1
Octopus AIM VCT 2 plc Annual report 2023
Call us on 0800 316 2295
Annual report and
accounts for the
year ended
30 November 2023
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 29
Directors' report 30
Corporate governance report 34
Audit Committee report 38
Directors' remuneration report 40
Directors' responsibility statement 43
Independent auditor's report 44
Income statement 50
Balance sheet 51
Statement of changes in equity 52
Cash flow statement 53
Notes to the financial statements 54
Information and contact details 70
Glossary of terms 74
Directors and advisers 75
Notice of Annual General Meeting 76
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').
1
Octopus AIM VCT 2 plc Annual report 2023
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30 November 2023
30 November 2022
Net assets (£'000)
84,690
101,794
Loss after tax (£'000)
(15,709)
(36,695)
Net asset value (NAV) per share (p)
47.9
61.6
Dividends per share paid in year (p)
4.1
4.2
Total return (%)
1
(15.6)
(27.5)
Final dividend proposed (p)
2
1.8
2.3
Special dividend proposed (p)
2
3.6
–
Ongoing Charges (%)
3
2.2
2.2
1
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.
2
Subject to shareholder approval at the Annual General Meeting, the proposed final and special dividends will be paid on 27 June 2024 to shareholders on the register on
31 May 2024.
3
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 74.
Financial summary
Key dates
Annual General Meeting 16 May 2024
Final dividend payment date 27 June 2024
Half-yearly results to 31 May 2024 announced August 2024
Annual results to 30 November 2024 announced March 2025
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Octopus AIM VCT 2 plc Annual report 2023
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 2023 has been another extremely
challenging period for stock markets in general, and smaller
companies in particular, with the Alternative Investment Market
('AIM') Index once again the worst performer in 2023. The very
real issue of inflation and the need to tighten monetary policy
by raising interest rates further than had been anticipated when
I wrote this statement a year ago has prolonged the pain for
the share prices of companies exposed to growth sectors. It has
also posed a particular challenge to the early stage companies
in the portfolio which have yet to attain profitability. Against
this background, the net asset value (NAV), which had already
fallen by 8.8% on a total return basis in the first half of the year,
declined further, ending the year 15.6% behind on a total return
basis, in line with the AIM Index.
In the year under review AIM raised £1.6 billion of new capital,
for new and existing companies, a decrease on the £3.0 billion
raised in the previous year and a substantial fall from the high of
£8.7 billion in 2021, reflecting continuing volatile market
conditions. For the second year running new issues were very
subdued and the majority of fundraisings in 2023 were for
existing AIM companies seeking further capital. The Investment
Manager made £3.9 million of new qualifying investments,
down from £6.1 million the previous year. Although significant
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 in 2024. The
Investment Manager expects the pipeline of potential new issues
to strengthen later this year, supplementing existing companies
seeking further finance.
Performance
The NAV on 30 November 2023 was 47.9p per share, a sharp
decline from the NAV of 61.6p per share reported at 30 November
2022. Adding back the 4.1p of dividends paid in the year, to adjust
the year-end NAV to 52.0p, gives a total return decrease of 15.6%.
In the same year, the FTSE AIM All-Share Index fell by 14.2%, the
FTSE SmallCap (excluding investment trusts) Index increased
by 2.7% and the FTSE All-Share Index rose by 1.8%, all on a total
return basis.
As always, it was stock-specific factors that had the most
significant impact on performance, and these are covered in more
detail in the Investment Manager's Review. As interest rates rose
during the year investors became less willing to take risks and this
had the greatest impact on the earlier stage companies exposed
to the new economy (emerging, high growth industries expected
to boost economic growth and productivity) which make up a
significant proportion of our investment portfolio. The purpose
of a VCT is to provide capital for small, growth companies at an
early stage and the benefits of doing so have been clear in past
periods. However, in the year under review it was the smallest AIM
companies which were the worst performers. Additionally, AIM as
a whole trailed the other UK indices because of its concentration
of growth stocks and the larger and more profitable holdings
in the portfolio saw valuations retreat to levels last seen at the
time of the financial crisis. The FTSE Small Cap Index (excluding
Investment Trusts) fared much better, helped by a strong
recovery in November. It has a much narrower membership and
its constituents were less aected by the conditions described
above.
Dividends
In November 2023 an interim dividend of 1.8p was paid to all
shareholders. The Board is recommending a final dividend in
respect of the year to 30 November 2023 of 1.8p per share totalling
3.6p in respect of the year, which is a 6.2% yield on the prior year
closing share price of 58.0p, all paid from special distributable
reserves. In addition, as a result of taking exceptional profits in a
number of long-term holdings during the year, most notably the
full disposal of Ergomed, the Board is proposing a special dividend
of 3.6p which will be paid at the same time as the final dividend.
Including the special dividend, the total dividend in respect of
the year is 7.2p which is a 12.4% yield on the prior year closing
share price. Subject to the approval of shareholders at the Annual
General Meeting ('AGM'), both dividends will be paid on 27 June
2024 to shareholders on the register on 31 May 2024. 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
closing 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 75.
Cancellation of share premium account
At the last AGM, shareholders voted to cancel share premium
to increase the pool of distributable reserves by the amount of
£13.6 million. This is a regular occurrence to enable the continued
payment of dividends and buyback of shares.
Board changes
There have been no board changes during the year although
Elizabeth Kennedy has announced her intention to step down at
the AGM in May. We thank her for her years of service to the
Board, and wish her well in retirement. The Board have undertaken
a recruitment process and were delighted to announce the
appointment of Virginia Bull as a Director from 1 January 2024.
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
3
Octopus AIM VCT 2 plc Annual report 2023
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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 2,557,239 new shares have been issued under this scheme,
returning £1.3 million to the Company. The final and special
dividends referred to above will be eligible for the DRIS.
Share buybacks
During the year to 30 November 2023 the Company continued
to buy back shares in the market from selling shareholders and
purchased 6,011,097 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
On 14 September 2023, 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. The oer
closed fully subscribed on 21 December 2023 with £11.4 million
being raised for the Company, £7.0 million of which was raised
in the year to 30 November 2023. A total of 17,713,658 shares
were issued during the year, raising £8.4 million after costs for
the Company.
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, 37.5% of the Company's net assets were held
in cash or collective investment funds including funds managed
by the team at Octopus and money market funds, providing
short-term liquidity, 54.3% in individual quoted shares and 8.6%
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. A key requirement is to maintain
at least an 80% qualifying investment level. As at 30 November
2023, the level was 85.4%.
Annual General Meeting
The AGM will take place on 16 May 2024 at 12.00pm. Further
information can be found in the Notice of Annual General
Meeting on pages 76 to 79. The Investment Manager will provide
an update on the Company's activities and future plans at the
AGM.
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
13 May 2024 if you are unable to attend the AGM in person.
If your shares are held through a nominee account, formal notices
will be sent to your nominee.
Outlook
Although significant geo-political and economic risks remain,
the positive stock market reaction to lower inflation figures
in November demonstrated how quickly share prices can turn
when commentators start to believe that interest rates will
start to fall in response to a more positive macro-economic
environment. Strategists are now aligned on interest rate cuts
later in 2024 which will be supportive of a recovery in equity
markets following a very challenging period. Meanwhile GDP
and 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 already
reflected in share prices at current valuations.
The portfolio contains 83 holdings across a range of sectors with
exposure to some exciting new technologies in the environmental
and healthcare sectors. Although the current market environment
remains challenging for those companies in need of further
funding, this can provide the Investment Manager with good
opportunities to invest newly raised cash at attractive valuations.
The balance of the portfolio towards profitable companies
remains, with the majority of these now trading at a significant
valuation discount to their long term averages.
We are also pleased that the sunset clause in place for April 2025,
regarding eligibility of VCT's for tax relief, has been extended to
April 2035 and seems likely to be removed all together in due
course.
Keith Mullins
Chair
7 March 2024
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Octopus AIM VCT 2 plc Annual report 2023
Introduction
Many of the equity market and economic trends seen in 2022 flowed through into 2023. Concerns about rising inflation, continued
interest rate hikes, the possibility of a protracted recession and a consumer credit crunch aected sentiment for most of the year.
Moreover, geo-political conflict continues unabated, from Russia's war with Ukraine to violence in the Middle East. This dampened
investor sentiment and, in its wake, fuelled equity market volatility for most of the year. However, we ended the year with inflation
data confirming that UK inflation had begun to ebb and that the widely anticipated recession might not appear. Furthermore, this
led to a growing consensus amongst strategists and economists, that the UK (and other major global economies) will see a fall in
interest rates in the coming year. This should provide much needed and long-awaited support for equity markets, particularly small
growth companies, following a very challenging period. In 2024, the debate amongst market strategists and economists is focused
on whether inflation will stay on its downward path, interest rates will be cut aggressively, and if upcoming elections will bring in any
impactful changes.
Against a challenging macro-economic and stock market environment, AIM continued to retreat over the period signalling that small,
growth companies remained out of favour. Despite this, AIM raised further capital for existing listed companies and the AIM Initial
Public Oering ('IPO') market (albeit slower), was still active in the second half of the year. With the appetite for risk still to rebound,
small, growth companies in the UK remain undervalued and well below their long-term valuation range, which in turn creates a strong
opportunity for potential revaluation when stock markets recover. Since the period end some confidence has been restored, helped by
encouraging January and February trading updates.
The Alternative Investment Market
The performance of AIM over the last year was disappointing, with the appetite for small growth companies impacted more by macro-
headwinds compared to its larger peers. In the 12 months to November 2023 the AIM Index fell by 14.2% compared with an increase
of 2.7% for the FTSE SmallCap index (excluding investment companies) and a rise of 1.8% for the FTSE All-Share Index, all on a total
return basis.
The graph below shows total fundraising by AIM companies each month throughout the year to 30 November 2023.
Funds raised on AIM (£m): December 2022-November 2023
0
100
200
300
400
500
600
700
800
NovemberOctoberSeptemberAugustJulyJuneMayAprilMarchFebruaryJanuaryDecember
Year Ended Nov 2023
Year Ended Nov 2022
Source: London Stock Exchange.
Investment Manager's
review
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Octopus AIM VCT 2 plc Annual report 2023
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AIM has a high exposure to growth stocks in the software,
technology and healthcare sectors, which counted against
it as sentiment moved against highly rated growth stocks as
inflationary and recessionary pressures intensified. 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 indices
provide wider market context. The continued movement away
from growth and momentum-driven shares and subsequent
weak performance of AIM versus its market peers, highlighted
that investors sought value in more traditional sectors which has
been the case for the last two years.
The rate of IPOs on AIM remained slow, while the number of
companies leaving the market throughout 2023 picked up pace.
There was a total of 14 IPOs on AIM over the year, compared
to 31 the previous financial year. AIM ended the year with 760
companies, which was down 7% on the previous year. We still
believe in the importance of functioning equity markets as a driver
of growth in the UK, particularly at the smaller, growth company
end, where the Company invests. Although the pipeline for new
issues remains active in the new financial year, the significance
of VCTs as a critical funding platform for smaller companies
remains which is evident by the flow of further fundraisings on
AIM over the year and since the year end albeit at a slower speed
than previous years. In the year to 30 November 2023 AIM raised
£1.5 billion of new capital for existing companies, which compares
to a figure of £2.7 billion the previous year. Furthermore, we were
encouraged by the government's decision to address pension
policy reform, in the Mansion House Reforms in the Treasury's
Autumn Budget statement.
Performance
Adding back the 4.1p of dividends paid in the year, the NAV total
return was a loss of 15.6%. This compares with a fall in the FTSE AIM
All-Share Index of 14.2%, a rise in the FTSE SmallCap (excluding
investment companies) of 2.7% and a small rise in the FTSE All-
Share Index of 1.8% all on a total return basis. The last year was
again characterised by months of significant market volatility in
response to both global and local economic uncertainty. Rising
inflationary and interest rate expectations were the dominant
theme and seeped their way into weaker consumer confidence
and the reality of a credit crunch aected many in the UK.
This was not helped as the impact of variable rates extended
to those ending fixed rate arrangements. As a result, the soft
landing of lower energy and food prices in the latter part of the
year was barely felt. Despite the squeeze on consumer spending,
interest rate expectations continued to rise more steeply than
had previously been anticipated. Between December 2021 and
August 2023, the Bank of England raised interest rates a total
of 14 times from a low of 0.1% to the current level of 5.25%.
Against this background, performance in the FTSE AIM All-Share
Index was aected by the momentum away from smaller,
growth companies and the move towards lower risk appetite
drove the investment in traditional sectors and larger well-
established companies. This largely explains the fall in the NAV
in the year under review. The portfolio's relatively high exposure
to higher rated growth companies (particularly healthcare and
technology sectors) was detrimental to performance in a market
environment where risk averse investors have little appetite for
earlier stage growth stocks. Predictably, volatile market dynamics
led to greater investor focus not just on product/service oering,
but on healthy balance sheets and the ability to access financing.
The VCT rules require investment to be made at this early stage
and the benefits of doing so have been clear in many past
periods.
Some of the larger, profitable holdings in the portfolio were
aected by the poor market sentiment towards AIM growth
stocks, which included GB Group, IDOX plc and Craneware.
Learning Technologies was the biggest detractor to the
performance of the portfolio over the year. The company's
trading performance was aected by the challenging macro
environment which impacted both transaction and project-
based work. However, this has prompted a much needed refocus
on profitability and technology redevelopment. Furthermore, the
company recently embarked on a plan to accelerate its support
of higher growth areas of the business that are more aligned with
its core proposition of digital learning and talent management,
through the sale of non-core assets which will enable it to fund
future value-enhancing acquisitions. Libertine Holdings had a very
challenging year. Despite this the company continuing to support
the integration of its HEXAGEN™ technology platform with
Hyliion Holdings Corp. and develop its intelliGEN™ technology
platform through grant funded operations with the Department
for Business, Energy and Industrial Strategy, alongside a number
of other commercial projects. Furthermore, the company has
completed work on performance validation prototypes for both
the intelliGEN™ and HEXAGEN™ platforms and is currently
working on performance and durability enhancements, which
it is confident will meet the requirements of Original Equipment
Manufacturer product development programmes expected
to commence in 2024. However, the need for further raising to
enable the development of its technology weighs down on the
share price performance. SDI Group disappointed a couple of
times over the year due to the end of a contract with Atik cameras,
which had been lucrative over the Covid period. However, we are
encouraged by the recent change in the management team and
the new CEO comes with a wealth of operational experience in
the sector. Later in the year, Sosandar announced its decision to
open own-branded retail outlets in the UK and the move away
from being a pure play retail online business came as a surprise
to the market, aecting its rating. Though the decision will likely
increase the costs of the business in the short term, the instore
retail oering allows the company to capitalise on the growth of
its brand visibility and popularity in existing major UK retail stores
(both instore and online) which include Sainsbury's Tu, NEXT and
Marks & Spencer. Encouragingly, and despite slowing down its
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Octopus AIM VCT 2 plc Annual report 2023
discount strategy, the company had a strong calendar year end
trading period and has returned to quarterly profitability. ENGAGE
XR, the spatial computing and metaverse technology company,
had a mixed trading year. Although the company continues to
expand its reach globally, including securing contracts with global
banks, the slippage of a few sizeable contracts over the year has
led to a recent downgrade. However, we are encouraged by the
progress the company is achieving across the US.
On the positive side, we have seen many companies in the
portfolio report solid trading performances over the period
which was reflected in their share prices and contributed
positively to the portfolio performance. This included Breedon,
who continued to benefit from its dynamic pricing strategy and
focus on operational excellence throughout the year, putting
them in a strong position despite macro-economic and industry
headwinds. As a result, the company had a series of revenue
and profit upgrades during the year. Equipmake, the provider
of electric drivetrain solutions for heavy vehicles and aerospace,
made progress over the year and now has working buses in York
and secured contracts within the global aerospace industry.
Although a positive contributor to the portfolio over the year,
Vertu Motor's trading performance has been aected by tough
conditions in the used car market. Wholesale values in the used
market reduced significantly at the latter end of the year as a
result of the higher supply of new cars. This coupled with weak
consumer demand impacted sales volumes. Having had a fairly
volatile share price performance the previous year, Ergomed
had a solid trading performance throughout the year, recording
strong revenue and profit growth. However, the company was
approached by Premia, a private equity firm and the bid was duly
accepted. Other exits in the portfolio over the year and since the
period end include Adept Telecom, TP Group, Glantus and Falanx.
In our private company holdings, Hasgrove had its valuation
increased over the year due to a growing recurring revenue base
and a strong balance sheet. General market weakness that
impacted quoted company share price performance resulted
in the proportion of the portfolio represented by unquoted
investments increasing. The bases of valuation of unquoted
holdings is set out in note 10 to the financial statements.
Portfolio activity
Having made two qualifying investments at a total cost of
£1.2 million in the first half of the year, we added two new
qualifying investments totalling £1.4 million as well as two
follow-on investments totalling £1.3 million in the second half of
the year. This made a total investment of £3.9 million in qualifying
investments for the year, a decrease on last year's £6.3 million,
reflecting a slower AIM market for both fundraisings and new
issues. Post the year end, we have invested a further £2.1 million
in 5 qualifying investments.
Of the two first half investments, one was a follow-on investment
in Equipmake Holdings plc and one was a new entrant to AIM,
Itaconix plc.
We invested in two new issues in the second half of the year, Tan
Delta Systems plc and Eden Research plc, and made follow on
investments into Haydale Graphene Industries plc and Rosslyn
Data Technologies plc. In August, we made a £0.3 million
investment in Tan Delta Systems plc, a global manufacturer
of real-time oil quality monitoring sensors and systems and a
new entrant to AIM. In September, we invested approximately
£0.5 million in Rosslyn Data Technologies plc, a United Kingdom-
based provider of a cloud-based enterprise data analytics
platform and an existing AIM-listed company. In November,
we made two investments, a follow-on investment in Haydale
Graphene Industries plc (£0.8 million), a supplier of production
quantities of functionalized graphene nanomaterials for
innovative materials development and a new investment in
Eden Research plc (£1.1 million), a company that develops and
supplies biopesticide products and natural microencapsulation
technologies.
During the year we sold partial holdings in eight companies, six
of these where we took profits into rising share prices, Judges
Scientific, Cirata, EKF Diagnostics, Equipmake, Nexteq and
Intelligent Ultrasound. We also had full disposals of six holdings
being Adept Telecom plc, Ergomed, Osirium Technologies, TP
Group, Itsarm and Glantus Holdings. Total disposals made a
£3.8 million gain over original cost and generated £9.2 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, FP Octopus Multi Cap Income Fund and the FP Octopus
Future Generation Fund, investing a total of £2.0 million over the
period and disposed of part of our holding in FP Octopus UK Multi
Cap Income Fund for £1.5 million.
Investment Manager's review continued
7
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VCT regulations
There have been no further changes to the VCT regulations since
publication of the previous set of audited accounts, however
the sunset clause was extended to 2035 in the recent Autumn
statement. 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 (at HMRC value) 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
Against a backdrop of economic, geopolitical and market
uncertainty, risk appetite, particularly for smaller companies,
remains low leaving UK equities materially undervalued relative
to other developed markets. The macro dynamics continue to be
a key area of focus with a particular attention on the direction
of inflation and timing of interest rate cuts which appear to be
the main lever driving market sentiment. Consensus among
economists still indicates that interest rates have peaked, with
cuts on the way this year expected by the end of the third
quarter. The news that the UK is in a recession following the
economy's contraction for two consecutive quarters in 2023 has
dampened some of the market momentum seen at the end
of 2023. However, we have been encouraged by the number of
positive trading statements and general news flow from many
holdings in the portfolio since the period end. We believe that
smaller, growth companies, in particular, oer exceptional
value, reflected by many holdings within the portfolio trading at
historically low valuation multiples not seen since the Financial
Crisis. Reassuringly, the VCT qualifying pipeline remains active
and the current market conditions provide opportunities to invest
at attractive valuations.
The Octopus Quoted Companies team
Octopus Investments Limited
7 March 2024
8
Octopus AIM VCT 2 plc Annual report 2023
Investment portfolio
Portfolio company Sector
Book cost
as at
30 November
2023
£'000
Cumulative
change in
fair value
£'000
Fair value
as at
30 November
2023
£'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
Breedon Group plc Construction & Materials 573 2,731 3,304 415 0.28% 0.70% 3.90%
Judges Scientific plc Electronic & Electrical
Equipment
188 2,535 2,723 363 0.46% 1.14% 3.22%
Equipmake Holdings plc Software & Computer
Services
1,285 1,405 2,690 777 3.14% 7.93% 3.18%
Craneware plc Health Care Providers 479 2,054 2,533 (750) 0.44% 3.63% 2.99%
IDOX plc Software & Computer
Services
356 2,013 2,369 (82) 0.82% 7.0 0% 2.80%
Learning Technologies
Group plc
Software & Computer
Services
701 1,537 2,238 (1,786) 0.39% 7.83% 2.64%
Vertu Motors plc Retailers 777 816 1,593 710 0.55% 1.79% 1.88%
Netcall plc Software & Computer
Services
356 1,222 1,578 (216) 1.34% 3.39% 1.86%
SDI Group plc Electronic & Electrical
Equipment
119 1,429 1,548 (967) 1.43% 3.57% 1.83%
Animalcare Group plc Pharmaceuticals &
Biotechnology
824 682 1,506 (376) 1.46% 2.37% 1.78%
Brooks Macdonald Group
plc
Investment Banking &
Brokerage Services
610 801 1,411 (110) 0.45% 15.57% 1.67%
GB Group plc Software & Computer
Services
337 934 1,271 (510) 0.22% 6.46% 1.50%
Maxcyte Inc Pharmaceuticals &
Biotechnology
689 529 1,218 (329) 0.32% 1.32% 1.44%
Intelligent Ultrasound
Group plc
Medical Equipment &
Services
1,437 (254) 1,183 (54) 4.39% 10.97% 1.40%
Sosandar plc Retailers 1,235 (108) 1,127 (523) 3.24% 11.37% 1.33%
Next 15 Group plc Media 302 777 1,079 (438) 0.15% 11.92% 1.27%
EKF Diagnostics Holdings
plc
Medical Equipment &
Services
737 257 994 (533) 0.80% 2.31% 1.17%
PCI-Pal plc Software & Computer
Services
732 139 871 (162) 3.09% 7.74% 1.03%
Diaceutics plc Health Care Providers 620 122 742 130 0.97% 2.67% 0.88%
Nexteq plc Technology Hardware 339 395 734 (492) 1.10% 2.76% 0.87%
Eden Research plc Chemicals 1,080 (349) 731 (349) 3.12% 7.79% 0.86%
Haydale Graphene
Industries plc
Industrial Materials 1,238 (515) 723 (121) 9.35% 23.37% 0.85%
Access Intelligence plc Software & Computer
Services
501 133 634 (351) 0.89% 2.13% 0.75%
LungLife AI Inc Pharmaceuticals &
Biotechnology
1,386 (756) 630 (197) 3.09% 7.72% 0.74%
llika plc Electronic & Electrical
Equipment
706 (87) 619 197 0.88% 2.21% 0.73%
Beeks Financial Cloud
Group plc
Software & Computer
Services
302 301 603 (241) 0.92% 3.01% 0.71%
Itaconix plc Industrial 1,059 (499) 560 (498) 3.08% 10.73% 0.66%
Spectral AI Inc Health Care Providers 1,410 (898) 512 (205) 1.43% 5.91% 0.60%
Gamma Communications
plc
Telecommunications
Service Providers
183 320 503 (19) 0.05% 6.95% 0.59%
Feedback plc Medical Equipment &
Services
1,000 (530) 470 (81) 5.04% 12.75% 0.55%
RWS Holdings plc Industrial Support Services 99 310 409 (149) 0.05% 5.14% 0.48%
Investment Manager's review continued
9
Octopus AIM VCT 2 plc Annual report 2023
Call us on 0800 316 2295
Portfolio company Sector
Book cost
as at
30 November
2023
£'000
Cumulative
change in
fair value
£'000
Fair value
as at
30 November
2023
£'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
Oberon Investments Group
plc
Investment Banking &
Brokerage Services
576 (208) 368 (74) 2.02% 8.48% 0.43%
Gear4music Holdings plc Leisure Goods 352 11 363 114 1.21% 3.02% 0.43%
Ixico plc Pharmaceuticals &
Biotechnology
697 (336) 361 (336) 5.15% 12.87% 0.43%
Gooch & Housego plc Technology Hardware &
Equipment
281 67 348 34 0.27% 11.82% 0.41%
TPXimpact Holdings plc Software & Computer
Services
653 (318) 335 (44) 0.96% 2.39% 0.40%
DP Poland plc Travel & Leisure 677 (346) 331 69 0.44% 1.11% 0.39%
Clean Power Hydrogen plc Alternative Energy 1,137 (821) 316 (493) 0.94% 2.36% 0.37%
Cambridge Cognition
Holdings plc
Health Care Providers 400 (97) 303 (366) 1.64% 4.09% 0.36%
Mattioli Woods plc Investment Banking &
Brokerage Services
101 187 288 (5) 0.09% 13.71% 0.34%
Restore plc Industrial Support Services 171 113 284 (143) 0.09% 12.70% 0.34%
MyCelx Technologies
Corporation
Oil, Gas & Coal 980 (698) 282 142 2.36% 24.07% 0.33%
Tan Delta Systems plc Oil Services 302 (35) 267 (35) 1.59% 3.97% 0.32%
Creo Medical Group plc Medical Equipment &
Services
981 (730) 251 (47) 0.22% 1.57% 0.30%
Libertine Holdings plc Industrial Engineering 2,000 (1,750) 250 (1,250) 7.18% 18.14% 0.30%
Advanced Medical
Solutions Group plc
Medical Equipment &
Services
190 46 236 (82) 0.05% 12.65% 0.28%
Velocity Composites plc Aerospace & Defense 533 (301) 232 75 1.17% 2.93% 0.27%
ENGAGE XR Holdings Software & Computer
Services
1,253 (1,027) 226 (1,059) 1.96% 10.61% 0.27%
Rosslyn Data Technologies
plc
Software & Computer
Services
646 (444) 202 (209) 8.80% 22.01% 0.24%
Crimson Tide plc Software & Computer
Services
378 (195) 183 (81) 1.92% 4.79% 0.22%
Verici Dx plc Pharmaceuticals &
Biotechnology
444 (295) 149 (75) 1.10% 2.78% 0.18%
KRM22 plc Closed End Investments 453 (312) 141 (68) 1.27% 3.18% 0.17%
Evgen Pharma plc Pharmaceuticals &
Biotechnology
700 (560) 140 (446) 3.18% 7.96% 0.17%
Gelion plc Electronic & Electrical
Equipment
760 (632) 128 (139) 0.39% 0.96% 0.15%
GENinCode plc Medical Equipment &
Services
800 (691) 109 (91) 1.90% 4.74% 0.13%
Northcoders Group plc Software & Computer
Services
253 (152) 101 (152) 1.05% 2.63% 0.12%
Cordel Group plc Software & Computer
Services
296 (201) 95 (43) 0.99% 2.47% 0.11%
Strip Tinning Holdings plc Electronic & Electrical
Equipment
337 (264) 73 (46) 1.18% 2.95% 0.09%
Enteq Upstream plc Oil, Gas and Coal 687 (615) 72 3 0.97% 2.43% 0.09%
XP Factory PLC Travel & Leisure 659 (593) 66 (17) 0.28% 0.70% 0.08%
DXS International plc Software & Computer
Services
200 (137) 63 (50) 3.90% 9.76% 0.07%
Mears Group plc Industrial Support Services 51 – 51 16 0.02% 0.44% 0.06%
ReNeuron Group plc Pharmaceuticals &
Biotechnology
990 (944) 46 (220) 2.02% 5.06% 0.05%
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10
Octopus AIM VCT 2 plc Annual report 2023
Portfolio company Sector
Book cost
as at
30 November
2023
£'000
Cumulative
change in
fair value
£'000
Fair value
as at
30 November
2023
£'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
Polarean Imaging plc Medical Equipment &
Services
458 (418) 40 (380) 0.35% 0.88% 0.05%
Fusion Antibodies plc Health Care Providers 497 (458) 39 (217) 1.00% 2.50% 0.05%
Renalytix plc Health Care Providers 228 (194) 34 (101) 0.19% 0.54% 0.04%
Abingdon Health plc Medical Equipment &
Services
347 (313) 34 19 0.30% 0.74% 0.04%
1Spatial plc Software & Computer
Services
200 (170) 30 1 0.06% 3.71% 0.03%
Velocys plc Alternative Energy 664 (645) 19 (346) 0.50% 1.26% 0.02%
Cirata plc Software & Computer
Services
52 (35) 17 (175) 0.03% 0.07% 0.02%
Cloudified Holdings Ltd Industrial Support Services 600 (587) 13 (107) 3.80% 9.50% 0.01%
Genedrive Plc Pharmaceuticals &
Biotechnology
145 (134) 11 (5) 0.15% 0.38% 0.01%
Tasty plc Travel & Leisure 336 (325) 11 (22) 0.76% 1.61% 0.01%
LoopUp Group plc Software & Computer
Services
197 (193) 4 (6) 0.10% 0.24% 0.00%
Microsaic Systems plc Electronic & Electrical
Equipment
922 (921) 1 (6) 0.27% 0.68% 0.00%
Trackwise Designs plc Technology Hardware &
Equipment
1,289 (1,289) – (217) 0.28% 0.70% 0.00%
Location Sciences Group plc Software & Computer
Services
509 (509) – (1) 0.01% 0.02% 0.00%
The British Honey Company
plc
General Retailers 880 (880) – (277) 4.74% 11.86% 0.00%
Total quoted investments 47,922 (1,903) 46,019 (13,905) 54.34%
Unquoted equity investments
Hasgrove Limited 153 4,948 5,101 1,465 2.54% 12.81% 6.02%
Popsa Holdings Limited 1,060 921 1,981 (1,604) 4.30% 10.74% 2.34%
The Food Marketplace Ltd 200 (145) 55 (105) 4.40% 10.99% 0.06%
Eluceda Limited 200 (189) 11 (162) 1.60% 4.01% 0.01%
Rated People Limited 236 (235) 1 (22) 0.07% 0.32% 0.00%
Airnow Limited 838 (838) – – 0.28% 0.73% 0.00%
Total unquoted equity investments 2,687 4,462 7,149 (428) 8.43%
Loan notes
Rosslyn Data Technologies
plc (Loan)
Software & Computer
Services
120 – 120 – n/a n/a 0.14%
Total loan notes 120 – 120 –
n/a n/a
0.14%
Investment portfolio continued
Investment Manager's review continued
11
Octopus AIM VCT 2 plc Annual report 2023
Call us on 0800 316 2295
Portfolio company Sector
Book cost
as at
30 November
2023
£'000
Cumulative
change in
fair value
£'000
Fair value
as at
30 November
2023
£'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
Current asset investments
FP Octopus UK Micro Cap
Growth Fund
5,012 138 5,150 (878) n/a n/a 6.08%
FP Octopus UK Multi Cap
Income Fund
2,888 37 2,925 (124) n/a n/a 3.45%
FP Octopus UK Future
Generations Fund
860 (139) 721 (45) n/a n/a 0.85%
Total current asset investments 8,760 36 8,796 (1,047) 10.38%
Total fixed and current asset investments
62,084
Money market funds 21,893
Cash at bank 1,045
Debtors less creditors (332)
Total net assets 84,690
Investment portfolio continued
12
Octopus AIM VCT 2 plc Annual report 2023
Top ten holdings
Listed below are the ten largest investments by value, comprised 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 60 to 62, as at 30 November 2023:
Hasgrove Limited (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
£5,101,000
2.54%
6.02%
31 December 2022
£29.4 million
£8.1 million
£13.1 million
£nil
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
£3,304,000
0.28%
3.90%
31 December 2022
£1,396.3 million
£132.3 million
£1,043.5 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
£188,000
£2,723,000
0.46%
3.22%
31 December 2022
£113.2 million
£16.0 million
£54.5 million
£0.03 million
Investment Manager's review continued
13
Octopus AIM VCT 2 plc Annual report 2023
Call us on 0800 316 2295
Equipmake Holdings plc
Equipmake Holdings operates as a UK based provider of electric powertrain solutions, focussing on automotive, aerospace, and
marine markets. Specialising in the design, engineering, and manufacturing of turnkey electrification systems
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:
Loss before tax:
Net assets:
Dividends received in year:
July 2022
£1,285,000
£2,690,000
3.14%
3.18%
31 May 2023
£5.1 million
£5.0 million
£13.8 million
£nil
Craneware plc
Craneware is the leading provider of software and support services for the US healthcare industry. Its services and solutions include
patient engagement, charge capture and pricing, claims analysis, revenue recovery and retention, and cost analytics.
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
£2,533,000
0.44%
2.99%
30 June 2023
$174.0 million
$13.1 million
$327.8 million
£0.04 million
IDOX plc
IDOX specialises in the development and supply of information and knowledge management products and services. It operates
through Public Sector Software and Engineering Information products.
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
£2,369,000
0.82%
2.80%
31 October 2023
£73.3 million
£7.8 million
£73.3 million
£0.02 million
Top ten holdings continued
14
Octopus AIM VCT 2 plc Annual report 2023
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
£2,238,000
0.39%
2.64%
31 December 2022
£596.9 million
£40.5 million
£426.3 million
£0.05 million
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
£1,981,000
4.30%
2.34%
31 December 2022
£26.7 million
£2.1 million
£11.3 million
£nil
Vertu Motors plc
Vertu Motors engages in the distribution and retail trade of automobiles. Its automotive dealership operates under a number of
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:
December 2006
£777,000
£1,593,000
0.55%
1.88%
28 February 2023
£4,015 million
£32.5 million
£341.4 million
£0.04 million
Top ten holdings continued
Investment Manager's review continued
15
Octopus AIM VCT 2 plc Annual report 2023
Call us on 0800 316 2295
Netcall plc
Netcall designs, develops and markets communications, workforce management and business process management software and
services to the healthcare, public and private sectors in the United Kingdom and internationally.
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 2010
£356,000
£1,578,000
1.34%
1.86%
30 June 2023
£36.0 million
£4.0 million
£35.4 million
£0.01 million
Top ten holdings continued
16
Octopus AIM VCT 2 plc Annual report 2023
Sector analysis
The graph below shows the top ten sectors the equity portfolio was invested in by value as at 30 November 2023. It also shows the
sectors of the AIM market as a whole as at 30 November 2023:
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
AIM VCT 2 plc
AIM market
Other
Industrial Support
Services
Media
Investment Banking and
Brokerage Services
Retailers
Construction and
Materials
Medical Equipment
and Services
Pharmaceutical
and Biotechnology
Health Care Providers
Electronic and
Electrical Equipment
Software and
Computer Services
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:
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
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
1
Other sectors include Industrial Engineering, Media, Alternative Energy, Telecommunications Service Providers, Travel & Leisure, General Retailers, Leisure Goods, Aerospace
& Defence, Oil, Gas & Coal, Closed End Investments, and Industrial Materials.
Investment Manager's review continued
17
Octopus AIM VCT 2 plc Annual report 2023
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
across all products. 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 contact us on 0800 316 2295.
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 Close
Brothers Group and was involved in the management of multiple
AIM portfolios including the AIM VCTs. In 2008 she joined Octopus
Investments and is focused primarily on the management of
the AIM VCT portfolios. Kate provides investment management
support across all the Quoted Companies team products.
Mark Symington
Mark is a Fund Manager on the Octopus Quoted Companies
team, focusing predominantly on the Octopus AIM VCTs. Mark
joined Octopus Investments 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 products.
Dominic Weller
Dominic is a Fund Manager on the Octopus Quoted Companies
team. Dominic joined Octopus in 2015. Providing analytical and
investment support across all the Quoted Companies team
portfolios. He is lead manager on the FP Octopus UK Future
Generations Fund, and co-manager on the 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 eorts. He is a CFA charter holder.
Freda Isingoma
Freda is a Fund Manager on the Octopus Quoted Companies
team, focussing predominately on the AIM VCTs. Freda started
her career as an investment analyst at Charterhouse CCF before
joining 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 products.
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, also oversees the investment process
of the team which include the AIM IHT portfolios, and AIM VCTs.
Richard is also a 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
small companies fund. He subsequently joined Close Brothers to
manage a smaller companies investment trust before moving to
Octopus Investments Limited to head up the Quoted Companies
team in 2004. Richard was awarded Trustnet FE fundinfo Alpha
Manager status in 2022 acknowledging his proven track record.
Chris McVey
Chris is a Senior Fund Manager within the Octopus Quoted
Companies team. He works across all desk portfolios and 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. He has been a specialist
within the quoted UK Smaller Company market for over 20
years. In 2016 he joined Octopus from Citigroup where he led the
UK Small and Mid-Cap Equity research team 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 analyst and investment manager. Chris was awarded
Trustnet FE fundinfo Alpha Manager status in 2023.
Edward Griths
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 investments 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 products.
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.
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 Investments, before moving to
the Quoted Companies team in 2018 to co-manage the AIM
Inheritance Tax portfolios. Jessica also provides investment
and trading support across all the Quoted Companies team
mandates.
18
Octopus AIM VCT 2 plc Annual report 2023
Ross MacSween
Ross is a Junior Investment Analyst on the Octopus Quoted
Companies team, primarily providing analytical and investment
management support across the OEIC oerings as well as
assisting on all wider team mandates. He is an Accounting and
Finance graduate from Edinburgh University and initially joined
Octopus in 2022 on a sales and operations rotation programme.
Ben Tyson
Ben is a Product Analyst on the Octopus Quoted Companies team
and is focused on strengthening the team’s trading capabilities,
performance analytics and operational eciencies. Ben joined
Octopus Investments in 2017, as a member of the operations
team. He joined from PwC’s Investment Management Tax team
and previously worked within the Share Dealing and Share Plans
businesses at Capita. He joined the Quoted Companies team in
December 2023 having moved from the Investment Operations
team where he was a Settlements Subject Matter Expert (‘SME’).
Martin Jager
Martin is an Investment Analyst on the Octopus Quoted
Companies team, primarily providing analytical and investment
management support across the AIM VCTs as well as assisting on
all wider team mandates. He initially joined Octopus in 2021 as
a member of the Finance team and is a Chartered Accountant
and graduate from The University of Manchester with a degree
in International Management with American Business Studies.
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 Manager 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 Investment Manager 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:
• Gelion – global energy storage innovator specialising in the
next generation of safe stationary storage technology to
maximise reliable energy storage solutions to stand alone
power systems.
• Mycelx – provider of clean water technology equipment and
related services to the oil and gas, power, marine, and heavy
manufacturing sectors.
• Learning Technologies – a market leader in the fast-growing
workplace digital learning and talent management market.
• Diaceutics – provider of end-to-end solutions for the launch
of precision medicine diagnostics.
Materiality of risks to investments
As part of the investment process, the Investment Manager
incorporates 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 Investment Manager 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 28.
Responsibility
As part of the investment management approach, the
Investment Manager’s team discuss the portfolio companies’
strategy, financial performance, data disclosures, capital
structure and corporate governance with their management
teams. Existing governance structures may not be mature
(given the small size of portfolio companies), so the team assess
whether weaknesses exist and if the company management can
address these weaknesses. The team take part in consultations
on remuneration and challenge 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 consider the independent research ISS provides and discuss
votes as a team to create long-term shareholder value.
The Investment Manager continued
19
Octopus AIM VCT 2 plc Annual report 2023
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Introduction
The purpose of the report is to provide shareholders with sucient
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 AGM, the Investment Manager
shareholder presentation provided at 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 19 April 2023 the Company
held an online shareholder event that was well attended by over
25 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 26 April 2023 at the Company’s
registered oce. The voting results from all General Meetings are
published on the Company’s website.
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
13 May 2024.
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
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Octopus AIM VCT 2 plc Annual report 2023
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 sucient 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.
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 14 September 2023,
the Board issued an oer 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 4.1p were paid to shareholders (comprising
a final dividend of 2.3p, in respect of the previous financial
year, and an interim dividend of 1.8p).
Section 172(1) statement continued
21
Octopus AIM VCT 2 plc Annual report 2023
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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 Ocial 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 oering (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 dierent businesses
across a range of industry sectors. 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 stewardship of assets 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 2023 with the
total return from notional investments in the FTSE AIM All-Share
Index, FTSE All-Share index, and the 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 16.6% 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
22
Octopus AIM VCT 2 plc Annual report 2023
Comparative portfolio performance
310
290
270
250
230
210
190
170
150
130
110
90
70
50
30
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
Nov 23
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Results and dividends
Year ended
30 November 2023
£’000
Year ended
30 November 2022
£’000
Loss attributable to shareholders
(15,709)
(36,695)
Distributions:
Interim dividend paid 1.8p (2022 – 2.1p)
2,927
3,075
Special dividend proposed 3.6p (2022 – nil)
6,639
–
Final dividend proposed 1.8p (2022 – 2.3p)
3,328
3,773
The proposed final dividend of 1.8p for the year ended 30 November 2023 and the proposed special dividend of 3.6p will be paid on 27
June 2024 to shareholders on the register on 31 May 2024 subject to approval at the AGM being held on 16 May 2024.
Business review continued
23
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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
1
) in line with Financial Reporting Council (FRC) guidance. The Glossary of
terms on page 74 has further details:
1. NAV per share
1
;
2. Total return per share
1
;
3. Dividends per share paid in the year;
4. Total ongoing charges
1
; 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
47.9 61.6 The NAV per share has decreased from last year’s value of 61.6p to 47.9p.
This decrease of 22.2% is largely the result of a market-driven fall in
valuations.
2. Total return per share
1
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
(15.6) (27. 5) As previously considered, the NAV per share has decreased from last
year’s value of 61.6p to 47.9p. This gave a total return of -15.6% or a loss
of 9.6p per share, after adding back dividends of 4.1p paid in the year.
The Board notes that for the year under review this was in line with the FTSE AIM All-Share Index total return figure of -14.2%. 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 increased by 2.7% and the FTSE All-Share Index
rose by 1.8%, 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
4.1 4.2 The slight reduction in dividend this year is due to the fall in NAV, whilst
still maintaining at least a 5% dividend yield.
1
These KPIs are defined as alternative performance measures (APMs) and are defined in more detail on the Glossary of terms on page 74.
24
Octopus AIM VCT 2 plc Annual report 2023
The 4.1p of dividends paid in the year maintains the minimum of 5% dividend yield target. The proposed final dividend of 1.8p and
gives a total dividend in respect of the year of 3.6p, which is a yield of 6.2% based on the share price of 58.0p 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. Including the proposed special
dividend of 3.6p gives a total dividend of 7.2p in respect of the year, which is a yield of 12.4%. 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 71.
4. Ongoing charges
1
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 2.2 The ongoing charges ratio has remained the same year on year.
There are a number of costs involved in operating a VCT, these expenses are outlined in note 4 on page 57. 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
85.4 87.3 85.4% (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 1.9% due to lower deployment and
disposals made 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 page 7.
The Company has continued to meet the 80% qualification investment level. There continues to be sucient 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.
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 oer for subscription which closed
to new applications on 21 December 2023 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 2028.
Business review continued
1
These KPIs are defined as alternative performance measures (APMs) and are defined in more detail on the Glossary of terms on page 74.
25
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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 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
eectively, 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 poor 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
26
Octopus AIM VCT 2 plc Annual report 2023
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 sucient 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 dicult 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 sucient cash
and readily realisable securities, including money market funds and OEICs, which
can be accessed at short notice. At 30 November 2023, 27.1% of net assets was
held in cash and cash equivalents, realisable within one business day, and 10.4%
in OEICs, realisable in seven business days.
Valuation: For smaller companies or illiquid shares,
establishing a fair value can be dicult due to the
lack of readily available market data for similar
shares, resulting in a 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 sta, 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 sta 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
• Geo-political tensions
• Climate change
Risk and risk management continued
27
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Gender and diversity
The Board of Directors currently comprises two 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. As per Listing Rule 9.8.6R (9)(a) 25%
of individuals on the Company’s Board were women as at 30 November 2023. As the Company is externally managed the roles of
CEO or CFO do not exist. No senior Board positions are held by a woman in the Company. Furthermore, no individual on the Board is
from a minority ethnic background. Following the period end the Company has met the criteria of Listing Rule 9.8.6R (9)(a) as 40%
of individuals on the Board are women.
Please see the tables below which report on gender identity/sex and ethnic background for completeness as at 30 November 2023.
Gender identity or sex
Number of
Board members
Percentage of
the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Men 3 75% Not applicable
1
Women 1 25%
Not specified/prefer not to say – –
1
This column is not applicable as the Company is externally managed and does not have executive management functions, specifically it does not have a CEO or CFO. The
Company considers that the role of Chair and Chair of the Audit Committee are senior positions. Of these two senior positions, both are performed by men.
Ethnic background
Number of
Board members
Percentage of
the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
White British or other White
(including minority white groups)
4 100% Not applicable
2
Mixed/Multiple Ethnic Groups – –
Asian/Asian British – –
Black/African/Caribbean/Black British – –
Other ethnic group, including Arab – –
Not specified/prefer not to say – –
2
This column is not applicable as the Company is externally managed and does not have executive management functions, specifically it does not have a CEO or CFO.
The Company considers that the role of Chair and Chair of the Audit Committee are senior positions. Of these two senior positions, both are performed by those from a
White British background.
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 31.
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Octopus AIM VCT 2 plc Annual report 2023
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 of investment decisions, sits within the Investment
Manager’s governance structures.
• Strategy: The Company makes investments into a range of sectors but the companies receiving funding are small companies
primarily listed on AIM. Exposure to climate-related risks is assessed on a deal-by-deal basis by the Investment Manager. 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 Investment Manager is 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 Manager assesses how
well the risk is managed by the company through further due diligence. This is raised at the Investment Manager’s committee
meeting, where appropriate, as part of the investment process and is continually monitored.
• Metrics: Where relevant for the industry and sector, the team review metrics reported by the company to understand material
exposures, how they are being managed and company 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 Investment
Manager 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. Scope 3 emissions are all indirect emissions, not included in Scope 2.
While the ultimate goal is to reduce portfolio emissions to minimise these risks, the immediate goal is to increase data coverage to
100% within the next year. The data coverage is currently 74% (2022: 44%). Given the intricate modelling, lack of data and calculations
involved, we regard the analysis as indicative. Current greenhouse gas (GHG) emissions:
Metrics for equity holdings
Octopus AIM
VCT 2 plc
30/11/2023
AIM All Share
30/11/2023
Variance to index
30/11/2023
Scope 1 & 2 emissions (tCO2e) 6,128 6,455 (5%)
Scope 3 emissions (tCO2e) 34,723 68,103 (49%)
Scope 1 & 2 footprint (tCO2e/mGBP invested) 72 76 (5%)
Scope 1 & 2 weighted average carbon intensity (tCO2e/mGBP revenue) 7,437 24,776 (70%)
Percentage of issuer emission data coverage (including estimates) 74% 45% 65%
Consumer Duty
The Directors are aware of the Investment Manager’s obligations to comply with the FCA’s Consumer Duty rules and principles which
came into force in 2023. Firms subject to Consumer Duty must ensure they are acting to deliver good outcomes for consumers and
that this is reflected in their strategies, governance, leadership, and policies. The Investment Manager undertook a review of its
practices to identify and uplift areas of its operations in order to comply with the Consumer Duty principles which concluded ahead of
the Consumer Duty principles coming into force. The Company is not directly captured by Consumer Duty, however the Directors will
receive updates from the Investment Manager in order to monitor how the Investment Manager is meeting its obligations.
The Strategic Report was approved on behalf of the Board by:
Keith Mullins
Chair
7 March 2024
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Octopus AIM VCT 2 plc Annual report 2023
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Details of Directors
The Board comprises five 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.
Andy 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.
Elizabeth will be retiring from the Board from the conclusion of
the AGM on 16 May 2024.
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.
Virginia (Connelly) Bull
Virginia has almost 20 years of PLC Advisory and Corporate
Broking experience working with AIM and Main Market companies.
Virginia is a nominated adviser to AIM companies. Currently,
Virginia is a Director in the Investec Bank plc Corporate Broking
team, focused on partnering with Tech and Media companies
along their growth journey. Virginia became a Director of the
Company on 1 January 2024.
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Octopus AIM VCT 2 plc Annual report 2023
Directors’ report
The Directors present their report and the audited financial
statements for the year ended 30 November 2023. The Corporate
Governance Report on pages 34 to 37 and the Audit Committee
Report on pages 38 and 39 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 29.
In accordance with the Articles of Association of the Company,
Andy Raynor will retire as Director at the AGM and, being eligible,
oer himself for re-election. Virginia (Connelly) Bull, who was
appointed on 1 January 2024, oers herself for election and, as
announced previously, Elizabeth Kennedy will be retiring from
the Board on the conclusion of the business of the 2024 AGM.
Following a formal performance evaluation as part of the Board
evaluation, the Board believes that all the Directors continue
to be eective 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 35.
Directors’ and ocers’ 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 sucient 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 page 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
aect 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.
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Octopus AIM VCT 2 plc Annual report 2023
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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 76,
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 1.8p for the year ended
30 November 2023 and special dividend of 3.6p will be paid on 27
June 2024 to shareholders on the register on 31 May 2024 subject
to approval at the AGM being held on 16 May 2024, 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 sta 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 aairs 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 eectiveness 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 Streamlined Energy and Carbon Reporting (‘SECR’)
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 Octopus employees and those
working for, or on behalf of, the Investment Manager are aware
of their legal obligations when conducting Company business.
Share capital
The Company’s Ordinary share capital as at 30 November 2023
comprised 176,875,405 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.
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Octopus AIM VCT 2 plc Annual report 2023
Share issues
On 14 September 2023, a prospectus oer 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 21 December 2023 being fully subscribed.
In the year, 17,713,658 shares were issued, raising £8.4 million after
costs. This was allocated as follows:
During the year 15,118,182 shares were issued under the fundraise
that launched on 14 September 2023, raising £7.0 million after
costs.
During the year 2,557,239 shares were issued to those
shareholders who elected to receive shares under the Dividend
Reinvestment Scheme as an alternative to dividends. This raised
£1.3 million.
An additional 38,237 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 oered 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 6,011,097 Ordinary
shares with a nominal value of 0.01p for cancellation at a
weighted average price of 51.2p per share (2022: 4,494,597
shares at a weighted average price of 69.4p per share) for a total
consideration of £3.1 million (2022: £3.1 million). This represents
3.4% 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 2023
can be found in note 18 to the financial statements on page 68.
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
(c) the right to receive notice of and to attend and speak 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
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 Ocial List maintained by the UK Listing
Authority, any such discretion may not be exercised so as to
Directors’ report continued
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Octopus AIM VCT 2 plc Annual report 2023
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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 oer
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 2024
Directors’ authority to allot shares, to disapply
pre-emption rights
The authority proposed under Resolution 8 is required so that
the Directors may issue shares in connection with oers, 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 8 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 9 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 10 and 11 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 oer 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 12 is required so that
the Directors may make purchases of up to 27,644,406 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 eect is being proposed at Resolution 13.
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
7 March 2024
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Octopus AIM VCT 2 plc Annual report 2023
Corporate governance
report
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 diers from that of other companies. In
addition, VCTs dier 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.
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 37.
Board of Directors
The Company has a Board of five 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.
Virginia (Connelly) Bull joined the Board on 1 January 2024. Trust
Associates Limited, who are independent of the Company, were
engaged for the recruitment.
Elizabeth Kennedy will be retiring from the Board following the
conclusion of the business of the 2024 AGM.
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 eectiveness
and setting its agenda, and has no involvement in the day-to-day
business of the Company. He facilitates the eective contribution
of the Directors and make sure that they receive accurate, timely
and clear information and that they communicate eectively
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.
1
Please see the AIC Code at www.theaic.co.uk.
35
Octopus AIM VCT 2 plc Annual report 2023
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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 3 3
Elizabeth Kennedy 6 6 3 3
Andy Raynor 6 5 3 2
Brad Ormsby 6 6 3 3
Virginia (Connelly) Bull was appointed as a non-executive Director on 1 January 2024 and as such is not included in the meeting
attendance table above.
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. Judges Scientific plc are a client of Investec Bank plc and
consequently Virginia (Connelly) Bull as a Director of the Investec Bank plc Corporate Broking team was known to Brad Ormsby before
her appointment to the Board. As part of the recruitment process the Board were satisfied this does not present a conflict. 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 18 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. Andy
Raynor, who was appointed in 2005, is also considered independent.
Length of service
Date of original appointment Date of last election/re-election
Keith Mullins 14 September 2005 AGM 2022
Elizabeth Kennedy 12 August 2010 AGM 2023
Andy Raynor 14 September 2005 AGM 2021
Brad Ormsby 1 January 2022 AGM 2022
Virginia (Connelly) Bull 1 January 2024 n/a
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, and when considering succession
planning. 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 sucient corporate memory and consistent adherence to strategy.
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 2023 AGM to make market purchases of up to 14.99% of the issued Ordinary share
capital at any time up to the 2024 AGM and otherwise on the terms set out in the relevant resolution and renewed authority is being
sought at the 2024 AGM as set out in the notice of meeting.
36
Octopus AIM VCT 2 plc Annual report 2023
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 40 to 42. 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 have recent and relevant
financial experience. 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 38 and 39.
Internal controls
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 eectiveness 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 2023 AGM were for the resolutions relating to the approval
of the Directors’ Remuneration Report (7.2% of votes cast) and
the approval of the Directors’ Remuneration Policy (6.98% 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 Investment Manager will provide an update on the
Company’s activities and future plans at the AGM to be held on
16 May 2024. 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 16 May 2024 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 13 May 2024. Alternatively, please contact the
team at Octopus to answer any queries. They can be contacted
on 0800 316 2295.
Corporate Governance Code
The Board are aware of the revised UK Corporate Governance
Code as published by the FRC on 22 January 2024, which will
apply to accounting periods beginning on or after 1 January
2025, with the exception of a new provision (29) relating to risk
management and internal controls, which will be applicable
for accounting periods beginning on or after 1 January 2026. It
is expected that the Association of Investment Companies will
publish an update to the 2019 AIC Code of Corporate Governance
which the Company reports against. The Board will ensure that
all measures within the updated UK Code and AIC Code, once
revised, are acted upon.
Corporate governance report continued
37
Octopus AIM VCT 2 plc Annual report 2023
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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 2023, 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, 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
7 March 2024
38
Octopus AIM VCT 2 plc Annual report 2023
Audit Committee report
This report is submitted in accordance with The AIC Code in
respect of the year ended 30 November 2023 and describes the
work of the Audit Committee in discharging its responsibilities.
The Committee’s key objective is the provision of eective
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 29.
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 eectiveness 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 sta in relation to propriety of
financial reporting or other matters.
The Committee reviews its terms of reference and its eectiveness
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 LLP
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 sixteen years. In addition, during the year the previous
audit partner Peter Smith rotated o the audit with Elizabeth
Hooper joining.
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 eectiveness 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 eectiveness 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 eective 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 aect 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.
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:
39
Octopus AIM VCT 2 plc Annual report 2023
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• 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 higher interest rates. As at the date
of issuing this Report, whilst the Committee anticipates further
market volatility aecting 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 2023 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 2023.
Andy Raynor
Audit Committee Chair
7 March 2024
40
Octopus AIM VCT 2 plc Annual report 2023
Directors’ remuneration
report
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 2023.
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 pages 41 and 42.
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 ocer,
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 aairs.
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
aairs and the responsibilities borne by the Directors. They should
be sucient 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 oce 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
2023 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 on 16 May 2024, as in
previous years.
Statement of voting at the Annual General
Meeting
The 2022 Remuneration Report was presented to the AGM in
April 2023 and received shareholder approval following voting
by way of a poll. 92.8% of the votes cast were in favour of the
Remuneration Report or at the Chair’s discretion, 7.2% were
against the resolution and 83,206 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 36.
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 and
the FTSE All Share Index.
41
Octopus AIM VCT 2 plc Annual report 2023
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Directors’ emoluments (audited)
The amount of each Director’s fees for the year were:
Year ended
30 November
2023
£’000
Year ended
30 November
2022
£’000
2023
% Increase/
(Decrease)
2022
% Increase/
(Decrease)
2021
% Increase/
(Decrease)
Keith Mullins
29
28 3.6 7.7 4.0
Andy Raynor
26
25 4.0 4.2 4.3
Elizabeth Kennedy
24
22 9.1 4.8 5.0
Alastair Ritchie
n/a
10 n/a (52.4) 5.0
Brad Ormsby
24
21 14.3 n/a n/a
Total
103
106 (2.8) 15.2 4.5
1
Retired from the Board on 28 April 2022.
2
Appointed to the Board on 1 January 2022 and received fees for 11 months of the year ended 30 November 2022.
Virginia (Connelly) Bull was appointed as a non-executive Director on 1 January 2024 and as such is not included in the Directors’
emoluments table above.
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.
Following a review, the Board agreed the following fee rates with eect from 1 May 2023 (previous fees shown in brackets): Chair of the
Board £30,250 (£27,500); Chair of the Audit Committee £27,250 (£24,750) and all other Directors £24,750 (£22,500).
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.
Relative importance of spend on pay
The actual expenditure in the current year is as follows:
Year ended
30 November 2023
£’000
Year ended
30 November 2022
£’000
Total dividends paid
6,673
6,155
Total buybacks
3,076
3,117
Total directors’ fees
103
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.
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Octopus AIM VCT 2 plc Annual report 2023
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 2023
Ordinary shares of 0.01p each
30 November 2022
Keith Mullins
416,929
308,563
Andy Raynor
21,080
21,080
Elizabeth Kennedy
37,380
37,380
Brad Ormsby – –
Virginia (Connelly) Bull was appointed as a non-executive Director on 1 January 2024 and as such is not included in the Directors’
interests in shares table above.
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 2023 and the date of this report.
Shareholders’ proxy voting information
As required by Schedule 8:23 of the Regulations, the votes received for the AGM in 2023 were as follows:
For (including discretionary) Against
No. of Shares % No. of Shares %
Approval of Directors’
Remuneration Report
2,620,408 92.8 203,279 7.2
By Order of the Board
Keith Mullins
Chair
7 March 2024
Directors’ remuneration report continued
43
Octopus AIM VCT 2 plc Annual report 2023
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The Directors are responsible for preparing the Strategic Report,
the Directors’ Report, the Directors’ Remuneration Report and
the financial statements in accordance with applicable laws 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 aairs
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 sucient 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 laws 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
dier 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
7 March 2024
Directors’ responsibility
statement
44
Octopus AIM VCT 2 plc Annual report 2023
Opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Company’s aairs
as at 30 November 2023 and of its loss for the year then
ended;
• have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of
the Companies Act 2006.
We have audited the financial statements of Octopus AIM VCT
2 plc (the ‘Company’) for the year ended 30 November 2023
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 sucient 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. The period of total uninterrupted
engagement including retenders and reappointments is 16 years,
covering the years ended 30 November 2008 to 30 November
2023. We remain independent of the Company in accordance
with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical
Standard as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with these
requirements. The non-audit services prohibited by that standard
were not provided to the Company.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. Our
evaluation of the Directors’ assessment of the Company’s ability
to continue to adopt the going concern basis of accounting
included:
• Obtaining the VCT compliance reports during the year
and as at year end and reviewing their calculations to check
that the Company was meeting its requirements to retain
VCT status;
• Reviewing the forecasted cash flows that support the
Directors’ assessment of going concern, challenging
assumptions and judgements made in the forecasts,
and assessing them for reasonableness. In particular, we
considered the available cash resources relative to the
forecast expenditure which was assessed against the prior
year for reasonableness;
• Evaluating the Director’s method of assessing going concern
in light of market volatility having regard to the liquidity of
the investment portfolio.
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
45
Octopus AIM VCT 2 plc Annual report 2023
Call us on 0800 316 2295
Overview
2023 2022
Key audit matters Valuation and existence of investments
Materiality
£846,000 (2022: £1,017,000) based on 1% (2022: 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 eect on: the overall audit strategy, the allocation of resources in the
audit, and directing the eorts of the engagement team. These matters 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 these matters.
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 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 the holding %
may have changed or that the bid 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;
• 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 from the custodian and agreed all investments
held at the balance sheet date to CREST records.
In respect of 99% 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;
• Obtained share capital tables directly from the investee company to confirm
ownership at year end and recalculated the value attributable to the
Company;
• 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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Octopus AIM VCT 2 plc Annual report 2023
Quoted Investments: £46 million (86%) of
the Company’s investments held at fair
value through profit and loss are quoted
investments.
Unquoted investments: £7 million (14%) of
the Company’s investments held at fair value
through profit and loss are unquoted and
are valued using more subjective techniques
(level 3).
For these reasons we considered the valuation
and existence of unquoted and quoted
investments to be a key audit matter.
• 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 our procedures performed we did not identify any matters to suggest
the valuation or existence of investments was not appropriate and we are satisfied
that the estimates and judgements made in the unquoted investment valuations
are 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 eect 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 eect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality
as follows:
Company Financial statements
2023 2022
Materiality
£846,000 £1,017,000
Basis for determining materiality
1% of net assets.
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.
Performance materiality
£634,000 £762,000
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.
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 £209,000 which is based on 10% of gross expenditure. (2022: £284,000).
Independent auditor’s report to the members of
Octopus AIM VCT 2 plc continued
47
Octopus AIM VCT 2 plc Annual report 2023
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Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit dierences in excess of £42,000 (2022: £50,000).
We also agreed to report dierences 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 Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit.
Going concern and
longer-term viability
• The Directors’ statement with regards 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 eectiveness of risk
management and internal control systems ; and
• The section describing the work of the audit committee.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies
Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and
Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
• 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.
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Octopus AIM VCT 2 plc Annual report 2023
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.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
• Our understanding of the Company and the industry in which it operates;
• Discussion with the Manager and those charged with governance; and
Independent auditor’s report to the members of
Octopus AIM VCT 2 plc continued
49
Octopus AIM VCT 2 plc Annual report 2023
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• Obtaining an understanding of the Company’s policies and
procedures regarding compliance with laws and regulations.
We considered the significant laws and regulations to be the
Companies Act 2006, the FCA listing and DTR rules, the principles
of the UK Corporate Governance Code, industry practice
represented by the Statement of Recommended Practice:
Financial Statements of Investment Trust Companies and Venture
Capital Trusts (2022) (“the SORP”) and the applicable financial
reporting framework. We also considered the Company’s
qualification as a VCT under UK tax legislation.
Our procedures in respect of the above included:
• Obtaining an understanding of the control environment in
monitoring compliance with laws and regulations
• Review of financial statement disclosures and agreeing to
supporting documentation;
• Enquiries of the Manager and those charged with governance
relating to the existence of any non-compliance with laws
and regulations;
• Review of minutes of meeting of those charged with
governance for any instances of non-compliance with laws
and regulations;
• 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.
Fraud
We assessed the susceptibility of the financial statements to
material misstatement, including fraud. Our risk assessment
procedures included:
• Enquiry with management and those charged with
governance regarding any known or suspected instances of
fraud;
• Obtaining an understanding of the Company’s policies and
procedures relating to:
• Detecting and responding to the risks of fraud; and
• Internal controls established to mitigate risks related to
fraud.
• Review of minutes of meeting of those charged with
governance for any known or suspected instances of fraud;
and
• Discussion amongst the engagement team as to how and
where fraud might occur in the financial statements.
Based on our risk assessment, we considered the areas most
susceptible to fraud to be the valuation and existence of unquoted
investments and management override of controls.
Our procedures in respect of the above included, but were not
limited to:
• The procedures set out in the Key Audit Matters section
above;
• Obtaining evidence to support the existence of investments;
• Review of estimates and judgements applied by
management in the financial statements to assess their
appropriateness and the existence of any systematic bias
• Review and consideration of the appropriateness of
adjustments made in the preparation of the financial
statements; and
• Review of unadjusted audit dierences, if any, for indication
of bias or deliberate misstatement.
We also communicated relevant identified laws and regulations
and potential fraud risks to all engagement team members
who were all deemed to have appropriate competence and
capabilities and remained alert to any indications of fraud or
non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of
material misstatement in the financial statements, recognising
that the risk of not detecting a material misstatement due
to fraud is higher than the risk of not detecting one resulting
from error, as fraud may involve deliberate concealment by, for
example, forgery, misrepresentations or through collusion. There
are inherent limitations in the audit procedures performed and
the further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the
Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and
the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Elizabeth Hooper (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
7 March 2024
BDO LLP is a limited liability partnership registered in England and
Wales (with registered number OC305127).
50
Octopus AIM VCT 2 plc Annual report 2023
Income statement
Year to 30 November 2023
Year to 30 November 2022
Notes
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Gain/(loss) on disposal of fixed asset
investments
10
– 668 668
– (32) (32)
Loss on disposal of current asset
investments
– (91) (91)
– – –
Loss on valuation of fixed asset
investments
10
– (14,333) (14,333)
– (31,821) (31,821)
Loss on valuation of current asset
investments
– (1,047) (1,047)
– (2,946) (2,946)
Investment income 2
1,194 – 1,194
589 19 608
Investment management fees 3
(393) (1,179) (1,572)
(481) (1,443) (1,924)
Other expenses 4
(528) – (528)
(580) – (580)
Profit/(loss) before tax 273 (15,982) (15,709)
(472) (36,223) (36,695)
Tax 6
– – –
– – –
Total comprehensive Income/
(loss) after tax
273 (15,982) (15,709)
(472) (36,223) (36,695)
Earnings per share – basic and
diluted
8
0.2p (9.8p) (9.6p)
(0.3p) (24.5p) (24.8p)
• The ‘Total’ column of this statement represents the statutory income statement of the Company prepared in accordance with
the accounting policies detailed in the Notes to the financial statements; 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 54 to 69 form an integral part of the financial statements.
51
Octopus AIM VCT 2 plc Annual report 2023
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As at 30 November 2023
As at 30 November 2022
Notes £’000 £’000 £’000 £’000
Fixed asset investments 10
53,288
72,249
Current assets:
Investments 11
8,796
9,399
Money market funds 11
21,893
3,515
Debtors 12
152
205
Cash at bank 11
1,045
17,217
31,886
30,336
Creditors: amounts falling due within
one year
13
(484)
(791)
Net current assets
31,402
29,545
Total assets less current liabilities 84,690
101,794
Called up equity share capital 14
18
17
Share premium
7,619
12,904
Capital redemption reserve
3
3
Special distributable reserve
80,043
76,154
Capital reserve realised
(5,400)
(5,843)
Capital reserve unrealised
4,765
21,190
Revenue reserve
(2,358)
(2,631)
Total equity shareholders’ funds 84,690
101,794
NAV per share – basic and diluted
9
47.9p
61.6p
The statements were approved by the Directors and authorised for issue on 7 March 2024 and are signed on their behalf by:
Keith Mullins
Chair
Company No: 05528235
The accompanying notes on pages 54 to 69 form an integral part of the financial statements.
Balance sheet
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Octopus AIM VCT 2 plc Annual report 2023
Share
capital
£’000
Share
premium
£’000
Capital
redemption
reserve
£’000
Special
distributable
reserves
1
£’000
Capital
reserve
realised
1
£’000
Capital
reserve
unrealised
£’000
Revenue
reserve
1
£’000
Total
£’000
As at 1 December 2022 17 12,904 3 76,154 (5,843) 21,190 (2,631) 101,794
Comprehensive income/(loss) for the year:
Management fee allocated as capital
expenditure
– – – – (1,179) – – (1,179)
Current year net gain on disposal – – – – 577 – – 577
Current year loss on fair value of
investments
– – – – – (15,380) – (15,380)
Profit after tax – – – – – – 273 273
Total comprehensive loss for the year – – – – (602) (15,380) 273 (15,709)
Contributions by and distributions to owners:
Repurchase and cancellation of own shares – – – (3,076) – – – (3,076)
Issue of shares 1 8,821 – – – – – 8,822
Share issue costs – (468) – – – – – (468)
Dividends paid – – – (6,673) – – – (6,673)
Total contributions by and distributions to
owners
1 8,353 – (9,749) – – – (1,395)
Other movements:
Cancellation of share premium – (13,638) – 13,638 – – – –
Prior years’ holding gains now realised – – – – 3,215 (3,215) – –
Transfer between reserves – – – – (2,170) 2,170 – –
Total other movements – (13,638) – 13,638 1,045 (1,045) – –
Balance as at 30 November 2023 18 7,619 3 80,043 (5,400) 4,765 (2,358) 84,690
Share
capital
£’000
Share
premium
£’000
Capital
redemption
reserve
£’000
Special
distributable
reserves
1
£’000
Capital
reserve
realised
1
£’000
Capital
reserve
unrealised
£’000
Revenue
reserve
1
£’000
Total
£’000
As at 1 December 2021 15 54,600 2 30,826 (4,533) 56,103 (2,159) 134,854
Comprehensive income/(loss) 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
1
Included within these reserves is an amount of £72,285,000 (2022: £67,680,000) which is considered distributable to shareholders under Companies Act rules.
The accompanying notes on pages 54 to 69 form an integral part of the financial statements.
Statement of changes
in equity
53
Octopus AIM VCT 2 plc Annual report 2023
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Notes
Year to 30 November 2023
£’000
Year to 30 November 2022
£’000
Cash flows from operating activities
Loss on ordinary activities before tax
(15,709)
(36,695)
Adjustments for:
Decrease/(increase) in debtors 12
53
(20)
Decrease in creditors 13
(82)
(196)
(Gain)/loss on disposal of fixed assets 10
(668)
32
Loss on disposal of current asset investments
91
–
Loss on valuation of fixed asset investments 10
14,333
31,821
Loss on valuation of current asset investments
1,047
2,946
Non-cash distributions 2 – (19)
Net cash utilised in operating activities (935)
(2,131)
Cash flows from investing activities
Purchase of fixed asset investments 10
(4,086)
(6,071)
Proceeds from sale of fixed asset investments 10
9,157
2,249
Purchase of current asset investments
(2,040)
(352)
Proceeds from sale of current asset investments
1,505
–
Total cash flows generated from/(utilised in)
investing activities
4,536
(4,174)
Cash flows from financing activities
Purchase of own shares 14
(3,076)
(3,117)
Share issues net of DRIS 14
7,519
12,502
Share issue costs net of DRIS 14
(468)
(794)
Dividends paid net of DRIS
(5,370)
(4,956)
Total cash flows (utilised in)/generated from
financing activities
(1,395)
3,635
Increase/(decrease) in cash and cash equivalents 2,206
(2,670)
Opening cash and cash equivalents
20,732
23,402
Closing cash and cash equivalents 22,938
20,732
Closing cash and cash equivalents is represented by:
Cash at bank 11
1,045
17,217
Money market funds 11
21,893
3,515
Total cash and cash equivalents 22,938
20,732
The accompanying notes on pages 54 to 69 form an integral part of the financial statements.
54
Octopus AIM VCT 2 plc Annual report 2023
1. Principal accounting policies
The Company is a Public Limited Company (“plc”)
incorporated in England and Wales and its registered oce
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 July 2022
with consequential amendments).’
The principal accounting policies have remained unchanged
since those set out in the Company’s 2022 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 £2.1 million and the
Company had £22.9 million in cash at bank and Money
Market Funds 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 sucient cash buer. 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 30 to 33 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 aect 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 eects 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).
55
Octopus AIM VCT 2 plc Annual report 2023
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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 and cash equivalents. 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.
Financing Strategy and Capital Structure
We define capital as shareholder’s funds and our financial
strategy in the medium term is to manage a level of cash
that balances the risks of the business with optimising the
return on equity. The Company currently has no borrowings
nor does it anticipate that it will have any borrowing facilities
in the future to fund the acquisition of investments.
The Company does not have any externally imposed capital
requirements.
The Board considers the distributable reserves and the total
return for the year when recommending a dividend. In
addition, the Board is authorised to make market purchases
up to a maximum of 14.99% of the issues Ordinary share
capital in accordance with Special Resolution 11 in order to
maintain sucient liquidity in the Company’s shares.
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 eective yield, provided there
is no reasonable doubt that payment will be received in
due course.
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Octopus AIM VCT 2 plc Annual report 2023
2. Income continued
Disclosure
30 November 2023
£’000
30 November 2022
£’000
Dividends receivable from fixed asset investments
563
522
In-specie dividend
1
–
19
Loan note interest receivable
20
30
Income receivable on money market securities and
bank balances
611
37
1,194
608
1
There was no in-specie dividend for the year ended 30 November 2023. In the prior period, the Company received shares in Verici Dx 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 2023
30 November 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Investment management fees
393 1,179 1,572
481 1,443 1,924
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 eect 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 insucient 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. The Investment Manager is not entitled to
any annual performance incentive scheme.
During the year Octopus charged gross management fees of £1,860,000 (2022: £2,266,000). When the various allowances detailed
below are included, the net management fee for the year is £1,572,000 (2022: £1,924,000). At the year end £356,000 was payable
to Octopus (2022: £395,000). Octopus received £154,000 as a result of upfront fees charged on allotments of Ordinary shares
(2022: £186,000). 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 2023 the rebate received was £105,000 (2022: £133,000).
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 2023 the rebate received was £127,000 (2022: £152,000).
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 £56,000 for the year to 30 November 2023 (2022: £57,000).
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.
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Octopus AIM VCT 2 plc Annual report 2023
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4. Other expenses
Accounting policy
All expenses are accounted for on an accruals basis and are charged wholly to revenue, apart from management fees which are
charged 25% to revenue and 75% to capital.
The transaction costs incurred when purchasing or selling assets are written o to the income statement in the period that
they occur.
Disclosure
30 November 2023
£’000
30 November 2022
£’000
Other administration expenses
145
204
IFA charges
105
133
Directors’ remuneration
103
106
Audit fees
51
42
Registrar fees
49
47
Printing and postage
22
10
VCT monitoring fees
20
3
Legal and professional fees
14
16
Directors’ and ocers’ liability insurance
13
12
Brokers’ fees
6
7
528
580
The fees payable to the Company’s auditor above are stated net of VAT and the VAT is included within other administration
expenses. No non-audit services were provided by the Company’s auditor.
The ongoing charges of the Company were 2.2% of average net assets during the year to 30 November 2023 (2022: 2.2%).
5. Directors’ remuneration
Total Directors’ fees during the year were £103,000 (2022: £106,000). This excludes Employer’s National Insurance contributions
of £9,500 (2022: £9,000) which have been included within other administration expenses. The highest paid Director received
£29,000 (2022: £27,500). 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 (2022: 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 eect of dierent 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 dierences 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.
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Octopus AIM VCT 2 plc Annual report 2023
6. Tax continued
Disclosure
The corporation tax charge for the year was £nil (2022: £nil).
30 November 2023
£’000
30 November 2022
£’000
Loss before tax
(15,709)
(36,695)
Current tax at 23.01% (2022: 19.00%)
(3,615)
(6,972)
Eects of
Non-taxable income
(270)
(110)
Non-taxable capital gains
3,406
6,608
Non-deductible expenses
3
6
Excess management expenses on which deferred tax not
recognised
476
468
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 aairs 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 2023, there
is an unrecognised deferred tax asset of £5,118,000 (2022: £4,616,000) in respect of surplus management expenses, based on a
prospective tax rate of 25% (2022: 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. Additionally, the tax rate used of 23% was calculated as an average of the
tax rate during the year, being 19% from 1 December 2022 to 31 March 2023, and 25% from 1 April 2023 to 30 November 2023.
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 2023
£’000
30 November 2022
£’000
Dividends paid on Ordinary shares during the year
2022 Final dividend – 2.3p per share paid 25 May 2023
(2022: 2.1p per share)
3,746
3,080
2023 Interim dividend – 1.8p per share paid 3 November
2023 (2022: 2.1p per share)
2,927
3,075
Total 6,673
6,155
During the year £1,303,000 (2022: £1,199,000) of dividends were reinvested under the DRIS, see note 14.
59
Octopus AIM VCT 2 plc Annual report 2023
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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 2023
£’000
30 November 2022
£’000
Dividends paid and proposed
2023 Interim dividend – 1.8p per share paid 3 November
2023 (2022: 2.1p per share)
2,927
3,075
2023 Special dividend – 3.6p per share payable 27 June
2024 (2022: Nil)
6,639
–
Final proposed dividend – 1.8p per share payable 27 June
2024 (2022: 2.3p share)
3,328
3,773
12,894
6,848
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 dier 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 2023
30 November 2022
Revenue
£’000
Capital
£’000
Total
£’000
Revenue
£’000
Capital
£’000
Total
£’000
Profit/(loss) attributable to Ordinary
shareholders
273 (15,982) (15,709)
(472) (36,223) (36,695)
Earnings per Ordinary share
0.2p (9.8p) (9.6p)
(0.3p) (24.5p) (24.8p)
The profit/(loss) per share is based on 164,257,336 (2022: 147,948,350) 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 £15,709,000 (2022: loss of
£36,695,000).
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 2023
30 November 2022
Net assets (£’000)
84,690
101,794
Shares in issue
176,875,405
165,172,844
NAV per share (p)
47.9
61.6
There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted NAV per share are identical.
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Octopus AIM VCT 2 plc Annual report 2023
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
and loan notes, fair value is established by assessing dierent
methods of valuation, such as price of recent transaction,
earnings or revenue-based 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 recommends 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.
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Octopus AIM VCT 2 plc Annual report 2023
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10. Fixed asset investments continued
Level 1:
Quoted equity
investments
£’000
Level 2:
Quoted equity
investments
£’000
Level 3:
Unquoted
investments
£’000
Total
£’000
Opening cost at 1 December 2022 49,113 – 3,087 52,200
Opening unrealised gain as at 1 December
2022
15,159 – 4,890 20,049
Valuation as at 1 December 2022 64,272 – 7,977 72,249
Purchases at cost* 3,741 – 120 3,861
Disposal proceeds (8,757) – (400) (9,157)
Gain on realisation of investments 668
–
– 668
Change in fair value in year (13,905) – (428) (14,333)
Closing valuation as at 30 November 2023 46,019 – 7,269 53,288
Closing cost as at 30 November 2023 47,922
–
2,807 50,729
Closing unrealised (loss)/gain as at 30
November 2023
(1,903) – 4,462 2,559
Valuation as at 30 November 2023 46,019 – 7,269 53,288
*The dierence to the cash flow statement is a timing dierence 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 £9,157,000 (2022: £2,249,000) from investments sold in the year. The book cost of these investments when
they were purchased was £5,332,000 (2022: £2,135,000). 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 dierent assumptions were to be used, dierent valuations could have been attributed to some of the
Company’s investments.
The Company holds six unquoted investments, and one loan note stock, 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 suciently 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.
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 Limited and Popsa Holdings Ltd make up 99%
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. See below for the results of our analysis:
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Octopus AIM VCT 2 plc Annual report 2023
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 Ltd Revenue multiple 6.0
+0.5x +0.4 +0.23
-0.5x -0.4 -0.23
EV/Sales multiple Popsa Holdings Ltd EV/Sales multiple 1.8
+0.2x +0.2 +0.11
-0.2x -0.2 -0.11
The Board and the Investment Manager believe that the valuations as at 30 November 2023 reflect the most reasonable
assumptions at that date, giving due regard to all information available from each portfolio company.
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 2023 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 o to the income statement in the period that
they occur.
There have been no transfers between these classifications in the year (2022: none).
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 business 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.
63
Octopus AIM VCT 2 plc Annual report 2023
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11. Current asset investments, cash and cash equivalents continued
Disclosure
Current asset investments at 30 November 2023 and at 30 November 2022 comprised of money market funds, 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 2023
£’000
30 November 2022
£’000
OEICs:
FP Octopus UK Micro Cap Growth Fund
5,150
4,768
FP Octopus UK Multi Cap Income Fund
2,925
4,146
FP Octopus UK Future Generations Fund
721
485
Total current asset investments 8,796
9,399
Money market funds
21,893
3,515
Total current asset investments and money
market funds
30,689
12,914
Cash at bank
1,045
17,217
Total current asset investments and cash and
cash equivalents
31,734
30,131
12. Debtors
30 November 2023
£’000
30 November 2022
£’000
Prepayments
Accrued income
Other debtors
21
131
–
4
200
1
152
205
13. Creditors: Amounts falling due within one year
30 November 2023
£’000
30 November 2022
£’000
Trade creditors*
4
229
Accruals
479
562
Other
1
–
484
791
*The dierence to the cash flow statement is a timing dierence 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
64
Octopus AIM VCT 2 plc Annual report 2023
14. Share capital
30 November 2023
£’000
30 November 2022
£’000
Allotted and fully paid up:
176,875,405 Ordinary shares of 0.01p (2022: 165,172,844)
18
17
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 Alternative Investment Fund Manager (‘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.
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 (£)
15 December 2022 274,131 57.9 159,000
19 January 2023 436,267 57.7 252,000
16 February 2023 432,226 58.5 253,000
16 March 2023 731,856 55.6 407,000
20 April 2023 442,177 55.6 246,000
18 May 2023 359,232 53.1 191,000
15 June 2023 219,586 52.0 114,000
13 July 2023 320,586 50.3 161,000
17 August 2023 422,806 50.5 214,000
21 September 2023 314,101 49.5 155,000
19 October 2023 976,986 44.7 437,000
16 November 2023 1,081,143 45.2 487,000
Totals 6,011,097 3,076,000
The total nominal value of the shares repurchased for cancellation was £601 representing 3.4% of the issued share capital (2022:
4,494,597 shares with a nominal value of £449 representing 2.7% 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 (£)
25 May 2023
1
1,340,242 54.7 733,000
10 August 2023
2
38,237 52.4 20,000
9 November 2023
1
1,216,997 46.8 570,000
10 November 2023 15,118,182 49.6 7,031,000
Totals 17,713,658 8,354,000
1
Shares issued under the Dividend Reinvestment Scheme (DRIS).
2
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 £7,051,000 (2022:
£11,708,000). This is shown in the cash flow statement.
65
Octopus AIM VCT 2 plc Annual report 2023
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15. Reconciliation of movements in equity
Notes
30 November 2023
£’000
30 November 2022
£’000
Shareholders’ funds at start of year
101,794
134,854
Total comprehensive loss
(15,709)
(36,695)
Share capital bought back 14
(3,076)
(3,117)
Issue of shares (net of issue costs) 14
8,354
12,907
Dividends paid 7
(6,673)
(6,155)
Shareholders’ funds at end of year
84,690
101,794
Included within these reserves is an amount of £72,285,000 (2022: £67,680,000) which is considered distributable to shareholders
under Companies Act rules.
During the year there was a share premium cancellation amounting to £13,638,000 (2022: £54,601,000). This was carried out with
the approval of shareholders for the purpose of creating additional 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 2023
£’000
30 November 2022
£’000
Financial assets at fair value through profit or loss
Fixed asset investments
53,288
72,249
Money market securities
21,893
3,515
OEICs
8,796
9,399
Total financial assets at fair value through profit or
loss
83,977
85,163
Financial assets measured at amortised cost
Cash at bank
1,045
17,217
Debtors
131
200
Total financial assets measured at amortised cost 1,176
17,417
Financial liabilities measured at amortised cost
Creditors
484
(791)
Total financial liabilities measured at
amortised cost
484
(791)
The Company holds six qualifying, unquoted investments; Rated People Limited, Popsa Holdings Limited, Airnow Group plc,
Hasgrove Limited (which delisted from AIM in 2013), The Food Marketplace Ltd and Eluceda Ltd. The Company also holds one
unquoted loan note investment in Rosslyn Data Technologies plc valued at £120,000, held at price of recent investment. Unquoted
investments and loan notes are included in fixed asset investments in the table above.
66
Octopus AIM VCT 2 plc Annual report 2023
16. Financial instruments continued
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 eective 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 market 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 34 to 37, having regard to the possible eects of adverse price movements, and other
macroeconomic eects 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, 54.3% (2022: 63%) of the Company’s net assets comprised equity securities listed on the London Stock Exchange, Aquis,
NASDAQ 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 2022. Therefore, a decrease
in the bid price of these securities as at 30 November 2023 would have decreased net assets and the total return for the year by
£9,204,000 (2022: £12,854,000 decrease); and an equivalent change in the opposite direction would have increased net assets for
the year by the same amount.
OEIC investments comprised 10.4% of the Company’s net assets by value (2022: 9.0%). A 20% decrease (2022: 20%) in the price of
these securities at 30 November 2023 would have decreased net assets by £1,759,000 (30 November 2022: £1,880,000 decrease);
and an equivalent change in the opposite direction would have increased net assets for the year by the same amount.
Unquoted investments comprised 8.6% of the Company’s net assets by value (2022: 8.0%). A 20% decrease (2022: 20%) in the
multiple or price of recent investment used in the valuation of these securities as at 30 November 2023 would have decreased net
assets by £1,454,000 (2022: £1,595,000 decrease); and an equivalent change in the opposite direction would have increased net
assets for the year by the same amount.
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.
67
Octopus AIM VCT 2 plc Annual report 2023
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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 5.25% at 30 November 2023 (2022: 3.0%). The amounts held in floating rate
investments at the balance sheet date were as follows:
30 November 2023
£’000
30 November 2022
£’000
Money market funds
21,893
3,515
Cash at bank¹
1,045
17,217
22,938
20,732
1
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
£219,000 (2022: £35,000).
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.
30 November 2023
£’000
30 November 2022
£’000
Investments in interest bearing instruments
120
400
Cash on deposit
1,045
17,217
Accrued dividends and interest receivable
151
230
1,316
17,8 47
Other than cash, loan notes or liquid money market funds, there were no significant concentrations of credit risk to counterparties
at 30 November 2023 or 30 November 2022. By value, no individual bank holding or fixed rate note investment exceeded 9% of
the Company’s net assets at 30 November 2023 (2022: 15%).
The Company’s interest-bearing deposit and current accounts are maintained with HSBC and Money Market Funds held with
BlackRock, HSBC and JP Morgan. The risk of loss to this balance is deemed to be low due to the historical credit ratings and a
current Moody’s rating of Aaa (2022: Aaa) for HSBC, JP Morgan and BlackRock Money Market 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 these counterparties 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.
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, accrued dividends and interest receivable is considered to be small due to the short
settlement and the contracted agreements in place with the settlement lawyers.
68
Octopus AIM VCT 2 plc Annual report 2023
17. Financial risk management continued
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.
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 sucient investments in cash
and readily realisable securities to pay accounts payable
and accrued expenses. At 30 November 2023 these
investments were valued at £31,734,000 (2022: £30,131,000).
The Company has no debt, therefore no maturity analysis
is required.
18. Events after the end of the reporting period
The following events occurred between the balance sheet
date and the signing of these financial statements:
• an investment of £600,000 into Verici Dx plc
• an investment of £534,204 into GENinCode plc
• an investment of £129,600 into Equipmake Holdings plc
• an investment of £199,998 into Alusid Limited
• a loan note of £600,000 into Strip Tinnings Holdings plc
• an investment of £120,000 into FP Octopus UK Future
Generations Fund
• a partial disposal of 141,437 shares in FP Octopus UK Multi
Cap Income Fund for total consideration of £200,000
• a partial disposal of 762,912 shares in Polarean Imaging
plc for total consideration of £45,682
• a partial disposal of 2,800 shares in Judges Scientific plc
for total consideration of £293,411
• a full disposal of 8,298,059 shares in Velocys plc for total
consideration of £20,745
• a full disposal of 2,526,666 shares in Clean Power
Hydrogen plc for total consideration of £213,038
• a full disposal of 108,404 shares in Renalytix plc for total
consideration of £98,254
The following shares have been allotted since the year end:
• 14 December 2023: 5,635,893 Ordinary shares at a price
of 50.5p per share
• 11 January 2024: 3,555,668 Ordinary shares at a price of
51.4p per share
The following shares have been bought back since the
year end:
• 14 December 2023: 791,619 shares at a price of 45.9p
per share
• 18 January 2024: 408,110 shares at a price of 46.6p
per share
• 22 February 2024: 448,271 shares at a price of 46.8p
per share
19. Contingencies, guarantees and financial
commitments
There were no contingencies, guarantees or financial
commitments as at 30 November 2023 (2022: nil).
20. Transactions with the Investment Manager
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
£1,572,000 by Octopus as a management fee in the year
to 30 November 2023 (2022: £1,924,000). 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
£56,000 in the year to 30 November 2023 (2022: £57,000).
For further details please refer to note 3. Details of amounts
invested in Octopus managed funds can be found on
page 11.
69
Octopus AIM VCT 2 plc Annual report 2023
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21. Related party transactions
As at 30 November 2023, Octopus Investments Nominees
Limited (OINL) held nil shares (2022: 4,284) in the Company
as beneficial owner, having purchased these at a cost of £nil
(2022: £3,000) from shareholders to protect their interests
after delays or errors with shareholder instructions and other
similar administrative tasks. Throughout the period to 30
November 2023 OINL purchased nil shares (2022: 7,916) at a
cost of £nil (2022: £6,000) and sold 4,284 shares (2022: 3,632)
for proceeds of £2,000 (2022: £3,000). In accordance with
the listing rules, 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 40 to 42.
70
Octopus AIM VCT 2 plc Annual report 2023
Octopus AIM VCT 2 plc was launched as Close IHT AIM VCT
plc in March 2006 and raised £25 million through an oer 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 oer, launched on 6 February 2012 and which closed on
5 April 2012, raised £1.3 million for the Company. An oer 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 oer 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 oer 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 oer
closed, fully subscribed, on 21 October 2016. On 6 February 2017
the Board announced a further oer for subscription to raise up
to £4.3 million.
A further combined oer 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 oer 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 oer
closed, fully subscribed, on 27 February 2020.
On 20 August 2020, a prospectus oer 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 oer 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.
On 14 September 2023, 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. The Oer
closed on 21 December 2023.
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’
1
(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.
1
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
71
Octopus AIM VCT 2 plc Annual report 2023
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’
and ‘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
shares
2023/24
Octopus
AIM VCT 2
Ordinary
shares
2022/23
Octopus
AIM VCT 2
Ordinary
shares
2021/22
Octopus
AIM VCT 2
Ordinary
shares
2020/21
Octopus
AIM VCT 2
Ordinary
shares
2019/20
Octopus
AIM VCT 2
Ordinary
shares
2018/19
Octopus
AIM VCT 2
Ordinary
shares
2017/18
Octopus
AIM VCT 2
Ordinary
shares
2016/17
Octopus
AIM VCT 2
Ordinary
shares
2015/16
Octopus
AIM VCT 2
Ordinary
shares
2014/15
Octopus
AIM VCT 2
Ordinary
shares
2013/14
Octopus
AIM VCT 2
Ordinary
shares
2012/13
Octopus
AIM VCT 2
Ordinary
shares
2011/12
Octopus
AIM VCT 2
Ordinary
shares
2010/11
Octopus
Second
AIM VCT
(formerly
Octopus
IHT AIM
VCT A&B
shares)
2005/06
Octopus
Third AIM
VCT C&D
shares
2005/06
(formerly
Octopus
Second
AIM VCT)
Octopus
Third AIM
Ordinary
shares
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
1
3.3 3.9
1
1.6
1
30 November 2012 – – – – – – – – – – – 2.3
1
4.4
1
4.6
1
3.2 3.8
1
1.6
1
30 November 2013 – – – – – – – – – – 4.5
1
5.1
1
4.7
1
5.0
1
3.5 4.1
1
1.7
1
30 November 2014 – – – – – – – – – 4.3
1
5.2
1
5.8
1
5.4
1
5.8
1
4.0 4.7
1
1.9
1
30 November 2015 – – – – – – – – 7.0
1
6.4
1
7.8
1
8.7
1
8.1
1
8.6
1
6.0 7.1
1
2.9
1
30 November 2016 – – – – – – – 4.8
1
4.6
1
4.3
1
5.2
1
5.8
1
5.4
1
5.8
1
4.0 4.7
1
1.9
1
30 November 2017 – – – – – 4.5
1
4.9
1
4.8
1
4.4
1
5.3
1
5.9
1
5.5
1
5.9
1
4.1 4.8
1
2.0
1
30 November 2018 – – – – – 4.5
1
4.6
1
5.0
1
4.9
1
4.5
1
5.5
1
6.1
1
5.6
1
6.0
1
4.2 4.9
1
2.0
1
30 November 2019 – – – – 9.8
1
8.7
1
8.9
1
9.7
1
9.4
1
8.6
1
10.5
1
11.7
1
10.9
1
11.6
1
8.1 9.5
1
3.9
1
30 November 2020 – – – 6.0
1
5.1
1
4.5
1
4.6
1
5.0
1
4.9
1
4.5
1
5.5
1
6.1
1
5.6
1
6.0
1
4.2 4.9
1
2.0
1
30 November 2021 – – 6.2
1
8.4
1
7.2
1
6.3
1
6.5
1
7.0
1
6.8
1
6.3
1
7.7
1
8.6
1
7.9
1
8.5
1
5.9 6.9
1
2.9
1
30 November 2022 – 5.0
1
4.4
1
6.0
1
5.1
1
4.5
1
4.6
1
5.0
1
4.9
1
4.5
1
5.5
1
6.1
1
5.6
1
6.0
1
4.2 4.9
1
2.0
1
30 November 2023 7. 5 4.9
1
4.3
1
5.8
1
5.0
1
4.4
1
4.5
1
4.9
1
4.8
1
4.4
1
5.3
1
5.9
1
5.5
1
5.9
1
4.1 4.8
1
2.0
1
Total dividends
paid (assumed
investment at 100p)
7.5 9.9 14.9 26.2 32.1 33.0 38.1 46.2 52.0 52.0 67.9 78.1 74.7 84.5 68.7 79.5 53.3
Adjusted NAV
(assumed
investment at 100p)
87.6p 56.9p 50.3p 68.2p
2
58.1
2
51.5
2
52.4
2
57.1
2
55.6
2
51.0
2
62.2
2
69.4
2
64.4
2
68.9
2
47.9 56.3
2
23.2
2
NAV plus total
dividends (assumes
investment at 100p)
95.1 66.7 65.2 94.4
3
90.2
3
84.5
3
90.5
3
103.3
3
107.5
3
103.0
3
130.1
3
147.5
3
139.0
3
153.4
3
116.6 135.8
3
76.4
3
1
Notional dividends assuming investment at 100p and adjusting for conversion of various share classes into Octopus AIM 2 VCT plc Ordinary shares.
2
NAV assuming investment at 100p and adjusting for conversion of various share classes into Octopus AIM 2 VCT plc Ordinary shares.
3
NAV plus cumulative dividends adjusting for conversion, assuming investment at 100p showing the notional return to shareholders based on their original investment
share class.
72
Octopus AIM VCT 2 plc Annual report 2023
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:
0p
20p
40p
60p
80p
100p
120p
140p
160p
180p
200p
Octopus
Third AIM
Ordinary
shares
(formerly
Octopus
Second
AIM VCT plc)
2000/01
Octopus
Third AIM VCT
C&D shares
(formerly
Octopus
Second
AIM VCT)
2005/06
Octopus
Second
AIM VCT
(formerly
Octopus IHT
AIM VCT
A&B shares)
2005/06
Octopus
AIM VCT 2
Ordinary
shares
2010/11
Octopus
AIM VCT 2
Ordinary
shares
2011/12
Octopus
AIM VCT 2
Ordinary
shares
2012/13
Octopus
AIM VCT 2
Ordinary
shares
2013/14
Octopus
AIM VCT 2
Ordinary
shares
2014/15
Octopus
AIM VCT 2
Ordinary
shares
2015/16
Octopus
AIM VCT 2
Ordinary
shares
2016/17
Octopus
AIM VCT 2
Ordinary
shares
2017/18
Octopus
AIM VCT 2
Ordinary
shares
2018/19
Octopus
AIM VCT 2
Ordinary
shares
2019/20
Octopus
AIM VCT 2
Ordinary
shares
2020/21
Octopus
AIM VCT 2
Ordinary
shares
2021/22
Octopus
AIM VCT 2
Ordinary
shares
2022/23
Octopus
AIM VCT 2
Ordinary
shares
2023/24
51.5p
33.0p
30.0p
57.1p
46.2p
30.0p
55.6p
52.0p
30.0p
51.0p
52.0p
30.0p
62.2p
67.9p
30.0p
64.4p
74.6p
30.0p
68.9p
84.5p
30.0p
Total return (p)
Adjusted NAV (p) assuming investment at 100p Cumulative dividends paid (p)
Income tax relief (p) Cost of investment
69.4p
78.1p
30.0p
52.4p
30.0p
38.1p
68.2p
26.2p
30.0p
50.3p
14.9p
30.0p
56.9p
9.9p
30.0p
87.6p
7.5p
30.0p
58.1p
30.0p
32.1p
47.9p
64.6p
40.0p
23.2p
51.3p
20.0p
56.3p
74.6p
40.0p
The proposed final dividend of 1.8p and proposed special dividend of 3.6p will, if approved by shareholders, be paid on 27 June 2024 to
shareholders on the register on 31 May 2024.
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
73
Octopus AIM VCT 2 plc Annual report 2023
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 6 March 2024 45.8 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 75.
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 oering 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, oer to
buy shares at a discount or oer 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 ocial 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.
74
Octopus AIM VCT 2 plc Annual report 2023
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 Ratio
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 Company
in the future.
This is calculated by dividing the expenses of £1,970,000 which
includes the management fee in note 3 on page 56 and the
expenses listed out in note 4 on page 57 excluding irrecoverable
VAT, exceptional costs and trail commission, by average net
assets of £89,047,000.
Total return
Total return is calculated as movement in NAV per share in the
period plus dividends paid in the period. Total return 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.
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 Company, as it reflects the underlying value
of the portfolio at the reporting date.
Money Market Fund (MMF)
A mutual fund that invests in highly liquid, short term instruments.
These instruments include cash, cash equivalent securities,
and high credit rating debt based securities with a short term
maturity. They are intended to oer investors high liquidity with
a low level of risk.
Open Ended Investment Company (OEIC)
A type of investment fund that invests in equities, bonds and
other securities. The price of the shares is based on the underlying
assets of the fund. These are highly liquid as new shares can be
created to meet investor demand and the fund will cancel shares
of investors who exit the fund.
Glossary of terms
75
Octopus AIM VCT 2 plc Annual report 2023
Call us on 0800 316 2295
The Board of Directors
Keith Mullins (Chair)
Andrew Raynor FCA
Elizabeth Kennedy LLB (Hons)
Brad Ormsby CA
Virginia (Connelly) Bull
Company Number
Registered in England No: 05528235
Legal Entity Identifier (LEI)
213800BW27BKJCI35L17
Secretary and Registered oce
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
James Cowper Kreston
The White Building
1-4 Cumberland Place
Southampton
SO15 2NP
VCT Status Adviser
Shoosmiths LLP
Apex Plaza
Forbury Road
Reading
RG1 1AX
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
Tel: 020 7886 2500
Directors and advisers
76
Octopus AIM VCT 2 plc Annual report 2023
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 16 May 2024 at 12 noon for the purposes of
considering, and if thought fit, passing the following resolutions
of which Resolutions 1 to 9 and 14 will be proposed as Ordinary
Resolutions and Resolutions 10 to 13 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 2023.
2. To approve a final dividend of 1.8p per Ordinary share.
3. To approve a special dividend of 3.6p per Ordinary share.
4. To approve the Directors’ Remuneration Report.
5. To re-elect Andrew Raynor as a Director.
6. To elect Virginia (Connelly) Bull as a Director.
7. 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:
8. 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 £3,688 (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 oers or agreements before the expiry
thereof, which would or might require relevant securities to
be allotted after the expiry of such authority.
9. 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 £553
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 oers 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 oer or agreement notwithstanding the expiry
of such authority.
10. 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 oers 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 oer 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 oer or agreement notwithstanding
the expiry of such power.
The power provided by this Resolution shall expire on the
earlier of the conclusion of the Company’s AGM next
following the passing of this Resolution and 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
77
Octopus AIM VCT 2 plc Annual report 2023
Call us on 0800 316 2295
11. 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 oers 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 oer 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 oer 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).
12. 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 27,644,406 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;
(c) the maximum price, exclusive of expenses, which may
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 Ocial 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.
13. 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.
14. 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
7 March 2024
78
Octopus AIM VCT 2 plc Annual report 2023
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.
(c) A form of proxy is enclosed which, to be effective,
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 oce
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
79
Octopus AIM VCT 2 plc Annual report 2023
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
ineective (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
oce 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 6 March 2024 (being the last practicable date prior to
the publication of this Notice) the Company’s issued share
capital consists of 184,418,986 Ordinary shares, carrying one
vote each. Therefore, the total voting rights in the Company
as at 6 March 2024 are 184,418,986.
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Call us on 0800 316 2295
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Octopus AIM VCT 2 plc