash equivalents

23,402

18,324

Closing cash and cash equivalents 20,732

23,402

Closing cash and cash equivalents is represented by:

Cash at bank 11

17,217

19,915

Money market funds 11

3,515

3,487

Total cash and cash equivalents 20,732

23,402

The accompanying notes on pages 53 to 67 form an integral part of the financial statements.

Cash flow statement

Octopus AIM VCT 2 plc Annual report 2022

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1. Principal accounting policies

The Company is a Public Limited Company (‘plc’)

incorporated in England and Wales and its registered office

is 6th Floor, 33 Holborn, London, EC1N 2HT.

The Company’s principal activity is to invest in a diverse

portfolio of predominantly AIM-traded companies with the

objective of providing shareholders with attractive tax-free

dividends and long-term capital growth.

Basis of preparation

The financial statements have been prepared under the

historical cost convention, except for the measurement at

fair value of certain financial instruments, and in accordance

with UK Generally Accepted Accounting Practice (GAAP),

including Financial Reporting Standard 102 – ‘The Financial

Reporting Standard applicable in the United Kingdom and

Republic of Ireland’ (FRS 102), and with the Companies Act

2006 and the Statement of Recommended Practice (SORP)

‘Financial Statements of Investment Trust Companies and

Venture Capital Trusts (issued 2014 and updated in October

2019 with consequential amendments).’

The principal accounting policies have remained unchanged

since those set out in the Company’s 2021 annual report and

accounts. A summary of the principal accounting policies is

set out below.

FRS 102 sections 11 and 12 have been adopted with regard

to the Company’s financial instruments. The Company held

all fixed asset investments at fair value through profit or

loss (FVTPL); therefore all gains and losses arising from such

investments held are attributable to financial assets held at

FVTPL. Accordingly, all interest income, fee income, expenses

and gains and losses on investments are attributable to

assets held at FVTPL.

Going concern

After reviewing the Company’s forecasts and expectations,

the Directors have a reasonable expectation that the

Company has adequate resources to continue in operational

existence for the foreseeable future. The annual expenses of

the Company are around £2.5 million and the Company had

£17.2 million in cash at the year end. The annual expenses do

not include outflows related to share buybacks or dividends

but the ability to retain cash is largely in the Company’s

control as it can shift investment strategy to ensure it has

a sufficient cash buffer. The Company therefore continues

to adopt the going concern basis in preparing its financial

statements. In reaching this conclusion the Directors

have had regard to the potential impact of economic

instability on the Company. See the Directors’ Report on

pages 29 to 32 for further details.

Revenue and capital

The Company presents its income statement in a three

column format to give shareholders additional detail of

the performance of the Company, split between items of a

revenue or capital nature as required by the SORP.

The revenue column of the income statement includes all

income and revenue expenses of the Company. The capital

column includes gains and losses on disposal of investments,

and gains and losses on the revaluation of investments.

Upon disposal of investments, gains or losses relating to the

assets are transferred from the unrealised capital reserve to

the realised capital reserve.

Key judgements and estimates

The preparation of the financial statements requires the

Board to make judgements and estimates that affect the

application of policies and reported amounts of assets and

liabilities. Estimates and assumptions mainly relate to the

fair valuation of the fixed asset investments, particularly

unquoted investments. Estimates are based on historical

experience and other assumptions that are considered

reasonable under the circumstances. The estimates and the

assumptions are under continuous review with particular

attention paid to the carrying value of the investments.

Investment valuation policies are important to the depiction

of the Company’s financial position and require the

application of subjective and complex judgements, notably

with regard to unquoted holdings, often as a result of the

need to make estimates about the effects of matters that

are inherently uncertain and may change in subsequent

periods. The main accounting and valuation policies used by

the Company are disclosed below.

Investments are regularly reviewed to ensure that the fair

values are appropriately stated. Unquoted investments are

valued in accordance with current IPEV guidelines, although

this does rely on subjective estimates such as appropriate

sector earnings multiples, forecast results of portfolio

companies, asset values of the subsidiary companies of

portfolio companies and liquidity or marketability of the

investments held.

Although the Company believes that the assumptions

concerning the business environment and estimate of

future cash flows are appropriate, changes in estimates and

assumptions could require changes in the stated values. This

could lead to additional changes in fair value in the future

(see note 10).

Notes to the financial

statements

Octopus AIM VCT 2 plc Annual report 2022

1. Principal accounting policies continued

Financial instruments

The Company’s principal financial assets are its investments

and the policies in relation to those assets are set out above

and in note 10. Financial liabilities and equity instruments

are classified according to the substance of the contractual

arrangements entered into. An equity instrument is any

contract that evidences a residual interest in the assets of

the entity after deducting all of its financial liabilities. Where

the contractual terms of share capital do not have any terms

meeting the definition of a financial liability then this is

classed as an equity instrument. Dividends and distributions

relating to equity instruments are debited direct to equity.

The Company’s trade receivables are initially recognised

at fair value which is normally transaction cost and

subsequently measured at amortised cost.

Cash and liquid resources

Cash, for the purposes of the cash flow statement,

comprises cash at bank. Cash equivalents are current asset

investments which are disposable without curtailing or

disrupting the business and are either readily convertible into

known amounts of cash at or close to their carrying values

or traded in an active market. This comprises investments

in money market funds subject to insignificant changes in

fair value.

Reserves

Called up equity share capital – represents the nominal

value of shares that have been issued.

Share premium account – includes any premiums received

on issue of share capital. Any transaction costs associated

with the issuing of shares are deducted from share premium.

Special distributable reserve – includes cancelled share

premium available for distribution.

Capital reserve realised – when an investment is sold,

any balance held in capital reserve unrealised is transferred

to capital reserve realised on disposal, as a movement in

reserves. The portion of the management fee allocated to

capital expenditure is also included in this reserve.

Capital reserve unrealised – when the Company revalues

the investments still held during the period, any gains or losses

arising are credited/charged to capital reserve unrealised.

Capital redemption reserve – includes nominal share

capital which has been bought back by the Company for

cancellation and cannot be distributed to shareholders.

Revenue reserve – includes all net revenue profits and losses

of the Company.

Functional and presentational currency

The financial statements are presented in sterling (£). The

functional currency is also sterling (£).

2. Income

Accounting policy

Investment income includes interest earned on money

market securities and shown net of income tax withheld

at source. Dividend income is shown net of any related

tax credit. Dividends are allocated to revenue or capital

depending on whether the dividend is of a revenue or capital

nature.

Dividends receivable are recognised when the Company’s

right to receive payment is established and it is probable that

payment will be received. Fixed returns on debt and money

market securities are recognised on a time apportionment

basis so as to reflect the effective yield, provided there

is no reasonable doubt that payment will be received in

due course.

Notes to the financial statements continued

Octopus AIM VCT 2 plc Annual report 2022

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Disclosure

30 November 2022

£’000

30 November 2021

£’000

Dividends receivable from fixed asset investments

522

451

In-specie dividend

109

Loan note interest receivable

Income receivable on money market securities and

bank balances

–

608

590

The Company received shares in Verici Dx plc as a result of an in-specie dividend from EKF Diagnostics Holdings plc. In the prior period the Company received shares

in Trellus Health plc as a result of an in-specie dividend from EKF Diagnostics Holdings plc. These have been treated as capital income.

3. Investment management fees

30 November 2022

30 November 2021

Revenue

£’000

Capital

£’000

Total

£’000

Revenue

£’000

Capital

£’000

Total

£’000

Investment management fees

481 1,443 1,924

493 1,478 1,971

Octopus provide investment management and accounting and administration services to the Company under a management

agreement which initially ran for a period of five years with effect from 6 October 2005 and may be terminated at any time

thereafter by not less than 12 months’ notice given by either party. No compensation is payable in the event of terminating

the agreement by either party, if the required notice period is given. The fee payable, should insufficient notice be given, will be

equal to the fee that would have been paid should continuous service be provided, or the required notice period was given. The

management fee is an annual charge and is set at 2% of the Company’s net assets.

During the year Octopus charged gross management fees of £2,266,000 (2021: £2,494,000). When the various allowances detailed

below are included, the net management fee for the year is £1,924,000 (2021: £1,971,000). At the year end there was £395,000

payable to Octopus (2021: £560,000). Octopus received £186,000 as a result of upfront fees charged on allotments of Ordinary

shares (2021: £419,000). The decrease in upfront fees this year has proportionately decreased in line with the value of allotments in

the year.

The Company pays ongoing adviser charges to independent financial advisers (IFAs). Ongoing adviser charges are an ongoing

fee of up to 0.5% per annum of the amount invested for a maximum of nine years paid to Advisers who are on an advised and

ongoing fee structure. The Company is rebated for this cost by way of a reduction in the annual management fee. For the year

to 30 November 2022 the rebate received was £133,000 (2021: £227,000).

The Company also facilitates upfront fees to IFAs where an investor has invested through a financial adviser and has received

upfront advice. Where an investor agrees to an upfront fee only, the Company can facilitate a payment of an initial adviser

charge of up to 4.5% of the investment amount. If the investor chooses to pay their intermediary/adviser less than the maximum

initial adviser charge, the remaining amount will be used for the issue and allotment of additional new shares for the investor. In

these circumstances the Company does not facilitate ongoing annual payments. To ensure that the Company is not financially

disadvantaged by such payment, a notional ongoing adviser charge equivalent to 0.5% per annum of the amount invested will

be deemed to have been paid by the Company for a period of nine years. The Company is rebated for this cost, also by way of a

reduction in the annual management fee. For the year to 30 November 2022 the rebate received was £152,000 (2021: £233,000).

The Company also receives a reduction in the management fee for the investments in other Octopus managed funds, being the

Multi Cap, Micro Cap Growth and Future Generations products, to ensure the Company is not double charged on these products.

This amounted to £57,000 for the year to 30 November 2022 (2021: £63,000).

The management fee has been allocated 25% to revenue and 75% to capital, in line with the Board’s expected long-term return

in the form of income and capital gains respectively from the Company’s investment portfolio.

Octopus AIM VCT 2 plc Annual report 2022

4. Other expenses

Accounting policy

All expenses are accounted for on an accruals basis.

The transaction costs incurred when purchasing or selling assets are written off to the income statement in the period that

they occur.

Disclosure

30 November 2022

£’000

30 November 2021

£’000

IFA charges

133

227

Directors’ remuneration

106

Registrar fees

Audit fees

VCT monitoring fees

Printing and postage

Legal and professional fees

Directors’ and officers’ liability insurance

Brokers’ fees

Other administration expenses

204

172

580

653

The fees payable to the Company’s auditor above are stated net of VAT and the VAT is included within other administration

expenses.

The ongoing charges of the Company were 2.2% of average net assets during the year to 30 November 2022 (2021: 1.8%).

5. Directors’ remuneration

Total Directors’ fees during the year were £106,000 (2021: £92,000). The highest paid Director received £27,500 (2021: £26,000).

None of the Directors received any other remuneration or benefit from the Company during the year. The Company has no

employees other than non-executive Directors. The average number of non-executive Directors in the year was four (2021: four).

6. Tax

Accounting policy

Current tax is recognised for the amount of income tax payable in respect of the taxable profit/(loss) for the current or past

reporting periods using the current UK corporation tax rate. The tax effect of different items of income/gain and expenditure/loss

is allocated between capital and revenue return on the ‘marginal’ basis as recommended in the SORP.

Deferred tax is recognised on an undiscounted basis in respect of all timing differences that have originated but not reversed at

the balance sheet date, except as otherwise indicated.

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred

tax liabilities or other future taxable profits.

Notes to the financial statements continued

Octopus AIM VCT 2 plc Annual report 2022

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Disclosure

The corporation tax charge for the year was £nil (2021: £nil).

30 November 2022

£’000

30 November 2021

£’000

(Loss)/profit before tax

(36,695)

18,088

Current tax at 19.00% (2021: 19.00%)

(6,972)

3,437

Effects of

Non-taxable income

(110)

(106)

Non-taxable capital gains

6,608

(3,823)

Non-deductible expenses

Excess management expenses on which deferred tax not

recognised

468

490

Total tax charge –

–

Approved VCTs are exempt from tax on capital gains within the Company. Since the Board intends that the Company will continue

to conduct its affairs so as to maintain its approval as a VCT, no deferred tax has been provided in respect of any capital gains or

losses arising on the revaluation or disposal of investments.

In March 2021, the UK Government announced that from 1 April 2023, the main rate of corporation tax will be increased to

25%. Consequently, deferred tax has been calculated at the year end using a tax rate of 25%. As at 30 November 2022, there is

an unrecognised deferred tax asset of £4,616,000 (2021: £4,008,000) in respect of surplus management expenses, based on a

prospective tax rate of 25% (2021: 25%). This deferred tax asset could in future be used against taxable profits.

Provided the Company continues to maintain its current investment profile, it is unlikely that the expenses will be utilised and that

the Company will obtain any benefit from this asset.

7. Dividends

Accounting policy

Dividends payable are recognised as distributions in the financial statements when the Company’s liability to make a payment

has been established. This liability is established on the record date, the date on which those shareholders on the share register

are entitled to the dividend.

Disclosure

30 November 2022

£’000

30 November 2021

£’000

Dividends paid on Ordinary shares during the year

2021 Final dividend – 2.1p per share paid 27 May 2022

(2021: 2.1p per share)

3,080

2,804

2022 Interim dividend – 2.1p per share paid 10 November

2022 (2021: 2.1p per share)

3,075

3,121

2022 Special dividend – Nil (2021: 1.7p)

–

2,527

Total 6,155

8,452

During the year £1,199,000 (2021: £1,642,000) of dividends were reinvested under the DRIS, see note 14.

Octopus AIM VCT 2 plc Annual report 2022

7. Dividends continued

Under Section 32 of FRS 102 ‘Events After the end of the Reporting Period’, dividends payable at year end are not recognised as a

liability. Details of these dividends and all other dividends declared in the year are set out below.

30 November 2022

£’000

30 November 2021

£’000

Dividends paid and proposed

2022 Interim dividend – 2.1p per share paid 10 November

2022 (2021: 2.1p per share)

3,075

3,121

2022 Special dividend – Nil (2021: 1.7p)

–

2,527

Final proposed dividend – 2.3p per share payable 25 May

2023 (2021: 2.1p share)

3,773

3,080

6,848

8,728

The above proposed final dividend is based on the number of shares in issue at the date of this report. The actual dividend paid

may differ from this number as the dividend payable will be based on the number of shares in issue on the record date and will

reflect any changes in the share capital between the year end and the record date.

8. Earnings per share

30 November 2022

30 November 2021

Revenue

£’000

Capital

£’000

Total

£’000

Revenue

£’000

Capital

£’000

Total

£’000

Profit/(loss) attributable to Ordinary

shareholders

(472) (36,223) (36,695)

(665) 18,753 18,088

Earnings per Ordinary share

(0.3p) (24.5p) (24.8p)

(0.5p) 13.8p 13.3p

The profit/(loss) per share is based on 147,948,350 (2021: 135,902,032) Ordinary shares, being the weighted average number of

Ordinary shares in issue during the year, and the loss on ordinary activities after tax for the year of £36,695,000 (2021: profit of

£18,088,000).

There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted earnings per share are identical.

9. Net asset value per share

30 November 2022

30 November 2021

Net assets (£’000)

101,794

134,854

Shares in issue

165,172,844

148,580,569

NAV per share (p)

61.6

90.8

There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted NAV per share are identical.

Notes to the financial statements continued

Octopus AIM VCT 2 plc Annual report 2022

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10. Fixed asset investments

Accounting policy

The Company’s principal financial assets are its investments

and the policies in relation to those assets are set out below.

Purchases and sales of investments are recognised in the

financial statements at the date of the transaction (trade

date).

These investments will be managed and their performance

evaluated on a fair value basis in accordance with a

documented investment strategy and information about

them has to be provided internally on that basis to the Board.

Accordingly, as permitted by FRS 102, the investments are

measured as being FVTPL on the basis that they qualify

as a group of assets managed, and whose performance

is evaluated, on a fair value basis in accordance with

a documented investment strategy. The Company’s

investments are measured at subsequent reporting dates at

fair value.

In the case of investments quoted on a recognised stock

exchange, fair value is established by reference to the

closing bid price on the relevant date or the last traded price,

depending upon convention of the exchange on which the

investment is quoted. In the case of unquoted investments

fair value is established by assessing different methods

of valuation, such as price of recent transaction, earnings

multiples, discounted cash flows and net assets. Where price

of recent investment is used as a starting point for estimating

fair value at subsequent measurement dates, this has been

benchmarked using an appropriate valuation technique.

These methodologies are consistent with IPEV guidelines.

Gains and losses arising from changes in fair value of

investments are recognised as part of the capital return

within the income statement and allocated to the capital

reserve – unrealised. The Investment Manager reviews

changes in fair value of investments for any permanent

reductions in value and will give consideration to whether

these losses should be transferred to the capital reserve –

realised.

In the preparation of the valuations of assets the Directors

are required to make judgements and estimates that

are reasonable and incorporate their knowledge of the

performance of the portfolio companies.

Fair value hierarchy

Paragraph 34.22 of FRS 102 suggests following a hierarchy of

fair value measurements, for financial instruments measured

at fair value in the balance sheet, which gives the highest

priority to unadjusted quoted prices in active markets for

identical assets or liabilities (Level 1) and the lowest priority

to unobservable inputs (Level 3). This methodology is

adopted by the Company and requires disclosure of financial

instruments to be dependent on the lowest significant

applicable input, as laid out below:

Level 1: The unadjusted, fully accessible and current quoted

price in an active market for identical assets or liabilities that

an entity can access at the measurement date.

Level 2: Inputs for similar assets or liabilities other than the

quoted prices included in Level 1 that are directly or indirectly

observable, which exist for the duration of the period of

investment.

Level 3: This is where inputs are unobservable, where no

active market is available and recent transactions for

identical instruments do not provide a good estimate of fair

value for the asset or liability.

Octopus AIM VCT 2 plc Annual report 2022

10. Fixed asset investments continued

Level 1:

Quoted equity

investments

£’000

Level 2:

Quoted equity

investments

£’000

Level 3:

Unquoted

investments

£’000

Total

£’000

Cost at 30 November 2021 44,933 – 3,087 48,020

Closing unrealised gain at 30 November 2021 48,393 – 3,623 52,016

Valuation at 30 November 2021 93,326

–

6,710 100,036

Purchases at cost

6,296 – – 6,296

In-specie dividend 19 – – 19

Disposal proceeds (2,249) – – (2,249)

Loss on realisation of investments (32) – – (32)

Reclassifications between levels – – – –

Change in fair value in year (33,088) – 1,267 (31,821)

Closing valuation at 30 November 2022 64,272

– 7,977

72,249

Cost at 30 November 2022 49,113 – 3,087 52,200

Closing unrealised gain at 30 November 2022 15,159 – 4,890 20,049

Valuation at 30 November 2022 64,272

–

7,977 72,249

The difference to the cash flow statement is a timing difference in respect of an investment in Intelligent Ultrasound Group plc which had a trade in November 2022

whilst the settlement of cash was in December 2022.

The Company received £2,249,000 (2021: £6,085,000) from investments sold in the year. The book cost of these investments when they were

purchased was £2,135,000 (2021: £2,134,000). These investments have been revalued over time and until they were sold any unrealised gains/losses

were included in the fair value of the investments.

Level 1 valuations are valued in accordance with the bid price on the relevant date. Further details of the fixed asset investments

held by the Company are shown within the Investment Manager’s Review.

Level 2 investments are valued using other observable inputs not included in Level 1.

Level 3 investments are reported at Fair Value in accordance with FRS 102 sections 11 and 12, which is determined in accordance with

the latest IPEV guidelines. In estimating Fair Value, there is an element of judgement, notably in deriving reasonable assumptions,

and it is possible that, if different assumptions were to be used, different valuations could have been attributed to some of the

Company’s investments.

The Company holds six unquoted investments which are classified as level 3 in terms of fair value hierarchy. These are valued based

on a range of valuation methodologies, determined on an investment specific basis. The price of recent investment is used where a

transaction has occurred sufficiently close to the reporting date to make this the most reliable indicator of fair value. Where recent

investment is not deemed to indicate the most reliable indicator of fair value i.e. the most recent investment is too distant from

the reporting date for this to be deemed a reasonable indicator, other market based approaches including earnings multiples,

annualised recurring revenues, discounted cashflows or net assets are used to determine a fair value for the investments. See below

for our analysis:

FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to

reasonable possible alternative assumptions. The Company’s holdings in Hasgrove plc and Popsa Holdings Ltd make up over 95%

of the market value of the level 3 investments on the balance sheet and therefore we have taken into account these valuations

when considering possible alternative assumptions. Given Popsa Holdings Ltd is based on the price of a recent transaction there

are no variable inputs included in the valuation and as a result there is nothing to adjust. See below for the results of our analysis:

Notes to the financial statements continued

Octopus AIM VCT 2 plc Annual report 2022

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Valuation

technique

Portfolio

company Input Base case

Change in

input

Change in

fair value of

investments

(£m)

Change in

NAV (pence

per share)

Revenue multiple Hasgrove plc Revenue Multiple 4.5

+0.5x 0.4 0.23

-0.5x -0.4 -0.23

Price of recent

transaction

Popsa Holdings Ltd n/a n/a n/a n/a n/a

The Board and the Investment Manager believe that the valuations as at 30 November 2022 reflect the most reasonable

assumptions at that date, giving due regard to all information available from each portfolio company. Subsequent to the year

end and in accordance with these bases of valuation, unquoted investments have been revalued resulting in a reduction in NAV

of 0.6 pence per share which has been reflected in weekly disclosures of NAV from 9 January 2023.

All capital gains or losses on investments are classified at FVTPL. Given the nature of the Company’s venture capital investments,

the changes in fair value of such investments recognised in these financial statements are not considered to be readily convertible

to cash in full at the balance sheet date and accordingly these gains are treated as holding gains or losses.

At 30 November 2022 there were no commitments in respect of investments approved by the Investment Manager but not yet

completed. The transaction costs incurred when purchasing or selling assets are written off to the income statement in the period that

they occur.

11. Current asset investments, cash and cash equivalents

Accounting policy

For the purposes of the cash flow statement, cash at bank comprises cash in hand and deposits repayable on demand, less

overdrafts payable on demand. Cash equivalents are short-term, highly liquid investments that are readily convertible to known

amounts of cash and that are subject to an insignificant risk of changes in value. Therefore, an investment normally qualifies

as a cash equivalent only when it has a short maturity of, say, three months or less from the date of acquisition. This comprises

government securities, investment grade bonds and investments in money market funds. Bank overdrafts are normally considered

financing activities similar to borrowings. However, if they are repayable on demand and form an integral part of an entity’s cash

management, bank overdrafts are a component of cash and cash equivalents.

Current asset investments on the balance sheet comprise of investments in Open Ended Investment Companies (OEICs), money

market funds and deposits and are designated as FVTPL. Gains and losses arising from changes in fair value of current investments

are recognised as part of the capital return within the income statement and allocated to the capital reserve – unrealised.

The current asset investments are convertible into cash at the choice of the Company, within seven days. The current asset

investments are held for trading, are actively managed and the performance is evaluated on a fair value basis in accordance with

a documented investment strategy. Information about them has to be provided internally on that basis to the Board.

Octopus AIM VCT 2 plc Annual report 2022

11. Current asset investments, cash and cash equivalents continued

Disclosure

Current asset investments at 30 November 2022 and at 30 November 2021 comprised of money market funds and deposits and

OEICs. These fall into Level 1 of the fair value hierarchy as defined in the fixed asset investment accounting policy in note 10 above.

30 November 2022

£’000

30 November 2021

£’000

OEICs:

FP Octopus UK Micro Cap Growth Fund

4,768

6,737

FP Octopus UK Multi Cap Income Fund

4,146

5,026

FP Octopus UK Future Generations Fund

485

230

Total current asset investments 9,399

11,993

Money market funds

3,515

3,487

Total current asset investments and money

market funds

12,914

15,480

Cash at bank 17,217

19,915

30,131

35,395

12. Debtors

30 November 2022

£’000

30 November 2021

£’000

Prepayments and accrued income

205

182

Other debtors

–

205

185

13. Creditors: Amounts falling due within one year

30 November 2022

£’000

30 November 2021

£’000

Trade creditors

229

–

Accruals

562

761

Other

–

791

762

14. Share capital

30 November 2022

£’000

30 November 2021

£’000

Allotted and fully paid up:

165,172,844 Ordinary shares of 0.01p (2021: 148,580,569)

The capital of the Company is managed in accordance with its investment policy with a view to the achievement of its investment

objective as set on page 21. As the Company is registered as an AIFM, it is subject to externally imposed capital requirements,

namely if the value of assets under management (AUM) exceeds €250 million then an additional amount of Company funds equal

to 0.02% of the excess over €250 million (subject to a cap of €10 million capital requirement) will be required.

Notes to the financial statements continued

Octopus AIM VCT 2 plc Annual report 2022

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During the year the Company repurchased the following shares to be cancelled:

Date Number of shares Price per share (p)

Total cost of shares

repurchased (£)

23 December 2021 255,091 83.9 214,000

20 January 2022 401,488 85.8 344,000

24 February 2022 488,263 77.8 380,000

24 March 2022 428,914 75.5 324,000

21 April 2022 465,274 75.9 353,000

12 May 2022 152,605 67.7 103,000

23 June 2022 294,050 63.4 186,000

27 July 2022 290,366 64.0 186,000

18 August 2022 206,539 66.3 137,000

15 September 2022 164,175 65.2 107,000

27 October 2022 845,229 57.1 483,000

17 November 2022 502,603 59.4 300,000

Totals 4,494,597 3,117,000

The total nominal value of the shares repurchased for cancellation was £449 representing 2.7% of the issued share capital (2021:

5,472,527 shares with a nominal value of £547 representing 3.7% of the issued share capital).

The Company issued the following shares during the year:

Date Number of shares Price per share (p)

Net proceeds of

shares issued (£)

14 April 2022

106,610 84.2 85,000

27 May 2022

849,989 70.6 600,000

12 August 2022

***

46,885 68.3 32,000

10 November 2022

979,161 61.2 599,000

14 November 2022 19,104,227 64.8 11,591,000

Totals 21,086,872 12,907,000

Shares allotted post tax year end under the prior year fundraise.

Shares issued under the Dividend Reinvestment Scheme (DRIS).

***

Shares issued as a result of reduced adviser charges, and reduced annual management fee for Octopus employees.

Excluding the value of shares issued under the DRIS, the total value of shares issued net of share issue costs was £11,708,000 (2021:

£24,403,000). This is shown in the cash flow statement.

Octopus AIM VCT 2 plc Annual report 2022

15. Reconciliation of movements in equity

Notes

30 November 2022

£’000

30 November 2021

£’000

Shareholders’ funds at start of year

134,854

104,146

Total comprehensive (loss)/income after tax

(36,695)

18,088

Share capital bought back 14

(3,117)

(4,973)

Issue of shares (net of issue costs) 14

12,907

26,045

Dividends paid 7

(6,155)

(8,452)

Shareholders’ funds at end of year

101,794

134,854

Included within these reserves is an amount of £67,680,000 (2021: £24,134,000) which is considered distributable to shareholders

under Companies Act rules.

During the year there was a share premium cancellation amounting to £54,601,000 (2021: £9,200,000). This was carried out with

the approval of shareholders for the purpose of creating sufficient distributable reserves.

16. Financial instruments

The Company’s financial instruments comprise equity investments, loan notes, OEICs, cash balances, investments in money market

funds and debtors and creditors. The Company holds financial assets in accordance with its investment policy of investing mainly

in a portfolio of VCT qualifying AIM-traded securities whilst holding a proportion of its assets in cash or near-cash investments in

order to provide a reserve of liquidity.

30 November 2022

£’000

30 November 2021

£’000

Financial assets at fair value through profit or loss

Fixed asset investments

72,249

100,036

Money market securities

3,515

3,487

OEICs

9,399

11,993

Total financial assets at fair value through profit or

loss

85,163

115,516

Financial assets measured at amortised cost

Cash at bank

17,217

19,915

Debtors

200

185

Total financial assets measured at amortised cost 17,417

20,100

Financial liabilities measured at amortised cost

Creditors

(791)

(762)

Total financial liabilities measured at

amortised cost

(791)

(762)

The Company holds six qualifying, unquoted investments; Rated People Limited, Popsa Holdings Limited, Airnow Group plc,

Hasgrove plc which delisted from AIM in 2013, The Food Marketplace Ltd and Eluceda Ltd. The Company also holds one unquoted

loan note investment Osirium Technologies plc valued at £400,000, held at cost. Unquoted investments and loan notes are

included in fixed asset investments in the table above.

Notes to the financial statements continued

Octopus AIM VCT 2 plc Annual report 2022

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Fixed and current asset investments (see notes 10 and 11) are initially recognised at FVTPL. For quoted investments this is the bid

price. The Directors believe that the fair value of the assets held at the year end is equal to their book value. Unquoted investments

are valued in accordance with IPEV guidelines.

The Company’s creditors and debtors are initially recognised at fair value which is usually the transaction cost and subsequently

measured at amortised cost using the effective interest method.

The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. The Directors

believe that the fair value of the assets held at the year end is equal to their book value.

17. Financial risk management

In carrying on its investment activities, the Company is exposed to various types of risk associated with the financial instruments

and markets in which it invests. The most significant types of financial risk facing the Company are price risk, interest rate risk,

credit risk and liquidity risk. The Company’s approach to managing these risks is set out below together with a description of the

nature and amount of the financial instruments held at the balance sheet date.

Market risk

The Company’s strategy for managing investment risk is determined with regard to the Company’s investment objective, as

outlined on page 21. The management of market risk is part of the investment management process and is a central feature of

venture capital investment. The Company’s portfolio is managed in accordance with the policies and procedures described in the

Corporate Governance Report on pages 33 to 36, having regard to the possible effects of adverse price movements, and other

macroeconomic effects on the market such as economic recession, movement in interest rates, inflation, political instability and

rising living costs with the objective of maximising overall returns to shareholders. Investments in smaller companies, by their

nature, usually involve a higher degree of risk than investments in larger companies quoted on a recognised stock exchange,

though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes. The

overall disposition of the Company’s assets is regularly monitored by the Board.

Details of the Company’s investment portfolio at the balance sheet date are set out on pages 8 to 11.

By value, 63% (2021: 69%) of the Company’s net assets comprised equity securities listed on the London Stock Exchange or quoted

on AIM. In the context of the continued short-term market volatility caused by the cost of living crisis and the unstable economic

environment, we have maintained the sensitivity analysis at 20%, consistent with 2021. Therefore, a decrease in the bid price of

these securities as at 30 November 2022 would have decreased net assets and the total return for the year by £12,854,000 (2021:

£18,665,000 decrease); and an equivalent change in the opposite direction would have increased net assets for the year by the

same amount.

OEIC investments comprised 9% of the Company’s net assets by value (2021: 9%). A 20% decrease (2021: 20%) in the price of these

securities at 30 November 2022 would have decreased net assets by £1,880,000 (30 November 2021: £2,399,000 decrease); and

an equivalent change in the opposite direction would have increased net assets for the year by the same amount.

Unquoted investments comprised 8% of the Company’s net assets by value (2021: 5%). A 20% decrease (2021: 20%) in the multiple

or price of recent investment used in the valuation of these securities as at 30 November 2022 would have decreased net assets

by £1,595,000 (2021: £1,342,000 decrease); and an equivalent change in the opposite direction would have increased net assets

for the year by the same amount. Due to the nature of the valuation of unquoted investments a more detailed analysis of the

sensitivity is not practical.

Interest rate risk

Some of the Company’s financial assets are interest bearing. As a result, the Company is exposed to fair value interest rate risk

due to fluctuations in the prevailing levels of market interest rates.

Octopus AIM VCT 2 plc Annual report 2022

17. Financial risk management continued

Floating rate

The Company’s floating rate investments comprise cash held on interest-bearing deposit accounts and, where appropriate, within

interest bearing money market securities. The benchmark rate which determines the rate of interest receivable on such investments

is the bank base rate, which was 3.0% at 30 November 2022 (2021: 0.1%). The amounts held in floating rate investments at the

balance sheet date were as follows:

30 November 2022

£’000

30 November 2021

£’000

Money market funds

3,515

3,487

Cash at bank¹

17,217

19,915

20,732

23,402

As part of our Cash Management policy we elect not to receive interest on cash at bank. VCTs must adhere to a nature of income condition whereby income must

derive wholly or mainly from shares or securities. It is therefore deemed reasonable and prudent not to earn income on bank deposits.

A 1% increase in the base rate would increase income receivable from these investments and the total return for the year by

£35,000 (2021: £234,020).

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has

entered into with the Company. The Investment Manager and the Board carry out a regular review of counterparty risk. Where

financial assets expose the Company to credit risk, the maximum exposure is represented by their carrying value.

Other than cash, loan notes or liquid money market funds, there were no significant concentrations of credit risk to counterparties

at 30 November 2022 or 30 November 2021. By value, no individual bank holding or fixed rate note investment exceeded 15% of

the Company’s net assets at 30 November 2022 (2021: 15%).

The Company’s interest-bearing deposit and current accounts are maintained with HSBC and BlackRock. The risk of loss to this

cash is deemed to be low due to the historical credit ratings and a current Moody’s rating of A3 for HSBC and A3 for BlackRock

cash funds. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an

ongoing basis. Should the credit quality or the financial position of HSBC or BlackRock deteriorate significantly, the Investment

Manager will move the cash holdings to another bank.

Credit risk relating to listed money market securities is mitigated by investing in a portfolio of investment instruments of high credit

quality, comprising securities issued by the UK Government and major UK companies and institutions. Credit risk relating to loans

to and shares in unquoted companies is considered to be part of market risk. The investments in money market funds and OEICs

are uncertified.

Those assets of the Company which are traded on recognised stock exchanges are held on the Company’s behalf by third party

sub-custodians (for example, BlackRock in the case of listed money market securities and Octopus Investments Limited in the case

of quoted equity securities). Bankruptcy or insolvency of a custodian could cause the Company’s rights with respect to securities

held by the custodian to be delayed or limited by bankruptcy proceedings.

Credit risk arising on the sale of investments is considered to be small due to the short settlement and the contracted agreements

in place with the settlement lawyers.

Liquidity risk

The Company’s financial assets include investments in AIM-traded companies, which by their nature involve a higher degree of risk

than investments on the main market, as well as unquoted securities which are not traded on a recognised stock exchange and

which generally may be illiquid. As a result, the Company may not be able to realise some of its investments in these instruments

quickly at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as

deterioration in the creditworthiness of any particular issuer.

The Company’s listed money market securities are considered to be readily realisable as they are of high credit quality as

outlined above.

Notes to the financial statements continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

The Company’s OEIC investments are considered to be

readily realisable as under the terms of the product funds

can be withdrawn at any point and received within seven

working days. There is a risk that the value of the investment

will fall, but this is monitored continually by the Investment

Manager.

The Company’s liquidity risk is managed on a continuing

basis by the Investment Manager in accordance with policies

and procedures laid down by the Board. The Company’s

overall liquidity risks are monitored on a quarterly basis by

the Board.

The Company maintains sufficient investments in cash

and readily realisable securities to pay accounts payable

and accrued expenses. At 30 November 2022 these

investments were valued at £30,131,000 (2021: £35,395,000).

The Company has no debt, therefore no maturity analysis

is required.

18. Post balance sheet events

The following events occurred between the balance sheet

date and the signing of these financial statements:

• an investment of £100,000 into Equipmake Holdings plc

• an investment of £1,059,000 into Itaconix plc

• an investment of £500,000 into FP Octopus UK Micro

Cap Growth Fund

• an investment of £500,000 into FP Octopus UK Multi

Cap Income

• an investment of £60,000 into FP Octopus UK Future

Generations Fund

• partial disposal of 24,000 shares in WANdisco plc for

total consideration of £196,000

• full disposal of 3,679,810 shares in TP Group plc for total

consideration of £83,000

Subsequent to the year end and in accordance with the bases

of valuation set out in note 10, unquoted investments have

been revalued resulting in a reduction in NAV of 0.6 pence

per share which has been reflected in weekly disclosures of

NAV from 9 January 2023.

The following shares have been bought back since the

year end:

• 15 December 2022: 274,131 shares at a price of 57.9p

per share

• 19 January 2023: 436,267 shares at a price of 57.7p

per share

• 16 February 2023: 432,226 shares at a price of 58.5p

per share

19. Contingencies, guarantees and financial

commitments

There were no contingencies, guarantees or financial

commitments as at 30 November 2022 (2021: nil).

20. Related party transactions

The Company has employed Octopus Investments Limited

(‘Octopus’ or ‘the Investment Manager’) throughout the

period as Investment Manager. Octopus have also been

appointed as Custodian of the Company’s investments under

a Custodian Agreement. The Company has been charged

£1,924,000 by Octopus as a management fee in the year

to 30 November 2022 (2021: £1,971,000). The management

fee is payable quarterly and is based on 2% of net assets at

quarterly intervals.

The Company receives a reduction in the management

fee for the investments in other Octopus managed funds,

being the Multi Cap Income Fund, Micro Cap Growth Fund

and Future Generations Fund, to ensure the Company is not

double charged on these products. This amounted to £57,000

in the year to 30 November 2022 (2021: £63,000). For further

details please refer to note 3. Details of amounts invested in

Octopus managed funds can be found on page 11.

As at 30 November 2022, Octopus Investments Nominees

Limited (OINL) held 4,284 shares (2021: nil) in the Company

as beneficial owner, having purchased these at a cost of

£3,000 (2021: £nil) from shareholders in order to correct

errors. Throughout the period to 30 November 2022 OINL

purchased 7,916 shares (2021: nil) at a cost of £6,000 (2021:

£nil) and sold 3,632 shares (2021: nil) for proceeds of £3,000

(2021: £nil). This is classed as a related party transaction as

Octopus, the Investment Manager, and OINL are part of the

same group of companies. Any such future transactions,

where OINL takes over the legal and beneficial ownership

of Company shares will be announced to the market and

disclosed in annual and half yearly reports.

Details of the Directors and their remuneration can be found

in the Directors’ Remuneration Report on pages 39 to 41.

Octopus AIM VCT 2 plc Annual report 2022

Octopus AIM VCT 2 plc was launched as Close IHT AIM VCT

plc in March 2006 and raised £25 million through an offer for

subscription. On 12 August 2010 the Company acquired the assets

and liabilities of Octopus Third AIM VCT plc (formerly Octopus

Second AIM VCT plc) (‘the merger’) and changed its name

from Octopus IHT AIM VCT plc to Octopus Second AIM VCT plc.

Shareholders of Octopus Third AIM VCT plc received 0.48356191

Ordinary shares in the Company for each Ordinary share they

had prior to the merger. On 30 January 2015, the Company name

changed to Octopus AIM VCT 2 plc.

An offer, launched on 6 February 2012 and which closed on

5 April 2012, raised £1.3 million for the Company. An offer launched

on 25 April 2012, closed on 31 July 2012 and raised a further

£0.5 million for the Company. An Enhanced Buyback Facility

opened on 23 October 2012 and closed on 28 December 2012.

10,470,985 existing shares were tendered and 9,974,094 new

shares were issued.

An offer for subscription of up to £10 million, which opened

on 1 February 2013 and closed on 17 January 2014, raised

£5.9 million. A further offer for subscription to raise £4.1 million

was opened on 3 February 2014 and closed, fully subscribed, on

28 March 2014. A combined fundraise with Octopus AIM VCT plc

by way of an issue of new shares was launched on 29 August

2014 to raise up to £8 million with an over-allotment facility of

£4 million was closed, fully subscribed on 11 August 2015. A

combined fundraise with Octopus AIM VCT plc by way of an issue

of new shares was launched on 21 December 2015 to raise up to

£8 million with an over-allotment facility of £4 million. This offer

closed, fully subscribed, on 21 October 2016. On 6 February 2017

the Board announced a further offer for subscription to raise up

to £4.3 million.

A further combined offer for subscription with Octopus AIM

VCT plc was launched on 16 June 2017 to raise up to £12 million

with an over-allotment facility of £4 million which closed to

new applications on 14 November 2017. A combined fundraise

with Octopus AIM VCT plc by way of an issue of new shares

was launched on 3 August 2018 to raise up to £20 million with

an over-allotment facility of £10 million. This offer closed, fully

subscribed, on 28 September 2018. A further combined fundraise

with Octopus AIM VCT plc by way of an issue of new shares was

launched on 29 November 2019 to raise a combined total of up

to £20 million with a £10 million over-allotment facility. This offer

closed, fully subscribed, on 27 February 2020.

On 20 August 2020, a prospectus offer was launched alongside

Octopus AIM VCT plc to raise a combined total of up to

£20 million with a £10 million over-allotment facility. This

prospectus closed to further applications on 30 November 2020.

On 19 August 2021, a prospectus offer was launched alongside

Octopus AIM VCT plc to raise a combined total of up to

£30 million with a £10 million over-allotment facility. This

prospectus closed to further applications on 13 September 2021.

On 22 September 2022, a prospectus offer was launched

alongside Octopus AIM VCT plc to raise a combined total of

up to £20 million with a £10 million over-allotment facility. This

prospectus closed to further applications on 13 October 2022.

About VCTs

VCTs were introduced in the Finance Act 1995 to provide a means

for private individuals to invest in unlisted companies in the

UK. Subsequent Finance Acts have introduced changes to VCT

legislation. The tax benefits currently available to eligible new

investors in VCTs include:

• up to 30% up-front income tax relief;

• exemption from income tax on dividends paid; and

• exemption from capital gains tax on disposals of shares

in VCTs.

The Company has been approved as a VCT by HMRC. In order to

maintain its approval, the Company must comply with certain

requirements on a continuing basis including the provisions of

chapter 3 of the Income Tax Act 2007, in particular s280A:

• at least 80% of the Company’s investments must comprise

‘qualifying holdings’

(as defined in the legislation);

• at least 70% of the qualifying holdings must be invested into

Ordinary shares with no preferential rights (30% for funds

invested before 6 April 2011);

• no single investment made can exceed 15% of the total

Company value at the time of investment; and

• a minimum of 10% of each qualifying investment must be in

Ordinary shares with no preferential rights.

A ‘qualifying holding’ consists of up to £5 million invested in any one year in new

shares or securities in a company admitted to trading on AIM (or an unquoted UK

company) which is carrying on a qualifying trade and whose gross assets do not

exceed a prescribed limit at the time of investment. The definition of a ‘qualifying

trade’ excludes certain activities such as property investment and development,

financial services and asset leasing.

VCT legislation changes

The Finance Act 2018 contained some further adjustments to

the VCT regulations. The new requirements are that any funds

raised in accounting periods beginning on or after 6 April 2018

should be 30% invested in qualifying holdings within 12 months

of the end of the accounting period in which the shares were

issued, and for financial years ending after 6 April 2019 the

portfolio also has to maintain a minimum qualifying investment

of 80%.

Information and contact

details

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Dividends

Dividends will be paid by the registrar on behalf of the Company. Shareholders who wish to have dividends paid directly into their bank

account rather than by cheque to their registered address can complete a mandate form for this purpose or complete an instruction

electronically by visiting the Computershare Investor Centre at: www-uk.computershare.com/investor/.

Queries relating to dividends, shareholdings or requests for mandate forms should be directed to Computershare by calling

0370 703 6326 (calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will

be charged at the applicable international rate. Lines are open Monday-Friday 9.00am-5.30pm), or by writing to them at:

The Registrar

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol

BS99 6ZZ

The table below shows the NAV per share and lists the dividends that have been paid since the launch of the Company. Following

the merger of Octopus IHT AIM VCT and Octopus Third AIM VCT and various share re-organisations, there is now only one share

class, Ordinary shares. For Octopus IHT AIM VCT Ordinary shares, together with Octopus Third AIM VCT Ordinary shares and ‘C’ & ‘D’

shares, the figures below represent the NAV, rebased to assume investment at 100p, and adjusted in accordance with the relevant

conversion factors. Investment has been assumed at the first allotment of each tax year, hence the dividends shown below may not

necessarily equate to the dividends actually received by shareholders.

Dividends paid

during the period

ending

Octopus

AIM VCT 2

Ordinary

2022/23

Octopus

AIM VCT 2

Ordinary

2021/22

Octopus

AIM VCT 2

Ordinary

2020/21

Octopus

AIM VCT 2

Ordinary

2019/20

Octopus

AIM VCT 2

Ordinary

2018/19

Octopus

AIM VCT 2

Ordinary

2017/18

Octopus

AIM VCT 2

Ordinary

2016/17

Octopus

AIM VCT 2

Ordinary

2015/16

Octopus

AIM VCT 2

Ordinary

2014/15

Octopus

AIM VCT 2

Ordinary

2013/14

Octopus

AIM VCT 2

Ordinary

2012/13

Octopus

AIM VCT 2

Ordinary

2011/12

Octopus

AIM VCT 2

Ordinary

2010/11

Octopus

Second

AIM VCT

(formerly

Octopus

IHT AIM

VCT A&B

shares)

2005/06

Octopus

Third AIM

VCT C&D

2005/06

(formerly

Octopus

Second

AIM VCT)

Octopus

Third AIM

Ordinary

2000/01

(formerly

Octopus

Second AIM

VCT plc)

30 November 2003 – – – – – – – – – – – – – – – 1.6

30 November 2004 – – – – – – – – – – – – – – – –

30 November 2005 – – – – – – – – – – – – – – – –

30 November 2006 – – – – – – – – – – – – – 1.4 – 1

30 November 2007 – – – – – – – – – – – – – 2.0 0.8 7

30 November 2008 – – – – – – – – – – – – – 2.0 2.2 11

30 November 2009 – – – – – – – – – – – – – 2.0 2.0 2

30 November 2010 – – – – – – – – – – – – – 2.5 5.4 2.2

30 November 2011 – – – – – – – – – – – – 4.7

3.3 3.9

1.6

30 November 2012 – – – – – – – – – – 2.3

4.4

4.6

3.2 3.8

1.6

30 November 2013 – – – – – – – – – 4.5

5.1

4.7

5.0

3.5 4.1

1.7

30 November 2014 – – – – – – – – 4.3

5.2

5.8

5.4

5.8

4.0 4.7

1.9

30 November 2015 – – – – – – – 7.0

6.4

7.8

8.7

8.1

8.6

6.0 7.1

2.9

30 November 2016 – – – – – – 4.8

4.6

4.3

5.2

5.8

5.4

5.8

4.0 4.7

1.9

30 November 2017 – – – – – 4.5

4.9

4.8

4.4

5.3

5.9

5.5

5.9

4.1 4.8

2.0

30 November 2018 – – – – 4.5

4.6

5.0

4.9

4.5

5.5

6.1

5.6

6.0

4.2 4.9

2.0

30 November 2019 – – – 9.8

8.7

8.9

9.7

9.4

8.6

10.5

11.7

10.9

11.6

8.1 9.5

3.9

30 November 2020 – – 6.0

5.1

4.5

4.6

5.0

4.9

4.5

5.5

6.1

5.6

6.0

4.2 4.9

2.0

30 November 2021 – 6.2

8.4

7.2

6.3

6.5

7.0

6.8

6.3

7.7

8.6

7.9

8.5

5.9 6.9

2.9

30 November 2022 5.0

4.4

6.0

5.1

4.5

4.6

5.0

4.9

4.5

5.5

6.1

5.6

6.0

4.2 4.9

2.0

Total dividends

paid (assumed

investment at 100p)

5.0 10.6 20.4 27. 2 28.6 33.6 41.4 4 7. 2 47.6 62.6 72.2 69.2 78.6 64.6 74.6 51.3

Adjusted NAV

(assumed

investment at 100p)

73.2p 64.7p 87.7p

74.7

66.2

67.4

73.4

71.5

65.6

80.0

89.3

82.8

88.6

61.6 72.4

29.8

NAV plus total

dividends (assumes

investment at 100p)

78.1 75.3 108.1

***

101.8

***

94.8

***

101.0

***

114.8

***

118.7

***

113.2

***

142.6

***

161.5

***

151.9

***

167.2

***

126.2 1 4 7.1

***

81.1

***

Notional dividends assuming investment at 100p and adjusting for conversion of various share classes into Octopus AIM 2 VCT plc Ordinary shares.

NAV assuming investment at 100p and adjusting for conversion of various share classes into Octopus AIM 2 VCT plc Ordinary shares.

***

NAV plus cumulative dividends adjusting for conversion, assuming investment at 100p showing the notional return to shareholders based on their original investment

share class.

Octopus AIM VCT 2 plc Annual report 2022

Notes

• Octopus Third AIM VCT ‘D’ shares converted into ‘C’ shares in May 2009, in accordance with a conversion factor of 1 ‘C’ share for

each ‘D’ share.

• Octopus Third AIM VCT ‘C’ shares converted into Octopus Third AIM VCT Ordinary shares in May 2009, in accordance with a

conversion factor of 2.4313 Ordinary shares for each ‘C’ share.

• Octopus AIM VCT 2 plc (previously Octopus IHT AIM VCT) ‘B’ shares converted into ‘A’ shares in May 2009, in accordance with a

conversion factor of 1 ‘A’ share for each ‘B’ share.

• Octopus Third AIM Ordinary shares converted into Octopus Second AIM (post August 2010) Ordinary shares in August 2010, in

accordance with a conversion factor of 0.48356191 Octopus Second AIM Ordinary shares (post August 2010), for each Octopus

Third AIM Ordinary share.

• In August 2010, Octopus IHT AIM VCT was renamed Octopus Second AIM VCT, and subsequently changed its name to Octopus

AIM VCT 2 plc.

The graph below depicts the NAV per share and the dividends that have been paid since the launch of Octopus AIM VCT 2 plc for each

class of share issued since the start, assuming an investment at 100p including the up-front tax relief and adjusted in accordance with

the relevant conversion factors. Investment has been assumed at the first allotment of each tax year:

20p

40p

60p

80p

100p

120p

140p

160p

180p

200p

220p

Octopus

Third

AIM Ordinary

2000/01

(formerly

Octopus

Second

AIM VCT plc)

Octopus

Third

AIM VCT

C&D shares

2005/06

(formerly

Octopus

Second

AIM VCT)

Octopus

Second

AIM VCT

(formerly

Octopus

IHT AIM

VCT A&B

shares)

2005/06

Octopus

AIM VCT 2

Ordinary

2010/11

Octopus

AIM VCT 2

Ordinary

2011/12

Octopus

AIM VCT 2

Ordinary

2012/13

Octopus

AIM VCT 2

Ordinary

2013/14

Octopus

AIM VCT 2

Ordinary

2014/15

Octopus

AIM VCT 2

Ordinary

2015/16

Octopus

AIM VCT 2

Ordinary

2016/17

Octopus

AIM VCT 2

Ordinary

2017/18

Octopus

AIM VCT 2

Ordinary

2018/19

Octopus

AIM VCT 2

Ordinary

2019/20

Octopus

AIM VCT 2

Ordinary

2020/21

Octopus

AIM VCT 2

Ordinary

2021/22

Octopus

AIM VCT 2

Ordinary

2022/23

67.4p

33.6p

30.0p

71.5p

47.2p

30.0p

65.6p

47.6p

30.0p

80.0p

62.6p

30.0p

89.3p

72.2p

30.0p

82.8p

69.1p

30.0p

88.6p

78.6p

30.0p

61.6p

64.6p

40.0p

72.4p

74.6p

40.0p

29.8p

51.3p

20.0p

Total return (p)

Adjusted NAV (p) assuming investment at 100p Cumulative dividends paid (p)

Income tax relief (p) Cost of investment

73.4p

30.0p

41.4p

62.2p

28.6p

30.0p

74.7p

27.2p

30.0p

87.7p

20.4p

30.0p

64.7p

10.6p

30.0p

73.2p

5.0p

30.0p

The proposed final dividend of 2.3p will, if approved by shareholders, be paid on 25 May 2023 to shareholders on the register on

5 May 2023.

Dividend Reinvestment Scheme (DRIS)

The Company established a DRIS in 2014, under which shareholders are given the opportunity to automatically reinvest future dividend

payments by subscribing for new Ordinary shares. This allows participating shareholders to reinvest the growth in their shareholdings

and, subject to personal circumstances, benefit from additional income tax reliefs.

Any shareholder wishing to reinvest their dividends can request a DRIS instruction form by calling Computershare

on 0370 703 6326 or complete an instruction electronically by visiting the Computershare Investor Centre at:

www-uk.computershare.com/investor/. The application form and rules can also be found in the Document Library on the Octopus

website: www.octopusinvestments.com/investor/our-products/venture-capital-trusts/octopus-aim-vcts/.

Information and contact details continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

Share price

The Company’s share price can be found on various financial

websites including www.londonstockexchange.com, with the

following TIDM/EPIC code:

Ordinary shares

TIDM/EPIC code OSEC

Latest share price 9 March 2023 56.5 pence per share

Buying and selling shares

The Company’s Ordinary shares can be bought and sold in the

same way as any other company quoted on the London Stock

Exchange via a stockbroker. There may be tax implications in

respect of selling all or part of your holdings, so shareholders

should contact their independent financial adviser if they have

any queries.

Buyback of shares

The Company operates a policy of buying its own shares for

cancellation as they become available, and envisages that

purchases will be made at up to a 5% discount to the prevailing

NAV. The Company is, however, unable to buy back shares directly

from shareholders. If you are considering selling your shares

or trading in the secondary market, please contact Panmure

Gordon (UK) Limited, the Company’s broker.

Panmure Gordon (UK) Limited 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 its

shares. Panmure Gordon (UK) Limited can be contacted as

follows:

Chris Lloyd 020 7886 2716 chris.lloyd@panmure.com

Paul Nolan 020 7886 2717 paul.nolan@panmure.com

Secondary market

UK income tax payers, aged 18 or over, can purchase shares in the

secondary market and benefit from:

• Tax-free dividends

• Realised gains not being subject to capital gains tax

(although any realised losses are not allowable)

• No minimum holding period

• No need to include VCT dividends in annual tax returns

The UK tax treatment of VCTs is on a first in and first out basis

and therefore tax advice should be obtained before shareholders

dispose of their shares.

Notification of change of address

Communications with shareholders are mailed to the registered

address held on the share register. In the event of a change of

address or other amendment, this should be notified to the

Company’s registrar, Computershare, under the signature of the

registered holder or via the Computershare Investor Centre at:

www-uk.computershare.com/investor/. Computershare’s

contact details are provided on page 73.

Other information for shareholders

Previously published Annual Reports and Half-yearly Reports

are available for viewing on the Investment Manager’s website

at www.octopusinvestments.com by navigating to Products,

Venture Capital Trusts, Octopus AIM VCTs, Shareholder

Information. If your shares are held via a nominee company, you

won’t receive communications regarding Annual Reports and

Half-yearly Reports directly from us or the Registrars. You’ll need

to speak to your nominee company about this or you can find

latest published reports on the Investment Manager’s website.

Other statutory information about the Company can also be

found on this page.

Electronic communications

We also publish reports and accounts and all other correspondence

electronically. This cuts the cost of print and reduces the impact

on the environment. If, in future, you would prefer to receive

an email telling you a report is available to view or to receive

documents by email, please contact Octopus on 0800 316 2295

or Computershare on 0370 703 6326. Alternatively you can sign

up to receive e-communications via the Computershare Investor

Centre at: www-uk.computershare.com/investor/.

Warning to shareholders

Many companies are aware that their shareholders have received

unsolicited phone calls or correspondence concerning investment

matters. These are typically from overseas based ‘brokers’ who

target UK shareholders offering to sell them what often turn out

to be worthless or high risk shares in US or UK investments. They

can be very persistent and extremely persuasive. Shareholders are

therefore advised to be wary of any unsolicited advice, offer to

buy shares at a discount or offer for free Company reports.

Please note that it is very unlikely that either the Company,

Octopus or the Registrar would make unsolicited telephone

calls to shareholders and that any such calls would relate only

to official documentation already circulated to shareholders and

would never be in respect of investment advice.

If you are in any doubt about the authenticity of an unsolicited

phone call, please call Octopus on 0800 316 2295.

The Financial Conduct Authority have also issued guidelines

on how to avoid share fraud and further information can be

found on their website: www.fca.org.uk/consumers/scams/

investment-scams/share-fraud-and-boiler-room-scams.

You can report any share fraud to them by calling 0800 111 6768.

Octopus AIM VCT 2 plc Annual report 2022

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 applicable financial reporting

framework. These APMs will help shareholders to understand and

assess the Company’s progress. A number of terms within this

glossary have been identified as APMs.

Net asset value or NAV

The value of the VCT’s total assets less liabilities. It is equal to the

total shareholders’ funds.

Net asset value per share or NAV per share

The NAV per share of the Company is the sum of the underlying

assets less the liabilities of the Company divided by the total

number of shares in issue.

Ongoing Charges

The Ongoing Charges ratio has been calculated using the

AIC recommended methodology and excludes exceptional

costs and trail commission. The figure shows the annual

percentage reduction in shareholder returns as a result of

recurring operational expenses. It informs shareholders

of the likely costs that will be incurred in managing the fund in

the future.

This is calculated by dividing the expenses of £2,325,000 which

includes the management fee in note 3 on page 55 and the

expenses listed out in note 4 on page 56 excluding irrecoverable

VAT, exceptional costs and trail commission, by average net

assets of £107,492,000.

Total return

Total return is calculated as movement in NAV per share in the

period plus dividends paid in the period, divided by the NAV per

share at the beginning of the period. Total return on the NAV

per share enables shareholders to evaluate more clearly the

performance of the Fund, as it reflects the underlying value of

the portfolio at the reporting date.

Glossary of terms

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

The Board of Directors

Keith Mullins (Chair)

Andrew Raynor FCA

Elizabeth Kennedy LLB (Hons)

Brad Ormsby CA

Company Number

Registered in England No: 05528235

Legal Entity Identifier (LEI)

213800BW27BKJCI35L17

Secretary and Registered office

Octopus Company Secretarial Services Limited

33 Holborn

London

EC1N 2HT

Investment and Administration Manager

Octopus Investments Limited

33 Holborn

London

EC1N 2HT

Tel: 0800 316 2295

www.octopusinvestments.com

Custodians

Octopus Investments Limited

33 Holborn

London

EC1N 2HT

Bankers

HSBC Bank plc

31 Holborn

London

EC1N 2HR

Independent Auditor

BDO LLP

55 Baker Street

London

W1U 7EU

Tax Adviser

PricewaterhouseCoopers LLP

1 Embankment Place

London

WC2N 6RH

VCT Status Adviser

Shoosmiths LLP

Apex Plaza

Forbury Road

Reading

RG1 1SH

Registrar

Computershare Investor Services PLC

The Pavilions

Bridgwater Road

Bristol

BS99 6ZZ

Tel: 0370 703 6326

(calls are charged at the standard geographic rate and will

vary by provider. Calls from outside the United Kingdom will be

charged at the applicable international rate.

www.computershare.com/uk

www-uk.computershare.com/investor/

Corporate Broker

Panmure Gordon (UK) Limited

40 Gracechurch Street

London

EC3V 0BT

020 7886 2500

Directors and advisers

Octopus AIM VCT 2 plc Annual report 2022

Notice is hereby given that the Annual General Meeting of

Octopus AIM VCT 2 plc will be held at 33 Holborn, London,

EC1N 2HT on 26 April 2023 at 12:00pm for the purposes of

considering, and if thought fit, passing the following resolutions

of which Resolutions 1 to 8 and 13 will be proposed as Ordinary

Resolutions and Resolutions 9 to 12 will be proposed as Special

Resolutions:

Ordinary Business

1. To receive and adopt the annual report and audited financial

statements for the year to 30 November 2022.

2. To approve a final dividend of 2.3p per Ordinary share.

3. To approve the Directors’ Remuneration Policy.

4. To approve the Directors’ Remuneration Report.

5. To re-elect Elizabeth Kennedy as a Director.

6. To re-appoint BDO LLP as auditor of the Company in

accordance with section 489 of the Companies Act 2006

(the ‘Act’), until the conclusion of the next general meeting

of the Company at which audited accounts are laid before

members, and to authorise the Directors to determine their

remuneration.

Special Business

To consider and if thought fit, pass Resolutions 7 to 8 and 13

as Ordinary Resolutions and Resolutions 9 to 12, as Special

Resolutions:

7. Authority to allot relevant securities

THAT, in addition to existing authorities, the Directors

be and are generally and unconditionally authorised in

accordance with s551 of the Act to exercise all the powers

of the Company to allot shares in the Company up to

a maximum nominal amount of £3,281 (representing

approximately 20% of the Ordinary share capital in issue

at the date of this Notice) such authority to expire at the

earlier of the conclusion of the Company’s AGM next

following the passing of this Resolution and the expiry of 15

months from the passing of the relevant Resolution (unless

previously renewed, varied or revoked by the Company

in a general meeting but so that such authority allows

the Company to make offers or agreements before the expiry

thereof, which would or might require relevant securities to

be allotted after the expiry of such authority).

8. Authority to allot relevant securities under the DRIS

THAT, in addition to existing authorities, the directors of the

Company be and hereby are generally and unconditionally

authorised in accordance with Section 551 of the Act to

exercise all the powers of the Company to allot shares in

the Company up to a maximum nominal amount of £492

in connection with the Company’s dividend reinvestment

scheme (representing approximately 3% of the Ordinary

share capital in issue as at the date of this Notice) provided

that the authority conferred by this Resolution shall expire on

the date falling 15 months from the date of the passing of

this Resolution (unless previously renewed, varied or revoked

by the Company in general meeting) save that this authority

shall allow the Company to make, before the expiry of this

authority, any offers or agreements which would or might

require Shares to be allotted or rights to be granted after

such expiry and the directors may allot Shares in pursuance

of any such offer or agreement notwithstanding the expiry

of such authority.

9. Empowerment to make allotments of equity securities

THAT, conditional upon the passing of Resolution 7 above,

and in addition to existing authorities, the Directors of the

Company be and are hereby empowered pursuant to s571 of

the Act to allot or make offers or agreements to allot equity

securities (as defined in s560(1) of the Act) for cash pursuant

to the authority granted by Resolution 7 as if s561 of the Act

did not apply to any such allotment and so that:

(a) reference to allotment of equity securities in this

Resolution shall be construed in accordance with s560(2)

of the Act; and

(b) the power conferred by this Resolution shall enable the

Company to make any offer or agreement before the

expiry of the said power which would or might require

equity securities to be allotted after the expiry of the said

power and the Directors may allot equity securities in

pursuance of such offer or agreement notwithstanding

the expiry of such power.

The power provided by this Resolution shall expire on the

date falling 15 months from the date of the passing of this

Resolution (unless previously renewed, varied or revoked by

the Company in a general meeting).

Notice of Annual General

Meeting

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

10. Empowerment to make allotments of equity securities

under the DRIS

THAT, conditional upon the passing of Resolution 8 above

and in addition to existing authorities, the directors of the

Company be and hereby are empowered pursuant to Section

571 of the Act to allot or make offers or agreements to allot

equity securities (which expression shall have the meaning

ascribed to it in Section 560(1) of the Act) for cash pursuant

to the authority granted by Resolution 9 above, as if Section

561 of the Act did not apply to any such allotment and so

that:

(a) reference to allotment of equity securities in this

Resolution shall be construed in accordance with Section

560(2) of the Act; and

(b) the power conferred by this Resolution shall enable

the Company to make any offer or agreement before

the expiry of the said power which would or might

require equity securities to be allotted after the expiry

of the said power and the Directors may allot equity

securities in pursuance of any such offer or agreement

notwithstanding the expiry of such power.

The power provided by this Resolution shall expire on the

date falling 15 months from the date of the passing of this

Resolution (unless previously renewed, varied or revoked by

the Company in general meeting).

11. Authority to make market purchases

THAT, in addition to existing authorities, the Company be

and is hereby generally and unconditionally authorised to

make market purchases (within the meaning of s693(4) of

the Act) of Ordinary shares of 0.01p each in the Company

(‘Ordinary shares’) provided that:

(a) the maximum number of Ordinary shares so authorised

to be purchased shall not exceed 24,588,129 Ordinary

shares, representing approximately 14.99% of the

Company’s issued share capital at the date of this

Notice;

(b) the minimum price which may be paid for an Ordinary

share shall be its nominal value;

be paid for an Ordinary share is an amount equal to (i)

105% of the average of the middle market quotation

for an Ordinary share taken from the London Stock

Exchange Daily Official List for the five business days

immediately preceding the day on which the Ordinary

share is contracted to be purchased; and (ii) the

amount stipulated by Article 5(6) of the Market Abuse

Regulation;

(d) the authority conferred comes to an end at the

conclusion of the next AGM of the Company or upon the

expiry of 15 months from the passing of this Resolution,

whichever is the earlier; and

(e) that the Company may enter into a contract to

purchase its Ordinary shares under this authority

prior to the expiry of this authority which would or

might be completed wholly or partly after the expiry of

this authority.

12. Cancellation of Share Premium Account

THAT, subject to the sanction of the High Court, the amount

standing to the credit of the share premium account of the

Company, at the date an order is made confirming such

cancellation by the Court, be and hereby is cancelled, and

the amount by which the share capital is so reduced be

credited to a reserve of the Company.

13. Continuation of the Company as a VCT

THAT the Company continue in being as a venture capital

trust.

By Order of the Board

Keith Mullins

Chair

10 March 2023

Octopus AIM VCT 2 plc Annual report 2022

Notes:

(a) A member entitled to attend and vote at the AGM may

appoint one or more proxies to attend and vote on his or her

behalf. A proxy need not be a member.

(b) Pursuant to Regulation 41 of the Uncertificated Securities

Regulations 2001, entitlement to attend and vote at the

meeting and the number of votes which may be cast thereat

will be determined by reference to the Register of Members

of the Company at close of business on the day which is two

days before the day of the meeting. Changes to entries on

the Register of Members after that time shall be disregarded

in determining the rights of any person to attend and vote at

the meeting.

must be completed and delivered to the Company’s

registrars, Computershare Investor Services PLC,

The Pavilions, Bridgwater Road, Bristol, BS99 6ZY or

alternatively, you may register your proxy electronically at

www.investorcentre.co.uk/eproxy, in each case, so as

to be received by no later than 48 hours before the time

the AGM is scheduled to begin. To vote electronically, you

will be asked to provide your Control Number, Shareholder

Reference Number and PIN which are detailed on your

proxy form.

Appointment of a proxy, or any CREST proxy instruction

(as described in paragraph (d) below) will not preclude a

member from subsequently attending and voting at the

meeting should he or she choose to do so. This is the only

acceptable means by which proxy instructions may be

submitted electronically.

(d) To appoint one or more proxies or to give an instruction to

a proxy (whether previously appointed or otherwise) via the

CREST system, CREST messages must be received by the

issuer’s agent (ID number 3RA50) not later than 48 hours

(excluding non-working days) before the time appointed for

holding the meeting. For this purpose, the time of receipt

will be taken to be the time (as determined by the time

stamp generated by the CREST system) from which the

issuer’s agent is able to retrieve the message. After this time

any change of instructions to a proxy appointed through

CREST should be communicated to the proxy by other

means. CREST personal members or other CREST sponsored

members, and those CREST members who have appointed

voting service provider(s) should contact their CREST sponsor

or voting service provider(s) for assistance with appointing

proxies via CREST. For further information on CREST

procedures, limitations and system timings please refer to

the CREST manual. The Company may treat as invalid a

proxy appointment sent by CREST in the circumstances set

out in Regulation 35(5)(a) of the Uncertificated Securities

Regulations 2001.

(e) Any person receiving a copy of the Notice as a person

nominated by a member to enjoy information rights under

section 146 of the Companies Act 2006 (a ‘Nominated

Person’) should note that the provisions in Notes (a) and

(b) above concerning the appointment of a proxy or proxies

to attend the meeting in place of a member, do not apply

to a Nominated Person as only shareholders have the right

to appoint a proxy. However, a Nominated Person may

have a right under an agreement between the Nominated

Person and the member by whom he or she was nominated

to be appointed, or to have someone else appointed, as a

proxy for the meeting. If a Nominated Person has no such

proxy appointment right or does not wish to exercise it,

he/she may have a right under such an agreement to give

instructions to the member as to the exercise of voting rights

at the meeting.

(f) Section 319A of the Companies Act 2006 requires the

Directors to answer any question raised at the AGM which

relates to the business of the meeting although no answer

need be given (a) if to do so would interfere unduly with

the preparation of the meeting or involve disclosure of

confidential information; (b) if the answer has already been

given on the Company’s website; or (c) if it is undesirable

in the best interests of the Company or the good order of

the meeting.

Questions from our shareholders in relation to the AGM can be

sent via email to AIMVCT2AGM@octopusinvestments.com.

The Company may, however, elect to provide answers to

questions raised within a reasonable period of days after the

conclusion of the AGM.

(g) Members satisfying the thresholds in section 527 of the

Companies Act 2006 can require the Company to publish

a statement on its website setting out any matter relating

to (a) the audit of the Company’s accounts (including the

auditor’s report and the conduct of the audit) that are to

be laid before the AGM; or (b) any circumstances connected

with an auditor of the Company ceasing to hold office

since the last AGM, that the members propose to raise at

the meeting. The Company cannot require the members

requesting the publication to pay its expenses. Any statement

required to be placed on the website must also be sent to

the Company’s auditors no later than the time it makes its

statement available on the website. The business which may

be dealt with at the meeting includes any statement that

the Company has been required to publish on its website.

(h) Under sections 338 and 338A Companies Act 2006, members

meeting the threshold requirements in those sections have

the right to require the Company:

(i) To give, to members of the Company entitled to receive

notice of the meeting, notice of a resolution which may

properly be moved and is intended to be moved at the

meeting, and/or

Notice of Annual General Meeting continued

Octopus AIM VCT 2 plc Annual report 2022

Call us on 0800 316 2295

(ii) To include the business to be dealt with at the meeting

any matters (other than a proposed resolution) which

may be properly included in the business.

A resolution may properly be moved or a matter may

properly be included in the business unless:

(i) (In the case of a resolution only) it would, if passed, be

ineffective (whether by reason of inconsistency with any

enactment or the Company’s constitution or otherwise);

(ii) It is defamatory of any person; or

(iii) It is frivolous or vexatious.

Such a request may be in hard copy form or in electronic

form, and must identify the resolution of which notice is to

be given or the matter to be included in the business, must

be authorised by the person or persons making it, must be

received by the Company not later than six weeks before the

meeting, and (in the case of a matter to be included in the

business only) must be accompanied by a statement setting

out the grounds for the request.

(i) A copy of the Notice of AGM and the information required

by Section 311A Companies Act 2006 is included on the

Company’s website, www.octopusinvestments.com

under VCTs. Copies of the Directors’ Letters of Appointment,

the Register of Directors’ Interests in the Ordinary shares of

the Company kept in accordance with the Listing Rules and a

copy of the Memorandum and Articles of Association of the

Company will be available for inspection at the registered

office of the Company during usual business hours on any

weekday from the date of this notice until the AGM, and at

the place of that meeting for at least 15 minutes prior to the

commencement of the meeting until its conclusion.

(j) As at 9 March 2023 (being the last practicable date prior to

the publication of this Notice) the Company’s issued share

capital consists of 164,030,220 Ordinary shares, carrying one

vote each. Therefore, the total voting rights in the Company

as at 9 March 2023 are 164,030,220.

Octopus AIM VCT 2 plc Annual report 2022

Octopus AIM VCT 2 plc