Octopus AIM VCT plc
## Annual report and
## accounts for the
## year ended
## 28 February 2023
## Company number: 03477519
For UK investors only
## Octopus AIM VCT 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’).
## Contents
Financial summary and key dates 1
Strategic report
• Chair’s statement 2
• Investment Manager’s review 4
• The Investment Manager 16
• Section 172(1) statement 18
• Business review 20
• Risk and risk management 25
Details of Directors 28
Directors’ report 29
Corporate governance report 33
Audit Committee report 37
Directors’ remuneration report 39
Directors’ responsibility statement 42
Independent auditor’s report 43
Income statement 49
Balance sheet 50
Statement of changes in equity 51
Cash ﬂow statement 52
Notes to the ﬁnancial statements 53
Shareholder information and contact details 68
Glossary of terms 73
Directors and advisers 74
Notice of Annual General Meeting 75
### Octopus AIM VCT plc Annual report 2023 1
## Financial summary

|  |  | Year to |  |  | Year to |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 28 February 2023 |  |  | 28 February 2022 |  |  |
| Net assets (£’000) |  | 141,222 |  |  | 168,169 |  |
| (Loss) after tax (£’000) |  | (33,414) |  |  | (19,459) |  |
| Net asset value (NAV) per share (p) |  |  | 78.5 |  | 104.8 |  |
| Dividends per share paid in year (p) |  |  | 5.5 |  |  | 8.5 |

1
Total return (%) (19.8) (9.1)
2
Final dividend proposed (p) 2.5 3.0
3
Ongoing charges (%) 2.1 1.9
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
The proposed ﬁnal dividend will be paid on 10 August 2023 to shareholders on the register on 28 July 2023.
3
Ongoing charges is an alternative performance measure calculated using the AIC recommended methodology.
Deﬁnitions of key terms and alternative performance measures shown above and throughout this report are shown in the Glossary
of Terms on page 73.
## Key dates
Shareholder event 13 July 2023
Annual General Meeting 20 July 2023
Final dividend payment date 10 August 2023
Half-yearly results to 31 August 2023 published November 2023
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2

Octopus AIM VCT 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, and to assure you that the Company's performance this year has not been typical for us. As explained further below, market turbulence this year has been particularly harsh on smaller companies in some of the key sectors in which we invest, and this has led to a material reduction in the Company's Net Asset Value.

The year to 28 February 2023 turned out to be another challenging period for stock markets in general and for smaller companies in particular. It started as Russia had just launched its invasion of Ukraine, causing an immediate shock to the global economy, and in particular a surge in European energy and food prices driving up inflation, which was already on the rise as economies emerged from the covid pandemic of 2021. By the half-year, inflation was nearing 10%, the Bank of England had raised its base rate from 0.5% in February to 1.75% and the Company's net asset value (NAV) had fallen by 14.6% on a total return basis as investors withdrew from smaller companies, which are generally perceived to be riskier assets. The second half was overshadowed by domestic political turmoil and an autumn budget that caused further financial instability as expectations for peak interest rates rose above 6% at one stage before falling back towards the end of the year as some semblance of stability returned. Interest rates ended the period at 4% and are now expected to peak in the first half of the current year. Against this background the NAV gave up further ground and finished the year 19.8% down on a total return basis.

In the context of this backdrop, the AIM market raised £2.1 billion of new capital in the year under review for both new and existing AIM companies, a substantial decrease on the £8.3 billion raised in the previous year. After the previous year, when the number of new issues had been buoyant coming out of covid, the majority of fundraisings in the year under review were for existing AIM companies seeking further capital. It was not surprising, therefore, that your Investment Manager made fewer qualifying investments, investing a total of £4.9 million in the period, well down from the record £21.6 million invested in the previous year. The Investment Manager and your Board were both clear that the relative shortage of investment opportunities should not be used as an excuse to lower the rigorous investment criteria that are applied when making new investments.

## Performance

The NAV on 28 February 2023 was 78.5p per share, a significant decrease on the NAV of 104.8p per share reported at 28 February 2022. Adding back the 5.5p of dividends paid in the year gives a total negative return of 19.8%. In the same year, the FTSE AIM All-Share Index fell by 16.1%, the FTSE SmallCap (excluding investment companies) Index fell by 5.8% and the FTSE All-Share Index rose by 7.3%, all on a total return basis. AIM was the worst performing UK Index, with the FTSE All-Share's positive return narrowly based and reliant on a few very large companies in

the energy and pharmaceutical sectors. AIM trailed the FTSE SmallCap (excluding investment companies) Index because of the poor performance of AIM's larger constituents which suffered the greatest de-ratings.

Once again stock specific factors had a significant impact on our performance, both positive and negative, and these are covered in more detail in the Investment Manager's review. As fears about high inflation and the extent of likely interest rate rises increased, so did stock market volatility, causing growth stocks to devalue further as the year progressed. In addition, the deterioration in appetite for risk which had been apparent since the end of 2021 intensified, resulting in some significant falls in the share prices of earlier stage companies exposed to the new economy. In some cases raising further capital proved difficult except at a deep discount and resulted in companies having to accept much lower valuations. The purpose of a VCT is to provide capital for small growing companies and as a result those companies exposed to the new economy in the software, technology and healthcare sectors make up a significant proportion of our investment portfolio. This worked against us in the period.

## Dividends

In January 2023 an interim dividend for the year to 28 February 2023 of 2.5p was paid to all shareholders. This was in addition to the 3.0p final dividend that had been paid in August 2022 and which related to the previous financial year ended 28 February 2022. The Board has considered the level of dividend in the context of the NAV fall during the period and on this occasion is recommending a final dividend of 2.5p, which brings the total dividends for the year to 28 February 2023 to 5.0p which is a 6.7% yield based on the share price of 74.5p on 28 February 2023. It remains the Board's target to pay an annual dividend of 5.0p or 5% of the year end share price, whichever is greater at the time.

## Cancellation of share premium account

At the last Annual General Meeting, shareholders voted to cancel share premium to increase the pool of distributable reserves to the amount of £25.6 million. This is a regular occurrence, and common practice, to enable the continued payment of dividends and buyback of shares. A further resolution to cancel share premium is being proposed at this year's Annual General Meeting.

## Dividend reinvestment scheme

In common with many other VCTs in the industry, the Company has established a Dividend Reinvestment Scheme ('DRIS'). Many shareholders have already taken advantage of this opportunity. For investors who do not require income, but value the additional tax relief on their reinvested dividends, this is an attractive scheme and I hope more shareholders will find it useful. In the course of the year 2,122,937 new shares have been issued under this scheme, returning £1.8 million to the Company. The final dividend referred to above will be eligible for the DRIS.
Octopus AIM VCT plc Annual report 2023

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## Share buybacks

During the year to 28 February 2023 the Company continued to buy back shares in the market from selling shareholders and purchased 4,312,810 ordinary shares for a total consideration of £3.6 million. We have maintained a discount of approximately 4.5% to NAV (equating to up to a 5.0% 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 22 September 2022, a prospectus offer was launched alongside Octopus AIM VCT 2 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. There was strong appetite for the share issue, and it closed fully subscribed on 13 October 2022. The Company issued 21,311,806 shares under the offer, raising £17.3 million after costs.

## VCT status

Shoosmiths LLP were engaged throughout the year to 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 28 February 2023, 88.6% of the Company's portfolio was in VCT qualifying investments.

In 2015 the government introduced a VCT sunset clause in order to comply with EU State Aid requirements. This clause provides that income tax relief will no longer be given to new VCT subscriptions made on or after 6 April 2025, unless the relevant legislation is renewed by an HM Treasury order. The VCT community has been campaigning to get this clause revoked, and in September 2022 the Chancellor of the Exchequer announced that the sunset clause would be extended beyond 2025. While there has been no further update or announcement from the government since September, the VCT community remains confident that the sunset clause will be revoked, enabling VCTs to continue to fulfil the important role that they play in the funding of small UK growth companies.

## Annual General Meeting (AGM)

The AGM will take place on 20 July 2023 at 10.30am. Further information can be found in the Directors' Report and Notice of Annual General Meeting on pages 29 and 75 respectively. We will also be hosting a virtual shareholder event prior to the AGM, on 13 July 2023 at 11.00am. This will enable shareholders to receive an update from the Investment Manager and provide an opportunity for questions to the Board and the Investment Manager. There will not be a presentation from the Investment Manager at the AGM

itself. Formal notices will be sent to shareholders by their preferred method (email or post) and shareholders are encouraged to submit their votes by proxy. We always welcome questions from our shareholders at the AGM. Please send any questions via email to AimAGM@octopusinvestments.com by 5.00pm on 14 July 2023.

## Outlook

2023 started with a degree of cautious optimism and a noticeable improvement in investor appetite. However, the collapse of Silicon Valley Bank and the enforced takeover of Credit Suisse in March, demonstrated the continued fragility of investor confidence despite banks generally being in a much better shape than they were at the time of the 2007/8 financial crisis. Inflation remains high although it is expected to fall from current levels which should enable interest rates to peak in the next few months. It now seems as if the UK may have avoided the prospect of a formal recession as GDP projections have been adjusted upwards, with any trough now expected to be shallow.

Company statements have been robust in the first results season of the year and forecasts are mostly conservatively set at this stage. Valuations have not yet recovered from last year's falls, leaving many of the larger and faster growing shares in the portfolio on ratings well below their long-term averages. The Investment Manager's assessment is that the underlying businesses of these companies are generally robust, giving good prospects for uplifts in valuations as overall market sentiment improves.

The portfolio contains 88 holdings across a range of sectors with exposure to some exciting new technologies in the environmental and healthcare sectors in particular. Many of these companies remain well funded, although the challenge of raising further capital in the current market environment cannot be dismissed. The balance of the portfolio towards profitable companies remains, and the Investment Manager remains confident that there will continue to be sufficient opportunities to invest our funds in good companies seeking more growth capital at attractive valuations.

Neal Ransome
Chair
6 June 2023

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4

Octopus AIM VCT plc Annual report 2023

# Investment Manager’s review

## Introduction

The 12 months under review was an extremely challenging time for investors who had to contend with the Russian invasion of Ukraine, rapidly rising inflation and interest rates, and a squeeze on consumer incomes combined with a constant threat of recession. This resulted in volatile stock markets with investors seeking safety in less highly rated sectors such as banks and energy. It caused the retreat of AIM growth stocks, which was a key factor in the fall in the net asset value (NAV) which ended the year with a negative total return of 19.8%, slightly behind AIM itself. In addition, as appetite for risk diminished, some of the earlier stage investments in the portfolio suffered de-ratings. Solid January trading updates caused a brief recovery in optimism although this proved transitory in the face of the collapse of Silicon Valley Bank and the enforced takeover of Credit Suisse just after the year end. Fragile investor confidence has left AIM shares valued at levels previously visited around the time of the 2007/8 financial crisis despite a mostly encouraging results season past the year end.

Against this background AIM fundraisings slowed dramatically as the year unfolded as companies looking to float paused in response to lower valuation expectations for their businesses. However, AIM still successfully raised capital for its existing members, enabling them to fund the next stage of their development.

## The Alternative Investment Market

Following a strong year for the financial markets in 2021, 2022 proved to be a rather turbulent year in many ways. In addition to global headwinds, the UK market suffered from continued concerns about inflation, increasing interest rates, and the looming threat of a long recession. This directly impacted fundraising levels and the number of new IPOs across all UK indices, both large and small. However, smaller company indices were particularly impacted by the equity market de-rating as

sentiment moved sharply away from growth and momentum driven stocks and investors sought out a narrow group of pharmaceutical and energy stocks in the FTSE 100. AIM’s high exposure to growth stocks in the software, technology, new economy and healthcare sectors counted against it over the period and it was the worst performing index, with its largest constituents faring particularly badly. Conversely, the FTSE SmallCap Index (ex investment companies) fared better as it did not have exposure to the larger companies that held back AIM. In the 12 months to 28 February 2023 the AIM Index fell 16.1% compared with a fall of 5.8% for the FTSE SmallCap index (excluding investment companies) and an increase of 7.3% for the FTSE All-Share Index on a total return basis. 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 market for fundraising and new IPOs remained quiet throughout the year. Disappointingly, in the year to 28 February 2023, AIM raised £2.0 billion of new capital for existing companies which compares to a figure of £8.3 billion the previous year. The bar chart on the next page shows that the monthly figures were lower than the previous year. Not surprisingly, there were only 13 new IPOs compared to 88 in the previous year. AIM raised £0.1 billion for new listings, a significant decrease on the figure of £1.9 billion in the previous year.

We are still hearing about potential new issues from brokers and we hope that the current more volatile market conditions do not affect this. VCTs play a significant part in the funding process and we identify, on the following pages, the companies we have invested in during the year, which include many that are developing technologies to help solve the climate and healthcare problems that face us.
Octopus AIM VCT plc Annual report 2023

5

The graph below shows the total fundraising by AIM that has been undertaken in the 12 months to 28 February 2023 and the prior year comparison.

![img-0.jpeg](img-0.jpeg)

Source: London Stock Exchange

## Performance

Adding back the 5.5p of dividends paid in the year, the NAV total return fell by 19.8%. This compares with a fall in the FTSE AIM All-Share Index of 16.1%, a fall in the FTSE SmallCap (excluding investment companies) of 5.8% and a rise in the FTSE All-Share Index of 7.3%, all on a total return basis. It was another year characterised by individual months of significant market volatility as investors reacted to unfolding events. The year opened when Russia had just invaded Ukraine, which added a steep rise in energy and food costs to existing price inflation caused by a post-pandemic shortage of labour and supply chain difficulties. As a result, consensus moved from inflation being seen as transitory to a longer-term issue, and central banks reacted by indicating that interest rates would have to rise further and faster than had previously been expected. The situation was unfortunately exacerbated in the second half by political instability, with market reactions to the autumn budget causing peak interest rate expectations to rise above 6%, much further than had been anticipated, disrupting the gilt and property markets. Faced with these conditions and uncertainties, investors continued their previous moves away from smaller company investments and concentrated their attention on a very narrow cohort of the largest energy and pharmaceutical companies, causing AIM and smaller companies to lag significantly in contrast to the well-established long-term trend. This impacted both the larger growth stocks in the portfolio, which were de-rated even when the tone of their outlook statements continued to be positive, as well as early-stage technology companies needing cash to fulfil their growth ambitions and contributed to the underperformance of the NAV compared with the FTSE AIM All-Share. More details on the performance of individual holdings can be seen on pages 9 to 11.

Among the larger, profitable holdings in the portfolio, several were caught by the dramatic de-rating of larger AIM growth stocks in the period caused by poor market sentiment in the face of sharp rises in interest rates and inflation. GB Group ('GBG') and Learning Technologies Group were in the top ten fallers, and others such as RWS, Advanced Medical Solutions and Next Fifteen were also affected although the impact on the performance of the fund was less for these and other smaller holdings.

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### 6 Octopus AIM VCT plc Annual report 2023
## Investment Manager’s review continued
Performance continued proﬁtable months in 2023 as well as signiﬁcant growth in its sales
One of the biggest contributors to the negative return in the year through Next, M&S and John Lewis and most recently Sainsbury’s.
was GBG, a leading global player in identity veriﬁcation. GBG has Although the shares were not a signiﬁcant drag on performance
been a long-term successful investment where we have taken in the year, they still don’t reﬂect the scale of the progress made
proﬁts in the past and continue to believe it will deliver growth by the business.
and positive returns for the Company in the future. Its share price
It has been another very tough period for early-stage businesses
was impacted partly by slower than hoped for growth as some
yet to reach proﬁtability, with the priority to make sure they have
of the froth came o the digital economy as the eect of covid
enough funding to develop their technologies and get them to
lockdowns waned and partly in reaction to the acquisition of
a self-supporting stage. Share prices have come under pressure
US-based Acuant, an expensive acquisition albeit with good
even where funding is not an immediate problem and progress has
long-term strategic beneﬁts. It ended the period on a valuation
remained on track, such as in the cases of LungLife, GENinCode,
multiple well below its historic average and at a level not seen since
Velocys and Maxcyte. There have been some dramatic reactions
the 2007/8 ﬁnancial crisis. Fears that Learning Technologies would
where early-stage companies have disappointed investors, such
see its customers cut back on spending on employees in the event
as with CPH2 which has been slower than expected to develop a
of a recession weighed on its share price. It produced upgrades to
working model of its membrane-free electrolyser. Two other big
2022 forecasts as the year progressed, leaving the shares trading
fallers were Libertine, which had gone to a large premium to its
at the bottom end of the longer-term valuation range. EKF
IPO price before falling back as investors appreciated how early
Diagnostics and Animalcare were also signiﬁcant contributors to
stage its innovative drive train is, despite having some serious
negative returns in the year. EKF’s proﬁts have shrunk back to
partners, and Ilika where its Stereax solid state battery has seen
pre-covid levels after a period of signiﬁcant revenues and proﬁts
slower scale-up demand than originally expected. We had taken
from covid test kits, but it remains a proﬁtable provider of point
proﬁts in Ilika at higher levels the previous year.
of care tests and we expect its shares to recover as proﬁts start to
grow again. Animalcare has found the development and launch
Investing for a VCT involves backing companies when they are
of new animal drugs less easy during lockdowns but remains
small and still at an early stage of development and share price
focused on invigorating its growth.
progress depends on them being noticed by a wider circle of
investors as they produce results and develop their businesses
TPX Impact and Trackwise Designs were two very disappointing
over time. This quite often takes longer than expected and these
performers in the year. TPX Impact had been growing strongly as
companies remain potentially vulnerable until they achieve
a result of demand from various government departments for its
proﬁtability – something we experienced with Creo Medical this
digital transformation expertise and the eciencies to be gained
year, which was forced to raise money on a much lower valuation
from it. However, it was caught by a shortage of skilled technical
as VCTs were no longer able to ﬁnance it. The relatively good
labour which delayed contract delivery and eroded margins as it
news is that it is now funded to develop its innovative endoscopic
had to ﬁll the gap with outside contractors. A new chief executive
instruments.
is now in charge and some of the labour pressures have eased,
giving us conﬁdence that the business can recover. Demand from
There have been some instances of more resilient performance
customers remains good and the business is well funded. The
despite the market conditions outlined above. The share price of
situation at Trackwise Designs was more serious. The company
Ergomed has been volatile over the year but it has broadly held its
built a new factory to fulﬁl a very large contract from electric
value as proﬁts have been upgraded. We have taken some proﬁts
vehicle manufacturer Arrival. Disappointingly, the order was
to manage the size of the holding although we still see plenty of
revised downwards at the end of last year which impacted the
scope for organic growth to continue and build further value for
funding allocated to the factory build and forced the company
shareholders, particularly as the shares have fallen back since the
to raise money at a moment when stock sentiment towards
year end. Equipmake made a strong debut on AIM and has been
early stage businesses was very poor. This resulted in signiﬁcant
a strong contributor to performance and Netcall, Quixant and
dilution for us as existing shareholders although it does now give
Judges Scientiﬁc have all maintained good momentum in their
the company the chance to win other customer business for its
businesses and been rewarded with higher share prices. In our
new facility.
private company holdings, Hasgrove had its valuation increased
over the year as it grew its recurring revenues and cash despite
The portfolio has very little exposure to the consumer, but where it
a fall in the valuation metrics used. By contrast, the quoted peer
does this has tended to hurt performance in the year. Gear4Music
group for Popsa was devalued in the second half and as a result
had enjoyed a very strong period of trading during the pandemic
we wrote down its valuation in the year. The business continues
when demand for musical instruments soared and high street
to grow well and cash spending is well under control. The bases
competitors were closed. This masked some of the underlying
of valuation of unquoted holdings and movements subsequent
challenges posed by Brexit and supply problems in China, which
to the year end is set out in note 10 to the ﬁnancial statements.
impacted proﬁts and margins that the management has spent
the past two years working through. It should be able to show
some of the beneﬁts of this process in 2023. Sosandar, another
consumer-focused company, has continued to achieve successive
Octopus AIM VCT plc Annual report 2023

7

## Portfolio activity

Having made four qualifying investments at a total cost of £2.4 million in the first half of the year, we added a further four qualifying investments totalling £2.5 million in the second half. This made a total investment of £4.9 million in qualifying investments for the year, a decrease on last year's £21.6 million. However, it should be pointed out that FY2022 had represented a record year for deployment, with a large selection of existing and new companies turning to public markets to strengthen their balance sheets as we came out of the covid pandemic.

In the first half of the year we made four qualifying investments; three were follow-ons into Oberon Investments Group plc, The British Honey Company and Verici Dx plc, and one was a new investment, Equipmake Holdings plc. In the second half, we invested in two new companies and two existing investments. We invested £0.4 million into Northcoders Group plc, a Manchester-based provider of training programmes for software coding. The funds raised will be used to expand the list of courses offered to individuals, to include Cyber Security and Platform Engineering, among others. The company has an exciting opportunity to form a meaningful part of the upskilling agenda across the UK. We invested £1.6 million into Itaconix plc, which is a leading producer of plant-based additives for a range of consumer products, from detergents to shampoos. Itaconix's natural polymers help to decarbonise products, whilst providing improved performance, safety and sustainability. The company raised a total of £10.5 million in a heavily over-subscribed share placing, which will be used to support a range of growth initiatives, including the development of new products and applications for its technology. We invested a further £0.3 million into Intelligent Ultrasound Group plc, the 'classroom-to-clinic' provider of training and AI-enabled medical simulation products. The company raised £5.2 million, which will support the ongoing development of several tech-enabled products which assist ultrasound practitioners and vastly improve the efficiency of the scanning process. We invested a further £0.2 million into Equipmake, the electric drivetrain specialists focusing on retrofitting carbon-intensive vehicles and aeroplanes, most notably diesel buses. The company had its IPO in July 2022, and successfully raised a further £6.2 million in January 2023, expanding its shareholder base. We opted to make a small further investment given the exciting progress the team are making.

During the year we took profits in several holdings. We sold part of our holdings in Advanced Medical Solutions, Next 15 Group and WANdisco. Two holdings, Clinigen Group and TP Group, were subject to successful cash takeover bids, Clinigen at a profit though frustratingly TP Group was at a substantial loss. We also fully exited from investments in Diurnal, Merit Group, Synargen and Midatech, and sold our non-qualifying position in Tasty. In all, disposals made a £0.5 million loss over original cost and generated £2.5 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. In the year under review £0.8 million was invested into the FP Octopus Micro Cap Growth Fund, £0.7 million into the FP Octopus Multi Cap Income Fund and £0.4 million into the FP Octopus Future Generation Fund at lower share prices than our previous investments. Recent adverse market conditions meant that these funds had a negative impact on returns in the year although we believe they are well positioned to have a positive impact once the investment environment improves. The balance of the cash is now held in two money market funds to earn a better return as VCTs are not permitted to earn significant amounts of interest on bank deposits.

## 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 66.6% of the Company's net assets were held in individual quoted shares, 6.1% were held in unquoted single company investments and 27.7% were held in cash or collective investment funds providing short-term liquidity. Shareholders should be aware that a proportion of the quoted holdings may have limited liquidity owing to the size of the investee company and the overall proportion held by the Company.

## VCT regulations

There have been no further changes to the VCT regulations since the publication of the previous set of audited accounts. The key requirements are that 30% of 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 cost) invested in qualifying holdings. We are determined to maintain a threshold of quality and to invest where we see the potential for returns from growth. Over time there has been a gradual change to the profile of the portfolio towards earlier-stage companies, although 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;
- have less than £15 million of gross assets at the time of investment and no more than £16 million immediately post investment;
- be less than seven years old from the date of their first commercial sale (or ten years if a knowledge intensive company) if raising State Aided (i.e. VCT) funds for the first time;
- 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 £10 million in 12 months and a £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.

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### 8 Octopus AIM VCT plc Annual report 2023
## Investment Manager’s review continued
Outlook and future prospects More than half the companies in the portfolio have updated us
Sentiment is slowly recovering after the latest market setback on trading since the period end, with many of these reassuring.
as prompted by the collapse of Silicon Valley Bank although Meanwhile we are starting to see companies considering
nervousness around the ﬁnancial health of some US banks ﬂoating on AIM in the medium term as well as VCT qualifying
remains. On the positive side, banking risk ratios are much more opportunities to invest in existing AIM companies. We believe the
exacting than at the time of the 2007/8 ﬁnancial crisis and there current cautious market conditions will provide opportunities to
are signs that the very rapid rise in interest rates which precipitated invest the VCT’s cash at attractive valuations.
the current stress may be reaching their peak. However, inﬂation,
The portfolio contains 88 holdings with investments across a
which is still widely expected to fall rapidly from here, remains an
range of sectors including both domestic and international
issue with no immediate prospect of achieving the Government’s
exposure and the balance towards proﬁtable companies remains.
2% target, which might hold back the scale of any cuts in rates
from the peak, still predicted to be later this year. Energy costs
remain high but the worst fears of winter power shortages were
not realised.
The Octopus Quoted Companies team
6 June 2023
### Octopus AIM VCT plc Annual report 2023 9
Investment portfolio

|  | Book cost |  |  |  | Fair value |  |  |  | % equity |  | % equity | Fair value |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | as at | Cumulative |  |  | as at |  |  | held by |  | held by | as a % of |  |
|  | 28 February |  | change in |  | 28 February |  | Movement |  | Octopus |  | all funds | Octopus |  |
|  |  | 2023 | fair value |  |  | 2023 |  | in year | AIM VCT |  | managed | AIM VCT |  |
| Portfolio company Sector |  | £’000 |  | £’000 |  | £’000 |  | £’000 |  | plc | by Octopus |  | NAV |

Ergomed plc Pharmaceuticals & Biotechnology 1,176 7,0 4 6 8,222 (327) 1.44% 9.24% 5.82%
Learning Technologies Group plc Software & Computer Services 1,051 5,484 6,535 (1,628) 0.59% 6.28% 4.63%
Breedon Group plc Construction & Materials 859 4,214 5,073 (823) 0.42% 5.49% 3.59%
Judges Scientiﬁc plc Electronic & Electrical Equipment 314 4,343 4,657 1,028 0.79% 1.32% 3.30%
SDI Group plc Electronic & Electrical Equipment 179 3,950 4,129 558 2.15% 3.58% 2.92%
Brooks Macdonald Group plc Investment Banking & Brokerage 746 2,396 3,142 (435) 0.96% 16.52% 2.22%
Services
Idox plc Software & Computer Services 353 2,556 2,909 (178) 1.03% 2.27% 2.06%
Equipmake Holdings plc Industrial Engineering 1,950 885 2,835 885 4.78% 8.12% 2.01%
Netcall plc Software & Computer Services 308 2,475 2,783 947 1.85% 3.30% 1.97%
GB Group plc Software & Computer Services 505 2,247 2,752 (1,857) 0.33% 5.83% 1.95%
Sosandar plc Retailers 1,853 863 2,716 (121) 4.86% 11.49% 1.92%
Libertine Holdings plc Industrial Engineering 3,000 (300) 2,700 (1,800) 10.77% 18.14% 1.91%
Mattioli Woods plc Investment Banking & Brokerage 529 1,728 2,257 (851) 0.77% 10.35% 1.60%
Services
Next Fifteen Communications Group Media 453 1,800 2,253 (741) 0.22% 12.11% 1.60%
plc
Quixant plc Technology Hardware & Equipment 587 1,629 2,216 598 1.92% 3.19% 1.57%
Craneware plc Health Care Providers 183 1,915 2,098 (303) 0.39% 1.64% 1.49%
Intelligent Ultrasound Group plc Medical Equipment & Services 2,168 (178) 1,990 595 6.62% 11.03% 1.41%
MaxCyte Inc. Pharmaceuticals & Biotechnology 1,035 842 1,877 (336) 0.48% 1.32% 1.33%
Feedback plc Medical Equipment & Services 1,500 313 1,813 504 7.55% 12.75% 1.28%
Vertu Motors plc Retailers 1,265 351 1,616 16 0.76% 1.73% 1.14%
PCI-Pal plc Software & Computer Services 1,098 482 1,580 (31) 4.64% 7. 74% 1.12%
Itaconix plc Industrial Support Services 1,588 (31) 1,557 (31) 4.62% 10.73% 1.10%
EKF Diagnostics Holdings plc Medical Equipment & Services 931 592 1,523 (1,147) 1.22% 2.74% 1.08%
Diaceutics plc Health Care Providers 930 452 1,382 171 1.45% 2.51% 0.98%
Access Intelligence plc Software & Computer Services 678 611 1,289 (429) 1.25% 2.13% 0.91%
Beeks Financial Cloud Group plc Software & Computer Services 450 829 1,279 (135) 1.38% 5.16% 0.91%
Spectral MD Holdings Ltd Health Care Providers 2,115 (1,075) 1,040 (107) 2.63% 7.69% 0.74%
Ilika plc Electronic & Electrical Equipment 1,058 (45) 1,013 (1,308) 1.34% 2.23% 0.72%
Cambridge Cognition Holdings plc Health Care Providers 601 368 969 (43) 2.46% 4.11% 0.69%
Animalcare Group plc Pharmaceuticals & Biotechnology 306 646 952 (765) 0.92% 2.83% 0.67%
Clean Power Hydrogen plc Alternative Energy 1,800 (880) 920 (1,400) 1.49% 2.48% 0.65%
Ixico plc Pharmaceuticals & Biotechnology 1,046 (150) 896 (710) 7. 72 % 12.87% 0.63%
RWS Holdings plc Industrial Support Services 143 725 868 (253) 0.06% 4.57% 0.61%
Gamma Communications plc Telecommunications Service Providers 274 561 835 (221) 0.07% 6.73% 0.59%
Adept Technology Group plc Software & Computer Services 601 231 832 60 1.71% 3.14% 0.59%
LungLife AI Inc. Pharmaceuticals & Biotechnology 2,079 (1,252) 827 (1,299) 4.63% 7. 72 % 0.59%
Oberon Investments Group plc Investment Banking & Brokerage 864 (220) 644 (460) 3.54% 9.91% 0.46%
Services
ENGAGE XR Holdings plc Software & Computer Services 1,879 (1,262) 617 (1,079) 2.94% 8.13% 0.44%
Restore plc Industrial Support Services 256 355 611 (204) 0.14% 12.33% 0.43%
WANdisco plc Software & Computer Services 79 504 583 432 0.07% 0.11% 0.41%
GENinCode plc Medical Equipment & Services 1,200 (627) 573 (136) 2.85% 4.74% 0.41%
Velocys plc Alternative Energy 996 (498) 498 (172) 0.89% 1.50% 0.35%
Gooch & Housego plc Technology Hardware & Equipment 422 71 493 (542) 0.41% 12.19% 0.35%
Call us on 0800 316 2295
### 10 Octopus AIM VCT plc Annual report 2023
## Investment Manager’s review continued
Investment portfolio continued

|  | Book cost |  |  |  | Fair value |  |  |  | % equity |  | % equity | Fair value |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | as at | Cumulative |  |  | as at |  |  | held by |  | held by | as a % of |  |
|  | 28 February |  | change in |  | 28 February |  | Movement |  | Octopus |  | all funds | Octopus |  |
|  |  | 2023 | fair value |  |  | 2023 |  | in year | AIM VCT |  | managed | AIM VCT |  |
| Portfolio company Sector |  | £’000 |  | £’000 |  | £’000 |  | £’000 |  | plc | by Octopus |  | NAV |

Crimson Tide plc Software & Computer Services 567 (76) 491 75 2.87% 4.79% 0.35%
Evgen Pharma plc Pharmaceuticals & Biotechnology 1,050 (564) 486 (39) 4.77% 7.96% 0.34%
Advanced Medical Solutions Group plc Medical Equipment & Services 284 155 439 (427) 0.08% 12.64% 0.31%
Fusion Antibodies plc Health Care Providers 745 (344) 401 (222) 3.42% 5.71% 0.28%
Velocity Composites plc Aerospace & Defense 799 (414) 385 188 2.55% 4.24% 0.27%
DP Poland plc Travel & Leisure 1,016 (637) 379 119 0.66% 1.11% 0.27%
Northcoders Group plc Software & Computer Services 380 (13) 367 (13) 1.58% 2.63% 0.26%
Gear4music Holdings plc Leisure Goods 529 (183) 346 (1,442) 1.81% 3.02% 0.25%
Gelion plc Electronic & Electrical Equipment 1,140 (810) 330 (496) 0.73% 1.21% 0.23%
Creo Medical Group plc Medical Equipment & Services 1,471 (1,141) 330 (1,176) 0.34% 0.99% 0.23%
Renalytix plc Health Care Providers 288 40 328 (396) 0.24% 0.56% 0.23%
TPXimpact Holdings plc Software & Computer Services 979 (668) 311 (2,204) 1.44% 2.40% 0.22%
Polarean Imaging plc Medical Equipment & Services 687 (384) 303 (304) 0.54% 0.90% 0.21%
KRM22 plc Closed End Investments 681 (388) 293 (6) 1.91% 3.18% 0.21%
Mears Group plc Industrial Support Services 139 119 258 12 0.11% 0.63% 0.18%
MyCelx Technologies Corporation Oil, Gas & Coal 1,470 (1,258) 212 (277) 3.54% 13.38% 0.15%
Verici Dx plc Pharmaceuticals & Biotechnology 651 (451) 200 (875) 1.61% 2.78% 0.14%
Cordel Group Software & Computer Services 443 (251) 192 (30) 1.73% 2.89% 0.14%
ReNeuron Group plc Pharmaceuticals & Biotechnology 1,485 (1,312) 173 (347) 3.03% 5.06% 0.12%
DXS International plc Software & Computer Services 300 (150) 150 (356) 7.7 7% 12.95% 0.11%
XP Factory plc Travel & Leisure 988 (842) 146 (37) 0.49% 0.81% 0.10%
Glantus Holdings plc Industrial Support Services 1,800 (1,659) 141 (1,200) 3.45% 5.75% 0.10%
Strip Tinning Holdings plc Electronic & Electrical Equipment 506 (369) 137 (314) 1.77% 2.95% 0.10%
Staine Group plc Industrial Support Services 334 (198) 136 (42) 0.22% 0.22% 0.10%
The British Honey Company plc General Retailers 1,321 (1,187) 134 (1,084) 7.12 % 11.86% 0.09%
Falanx Cyber Security Limited Industrial Support Services 900 (771) 129 (156) 5.70% 9.50% 0.09%
Enteq Upstream plc Oil, Gas & Coal 1,032 (908) 124 (15) 1.48% 2.47% 0.09%
Genedrive plc Pharmaceuticals & Biotechnology 361 (257) 104 41 0.49% 0.81% 0.07%
Rosslyn Data Technologies plc Software & Computer Services 429 (382) 47 (228) 2.52% 4.21% 0.03%
1Spatial plc Software & Computer Services 300 (253) 47 7 0.09% 3.75% 0.03%
Tasty plc Travel & Leisure 515 (479) 36 61 0.84% 1.61% 0.03%
In The Style plc Retailers 1,000 (967) 33 (417) 0.95% 1.59% 0.02%
Abingdon Health plc Medical Equipment & Services 521 (491) 30 (27) 0.45% 0.74% 0.02%
Trackwise Designs plc Technology Hardware & Equipment 1,934 (1,907) 27 (1,533) 0.42% 0.70% 0.02%
Osirium Technologies plc Software & Computer Services 1,350 (1,324) 26 (16) 0.76% 1.26% 0.02%
LoopUp Group plc Software & Computer Services 296 (285) 11 (11) 0.16% 0.26% 0.01%
Microsaic Systems plc Electronic & Electrical Equipment 1,384 (1,374) 10 (18) 0.41% 0.68% 0.01%
Haydale Graphene Industries plc Industrial Materials 598 (592) 6 (10) 0.05% 0.08% 0.00%
Location Sciences Group plc Software & Computer Services 765 (764) 1 0 0.01% 0.02% 0.00%
Total quoted investments 72,846 21,207 94,053 (27,293)
### Octopus AIM VCT plc Annual report 2023 11
Investment portfolio continued

|  | Book cost |  |  |  | Fair value |  |  |  | % equity |  | % equity | Fair value |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | as at | Cumulative |  |  | as at |  |  | held by |  | held by | as a % of |  |
|  | 28 February |  | change in |  | 28 February |  | Movement |  | Octopus |  | all funds | Octopus |  |
|  |  | 2023 | fair value |  |  | 2023 |  | in year | AIM VCT |  | managed | AIM VCT |  |
| Portfolio company |  | £’000 |  | £’000 |  | £’000 |  | £’000 |  | plc | by Octopus |  | NAV |

Unquoted equity investments
Hasgrove plc 88 3,915 4,003 582 2.63% 14.31% 3.20%
Popsa Holdings Limited 1,590 2,082 3,672 (1,705) 6.44% 10.74% 2.03%
Eluceda Limited 300 (138) 162 (78) 2.40% 4.01% 0.14%
The Food Marketplace Ltd 300 (150) 150 (90) 6.60% 10.99% 0.14%
Rated People Limited 354 (327) 27 (22) 0.11% 0.32% 0.03%
Airnow plc 1,256 (1,256) 0 0 0.41% 0.73% 0.00%
3,888 4,126 8,014 (1,313)
Loan notes
Osirium Technologies plc 600 0 600 0 N/A N/A 0.42%
600 0 600 0
Total ﬁxed asset investments 77,334 25,333 102,667 (28,606)
Current asset investments
FP Octopus UK Micro Cap Growth Fund 6,378 1,736 8,114 (1,589) N/A N/A 5.75%
FP Octopus UK Multi Cap Income 6,639 624 7, 26 3 (547) N/A N/A 5.14%
FP Octopus UK Future Generations Fund 960 (149) 811 (97) N/A N/A 0.57%
Total current asset investments 13,977 2,211 16,188 (2,233)
Total ﬁxed and current asset investments 118,855
Money market funds 21,433
Cash at bank 1,440
Debtors less creditors (506)
Total net assets 141,222
Call us on 0800 316 2295
### 12 Octopus AIM VCT plc Annual report 2023
## Investment Manager’s review continued
Top ten holdings
Listed below are the ten largest investments by value, which comprise of eight quoted level 1 investments which are valued at
bid price and two level 3 investments which are valued in accordance with IPEV guidelines (explained further on page 59), as at
28 February 2023.
Ergomed plc
Ergomed provides highly specialised services to the pharmaceutical industry, operating in over 65 countries.

| Initial investment date: | July 2014 |
| --- | --- |
| Cost: | £1,176,000 |
| Valuation: | £8,222,000 |
| Equity held: | 1.44% |
| Fair value as a % of NAV: | 5.82% |
| Last audited accounts: | 31 December 2022 |
| Revenue: | £145.3 million |
| Proﬁt before tax: | £18.0 million |
| Net assets: | £84.7 million |
| Dividend received in year: | £nil |

Learning Technologies Group plc
Learning Technologies provides a comprehensive and integrated range of e-learning services and technologies to corporate and
government clients.

| Initial investment date: | June 2011 |
| --- | --- |
| Cost: | £1,051,000 |
| Valuation: | £6,535,000 |
| Equity held: | 0.59% |
| Fair value as a % of NAV: | 4.63% |
| Last audited accounts: | 31 December 2022 |
| Revenue: | £596.9 million |

### learning

| Proﬁt before tax: | £40.5 million |  |
| --- | --- | --- |
| Net assets: | £426.3 million | group |
| Dividend received in year: | £0.04 million |  |

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

| Initial investment date: | August 2010 |
| --- | --- |
| Cost: | £859,000 |
| Valuation: | £5,073,000 |
| Equity held: | 0.42% |
| Fair value as a % of NAV: | 3.59% |
| Last audited accounts: | 31 December 2022 |
| Revenue: | £1,396.3 million |
| Proﬁt before tax: | £135.8 million |
| Net assets: | £1,043.8 million |
| Dividend received in year: | £0.08 million |

### technologies
### Octopus AIM VCT plc Annual report 2023 13
Top ten holdings continued
Judges Scientiﬁc plc
Judges Scientiﬁc is a group of scientiﬁc instrumentation businesses, serving a vast array of academic and industrial customers across
the globe.

| Initial investment date: | May 2012 |
| --- | --- |
| Cost: | £314,000 |
| Valuation: | £4,657,000 |
| Equity held: | 0.79% |
| Fair value as a % of NAV: | 3.30% |
| Last audited accounts: | 31 December 2022 |
| Revenue: | £113.2 million |
| Proﬁt before tax: | £16.0 million |
| Net assets: | £54.5 million |
| Dividend received in year: | £0.03 million |

SDI Group plc
SDI designs and manufactures specialist scientiﬁc products for use in a wide range of markets including life sciences, healthcare and
consumer manufacturing.

| Initial investment date: | November 2015 |
| --- | --- |
| Cost: | £179,000 |
| Valuation: | £4,129,000 |
| Equity held: | 2.15% |
| Fair value as a % of NAV: | 2.92% |
| Last audited accounts: | 30 April 2022 |
| Revenue: | £49.7 million |
| Proﬁt before tax: | £9.9 million |
| Net assets: | £35.8 million |
| Dividend received in year: | £nil |

Hasgrove plc (unquoted)
Hasgrove is the holding company for Interact, a SaaS business which provides an intranet product which focuses on the communication
and collaboration requirements of large organisations.

| Initial investment date: | September 2016 |
| --- | --- |
| Cost: | £88,000 |
| Valuation: | £4,003,000 |
| Equity held: | 3.20% |
| Fair value as a % of NAV: | 2.83% |
| Last audited accounts: | 31 December 2021 |
| Revenue: | £23.0 million |
| Proﬁt before tax: | £6.2 million |
| Net assets: | £6.1 million |
| Dividend received in year: | £nil |

Call us on 0800 316 2295
### 14 Octopus AIM VCT plc Annual report 2023
## Investment Manager’s review continued
Top ten holdings continued
Popsa Holdings Ltd (unquoted)
Popsa is a software technology company enabling consumers to create photobooks on mobile devices from various sources.

| Initial investment date: | April 2018 |
| --- | --- |
| Cost: | £1,590,000 |
| Valuation: | £3,672,000 |
| Equity held: | 6.44% |
| Fair value as a % of NAV: | 2.03% |
| Last audited accounts: | 31 December 2021 |
| Revenue: | £25.4 million |
| Loss before tax: | £3.7 million |
| Net assets: | £12 million |
| Dividend received in year: | £nil |

Brooks Macdonald Group plc
Brooks Macdonald is a provider of wealth and investment management services, operating from oces across the United Kingdom.

| Initial investment date: | March 2005 |
| --- | --- |
| Cost: | £746,000 |
| Valuation: | £3,142,000 |
| Equity held: | 0.96% |
| Fair value as a % of NAV: | 2.22% |
| Last audited accounts: | 30 June 2022 |
| Revenue: | £122.2 million |
| Proﬁt before tax: | £29.5 million |
| Net assets: | £148.4 million |
| Dividend received in year: | £0.1 million |

Idox plc
Idox is a leading supplier of specialist information management software with a particular focus on the public sector.

| Initial investment date: | May 2007 |
| --- | --- |
| Cost: | £353,000 |
| Valuation: | £2,909,000 |
| Equity held: | 1.03% |
| Fair value as a % of NAV: | 2.06% |
| Last audited accounts: | 31 October 2022 |
| Revenue: | £66.2 million |
| Proﬁt before tax: | £6.6 million |
| Net assets: | £67.4 million |
| Dividend received in year: | £0.02 million |

Equipmake Holdings plc
Equipmake is a UK-based technology company that has developed a range of electriﬁcation products for the provision of electric vehicle
drivetrains.

| Initial investment date: | July 2022 |
| --- | --- |
| Cost: | £1,950,000 |
| Valuation: | £2,835,000 |
| Equity held: | 4.78% |
| Fair value as a % of NAV: | 2.01% |
| Last audited accounts: | 31 May 2022 |
| Revenue: | £3.7 million |
| Loss before tax: | £5.2 million |
| Net liabilities: | £1.0 million |
| Dividend received in year: | £nil |

### Octopus AIM VCT plc Annual report 2023 15
Sector analysis
The graph below shows the top ten sectors the equity portfolio was invested in by value as at 28 February 2023. It also shows the sectors of
the AIM market as a whole as at 28 February 2023:
10%
0% 1
Other
Retailers
and Services Construction
Software and Biotechnology and Materials
Electronic and
and Equipment
Computer Services Medical Equipment
Electrical Equipment Investment Banking
Pharmaceuticals and Healthcare Providers
Industrial Engineering Technology Hardware
and Brokerage Services
The graph below shows the top ten sectors the equity portfolio was invested in by value as at 28 February 2022. It also shows the sectors
of the AIM market as a whole as at 28 February 2022:
60% 60%
50% 50%
10%
40% 40%
0%
30% 30%
Other

|  |  |  |  | Providers |  | Retailers |
| --- | --- | --- | --- | --- | --- | --- |
| 20% 20% |  |  |  | Healthcare |  |  |
|  |  |  | and Services |  | Construction |  |
|  | Software and | Biotechnology |  |  | and Materials |  |

Electronic and
and Equipment
Computer Services Medical Equipment Brokerage Services
Pharmaceuticals and Electrical Equipment
Industrial Engineering Technology Hardware
Investment Banking and
AIM VCT plc
1
Other includes Technology, Hardware and Equipment, Media, Alternative Energy, Telecommunications Service Providers, Travel and Leisure, Aerospace and Defence,
Leisure Goods, Closed End Investments, Oil, Gas and Coal, and Industrial Materials.
Call us on 0800 316 2295
AIM market AIM market AIM VCT plc
16

Octopus AIM VCT plc Annual report 2023

# The Investment Manager

## Personal service

Octopus was established in 2000 and has a strong commitment to both smaller companies and to VCTs. Octopus Investments Limited also acts as Investment Manager to four other listed investment companies and has a total of over £12.8 billion of funds under management. If you have any questions about this report, or if it would help to speak to one of the fund managers, please do not hesitate to contact us on **0800 316 2295**.

The Quoted Companies team at Octopus comprises:

### Kate Tidbury

Kate is the lead manager of the Octopus AIM VCTs and has over 35 years' experience within the UK quoted smaller companies market. Kate started her City career in 1986 as a research analyst with Sheppards and Chase followed by Panmure Gordon. From 1993 she was an Investment Manager responsible for managing ethical and smaller companies' funds with the Co-operative Bank and Colonial First State Investments. In 2000, she joined the AIM team at Close Brothers Group and was involved in the management of multiple AIM portfolios including the AIM VCTs. In 2008, she joined Octopus and is focused primarily on the management of the AIM VCT portfolios. Kate provides investment management support across all the Quoted Companies team portfolios.

### Mark Symington

Mark is a fund manager on the Quoted Companies team, focusing predominantly on the Octopus AIM VCTs. Mark joined Octopus in 2012, having worked previously at asset manager Warwick Wealth in South Africa. He graduated from the University of Cape Town in 2010 with a Bcom in Economics and Finance. In addition, Mark provides analytical and investment management support across all the Quoted Companies team portfolios.

### Dominic Weller

Dominic is a fund manager on the Quoted Companies team. He provides analytical and investment support across all the Quoted Companies team portfolios and co-manages the FP Octopus UK Future Generations Fund, FP Octopus UK Micro Cap Growth Fund, FP Octopus UK Multi Cap Income Fund and the Octopus AIM VCTs. He is a member of the Octopus Investments Responsible Investment Committee and leads the team's stewardship efforts. He is a CFA charterholder.

### Freda Isingoma

Freda started her career as an Investment Analyst at Charterhouse CCF before joining the Quoted Companies team at Close Brothers in 2001, focused on managing the AIM VCT, inheritance tax and smaller companies portfolios. In 2008 she moved to South Africa to join Investec Asset Management, where she co-managed the Africa Fund (a listed equity portfolio investing across Africa). In 2010 she ventured into entrepreneurship launching a beauty service brand in South Africa, and more recently a UK-based art investment business specialising in providing investment and ecosystem impact solutions for the African art market. She joined Octopus in January 2022 and is focused primarily on the AIM VCT portfolios.

### Richard Power

With overall responsibility for the Quoted Companies team at Octopus, Richard has over 25 years' experience of smaller company investing. He is lead manager of the FP Octopus UK Micro Cap Growth Fund and also oversees the investment process within the team which includes the AIM IHT portfolios, and AIM VCTs. Richard is also co-manager on the FP Octopus UK Multi Cap Income and FP Octopus UK Future Generation Funds. Richard started his career in 1995 at Duncan Lawrie, where he managed a successful small companies fund. He subsequently joined Close Brothers to manage a smaller companies investment trust before moving to Octopus to head up the Quoted Companies team in 2004.

### Chris McVey

Chris is the lead manager of the Octopus Multi Cap Income Fund and has been a specialist within the quoted UK smaller companies market for over 20 years. In 2016, he joined Octopus from Citigroup, where he was most recently a UK Small and Mid-Cap Equity research analyst focusing across a variety of sectors. Prior to this he spent almost seven years on the Smaller Companies team at Gartmore Investment Management as an investment manager and analyst. Chris works across all the Quoted Company portfolios. He is lead manager on the FP Octopus UK Multi Cap Income Fund, and a co-manager on the FP Octopus UK Micro Cap Growth and FP Octopus UK Future Generation Funds.

### Edward Griffiths

Edward is an experienced portfolio manager, with a City career spanning over 20 years. Having previously worked at Schroders Investment Management Pension Funds and State Street, he joined Octopus in 2004 to launch the company's AIM Inheritance Tax Service. Edward is involved primarily in the management of the AIM Inheritance Tax Service portfolios for private individuals and provides investment management and trading support across all the Quoted Companies team portfolios.

### Stephen Henderson

Steve is an experienced portfolio manager, with over 15 years in the City. He joined Octopus in 2008 as a graduate trainee and moved to the Quoted Companies team in 2011. Steve is involved primarily in the management of the Octopus AIM Inheritance Tax Service and Octopus AIM Inheritance Tax ISA portfolios. He conducts analysis across AIM with a particular interest in the legal sector, having graduated with a law degree from the University of Nottingham. Steve provides investment and trading support across all the Quoted Companies team portfolios.

### Jessica Sweeney

Jessica joined Octopus in 2014 having graduated from the University of Liverpool the same year, where she studied International Business. She worked in multiple operations functions across Octopus, before moving to the Quoted Companies team in 2018 to co-manage the AIM Inheritance Tax portfolios. Jessica provides investment and trading support across all the Quoted Companies team mandates.
### Octopus AIM VCT plc Annual report 2023 17
Charles Lucas Materiality of risks to investments
Charles joined Octopus in 2011 from LV= Asset Management, As part of the investment process, the team incorporate a
having previously worked in the Personal Pensions and SIPP space material risk review of sustainability issues. These risks include:
for GE Life and LV=. Charles initially joined Octopus as a member
of the operations team, later working as a Project Manager for • Environmental: emissions, energy management, waste,
MiFID II. He joined the Quoted Companies team as a Product ecological impact.
Development Analyst to enhance trading capabilities and • Social: privacy, security, product quality, selling practices.
performance analytics.
• Human: labour, health and safety, diversity.
• Business model: product design, supply chain, material
The Investment Manager and responsible sourcing.
investment • Leadership: ethics, competitive behaviour, regulatory, critical
Octopus is an accredited B Corp and signatory to the incidents, and risk management.
internationally recognised Principles for Responsible Investment,
demonstrating Octopus’ commitment to responsible investment The team consider the exposure to these risks and how well
and to creating a more sustainable ﬁnancial system. portfolio companies are managing them. Disclosures relating to
climate risks are set out in ‘climate-related matters’ on page 27.
The investment team make investments that can be a catalyst
for positive, meaningful change. The team believe that in the Responsibility
future, some of the most successful companies will be a force As part of the investment management approach, the team
for good, and that in today’s hyperconnected transparent world, discuss the portfolio companies’ strategy, ﬁnancial performance,
how a company behaves is just as important as what it does. data disclosures, capital structure and corporate governance
with the management teams. Existing governance structures
Mission may not be mature (given the small size of portfolio companies),
While the Company doesn’t target speciﬁc sustainability goals so the team assess whether weaknesses exist and if the company
or objectives, the team look for companies which will play an management can address these weaknesses. The team take part
integral role in our future. The purpose of a VCT is to provide in consultations on remuneration and challenge non-executive
capital for small growth companies. Companies exposed to the directors to align with company objectives, aiming to inﬂuence
new economy and technologies make up a signiﬁcant proportion by giving feedback to corporate advisers and meeting with non-
of the portfolio, which includes those focused on building a executive directors and voting on resolutions at general meetings.
sustainable planet, revitalising healthcare and empowering
people. Examples of this include: When it comes to voting, all holdings are covered by Institutional
Shareholder Services (ISS), a leading global advisory ﬁrm. The
• Ergomed – helping to develop treatments for some of the team consider the independent research ISS provides and discuss
world’s rarest diseases. votes as a team to create long-term shareholder value.
• Ilika – a pioneer in a ground-breaking solid state battery
technology designed to meet the speciﬁc demands of a wide
range of applications.
• Feedback – a specialist medical imaging technology
company providing innovative software and systems.
• Learning Technologies – a group of businesses who provide
innovative learning technology solutions.
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18

Octopus AIM VCT plc Annual report 2023

# Section 172(1) statement

## Introduction

The purpose of the report is to provide shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their legal duty to act in good faith and to promote the success of the Company in accordance with Section 172 of the Companies Act 2006 for the benefit of shareholders as a whole, as set out in the Strategic Report on pages 18 and 19. KPIs on performance are on pages 22 and 23.

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 plc has no employees. However, the Directors assessed the impact of the Company's activities on other stakeholders. The Company considers its shareholders, the Investment Manager, portfolio companies and other service providers to be its key stakeholders.

## Shareholder engagement

Shareholder engagement is given high priority by the Board. The Company engages with its shareholders via various media including, but not limited to, the Annual General Meeting (AGM), the 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, on 12 July 2022, the Company held an online shareholder event which gave shareholders the opportunity to hear directly from the Investment Manager and the Board, prior to the AGM which was held on 21 July 2022. There will be a similar shareholder event this year, to be held on 13 July 2023, in advance of the AGM on 20 July 2023. 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 RIS 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 Investment Manager's website at www.octopusinvestments.com.

The Board always welcomes questions from our shareholders at the AGM. To make sure 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 AimAGM@octopusinvestments.com by 5.00pm on 12 July 2023.

Provision 4 of the 2018 UK Corporate Governance Code requires a company which has received 20% or more of votes cast against a resolution to explain, when announcing the voting results, what actions it intends to take to consult shareholders in order to understand the reasons behind the result. The Company continues to monitor the 20% threshold for votes cast against Board recommendations for a resolution but has not yet been required to take any actions in this regard.

## Engagement with the Investment Manager

It is normal practice for Venture Capital Trusts to delegate authority for day-to-day management of the Company to an Investment Manager and then to engage with the Investment Manager in setting, approving and overseeing the execution of the business strategy and related policies and all administration and control functions. The Investment Manager attends the scheduled quarterly Board meetings, and other ad-hoc meetings as appropriate, of the Company, ensuring an open dialogue. At every Board meeting a review of financial and operational performance, as well as legal and regulatory compliance, is undertaken. The Board also reviews other areas over the course of the financial year including the Company's business strategy; key risks; stakeholder-related matters; diversity and inclusivity; environmental matters; corporate responsibility; and governance, compliance and legal matters. The Board formally reviews the performance of the Investment Manager on an annual basis. This is done by all Board members completing an annual questionnaire and discussing the outcome before concluding.

## 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.
### Octopus AIM VCT plc Annual report 2023 19
Engagement with other key stakeholders and Key decisions made during the year
Some of the key decisions made by the Company during the year
environment
that required the Board to take into consideration Section 172(1)
The Investment Manager is the Company’s key business partner,
factors include:
with responsibility for the provision of investment management,
administration, custody and company secretarial services.
• In line with the Company’s objectives, on 22 September 2022,
the Board issued an oer for subscription of shares. This was
During the period the Board received sucient information to
discussed with the Investment Manager, and allowed new
assist in understanding the interests and views of the Company’s
and existing shareholders to invest in the Company.
key stakeholders; investors, portfolio companies and service
providers to the Company, including the auditor, lawyers • The Company continued to buy back shares, providing
and registrar. liquidity to shareholders who wished to sell their shares. The
Board maintained a discount of approximately 4.5% to NAV,
The Board recognises the importance of ESG (environmental,
therefore balancing the interests of both remaining and
social and governance matters) and the Octopus Group, of
selling shareholders.
which the Investment Manager forms a part, certiﬁed as a B
• The Board looks to create shareholder value. During
Corp in February 2021. B Corp certiﬁcation is a designation that
the year, following targets agreed with the Investment
a business is meeting high standards of veriﬁed performance,
Manager, dividends totalling 5.5p were paid to shareholders
accountability and transparency on factors from employee
(comprising a ﬁnal dividend of 2.5p in respect of the previous
beneﬁts and charitable giving to supply chain practices and
ﬁnancial year, and an interim dividend of 3.0p in respect of
input materials. Certiﬁed B Corps are recognised as leaders in
this ﬁnancial year).
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 for Responsible Investing
(UNPRI) and working towards meeting the requirements of
the UK Stewardship Code managed by the Financial Reporting
Council (FRC). The Investment Manager will continue to monitor
the ESG practices of existing portfolio companies and over
the coming year we will review our portfolio to conﬁrm our
compliance with these expectations. An example of this is the
ongoing assessment of the carbon emission levels of companies
within the portfolio, and their progression towards furthering
sustainability and environmental goals regarding net zero
ambition and decarbonisation.
The Board has moved to a largely paperless operation over the
past 36 months, and the increasing use of conferencing platforms
has reduced travel in relation to the Company’s activities.
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### 20 Octopus AIM VCT plc Annual report 2023
## Business review
The Company’s objective No material changes may be made to the Company’s
The objective of the Company is to invest in a broad range of investment policy described above without the prior approval
Alternative Investment Market (‘AIM’) or Aquis Stock Exchange of shareholders by the passing of an Ordinary Resolution. The
(‘AQSE’) (previously known as New Securities Stock (‘NEX’) Directors will continually monitor the investment process and
Exchange) traded companies in order to provide shareholders ensure compliance with the investment policy.
with attractive tax-free dividends and long-term capital
growth. Investments are made selectively across a range of
Future prospects
sectors in qualifying companies that have the potential to grow
The Company’s longer-term performance record has allowed the
and enhance their value.
Company to maintain the dividend payments to shareholders in
line with the dividend policy set out on page 2. The Board believes
The Company has been approved as a Venture Capital Trust by
the Company’s business model will enable it to continue to deliver
HMRC under Section 259 of the Income Taxes Act 2007. The shares
the targeted regular tax-free annual dividends referred to in the
of the Company were ﬁrst admitted to the Ocial List of the UK
Chair’s Statement. We have seen another year of uncertainty due
Listing Authority and trading on the London Stock Exchange on
to the cost of living crisis and the unstable economic environment
17 March 1998 and can be found under the TIDM code ‘OOA’. The
and the Company performed marginally less well than the
Company is premium listed.
FTSE AIM All-Share Index. The FTSE All-Share performed better
due to large energy and pharmaceutical companies. However,
Investment policy the Company has a strong cash position which enables us
The Company’s investment policy has been designed and to invest in new companies and support existing companies.
updated to ensure continuing compliance with the VCT qualifying The outlook statements in both the Chair’s Statement and the
conditions. The Board intends that the long-term disposition Investment Manager’s Review on pages 3 and 8 respectively
of the Company’s assets will be at least 85% in a portfolio of provide further details on the more immediate prospects of
qualifying AIM, AQSE traded investments or unquoted companies the Company.
where in the short to medium term, the management views an
initial public oering (‘IPO’) on AIM or AQSE.
Performance
The non-qualifying balance (approximately 11% of its net assets) The Board is responsible for the Company’s investment strategy
will be invested in permitted investments held for short-term and performance, although the management of the Company’s
liquidity, generally comprising short-term cash or money market investment portfolio is delegated to Octopus through the
deposits with a minimum Moody’s long-term debt rating of ‘A’. investment management agreement, as referred to in the
A proportion of the balance can be invested in funds managed Directors’ Report.
by Octopus or other direct equity investments. This provides
The graph on the following page compares the total return of
a reserve of liquidity which should maximise the Company’s
the Company over the period from February 2005 to February
ﬂexibility as to the timing of investments, disposals, dividend
2023 with the total return from notional investments in the FTSE
payments and share buybacks.
All-Share Index, FTSE AIM All-Share Index and FTSE SmallCap
Risk is spread by investing in a number of dierent businesses (excluding investment companies) Index over the same period.
across a range of industry sectors. The maximum amount The FTSE AIM All-Share Index is a stock market index consisting
invested in any one company is limited to the amount permitted of all companies quoted on the Alternative Investment Market
pursuant to VCT legislation in a ﬁscal year and no more than 15% and the FTSE SmallCap Index is an index of small market
of the value of its investment at the time of investment. The value capitalisation companies. The Directors consider these to be
of an individual investment is expected to increase over time as a the most appropriate benchmarks but would remind investors
result of trading progress and a continuous assessment is made that approximately 15.7% of the FTSE AIM All-Share index is
of its suitability for sale. However, shareholders should be aware attributable to resources, investment vehicles and property
that the Company’s qualifying investments are held with a view sector stocks in which VCTs cannot invest. VCTs are also limited
to long-term capital growth as well as income and will often to investing into companies with certain size and age restrictions.
have limited marketability; as a result it is possible that individual The inclusion of the FTSE All-Share Index is to provide a wider stock
holdings may grow in value, to the point where they represent a market context. Investors should be reminded that shares in VCTs
signiﬁcantly higher proportion of total assets prior to a realisation generally continue to trade at a discount to the NAVs.
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.
Octopus AIM VCT plc Annual report 2023

21

# Octopus AIM VCT plc – Portfolio performance

![img-1.jpeg](img-1.jpeg)

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### 22 Octopus AIM VCT plc Annual report 2023
## Business review continued
Results and dividend

|  |  | Year ended |  |  | Year ended |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 28 February 2023 |  |  | 28 February 2022 |  |  |
|  |  |  | £’000 |  |  | £’000 |
| Net loss attributable to shareholders |  |  | (33,414) |  |  | (19,459) |

Distributions:
Interim dividend paid: 2.5p (2022: 2.5p) 4,501 4,031
Proposed ﬁnal dividend: 2.5p (2022: 3.0p) 4,462 4,775
The proposed ﬁnal dividend of 2.5p for the year ended 28 February 2023 will be paid on 10 August 2023 to shareholders on the register
on 28 July 2023 subject to approval at the AGM.
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
1
are classiﬁed as alternative performance measures (‘APMs’ ) in line with Financial Reporting Council (‘FRC’) guidance. The glossary of
terms on page 73 has further details:
1. NAV per share;
2. total return per share;
3. dividends per share payable in respect of the year;
4. ongoing charges; and
5. qualifying % under VCT rules.
1. NAV per share
The NAV per share of the Company is the sum of the underlying assets less the liabilities of the Company divided by the total
number of shares in issue.
Current year Prior year
(pence per share) (pence per share) Reason for movement
78.5 104.8 The NAV per share has decreased from last year’s value of 104.8p to
78.5p. This fall of 25.1% is the result of a market-driven fall in valuations.
1
2. Total return per share
Total return is calculated as movement in NAV per share in the period plus dividends paid in the period, divided by the NAV per
share at the beginning of the period. Total return 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
(19.8) (9.1) As previously considered, the NAV per share has decreased from last
year’s value of 104.8p to 78.5p. This gave a total negative return of 19.8%
or 20.8p per share, after adding back dividends of 5.5p paid in the year.
The Board notes that for the year under review this was behind the FTSE AIM All-Share Index total return ﬁgure of a negative 16.1%.
The Board remains conﬁdent about achieving the long-term objective of the Company. Performance is also measured against the
FTSE SmallCap Index and the FTSE All-Share Index, with the latter being provided for wider stock market context. This is also shown
on the graph on the previous page. In the year under review the FTSE SmallCap Index fell by 5.8% and the FTSE All-Share Index rose
by 7.3%, 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 15.
Octopus AIM VCT plc Annual report 2023

23

### 3. Dividends per share payable in respect of the year

The Company has a target of paying an annual dividend of 5.0p per share or a 5% yield based on the year-end share price, whichever is greater at the time.

|  Current year (pence per share) | Prior year (pence per share) | Reason for movement  |
| --- | --- | --- |
|  5.0 | 5.5 | Last year the Company declared ordinary dividends of 5.5p per share and no special dividend. This year the Company has declared ordinary dividends of 5.0p per share and no special dividend. This reduction in dividend is a reflection of the fall in NAV in the period but results in a higher yield than the prior period  |

The 5.0p dividends declared for the year gives an annual yield of 6.7% based on the year-end share price of 74.5p, which exceeds the Board's target of 5% yield. Dividends will be 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 70.

### 4. Ongoing charges$^{1}$

The ongoing charges ratio has been calculated using the AIC recommended methodology and excludes exceptional costs and trail commission. The ratio is calculated by expressing ongoing charges for the year as a percentage of average net asset value during the year.

|  Current year % | Prior year % | Reason for movement  |
| --- | --- | --- |
|  2.1 | 1.9 | The ongoing charges ratio has increased from last year primarily due to the fall in average net assets over the period combined with a lag in the reduction of the management fee, which will be seen in the next period.  |

The ongoing charges of the Company for the year to 28 February 2023 is in line with the Board expectations. The expenses incurred by the Company are summarised in notes 3 and 4 to the financial statements on pages 55 and 56.

### 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.

|  Current year % | Prior year % | Reason for movement  |
| --- | --- | --- |
|  88.6 | 90.8 | 88.6% (as measured by HMRC rules) by value of the Company's investments was represented at the end of the period by shares or securities comprised in qualifying holdings of the Company. The qualification level decreased by 2.2%. Further details on VCT regulations can be found within the Investment Manager's Review on page 7.  |

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 15.

$^{1}$These KPIs are defined as alternative performance measures ('APMs') and are defined in more detail in the Glossary of Terms on page 73.

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### 24 Octopus AIM VCT plc Annual report 2023
## Business review continued
Viability statement The Board has also considered the liquidity of the underlying
In accordance with provision 4.31 of the UK Corporate Governance investments and the Company’s cash flow projections
Code 2018, the Directors have assessed the prospects of the considering the material inﬂows and outﬂows of the Company
Company over a longer period than the 12 months required by including investment activity, buybacks, dividends and fees and
the ‘going concern’ provision. The Board conducted this review for found these to be realistic and reasonable. The Company’s cash
a period of ﬁve years, which was considered to be a reasonable ﬂow includes cash equivalents which are short-term, highly liquid
time horizon given that the Company has raised funds under investments.
an oer for subscription which closed to new applications on
Based on the above assessment the Board conﬁrms that it has
13 October 2022 and, under VCT rules, subscribing investors are
a reasonable expectation that the Company will be able to
required to hold their investment for a ﬁve-year period in order
continue in operation and meet its liabilities as they fall due over
to beneﬁt from the associated tax reliefs. The Board regularly
the ﬁve-year period to 28 February 2028.
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, 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.
### Octopus AIM VCT plc Annual report 2023 25
## Risk and risk management
Principal risks, risk management and regulatory environment
In accordance with the Listing Rules under which the Company operates, the Board is required to comment on the potential risks and
uncertainties which could have a material impact on the Company’s performance.
The Board carries out a review of the risk environment in which the Company operates. The main areas of risk identiﬁed by the Board
are as follows:
Risk Mitigation
Investment performance: The focus of the The Investment Manager has signiﬁcant experience and a strong track record
Company’s investments is into VCT qualifying of investing in AIM and AQSE companies, and appropriate due diligence
companies quoted on AIM and the AQSE, which is undertaken on every new investment. The overall risk in the portfolio is
by their nature entail a higher level of risk and mitigated by maintaining a wide spread of holdings in terms of ﬁnancing stage,
lower liquidity than investments in larger quoted age, industry sector and business models. The Board reviews the investment
companies. portfolio with the Investment Manager on a regular basis.
VCT qualifying status risk: The Company is Prior to investment, the Investment Manager seeks assurance from the
required at all times to observe the conditions Company’s VCT status adviser that the investment will meet the legislative
for the maintenance of HMRC approved VCT requirements for VCT investments.
status. The loss of such approval could lead to
the Company and its investors losing access On an ongoing basis, the Investment Manager monitors the Company’s
to the tax beneﬁts associated with VCT status compliance with VCT regulations on a current and forecast basis to ensure
and, in certain circumstances, to investors being ongoing compliance with VCT legislation. Regular updates are provided to the
required to repay the initial income tax relief on Board throughout the year.
their investment.
The VCT status adviser formally reviews the Company’s compliance with VCT
regulations on a bi-annual basis and reports their results to the Board.
Operational risk (reliance on Octopus): The The Board reviews the system of internal control, both ﬁnancial and non-
Board is reliant on the Investment Manager to ﬁnancial, operated by the Investment Manager (to the extent the latter are
manage investments eectively, and manage relevant to the Company’s internal controls). These include controls that are
the services of a number of third parties, in designed to ensure that the Company’s assets are safeguarded, that proper
particular the registrar and tax advisers. A failure accounting records are maintained, and that regulatory reporting requirements
of the systems or controls at the Investment are met. Feedback on other third parties is reported to the Board on at least an
Manager or third-party providers could lead annual basis, including adherence to Service Level Agreements where relevant.
to an inability to provide accurate reporting
and to ensure adherence to VCT and other
regulatory rules.
Information security: A loss of key data could Annual due diligence is conducted on third parties which includes a review of
result in a data breach and ﬁnes. The Board is their controls for information security. The Investment Manager has a dedicated
reliant on the Investment Manager and third information security team and a third party is engaged to provide continual
parties to take appropriate measures to prevent protection in this area. A security framework is in place to help prevent malicious
a loss of conﬁdential customer information. 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 and price risk: Events such as an The Company invests in a diverse portfolio of companies across a range of
economic recession, movement in interest rates, sectors, which helps to mitigate against the impact of performance in any one
inﬂation, political instability and rising living costs sector. The Company also maintains adequate liquidity to make sure it can
could cause volatility in the market, adversely continue to provide follow-on investment to those portfolio companies which
impacting the valuation of investments. This require it and which is supported by the individual investment case.
could result in a reduction in the value of the
Company’s assets. The Investment Manager monitors the impact of macroeconomic conditions
on an ongoing basis and provides updates to the Board at least quarterly.
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### 26 Octopus AIM VCT plc Annual report 2023
## Risk and risk management continued
Principal risks, risk management and regulatory environment (continued)
Regulatory and reputational risk/legislative: The Investment Manager engages with HM Treasury and industry bodies to
A change to the VCT regulations could adversely demonstrate the positive beneﬁts of VCTs in terms of growing UK companies,
impact the Company by restricting the creating jobs and increasing tax revenue, and to help shape any change to
companies the Company can invest in under VCT legislation.
its current strategy. Similarly, changes to VCT
tax reliefs for investors could make VCTs less The Investment Manager employs individuals with expertise across the legislation
attractive and impact the Company’s ability to and regulation relevant to the Company. Individuals receive ongoing training
raise further funds. and external experts are engaged where required.
Failure to adhere with other relevant legislation
and regulation could result in reputational
damage and/or ﬁnes.
Liquidity/cash ﬂow risk: The risk that the The Investment Manager prepares cash ﬂow forecasts to make sure cash
Company’s available cash will not be sucient levels are maintained in accordance with policies agreed with the Board.
to meet its ﬁnancial obligations. The Company The Company’s overall liquidity levels are monitored on a quarterly basis by
invests into smaller companies, which are the Board, with close monitoring of available cash resources. The Company
inherently less liquid than stocks on the main maintains sucient cash and readily realisable securities, including money
market. Therefore, these may be dicult to market funds and OEICs, which can be accessed at short notice. As at 28
realise for their fair market value at short notice. February 2023, 16.2% of net assets were held in cash and cash equivalents and
11.5% in OEICs, realisable in four business days.
Valuation risk: For smaller companies or illiquid Investments in companies traded on AIM and AQSE are valued by the
shares, establishing a fair value can be dicult Investment Manager using closing bid prices as reported on Bloomberg. Where
due to the lack of readily available market data investments are in unquoted companies or where there are indicators bid price
for similar shares, resulting in a limited number of is not appropriate, alternative valuation techniques are used in accordance
external reference points. with the International Private Equity and Venture Capital (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.
Investment in FP Octopus UK Micro Cap Growth Fund, FP Octopus UK Multi
Cap Income Fund and FP Octopus UK Future Generations Fund are all valued
with reference to the daily prices which are published by Fund Partners, the
Authorised Corporate Director.
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. 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.
The following are some of the potential emerging risks that the Board and the Investment Manager are currently monitoring:
• Adverse changes in global macroeconomic environment.
• Rising cost of living.
• Geo-political protectionism.
• Climate change.
Gender and diversity
The Board of Directors comprises one female and three male Non-Executive Directors with considerable experience of the
VCT industry. The gender, diversity and constitution of the Board is reviewed on an annual basis. If a new Director was to be appointed,
Octopus AIM VCT plc Annual report 2023

27

the appointment would be made on the basis of expertise and knowledge, with the objective of complementing the skillset of existing Directors. Any future appointments will also have regard to the FCA's policy on Diversity and Inclusion, published in April 2022 to take effect for accounting periods commencing after 1 April 2022.

### 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 29.

### 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. On an annual basis the Octopus Responsible Investment Committee ('ORIC') (comprised of an Octopus Founder, the Chief Investment Officer, the Heads of the Investment Teams and Head of Impact and Sustainability) reviews climate-related risks and opportunities that have been identified as being financially material to the management of the Company. The prior review highlighted that whilst the Company must consider physical risks, transition risk would be the focus, given the potential for the Company to influence legal, technology and market changes through its decision-making powers over which investments to make.
- **Strategy:** The Company makes investments into a range of sectors but the companies receiving funding are small companies specifically listed on AIM. Exposure to climate-related risks is assessed on a deal-by-deal basis by the investment team. The analysis considers transition risks and the physical risks and impacts of climate change for industries and sectors where this has been identified as a material issue. The team are also focused on identifying investment opportunities in companies that are well positioned to benefit from the transition to a lower carbon economy.
- **Risk management:** The investment team use guidance from the Sustainability Accounting Standards Board ('SASB') to identify climate-related risks. Where potential material climate-related risks have been identified, the investment team assess how well the risk is managed by the company through further due diligence. This is raised to the Investment Committee, where appropriate, as part of the investment process and is continually monitored.

- **Metrics:** 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 team have taken steps to measure Scope 1 and 2 greenhouse gas emissions. Scope 1 emissions are those directly from Company-owned and controlled resources. Scope 2 emissions are indirect emissions from the generation of purchased energy, from a utility provider. While the ultimate goal is to reduce portfolio emissions to minimise these risks, the immediate goal is to increase data coverage to 100% (currently 85% of portfolio companies have been measured) within the next two years. We are evolving the best way of reporting portfolio emissions and we will continue to assess how best to present carbon intensity measures in future reporting periods.

Current greenhouse gas ('GHG') emissions¹:

- Scope 1 GHG emissions (tonnes CO²e): 1,917,684
- Scope 2 GHG emissions (tonnes CO²e): 170,499

The Responsible Investment approach of the Investment Manager is detailed on page 17.

### Consumer Duty

The Directors are aware of the Investment Manager's obligations to comply with the FCA's Consumer Duty rules and principles introduced in 2022 and coming into force in 2023. Firms subject to Consumer Duty must ensure they are acting to deliver good outcomes for consumers and that this is reflected in their strategies, governance, leadership and policies. The Investment Manager is currently undergoing a review of its existing practices to identify any adaptations needed in order to comply with the Consumer Duty principles. 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:

Neal Ransome
Chair
6 June 2023

¹The source of the figures quoted are ISS ESG. The methodology was developed over three years with the Swiss Federal Institute of Technology and includes about 800 sector and sub-sector specific models. The numbers quoted are the total reported emissions of the portfolio companies that have published this information.

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28

Octopus AIM VCT plc Annual report 2023

# Details of Directors

The Board comprises four Directors, all of whom are independent of the Investment Manager. The Directors operate in a non-executive capacity and are responsible for overseeing the investment strategy of the Company. The Board has wide experience of investment in both smaller growing companies and larger quoted companies. All Directors are members of the Audit Committee.

## Neal Ransome (Chair)

Neal Ransome is a chartered accountant and was a partner at PwC from 1996 to 2013. He was Chief Operating Officer of PwC's Advisory business and led its Pharmaceutical and Healthcare Corporate Finance practice. Neal was formerly a director of Quercus (General Partner) Limited, a unit trust invested in healthcare properties, and Parity Group Plc, an AIM-listed professional services company. He is currently non-executive chair of Proven VCT plc, which invests in unquoted companies, and a non-executive director of Polar Capital Global Healthcare Trust Plc. He is also a trustee and director of The Conservation Volunteers, a UK charity dedicated to connecting people and green spaces. Neal became a Director of the Company in 2016 and was appointed as Chair of Octopus AIM VCT plc in 2021.

## Stephen Hazell-Smith

Stephen Hazell-Smith was the Managing Director of Close Investment Limited until September 2001, having previously founded Rutherford Asset Management in 1993. Prior to this he gained experience of investment in smaller companies at GT Investment Management where he was responsible for launching its first UK equity fund. He also worked at Mercury Asset Management from 1989 to 1992 and was the chair of PLUS Markets Group PLC from 2005 to 2010. He is a director of PFP Capital Limited and Puma VCT 13 plc. Prior to its merger with Octopus AIM VCT plc in 2010 he was chair of Octopus Phoenix VCT plc. Stephen became a Director of the Company in 1998.

## Joanne Parfrey

Joanne Parfrey has a degree in Chemistry from Oxford University and is an accountant by training. Joanne spent a number of years in corporate finance with BOC Group plc and Elementis plc before moving to private equity in 2000, joining LGV Capital. She was formerly a non-executive director of Guy's and St Thomas' Enterprises Limited and Essentia Trading Limited. She is currently chair of Babraham Research Campus Limited, a non-executive of the Worldwide Healthcare Trust plc, audit chair of Henderson International Income Trust plc, audit chair of Start Codon Limited and audit chair of Ieso Digital Health Limited. Joanne became a Director of the Company in 2016.

## Andrew Boteler

Andrew Boteler is a chartered accountant and was formerly Chief Financial Officer of Gooch & Housego plc and Finance Director of Riverford Organic Farmers Limited, one of the largest organic fresh food retailers in the UK. In July 2021 Andrew became a non-executive director of LungLife AI, Inc and holds the positions of chair of the audit committee, chair of the remuneration committee and senior independent director. Andrew has over 25 years' experience working in the manufacturing sector, the last 19 being spent with high technology manufacturing companies. Andrew became a Director of the Company in 2020 and was appointed Chair of the Audit Committee in 2021.
Octopus AIM VCT plc Annual report 2023

29

# Directors' report

The Directors present their report and the audited financial statements for the year ended 28 February 2023. The Corporate Governance Report on pages 33 to 36 and the Audit Committee Report on pages 37 and 38 form a part of this Directors' Report.

The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position, performance, business model and strategy.

## Directors

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

In accordance with the Articles of Association of the Company and the Association Investment Companies Code of Corporate Governance, Mr Boteler, Mr Hazell-Smith, Mr Ransome and Ms Parfrey will retire as Directors at the forthcoming AGM, and being eligible, offer themselves for re-election. Following a formal performance evaluation as part of the Board evaluation, further details of which can be found on page 34, the Board believes that all the Directors continue to be effective non-executive Directors, providing considerable experience and continuity to the Company and demonstrating commitment to their roles.

## Directors' and officers' liability insurance

The Company has, as permitted by s236 of the Companies Act 2006, maintained insurance cover on behalf of the Directors and Secretary indemnifying them against certain liabilities which may be incurred by them in relation to the Company.

## VCT regulations

Compliance with required rules and regulations is considered when all investment decisions are made. The Company is further monitored on a continual basis to ensure compliance. The main criteria which the Company must adhere to are outlined below:

The Company is required at all times to hold at least 80% of its investments (as defined in the legislation) in VCT qualifying holdings, of which at least 70% must comprise eligible Ordinary shares.

For this purpose, a 'VCT qualifying holding' consists of up to £5 million invested in any one year in new shares or securities of a UK AIM traded company or an unquoted company which is carrying on a qualifying trade, and whose gross assets and number of employees at the time of investment do not exceed a prescribed limit. The definition of 'qualifying trade' excludes certain activities such as property investment and development, some financial services and asset leasing.

The Finance Act 2014 amended the VCT rules in respect of VCT shares issued on or after 6 April 2014, such that VCT status will be withdrawn if a dividend is paid (or other forms of distribution or payments are made to investors) from the capital received by the VCT from that issue within three years of the end of the accounting period in which shares were issued to investors. This may reduce the amount of distributable reserves available to

the Company to fund dividends and share buybacks. However, with share premium cancellations when necessary, the Company currently has sufficient distributable reserves to allow dividends to continue to be paid at a level in line with the Company's current dividend policy.

The Finance Act 2016 introduced a number of changes to VCT rules to bring the legislation into line with EU State Aid Risk Finance Guidelines. The legislation introduced new criteria which stipulate a lifetime cap on the total amount of State Aid investment a company can receive, the age of companies which are eligible for investment and specific requirements relating to the use of the funds raised. See page 7 of the Investment Manager's 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 end of the accounting period in which the shares were issued.

The Company has maintained compliance with VCT legislation for the year under review and intends to continue to do so for future periods.

## Going concern

The Company's business activities and the factors likely to affect its future development, performance and position are set out in the Chair's Statement on pages 2 and 3 and the Investment Manager's Review on pages 4 to 15. Further details on the management of financial risk may be found in the Business Review on page 20 and in note 16 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 of at least 12 months. 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 both scenarios the Board is confident in the ability of the Company to maintain its VCT status and meet 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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### 30 Octopus AIM VCT plc Annual report 2023
## Directors’ report continued
Going concern continued Employee, human rights, social and community
The assets of the Company include securities, a large proportion
issues
of which are readily realisable and, accordingly, the Company
The Board seeks to conduct the Company’s aairs responsibly.
has adequate ﬁnancial resources to continue to satisfy the
The Company is required by company law to provide details of
expenses of commitments under share buybacks and to remain
employee, human rights, social and community issues, including
in operational existence for a period of at least 12 months.
information about any policies it has in relation to these matters
and the eectiveness of such policies. As an externally managed
A resolution will be put to the Company’s AGM to approve the
investment company with no employees the Company does not
Company continuing as a venture capital trust. A continuation
maintain speciﬁc policies in relation to these matters.
vote has been approved annually since 2011.
Environment policy and greenhouse gas
Dividend
emissions
The proposed final dividend of 2.5p for the year ended
The day-to-day operations of the Company are outsourced to
28 February 2023 will be paid on 10 August 2023 to shareholders on
the Investment Manager, and consequently the Company does
the register on 28 July 2023, subject to approval by shareholders
not have its own environmental policy, relying instead on the
at the AGM being held on 20 July 2023, as set out in the Strategic
Investment Manager’s environmental strategy. The Company
Report.
does, however, recognise the importance of conducting its
business, including investment decisions, in a manner that is
Management environmentally responsible. The Company does not produce
The Company has in place an agreement with Octopus to act any reportable emissions as the fund management is outsourced
as Investment Manager which is central to the ability of the to Octopus with no physical assets or property held by the
Company to continue in business. The principal terms of the Company. As the Company has no employees or operations, it is
Company’s management agreement with Octopus are set out not responsible for any direct emissions, and as it uses less than
in note 3 to the ﬁnancial statements. The Investment Manager 40,000 kWh of energy during the reporting year it is exempt from
also provides secretarial, administrative and custodian services SECR reporting requirements.
to the Company. Octopus is not entitled to any performance fee.
Financial risk management
There are no other contracts which are deemed to be essential to
The most signiﬁcant ﬁnancial risks arising from the Company’s
the business of the Company.
ﬁnancial instruments are price risk, interest rate risk, credit
risk and liquidity risk. The policies for managing these risks are
As required by the Listing Rules, the Directors conﬁrm that, in their
regularly reviewed by the Board and full details can be found in
opinion, the continuing appointment of Octopus as Investment
note 16 to the ﬁnancial statements.
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 Bribery Act
the Investment Manager to produce satisfactory investment Octopus has an Anti-Bribery policy which introduced robust
performance in the future. No Director has an interest in any procedures to ensure full compliance with the Bribery Act 2010
contract to which the Company is a party. and to ensure that the highest standards of professional ethical
conduct are maintained. All employees and those working for, or
The Board has delegated the routine management of decisions,
on behalf of, the ﬁrm are aware of their legal obligations when
such as the payment of running costs, to Octopus. Investment
conducting Company business.
decisions are discussed with the Board.
Share capital
Whistleblowing
The Company’s share capital as at 28 February 2023 comprised
The Board has considered the arrangements implemented by
179,802,084 Ordinary shares of 1p each.
the Investment Manager to encourage sta of the Investment
Manager or Company Secretary of the Company to raise The voting rights of the Ordinary shares on a show of hands is
concerns, in conﬁdence, within their organisation about possible one vote for each member present or represented, the voting
improprieties in matters of ﬁnancial reporting or other matters. rights on a poll are one vote for each share held. There are no
It is satisﬁed that adequate arrangements are in place to allow restrictions on the transfer of the Ordinary shares and there are
an independent investigation, and follow-on action where no shares that carry special rights with regard to the control of
necessary, to take place within the organisation. the Company.
Octopus AIM VCT plc Annual report 2023

31

## Share issues and open offers

On 22 September 2022, a prospectus offer was launched alongside Octopus AIM VCT 2 plc to raise a combined total of up to £20 million with a £10 million over-allotment facility. This prospectus closed to further applications on 13 October 2022, being fully subscribed. 21,311,806 shares were issued as part of the prospectus offer in the period, raising £17.3 million after costs for the Company.

During the year 2,122,937 shares were issued to those shareholders who elected to receive shares under the Dividend Reinvestment Scheme as an alternative to dividends. This raised £1.8 million.

An additional 199,628 shares were issued to shareholders as a result of reduced adviser charges, and to Octopus employee shareholders as a result of a rebate of part of the annual management fee. These shares were issued to those investors who, in accordance with the adviser charging terms contained in each fundraising document offered to the public and published since 31 December 2012 following the introduction of the retail distribution, had chosen to pay their adviser less than the 0.5% ongoing adviser charge; and to employees, who have been rebated the annual management charge.

## Share buybacks and redemptions

During the year, the Company purchased for cancellation 4,312,810 shares at a weighted average price of 82.7p (2022: 6,271,209 shares with a nominal value of 1p for cancellation, at a weighted average price of 119.6p) for a total consideration of £3.6 million (2022: £7.5 million). This represents 2.4% 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 28 February 2023 can be found in note 17 to the financial statements on page 66.

## 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 his 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 his 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 Official List maintained by the UK Listing Authority, any such discretion may not be exercised so as to

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### 32 Octopus AIM VCT plc Annual report 2023
## Directors’ report continued
prevent dealings taking place on an open and proper basis, or Resolutions 12 and 13 renew and extend the Directors’ authority
if, in the opinion of the Directors (and with the concurrence of to allot equity securities for cash without pre-emption rights
the UK Listing Authority), exceptional circumstances so warrant, applying in certain circumstances. These Resolutions will
provided that the exercise of such power will not disturb the authorise the Directors, until the date falling 15 months after the
market in those shares. Whilst there are no squeeze-out and date of the passing of the Resolution or, if earlier, the conclusion
sell-out rules relating to the shares in the Company’s Articles of the next AGM of the Company, to issue Ordinary shares for
of Association, shareholders are subject to the compulsory cash without pre-emption rights applying by way of an oer
acquisition provisions in s974 to s991 of the Companies Act 2006. to existing shareholders, or re-issuing shares out of Treasury up
to a maximum of Ordinary shares (representing approximately
0% of the Company’s issued share capital as at the date of this
Independent auditor and disclosure of information
report). These powers will be exercised only if, in the opinion of the
to auditor
Directors, it would be in the best interests of shareholders, as a
BDO LLP is the appointed auditor of the Company and oer
whole. Any shares allotted under this authority would be issued
themselves for re-appointment. A resolution to re-appoint BDO
at prices at or above NAV.
LLP as auditor and to authorise the Directors to determine their
remuneration will be proposed at the forthcoming AGM. Directors’ authority to make market purchase of its
own shares
As far as the Directors are aware, there is no relevant audit
The authority proposed under Resolution 14 is required so that
information of which the auditor is unaware and the Directors
the Directors may make purchases of up to 26,756,048 Ordinary
have taken all the steps they ought to have taken as a Director
shares (representing approximately 14.99% of the Company’s
in order to make them aware of any relevant audit information
issued share capital as at the date of the Notice of AGM) and the
and to establish that the Company’s auditor is aware of that
Resolution seeks renewal of such authority until the next AGM (or
information.
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 1p (being the nominal value of such shares) and
Resolutions being put to shareholders in 2023
a maximum of 5% above the average mid-market quotation for
Directors’ authority to allot shares, to disapply
such shares on the London Stock Exchange and the applicable
pre-emption rights
regulations thereunder). This power will be exercised only if, in
The authority proposed under Resolution 10 is required so that
the opinion of the Directors, a repurchase would be in the best
the Directors may oer existing shareholders the opportunity
interests of shareholders as a whole. Any shares repurchased
to add to their investment or to oer potential shareholders an
under this authority will either be cancelled or held in Treasury for
opportunity to invest in the Company in a cost-ecient manner.
future re-sale in appropriate market conditions.
Any consequent modest increase in the size of the Company will,
in the opinion of the Directors, be in the interests of shareholders
generally. Any issue proceeds will be available for investment in
Substantial shareholdings
line with the Company’s investment policy and may be used, in
As at the date of this report, no disclosures of major shareholdings
part, to purchase Ordinary shares in the market.
had been made to the Company under Disclosure Guidance and
Transparency Rule 5 (Vote Holder and Issuer Notiﬁcation Rules).
Resolution 10 renews the Directors’ authority to allot Ordinary
shares. Such authority would expire 15 months after the date of
the passing of the Resolution or, if earlier, the conclusion of the Cancellation of share premium account
next AGM of the Company, giving the Directors authority to allot The Board considers it appropriate to obtain shareholders’
up to 20% of the Company’s issued share capital at the date approval for the cancellation of the amount standing to the
of the Notice of AGM. This authority is in addition to existing share premium account of the Company, at the date of the
authorities. The Board intends to utilise this authority in respect Court Order, to create (subject to Court approval) a pool of
of the Company’s fundraising activities. Any shares allotted under distributable reserves. A Special Resolution to this eect is being
this authority would be issued at prices at or above NAV. proposed at Resolution 15.
Resolution 11 authorises the Directors to allot Ordinary shares in On behalf of the Board
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
Neal Ransome
AGM of the Company.
Chair
6 June 2023
### Octopus AIM VCT plc Annual report 2023 33
## Corporate governance
## report
The Board of the Company has considered the principles and Board of Directors
recommendations of the Association of Investment Companies The Company has a Board of four non-executive Directors, all
Code of Corporate Governance (‘AIC Code’). The AIC Code of whom are considered to be independent. The Board meets
addresses the Principles and Provisions set out in the UK at least four times a year, and on other occasions as required,
Corporate Governance Code (‘UK Code’), as well as setting out to review the investment performance and monitor compliance
additional Provisions on issues that are of speciﬁc relevance to with the investment policy laid down by the Board.
the Company.
The Board has a formal schedule of matters speciﬁcally reserved
The Board considers that reporting against the principles and for its decision which include:
provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council, provides more relevant information • the consideration and approval of future developments or
to shareholders. changes to the investment policy, including risk and asset
allocation;
Corporate governance within the closed-ended investment
• consideration of corporate strategy;
company industry diers from that of other companies. In
• approval of the appropriate dividend to be paid to the
addition, VCTs dier from most other investment companies in
shareholders;
that they have, developed over many years, a complex range of
additional legal, tax and regulatory requirements. • the appointment, evaluation, removal and remuneration of
the Investment Manager;
Octopus AIM VCT plc, as a VCT and closed-ended investment
• the performance of the Company, including monitoring of
company, has particular factors which have an impact on its
the discount of the NAV to the share price; and
governance arrangements. The Company:
• monitoring shareholder proﬁles and considering shareholder
• outsources all day-to-day activities (such as portfolio communications.
management, administration, accounting, custody and
The Chair leads the Board in the determination of its strategy and
company secretarial). This means that it is governed
in the achievement of its objectives. The Chair is responsible for
entirely by a Board of Non-Executive Directors. In these
organising the business of the Board, ensuring its eectiveness
circumstances, the proper oversight of these relationships is
and setting its agenda, and has no involvement in the day-to-day
the key aspect of achieving good corporate governance;
business of the Company. He facilitates the eective contribution
• does not have executive directors or employees. As a
of the Directors and ensures that they receive accurate, timely
consequence, the only ‘corporate memory’ is that of the
and clear information and that they communicate eectively
non-executive Directors; and
with shareholders.
• does not have customers, only shareholders.
The Company Secretarial function is discharged by Octopus
The AIC Code deals with matters such as the relationship with Company Secretarial Services Limited which is responsible
the Investment Manager and other service providers. In practice, for advising the Board, through the Chair, on all governance
most of the time spent by the Board of a well-functioning matters. All of the Directors have access to the advice and
investment company should be spent on matters of general services of the Company Secretary, which has administrative
corporate governance (e.g. the investment strategy, policy and responsibility for the meetings of the Board and its committees.
1
performance) which is what we do. Directors may also take independent professional advice at
the Company’s expense where necessary in the performance of
The Company is committed to maintaining high standards in
their duties.
corporate governance. The Directors consider that the Company
has, throughout the year under review, complied with the As all of the Directors are non-executive, it is not considered
provisions set out in the AIC Code with the exceptions set out in necessary to identify a member of the Board as the senior
the Compliance Statement on page 36. 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.
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### 34 Octopus AIM VCT plc Annual report 2023
## Corporate governance report continued
Board of Directors continued
During the year the following meetings were held as part of the regular programme of meetings:
Audit Committee
Full Board No. of meetings Audit Committee meetings
meetings held attended meetings held attended
Stephen Hazell-Smith 5 4 2 2
Joanne Parfrey 5 5 2 2
Neal Ransome 5 5 2 2
Andrew Boteler 5 5 2 2
Additional meetings were held as required to address speciﬁc issues, including approval of the Company’s annual report and accounts
and half-yearly report.
Performance evaluation and independence of Directors
Each year a formal performance evaluation is undertaken of the Board, its Committee 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.
Length of service
Date of original appointment Due date for election/re-election
Stephen Hazell-Smith 02/02/1998 AGM 2023
Joanne Parfrey 06/10/2016 AGM 2023
Neal Ransome 06/10/2016 AGM 2023
Andrew Boteler 19/03/2020 AGM 2023
Length of service of the Chair and other Directors is one of a number of factors taken into account when considering the contribution
and ongoing independence of the Board, both individually and in terms of overall composition. The Board considers the experience,
range of skills, knowledge of the Company and its operating environment and diversity of the Directors. Accordingly, the Board’s policy
on tenure is that the term the Chair and other Directors serve on the Board should not be restricted to a ﬁxed time limit in order to
ensure sucient corporate memory and consistent adherence to strategy. We believe (in line with the AIC Code) that members of the
Board are independent in character and judgement with respect to their duties to the shareholders.
The Company’s Articles of Association require that one-third of Directors should retire by rotation each year and seek re-election at the
AGM and that Directors appointed by the Board should seek re-appointment at the next AGM. The Directors have agreed to submit
themselves for annual re-election. This practice was followed during the year under review.
Notwithstanding the policy for one-third of the Directors to retire at each AGM, in order to follow best practice, all Directors stand for
re-election annually. The Companies Act allows shareholders in a general meeting by Ordinary Resolution (requiring a simple majority
of the persons voting on the relevant Resolution) to remove any Director before the expiration of his or her period of oce, but without
prejudice to any claim for damages which the Director may have for breach of any contract of service between him or her and the
Company.
Octopus AIM VCT plc Annual report 2023

35

## 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 2022 AGM to make market purchases of up to 14.99% of the issued Ordinary share capital at any time up to the 2023 AGM and otherwise on the terms set out in the relevant resolution. A renewed authority is being sought at the 2023 AGM, as set out in the Notice of Meeting.

## Board committees

There is no formal Management Engagement Committee as matters of this nature are dealt with by the independent non-executive Directors. The Board does not have a separate Remuneration Committee as the Company has no employees or executive directors. Detailed information relating to the remuneration of Directors is given in the Directors' Remuneration Report on pages 39 to 41. The Board does not have a separate Nomination Committee as there has not been a requirement for a committee. Whilst diversity considerations would normally be a function of a Nomination Committee, these are dealt with by the Board as a whole on an annual basis.

The Board has appointed one committee to make recommendations to the Board in a specific area:

### Audit Committee

Andrew Boteler 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. Andrew Boteler, as Audit Chair, Neal Ransome and Joanne Parfrey are Chartered Accountants and the Board is confident that the Committee as a whole has competence relevant to the sector in which the Company operates.

The Audit Committee Report is given on pages 37 and 38.

## Internal controls

The purpose of these controls is to make sure that proper accounting records are maintained, the Company's assets are safeguarded and the financial information used within the business and for publication is accurate and reliable; such a system can only provide reasonable and not absolute assurance

against material misstatement or loss. The system of internal controls is designed to manage rather than eliminate the risk of failure to achieve the business objectives. The Board regularly reviews financial results and investment performance with its Investment Manager.

The Board delegates the identification of appropriate opportunities and the investment of funds to the Investment Manager. The Board regularly review reports upon the investments made and on the status of existing investments. The Investment Manager is also engaged to carry out the accounting and custodian functions of the Company. All quoted investments are held in CREST. Unquoted investments are held in certificated form.

The Directors confirm that they have established a continuing process throughout the year and up to the date of this report for identifying, evaluating and managing the significant potential risks faced by the Company and have reviewed and were satisfied with the effectiveness of the internal control systems. As part of this process, an annual review of the internal control systems is carried out, by Octopus, in accordance with the Financial Reporting Council's Guidance on Risk Management, Internal Control and Related Financial and Business Reporting. As explained in the Audit Committee Report, the Board does not consider it necessary to maintain an internal audit function.

Internal control systems include the production and review of monthly bank reconciliations and management accounts. All outflows made from the VCT's accounts require the authority of two signatories from Octopus. The Investment Manager is subject to ongoing review by the Octopus Compliance Department.

## Financial risk management, objectives and policies

The Company is exposed to the risks arising from its operational and investment activities. Further details can be found in note 16 to the financial statements.

## Statement of voting at the Annual General Meeting

The most significant portion of the votes cast against a resolution at the 2022 AGM were for the resolutions relating to the approval of the Directors' Remuneration Report (3.50% of votes cast) and re-appointment of BDO LLP as auditor (2.69% 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.

Call us on 0800 316 2295
36

Octopus AIM VCT plc Annual report 2023

# Corporate governance report continued

### Relations with shareholders

The Board will be holding a virtual shareholder event on 13 July 2023 at 11.00am to enable shareholders to receive an update from the Investment Manager. This will also provide an opportunity for shareholders to ask questions of the Board relating to the AGM resolutions and annual report and accounts.

We always welcome questions from our shareholders at the AGM, which will take place on 20 July 2023 at 10.30am. To make sure we are able to respond to any questions you may have for either the Investment Manager or AIM VCT Board, please send these via email to AimAGM@octopusinvestments.com by 5.00pm on 14 July 2023. The Board is also happy to respond to any written queries made by shareholders during the course of the year and can be contacted at 33 Holborn, London EC1N 2HT. Alternatively, please call the team at Octopus to answer any queries. They can be contacted on 0800 316 2295.

### 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 28 February 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 Chair is a member of the Audit Committee, which is considered appropriate as he has significant experience as a chartered accountant, and there being only four Directors.

3. 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.
4. 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.
5. The Company has no major shareholders, therefore shareholders are not given the opportunity to meet any non-executive Directors at a specific meeting other than the AGM, or other designated shareholder events, but are welcome to contact the Board or the Investment Manager at any time.

By Order of the Board

Neal Ransome
Chair
6 June 2023
### Octopus AIM VCT plc Annual report 2023 37
## Audit Committee report
This report is submitted in accordance with the AIC Code in were re-appointed. When considering whether to recommend
respect of the year ended 28 February 2023 and describes the the re-appointment of the external auditor, the Committee
work of the Audit Committee in discharging its responsibilities. takes into account the tenure of the current auditor in addition
to comparing the fees charged to similar sized VCTs. The current
The Committee’s key objective is the provision of eective auditor was ﬁrst appointed in 2008 under the name of PKF (UK)
governance of the appropriateness of the Company’s ﬁnancial LLP, which subsequently merged with BDO LLP, and has held the
reporting, the performance of the auditor and the management position for nearly 15 years. Peter Smith, the current Audit Partner,
of the internal control and business risks systems. The Directors has been involved for ﬁve years and therefore this is his ﬁnal year.
forming the Audit Committee can be found on page 35.
Independence and objectivity of the auditor
Matters considered by the Audit Committee in Non-audit services were not provided by the external auditor and
the year therefore the Audit Committee does not believe there are any
The Audit Committee’s terms of reference include the following inﬂuences on their independence or objectivity.
responsibilities:
When considering the eectiveness of the external audit, the
• reviewing and making recommendations to the Board in Board considered the quality and content of the Audit Plan
relation to the Company’s published annual report and and Report provided to the Committee by the Auditor and the
ﬁnancial statements and other formal announcements resultant reporting and discussions on topics raised. Further
relating to the Company’s ﬁnancial performance; consideration is also given as part of the annual Board evaluation.
• reviewing and making recommendations to the Board
in relation to the Investment Manager’s internal controls
Auditor evaluation
(including internal ﬁnancial control) and risk management
The eectiveness of the external audit is assessed as part of the
systems to the extent they are relevant to the Company’s
Board evaluation conducted annually and by the quality and
internal controls;
content of the Audit Plan and Report provided to the Committee
• periodically considering the need for an internal audit by the Auditor and the resultant discussions on topics raised.
function; The Committee also challenges the Auditor when present at a
Committee meeting, if appropriate. The Audit Committee is
• making recommendations to the Board in relation to the
satisﬁed that BDO LLP provided eective challenge in carrying
appointment, re-appointment and removal of the external
out its responsibilities.
auditor and approving the remuneration and terms of
engagement of the external auditor;
Once the Committee has made a recommendation to the Board,
• reviewing and monitoring the external auditor’s independence
in relation to the appointment of the external auditor, this is then
and objectivity and the eectiveness of the audit process,
ratiﬁed at the AGM through an Ordinary Resolution.
taking into consideration relevant UK professional regulatory
requirements;
Internal audit
• monitoring the extent to which the external auditor is
The Company does not have an independent internal audit
engaged to supply non-audit services; and
function as it is not deemed appropriate given the size of the
• ensuring that the Investment Manager has arrangements
Company and the nature of the Company’s business. However,
in place for the investigation and follow-up of any concerns
the Committee considers annually whether there is a need for
raised conﬁdentially by sta in relation to propriety of
such a function and if so would recommend this to the Board.
ﬁnancial reporting or other matters.
Octopus has an internal audit function which reports to the
Board annually on the outcome of the internal audits that have
The Committee reviews its terms of reference and its eectiveness
taken place. Any signiﬁcant issues arising from the Octopus
annually and recommends to the Board any changes required as
internal audit that aect the Company would be raised to the
a result of the review. The terms of reference are available on
Committee immediately. Octopus’ Compliance Department also
request from the Company Secretary. The Committee meets
reports regularly to the Board.
twice per year and has direct access to BDO LLP, the Company’s
external auditor.
The Committee will monitor the signiﬁcant risks at each meeting
and will work closely with the internal auditor to mitigate the risks
and the resultant impact.
Auditor appointment
The Audit Committee undertook a competitive audit tender
process in 2019 as required for all Public Interest Entities who
have had the same auditor for ten years, following which BDO
Call us on 0800 316 2295
### 38 Octopus AIM VCT plc Annual report 2023
## Audit Committee report continued
Signiﬁcant issues These issues were discussed with the Investment Manager and the
The Audit Committee is responsible for considering signiﬁcant auditor at the conclusion of the audit of the ﬁnancial statements.
issues in relation to the ﬁnancial statements. The Committee has
The Committee has considered the whole Annual Report
identiﬁed the most signiﬁcant risks for the Company as:
and Accounts for the period ended 28 February 2023 and has
• Valuation and ownership of investments: The Committee reported to the Board that it considers them to be fair, balanced
gives special audit consideration to the valuation of and understandable, providing the information necessary for
investments and supporting data provided by the Investment shareholders to assess the Company’s performance, business
Manager. The impact of this risk would be a large gain or model and strategy.
loss in the Company’s results. The valuations are supported
The Audit Committee is also responsible for considering and
variously by stock market quotations, portfolio company
reporting on any signiﬁcant issues that arise in relation to the
audited accounts and third-party evidence (where relevant).
audit of the ﬁnancial statements. The Audit Committee can
These, together with reconciliations and independent
conﬁrm that there were no signiﬁcant issues to report to the
conﬁrmations performed by the auditor, give comfort to the
shareholders in respect of the audit of the ﬁnancial statements
Audit Committee.
to 28 February 2023.
• Management override of financial controls: The
Committee speciﬁcally reviews all signiﬁcant accounting
estimates that form part of the ﬁnancial statements and
considers any material judgements applied by management
during the completion of the ﬁnancial statements.
• Recognition and categorisation of revenue from Andrew Boteler
investments: Investment income is the Company’s main Audit Committee Chair
source of revenue. The revenue return is recognised when the 6 June 2023
Company’s right to the return is established in accordance
with the Statement of Recommended Practice, as either
revenue or capital income. The Investment Manager conﬁrms
to the Audit Committee that the revenues are recognised
appropriately.
In addition to the above, the Committee has also considered the
implications of inﬂation and high interest rates. As at the date of
issuing this report, whilst the Committee anticipates short-term
market volatility aecting 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.
Octopus AIM VCT plc Annual report 2023

39

# 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 28 February 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 shareholdings below, and their report on these and other matters is set out on pages 43 to 48.

## 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 Board of Directors of other VCTs. The Company does not have a chief executive officer, senior management or any employees.

## Directors' remuneration policy report

The Board consists entirely of Non-Executive Directors, who meet at least quarterly and on other occasions as necessary, to deal with the important aspects of the Company's affairs. Directors are appointed with the expectation that they will serve for a period of at least three years. All Directors are subject to election at the first AGM after their appointment and one-third of all Directors are subject to retirement by rotation at the AGMs. However, as best practice, all the Directors retire and stand for re-election annually. Re-election will be recommended by the Board but is dependent upon shareholder votes.

Each Director received a letter of appointment. A Director may resign at any time by giving three months' notice in writing to the Board. None of the Directors are entitled to compensation payable upon early termination of their contract other than in respect of any unexpired notice period.

The Company's policy is that the fees payable to the Directors should reflect the time spent by the Board on the Company's affairs and the responsibilities borne by the Directors. They should be sufficient to attract candidates of high calibre to be recruited. The policy is for the Chair of the Board and the Chair of the Audit Committee to be paid higher fees than the other Directors in recognition of their more onerous roles. The Remuneration policy is to review the Directors' fees from time to time, benchmarking

the fees against other VCT boards, although such review will not necessarily result in any changes. Due to the nature of the Company, there are no employees other than the Directors and therefore no such issues to consider when determining the Directors' remuneration.

The Company's policy is for the Directors to be remunerated in the form of fees, payable monthly in arrears. The fees are not specifically related to the Directors' performance, either individually or collectively. There are no long-term incentive schemes, share option schemes or pension schemes in place. The Board is also entitled to be repaid all reasonable travelling, subsistence and other expenses incurred by them respectively whilst conducting their duties as Directors. No other remuneration or compensation was paid or payable by the Company during the year to any of the current Directors. There will be no payment for loss of office unless approved by a separate shareholder resolution.

An Ordinary Resolution to approve the remuneration policy of the Company was put to, and approved by, shareholders at the 2020 AGM and therefore a resolution will be put to the 2023 AGM seeking approval. The policy 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.

## Statement of voting at the Annual General Meeting

The 2022 Directors' Remuneration Report was presented to the AGM in July 2022 and received shareholder approval following a vote by way of a poll. 96.5% of the votes cast were in favour of the Directors' Remuneration Report or at the Chair's discretion, 3.5% were against the resolution and 72,737 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.

## Annual remuneration report

This section of the report is subject to approval by a simple majority of shareholders at the AGM in July 2023, as in previous years.

Call us on 0800 316 2295
### 40 Octopus AIM VCT plc Annual report 2023
## Directors’ remuneration report continued
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 21 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.
Directors’ Fees (audited)
The amount of each Director’s fees for the year were:

|  |  | Year ended |  |  |  | Year ended |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | 28 February 2023 |  |  |  | 28 February 2022 |  |  |  |
|  |  |  |  | £ |  |  |  | £ |
| Stephen Hazell-Smith |  |  | 22,500 |  |  |  | 21,500 |  |
| Joanne Parfrey |  |  | 22,500 |  |  |  | 21,500 |  |
| Neal Ransome |  |  | 27,500 |  |  |  | 25,500 |  |
| Andrew Boteler |  |  | 25,000 |  |  |  | 23,000 |  |
| Roger Smith (resigned 22 July 2021) |  |  |  | – |  |  | 10,500 |  |
| Total |  |  | 97,500 |  |  |  | 102,000 |  |

The Directors do not receive any other form of emoluments in addition to the Directors’ fees, their total remuneration is not linked to
the performance of the Company and no bonuses were or will be paid to the Directors.
The Chair of the Company and Audit Committee Chair receive additional remuneration over the basic Directors’ fee in recognition of
the additional responsibilities and time commitment, and additionally, to be fair and comparable to similar VCTs.
Following a review, the Board agreed the following fee rates with eect from 1 March 2023: Chair of the Board £29,150; Chair of the
Audit Committee £26,500; and all other Directors £23,850. These fee rates represent an increase of 6.0%, compared to a 9.2% increase
in CPI over the preceding year.
Directors’ Fees annual percentage change
2023 % change 2022 % change 2021 % change
Stephen Hazell-Smith 4.7% 7.5% 0.0%
Joanne Parfrey 4.7% 7.5% 0.0%
Neal Ransome 7.8% 13.3% 0.0%
Andrew Boteler 8.7% 15.0% N/A
Roger Smith (resigned 22 July 2021) N/A (58.0%) 0.0%
### Octopus AIM VCT plc Annual report 2023 41
Relative importance of spend on pay
The actual expenditure in the current year is as follows:

|  |  | Year to |  |  | Year to |  |
| --- | --- | --- | --- | --- | --- | --- |
|  | 28 February 2023 |  |  | 28 February 2022 |  |  |
|  |  | £’000 |  |  | £’000 % change |  |
| Total dividends paid |  | 9,276 |  |  | 12,663 (26.7%) |  |
| Total buybacks |  | 3,567 |  |  |  | 7,522 (52.6%) |
| Total directors’ fees |  |  | 98 |  |  | 102 (3.9%) |

There were no other signiﬁcant payments during the year relevant to understanding the relative importance of spend on pay.
Directors’ interest in shares (audited)
There are no guidelines or requirements for Directors to own shares in the Company. The interests of the Directors, and their connected
persons, in shares of the Company during the year (in respect of which transactions are notiﬁable under Disclosure Guidance and
Transparency Rule 3.1.2) in the issued Ordinary shares of 1p are shown in the table below:

|  | Ordinary shares of 1p each |  |  | Ordinary shares of 1p each |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | 28 February 2023 |  |  | 28 February 2022 |  |
| Stephen Hazell-Smith |  |  | 139,003 |  |  | 139,003 |
| Neal Ransome |  |  | 47,377 |  |  | 35,251 |
| Joanne Parfrey |  |  | 33,911 |  |  | 18,754 |
| Andrew Boteler |  |  | 30,853 |  |  | 18,727 |

All of the shares held by the Directors, or their connected persons, were held beneﬁcially, in their own name. There have been no
changes in the Directors’ share interests between 28 February 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 2022 were as follows:
For (including discretionary) Against
No. of No. of
Shares % Shares %
Approval of Directors’ Remuneration Report 3,930,547 96.50 142,403 3.50
By Order of the Board
Neal Ransome
Chair
6 June 2023
Call us on 0800 316 2295
### 42 Octopus AIM VCT plc Annual report 2023
## Directors’ responsibilities
## statement
The Directors are responsible for preparing the annual report and Website publication
accounts in accordance with applicable law and regulations. The Directors are responsible for ensuring the annual report
and the accounts are made available on a website. Financial
Company law requires the Directors to prepare financial
statements are published on the Investment Manager’s website
statements for each ﬁnancial year. Under that law the Directors
in accordance with legislation in the United Kingdom governing
are required to prepare the ﬁnancial statements and have elected
the preparation and dissemination of ﬁnancial statements, which
to prepare the Company’s ﬁnancial statements in accordance
may vary from legislation in other jurisdictions. The maintenance
with United Kingdom Generally Accepted Accounting Practice
and integrity of the Company’s website is the responsibility of the
(United Kingdom Accounting Standards and applicable law)
Directors. The Directors’ responsibility also extends to the ongoing
including FRS 102 – ‘The Financial Reporting Standard applicable
integrity of the ﬁnancial statements contained therein.
in the UK and Republic of Ireland’. 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 Directors’ responsibilities pursuant to Disclosure
aairs of the Company and of the proﬁt or loss for the Company Guidance and Transparency Rule 4 (DTR4)
for that period. Neal Ransome (Chair), Andrew Boteler, Stephen Hazell-Smith
and Joanne Parfrey, the Directors, conﬁrm to the best of their
In preparing these ﬁnancial statements, the Directors are
knowledge that:
required to:
• the ﬁnancial statements have been prepared in accordance
• select suitable accounting policies and then apply them
with the Financial Reporting Standard applicable in the
consistently;
United Kingdom and Republic of Ireland (‘FRS 102’) and give
• make judgements and accounting estimates that are a true and fair view of the assets, liabilities, ﬁnancial position
reasonable and prudent; and proﬁt and loss of the Company; and
• state whether applicable UK accounting standards have • the annual report includes a fair review of the development
been followed, subject to any material departures disclosed and performance of the business and the ﬁnancial position
and explained in the ﬁnancial statements; of the Company, together with a description of the principal
risks and uncertainties that it faces.
• prepare the ﬁnancial statements on the going concern basis
unless it is inappropriate to presume that the Company will
By Order of the Board
continue in business; and
• prepare a strategic report, a Director’s report and Director’s
remuneration report which comply with the requirements of
the Companies Act 2006.
Neal Ransome
The Directors are responsible for keeping adequate accounting Chair
records that are sucient to show and explain the Company’s 6 June 2023
transactions and disclose with reasonable accuracy at any time
the ﬁnancial position of the Company and enable them to ensure
that the ﬁnancial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the annual
report and accounts, taken as a whole, are fair, balanced,
understandable and provide the information necessary for
shareholders to assess the Company’s position and performance,
business model and strategy.
Octopus AIM VCT plc Annual report 2023

43

# Independent auditor's report to the members of Octopus AIM VCT plc

## Opinion on the financial statements

In our opinion the financial statements:

- give a true and fair view of the state of the Company's affairs as at 28 February 2023 and of its loss for the year then ended;
- have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice;
- have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements of Octopus AIM VCT plc (the 'Company') for the year ended 28 February 2023 which comprise the Income Statement, the Balance Sheet, the Statement of Changes in Equity, the Cash flow 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

Following the recommendation of the audit committee, we were appointed at the AGM on 15 July 2020 to audit the financial statements for the year ended 28 February 2022 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 14 years, covering the years ended 28 February 2009 to 28 February 2022. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company.

## Independence

Following the recommendation of the audit committee, we were appointed at the AGM on 15 July 2020 to audit the financial statements for the year ended 28 February 2022 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 14 years, covering the years ended 28 February 2009 to 28 February 2022. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have

fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company.

## Conclusions relating to going concern

In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included:

- Obtaining the VCT compliance reports during the year and as at year end and reviewing their calculations to check that the Company was meeting its requirements to retain VCT status
- Reviewing and challenging the forecasted cash flows that support the Directors' assessment of going concern.
- Evaluating management's method of assessing going concern in light of market volatility having regard to the liquidity of the investment portfolio;
- Calculating financial ratios to consider the financial health of the Company.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

In relation to the Company's reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors' statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting.

Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.

Call us on 0800 316 2295
### 44 Octopus AIM VCT plc Annual report 2023
## Independent auditor’s report to the members of
## Octopus AIM VCT plc continued
Overview
2023 2022
Key audit matters Valuation and Ownership of Investments  
Materiality £1,412,000 (2022: £1,470,000) based on 1% (2022: 1%) of net assets (2022: 1% of adjusted 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 eect on: the overall audit strategy, the allocation of resources in
the audit, and directing the eorts of the engagement team. This matter were addressed in the context of our audit of the ﬁnancial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter.
Key Audit Matter How the scope of our audit addressed the key audit matter
Valuation and ownership of investments (Notes 1 We performed the following procedures:
and 10 to the ﬁnancial statements)
In respect of 100% of quoted equity investments we have:
The investment portfolio comprises of quoted and
unquoted investments. We responded to this matter by testing the valuation and ownership of
the whole portfolio of quoted investments. We performed the following
The Investment Manager’s fee is based on of the procedures:
value of the net assets of the fund, as shown in
note 3. • Conﬁrmed the year-end bid price was used by agreeing to externally
quoted prices;
As the Investment Manager is also responsible for
• Assessing if there were contra indicators, such as liquidity considerations,
preparing the valuation of investments for the
to suggest bid price is not the most appropriate indication of fair value
ﬁnancial statements, there is a potential risk of
by considering the realisation period for individual holdings;
misstatement in the investment valuations.
• Recalculating the valuation by multiplying the number of shares held per
the statement obtained from the custodian by the valuation per share;
There is a risk that the investment balance includes
investments which are no longer owned by the • Obtained direct conﬁrmation of the number of shares held per equity
Company or that the bid price or last price used to investment from the custodian regarding all investments held at the
value the investment is incorrect. balance sheet date. Agreed shares to reconciliation performed by the
investment manager.
There is a high level of estimation uncertainty
involved in determining the unquoted investment In respect of a sample of unquoted investments we have:
valuations.
For all Investments in our sample we:
There is an inherent risk of management override
• Challenged and corroborated the inputs to the valuation with reference
arising from the unquoted investment valuations
to management information of investee companies, market data and
being prepared by the Investment Manager, who is
our own understanding and assessed the impact of the estimation
remunerated based on a percentage of the value of
uncertainty concerning these assumptions and the disclosure of these
the net assets of the fund, as shown in note 3.
uncertainties in the ﬁnancial statements;
• Reviewed the historical ﬁnancial statements and any recent management
information available to support assumptions about maintainable
revenues, earnings or cash ﬂows used in the valuations;
• Considered the revenue or earnings multiples applied and the discounts
applied by reference to observable listed company market data; and
### Octopus AIM VCT plc Annual report 2023 45
• Challenged the consistency and appropriateness of adjustments made
to such market data in establishing the revenue, cash ﬂow or earnings
multiple applied in arriving at the valuations adopted by considering the
individual performance of investee companies against plan and relative
to the peer group, the market and sector in which the investee company
operates and other factors as appropriate.
Where appropriate, we performed a sensitivity analysis by developing our
own point estimate where we considered that alternative input assumptions
could reasonably have been applied and we considered the overall impact of
such sensitivities on the portfolio of investments in determining whether the
valuations as a whole are reasonable and free from bias.
Key observations:
Based on the procedures performed we consider the investment valuations
and ownership to be appropriate considering the level of estimation
uncertainty.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the eect 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 eect 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 |
| --- | --- | --- | --- | --- |
|  |  |  | £m | £m |
| Materiality |  | £1,412,000 £1,470,000 |  |  |
| Basis for determining materiality | 1% of net assets (2022: 1% of net assets adjusted to exclude fund raising |  |  |  |

during the year)
Rationale for the benchmark applied Net asset value is the primary measure used by the users in assessing
the performance of the Company as an investment entity. In setting
materiality, we have had regard to the nature and disposition of the
investment portfolio. Given that the VCT’s portfolio is comprised primarily
of quoted investments, we have applied a percentage of 1% of adjusted
net assets value. The benchmark used in the prior year is lower than the
net asset value to take into account cash that was raised from fund raising
in close proximity to the prior year-end. The net asset benchmark was not
adjusted in the current year as there was no cash from recent fund raises
as at the year end.
Performance materiality £1,059,000 £1,103,000
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.
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### 46 Octopus AIM VCT plc Annual report 2023
## Independent auditor’s report to the members of
## Octopus AIM VCT plc continued
Lower Testing Threshold
Whilst the majority of long-term returns are expected to arise from capital, we consider 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 £328,000 which is based on 10% of gross expenditure. (2022: £383,000)..
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit dierences in excess of £70,000 (2022: £75,000).
We also agreed to report dierences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report
and accounts, other than the ﬁnancial statements and our auditor’s report thereon. Our opinion on the ﬁnancial statements does not
cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the ﬁnancial statements or our knowledge obtained in the course of the audit, or otherwise appears to be
materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the ﬁnancial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Corporate governance statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of
the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance
Statement speciﬁed for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the ﬁnancial statements or our knowledge obtained during the audit.
Going concern and longer- • The Directors’ statement with regards the appropriateness of adopting the going concern
term viability 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 eectiveness of risk
management and internal control systems ; and
• The section describing the work of the audit committee
Octopus AIM VCT plc Annual report 2023

47

## Other Companies Act 2006 reporting

Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.

|  **Strategic report and Directors' report** | In our opinion, based on the work undertaken in the course of the audit: - the information given in the Strategic report and the Directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and - the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements. In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the Directors' report.  |
| --- | --- |
|  **Directors' remuneration** | In our opinion, the part of the Directors' remuneration report to be audited has been properly prepared in accordance with the Companies Act 2006.  |
|  **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:

We gained an understanding of the legal and regulatory framework applicable to the Company and the industry in which it operates, and considered the risk of acts by the Company which were contrary to applicable laws and regulations, including fraud. These included but were not limited to compliance with Companies Act 2006, the FCA listing and DTR rules, the principles of the UK Corporate Governance Code, industry practice represented by the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts ('the SORP') issued in November 2014 and updated in February 2018 with consequential amendments and FRS 102. We also considered the Company's qualification as a VCT under UK tax legislation.

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### 48 Octopus AIM VCT plc Annual report 2023
## Independent auditor’s report to the members of
## Octopus AIM VCT plc continued
We considered areas where the ﬁnancial statements could be that the risk of not detecting a material misstatement due
susceptible to material misstatement. Our audit work focussed to fraud is higher than the risk of not detecting one resulting
on the valuation of unquoted investments as described in the key from error, as fraud may involve deliberate concealment by, for
audit matters section of this report, where the risk of material example, forgery, misrepresentations or through collusion. There
misstatement due to fraud is the greatest. We also: are inherent limitations in the audit procedures performed and
the further removed non-compliance with laws and regulations
• Obtained independent evidence to support the ownership of is from the events and transactions reﬂected in the ﬁnancial
investments statements, the less likely we are to become aware of it.
• Recalculated investment management fees in total
A further description of our responsibilities is available on the
• Obtained independent conﬁrmation of bank balances.
Financial Reporting Council’s website at:
We focused on laws and regulations that could give rise to a
www.frc.org.uk/auditorsresponsibilities
material misstatement in the Company ﬁnancial statements.
This description forms part of our auditor’s report.
Our tests included, but were not limited to:
• Obtaining an understanding of the control environment in
Use of our report
monitoring compliance with laws and regulations;
This report is made solely to the Company’s members, as a body,
• Agreement of the financial statement disclosures to in accordance with Chapter 3 of Part 16 of the Companies Act
underlying supporting documentation; 2006. Our audit work has been undertaken so that we might
state to the Company’s members those matters we are required
• Enquiries of management;
to state to them in an auditor’s report and for no other purpose.
• Review of minutes of board meetings throughout the period;
To the fullest extent permitted by law, we do not accept or
• Obtaining and reviewing independent reports prepared for assume responsibility to anyone other than the Company and
the Company on compliance with the relevant tests in order the Company’s members as a body, for our audit work, for this
to maintain its qualifying status as a VCT. report, or for the opinions we have formed.
We addressed the risk of management override of internal
controls, including testing journals and evaluating whether there
was evidence of bias by the Directors that represented a risk of
material misstatement due to fraud..
Peter Smith (Senior Statutory Auditor)
We also communicated relevant identiﬁed laws and regulations
For and on behalf of BDO LLP, Statutory Auditor
and potential fraud risks to all engagement team members and
London, UK
remained alert to any indications of fraud or non-compliance
06 June 2023
with laws and regulations throughout the audit.
BDO LLP is a limited liability partnership registered in England and
Our audit procedures were designed to respond to risks of
Wales (with registered number OC305127).
material misstatement in the ﬁnancial statements, recognising
### Octopus AIM VCT plc Annual report 2023 49
## Income statement

|  |  |  |  | Year to 28 February 2023 |  |  |  |  | Year to 28 February 2022 |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  | Revenue |  |  | Capital | Total | Revenue |  |  | Capital | Total |
|  | Notes |  | £’000 |  | £’000 | £’000 |  | £’000 |  | £’000 | £’000 |
| Gain on disposal of ﬁxed asset | 10 |  |  | – 207 207 |  |  |  |  | – 1,001 1,001 |  |  |

investments
Loss on disposal of current asset – – – – (2) (2)
investments
Loss on valuation of ﬁxed asset 10 – (29,192) (29,192) – (17, 203) (17,203)
investments
Loss on valuation of current asset – (2,233) (2,233) – (313) (313)
investments

| Investment income 2 |  | 1,068 24 1,092 |  | 760 134 894 |  |
| --- | --- | --- | --- | --- | --- |
| Investment management fees 3 |  | (650) (1,949) (2,599) |  | (765) (2,296) (3,061) |  |
| Other expenses 4 |  | (689) – (689) |  | (775) – (775) |  |
| Loss before tax (271) (33,143) (33,414) |  |  |  | (780) (18,679) (19,459) |  |
| Tax 6 |  |  | – – – |  | – – – |
| Total comprehensive loss after tax (271) (33,143) (33,414) |  |  |  | (780) (18,679) (19,459) |  |
| Earnings per share – basic and | 8 | (0.2p) (20.0p) (20.2p) |  | (0.5p) (12.4p) (12.9p) |  |

diluted
• The ‘Total’ column of this statement represents the statutory income statement of the Company; the supplementary revenue
return and capital return columns have been prepared in accordance with the AIC Statement of Recommended Practice.
• All revenue and capital items in the above statement derive from continuing operations.
• The Company has only one class of business and derives its income from investments made in shares and securities and from bank
and money market funds, as well as OEIC funds.
The Company has no recognised gains or losses other than the results for the period as set out above. Accordingly, a statement of
comprehensive income is not required.
The notes on pages 53 to 67 form an integral part of these ﬁnancial statements.
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### 50 Octopus AIM VCT plc Annual report 2023
## Balance sheet
As at 28 February 2023 As at 28 February 2022
Notes £’000 £’000 £’000 £’000
Fixed asset investments 10 102,667 129,226
Current assets:

| Investments 11 | 16,188 |  | 16,543 |  |
| --- | --- | --- | --- | --- |
| Money market funds 11 | 21,433 |  |  | 1,326 |
| Debtors 12 |  | 354 |  | 329 |

1

| Applications cash | 11 |  | 3 |  | 246 |
| --- | --- | --- | --- | --- | --- |
| Cash at bank 11 |  | 1,437 |  | 21,910 |  |
|  |  | 39,415 |  | 40,354 |  |
| Creditors: amounts falling due within | 13 | (860) |  |  | (1,411) |

one year

| Net current assets |  | 38,555 |  | 38,943 |  |
| --- | --- | --- | --- | --- | --- |
| Total assets less current liabilities 141,222 |  |  |  | 168,169 |  |
| Called up equity share capital 14 |  | 1,798 |  | 1,605 |  |
| Share premium |  | 18,924 |  | 25,450 |  |
| Capital redemption reserve |  |  | 279 |  | 236 |
| Special distributable reserve |  | 118,015 |  | 105,258 |  |
| Capital reserve realised |  | (23,143) |  | (20,762) |  |
| Capital reserve unrealised |  | 27,545 |  | 58,307 |  |
| Revenue reserve |  | (2,196) |  |  | (1,925) |
| Total equity shareholders’ funds 141,222 |  |  |  | 168,169 |  |
| NAV per share – basic and diluted | 9 | 78.5p |  | 104.8p |  |
| 1 Cash held but not yet allotted. |  |  |  |  |  |

The statements were approved by the Directors and authorised for issue on 6 June 2023 and are signed on their behalf by:
Neal Ransome
Chair
Company number: 03477519
The Notes on pages 53 to 67 form an integral part of these ﬁnancial statements.
### Octopus AIM VCT plc Annual report 2023 51
## Statement of changes in
## equity

|  |  |  |  | Capital |  | Special |  | Capital |  |  | Capital |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Share |  | Share | redemption |  | distributable |  |  | reserve |  |  | reserve | Revenue |  |  |  |
|  |  |  |  |  |  |  | 1 |  | 1 |  |  |  |  | 1 |  |
| capital | premium |  |  | reserve |  | reserves |  | realised |  | unrealised |  | reserve |  |  | Total |
| £’000 |  | £’000 |  | £’000 |  | £’000 |  | £’000 |  |  | £’000 |  | £’000 |  | £’000 |

As at 1 March 2022 1,605 25,450 236 105,258 (20,762) 58,307 (1,925) 168,169
Comprehensive income for the year:
Management fee allocated as capital – – – – (1,949) – – (1,949)
expenditure
Current period gain on disposal – – – – 207 – – 207
Current period loss on revaluation of – – – – – (31,425) – (31,425)
investments
Capital investment income – – – – 24 – – 24
Loss after tax – – – – – – (271) (271)
Total comprehensive loss for the year – – – – (1,718) (31,425) (271) (33,414)
Contributions by and distributions to
owners:
Repurchase and cancellation of own (43) – 43 (3,567) – – – (3,567)
shares
Issue of shares 236 19,742 – – – – – 19,978
Share issue costs – (668) – – – – – (668)
Dividends paid – – – (9,276) – – – (9,276)
Total contributions by and 193 19,074 43 (12,843) – – – 6,467
distributions to owners:
Other movements – –
Cancellation of share premium – (25,600) – 25,600 – – – –
Prior years’ holding gains now realised – – – – (663) 663 – –
Total other movements – (25,600) – 25,600 (663) 663 – –
Balance as at 28 February 2023 1,798 18,924 279 118,015 (23,143) 27,545 (2,196) 141,222
As at 1 March 2021 1,461 57,966 173 67,47 7 (21,945) 78,169 (1,145) 182,156
Comprehensive income for the year:
Management fee allocated as capital – – – – (2,296) – – (2,296)
expenditure
Current period gain on disposal – – – – 999 – – 999
Current period loss on revaluation of – – – – – (17,516) – (17,516)
investments
Capital investment income – – – – 134 – – 134
Loss after tax – – – – – – (780) (780)
Total comprehensive loss for the year – – – – (1,163) (17,516) (780) (19,459)
Contributions by and distributions to
owners:
Repurchase and cancellation of own (63) – 63 (7,522) – – – (7,522)
shares
Issue of shares 207 27,030 – – – – – 27, 237
Share issue costs – (1,580) – – – – – (1,580)
Dividends paid – – – (12,663) – – – (12,663)
Total contributions by and 144 25,450 63 (20,185) – – – 5,472
distributions to owners:
Other movements –
Cancellation of share premium – (5 7,966) – 57,966 – – – –
Prior years’ holding gains now realised – – – – 2,346 (2,346) – –
Total other movements – (57,966) – 57,966 2,346 (2,346) – –
Balance as at 28 February 2022 1,605 25,450 236 105,258 (20,762) 58,307 (1,925) 168,169
1
Included in these reserves is an amount of £92,676,000 (2022: £82,571,000) which is considered distributable to shareholders.
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### 52 Octopus AIM VCT plc Annual report 2023
## 
Year to 28 February 2023 Year to 28 February 2022
Notes £’000 £’000
Cash ﬂows from operating activities
Loss before tax (33,414) (19,459)
Adjustments for:

| Increase in debtors |  | (25) |  | (136) |  |
| --- | --- | --- | --- | --- | --- |
| (Decrease)/increase in creditors |  | (794) |  | 470 |  |
| Gain on disposal of ﬁxed asset investments 10 |  | (207) |  | (1,001) |  |
| Loss on disposal of current asset investments |  |  | – |  | 2 |
| Loss on valuation of ﬁxed asset investments 10 | 29,192 |  |  | 17,203 |  |
| Loss on valuation of current asset investments | 2,233 |  |  | 313 |  |
| Non-cash distributions 2 |  | (24) |  | (134) |  |
| Cash utilised in operations (3,039) |  |  |  | (2,742) |  |
| Income taxes paid |  |  | – |  | – |
| Net cash utilised in operating activities (3,039) |  |  |  | (2,742) |  |

Cash ﬂows from investing activities

| Purchase of ﬁxed asset investments 10 | (4,880) |  | (21,639) |
| --- | --- | --- | --- |
| Proceeds from sale of ﬁxed asset investments 10 | 2,478 |  | 7,932 |
| Purchase of current asset investments | (1,878) |  | (2,250) |
| Proceeds from sale of current asset investments |  | – | 1,604 |
| Net cash ﬂows utilised in investing activities (4,280) |  |  | (14,353) |

Cash ﬂows from ﬁnancing activities

| Movement in applications account 13 |  | 243 |  | (106) |
| --- | --- | --- | --- | --- |
| Purchase of own shares 14 | (3,567) |  | (7,522) |  |
| Proceeds from share issues 14 | 18,217 |  | 25,657 |  |
| Share issue costs |  | (668) | (2,342) |  |
| Dividends paid (net of DRIS) 7 | (7,515) |  | (10,321) |  |
| Net cash ﬂows from ﬁnancing activities 6,710 |  |  | 5,366 |  |
| Decrease in cash and cash equivalents (609) |  |  | (11,730) |  |
| Opening cash and cash equivalents | 23,482 |  | 35,212 |  |
| Closing cash and cash equivalents 22,873 |  |  | 23,482 |  |

Cash and cash equivalents is represented by:

| Cash at bank 11 | 1,437 |  | 21,910 |
| --- | --- | --- | --- |
| Applications cash 11 |  | 3 | 246 |
| Money market funds 11 | 21,433 |  | 1,326 |
| Total cash and cash equivalents | 22,873 |  | 23,482 |

The notes on pages 53 to 67 form an integral part of these ﬁnancial statements.
### Octopus AIM VCT plc Annual report 2023 53
## 
## 
1. Principal accounting policies Revenue and capital
The Company is a Public Limited Company (plc) incorporated The Company presents its income statement in a three-
in England and Wales and its registered oce is 33 Holborn, column format to give shareholders additional detail of
London EC1N 2HT. the performance of the Company, split between items of a
revenue or capital nature as required by the SORP.
The Company’s principal activity is to invest in a diverse
portfolio of predominantly AIM-traded companies with The revenue column of the income statement includes all
the aim of providing shareholders with attractive tax-free income and revenue expenses of the Company. The capital
dividends and long-term capital growth. column includes gains and losses on disposal and holding
gains and losses on investments.
Basis of preparation
The ﬁnancial statements have been prepared under the Upon disposal of investments, gains relating to the assets are
historical cost convention, except for the measurement at transferred from the capital reserve unrealised to the capital
fair value of certain ﬁnancial instruments, and in accordance reserve realised.
with UK Generally Accepted Accounting Practice (‘GAAP’),
Key judgements and estimates
including Financial Reporting Standard 102 – The Financial
The preparation of the ﬁnancial statements requires the
Reporting Standard applicable in the United Kingdom and
Board to make judgements and estimates that aect the
Republic of Ireland’ (‘FRS 102’), and with the Companies Act
application of policies and reported amounts of assets,
2006 and the Statement of Recommended Practice (‘SORP’)
liabilities, income and expenses. Estimates and assumptions
‘Financial Statements of Investment Trust Companies and
mainly relate to the fair valuation of the fixed asset
Venture Capital Trusts (issued 2014 and updated in October
investments, particularly unquoted investments. Estimates
2019 with consequential amendments)’.
are based on historical experience and other assumptions
The principal accounting policies have remained unchanged that are considered reasonable under the circumstances.
from those set out in the Company’s 2022 annual report and The estimates and the assumptions are under continuous
accounts. A summary of the principal accounting policies is review with particular attention paid to the carrying value
set out below. of the investments.
FRS 102 Sections 11 and 12 have been adopted with regard to Investment valuation policies are important to the depiction
the Company’s ﬁnancial instruments. The Company holds of the Company’s financial position and require the
all ﬁxed asset investments at fair value through proﬁt or loss application of subjective and complex judgements, notably
(‘FVTPL’); therefore all gains and losses arising from such with regard to unquoted holdings, often as a result of the
investments held are attributable to ﬁnancial assets held at need to make estimates about the eects of matters that
FVTPL. Accordingly, all interest income, fee income, expenses are inherently uncertain and may change in subsequent
and gains and losses on investments are attributable to periods. The main accounting and valuation policies used by
assets held at FVTPL. the Company are disclosed below.
Going concern Investments are regularly reviewed to ensure that the fair
After reviewing the Company’s forecasts and expectations, values are appropriately stated. Unquoted investments are
the Directors have a reasonable expectation that valued in accordance with current IPEV guidelines, although
the Company has adequate resources to continue in this does rely on subjective estimates such as appropriate
operational existence for the foreseeable future. The Company sector earnings multiples, forecast results of portfolio
has sucient cash and liquid resources to meet its liabilities as companies, asset values of the subsidiary companies of
they fall due and methods through which it could manage its portfolio companies and liquidity or marketability of the
operations include adjusting investment strategy and careful investments held.
consideration of non-committed cash outﬂows, including
Although the Company believes that the assumptions
dividends and buybacks. The Company therefore continues
concerning the business environment and estimate of
to adopt the going concern basis in preparing its ﬁnancial
future cash ﬂows are appropriate, changes in estimates and
statements. In reaching this conclusion the Directors have
assumptions could require changes in the stated values. This
had regard to the potential impact of economic instability on
could lead to additional changes in fair value in the future
the Company. See the Director’s Report on pages 29 to 32 for
(see note 10).
further details.
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54

Octopus AIM VCT plc Annual report 2023

# Notes to the financial statements continued

## 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.

### Financing strategy and capital structure

Capital management is monitored and controlled by forecasting income and expenditure over both the short and medium terms to enable investments to be made at the same time as controlling short-term liquidity. The investments being managed include equity and short-term liquidity comprises cash and cash equivalents including debtors and creditors.

The Company defines capital as shareholders' funds and its 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 enter into any borrowing facilities in the future to fund the acquisition of investments.

As the Company is registered as an AIFM, it is subject to externally imposed capital requirements, namely if the value of assets under management ('AUM') exceeds €250 million then an additional amount of Company funds equal to 0.02% of the excess over €250 million (subject to a cap of €10 million capital requirement) will be required.

### Cash and liquid resources

Cash, for the purposes of the cash flow statement, comprises cash at bank. Cash equivalents are current asset

investments which are disposable without curtailing or disrupting the business and are either readily convertible into known amounts of cash at or close to their carrying values or traded in an active market. This comprises investments in money market funds subject to insignificant changes in fair value. The Company holds £3,000 (2022: £246,000) of cash on behalf of the Company and Octopus AIM VCT 2 plc. Of this, £2,000 (2022: £148,000) is attributable to the Company. This cash is held in an applications bank account until shares are issued. A corresponding creditor is recognised in note 13 on page 62.

### 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** – represents the nominal value of shares bought back from shareholders and cancelled from share capital.

**Revenue reserve** – 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 (£).
### Octopus AIM VCT plc Annual report 2023 55
2. Income
Accounting policy
Investment income includes interest earned on money market securities is 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 brought into account 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 eective yield, provided there is no reasonable doubt that payment will be received in due course.
Disclosure

|  | 28 February 2023 |  | 28 February 2022 |  |
| --- | --- | --- | --- | --- |
|  |  | £’000 |  | £’000 |
| Dividends receivable from ﬁxed asset investments |  | 834 |  | 715 |

1

| In-specie dividend |  | 24 | 134 |  |
| --- | --- | --- | --- | --- |
| Loan note interest receivable |  | 45 | 45 |  |
| Income receivable on money market securities |  | 189 |  | – |
|  | 1,092 |  | 894 |  |

1
The Company received shares in Verici Dx PLC as a result of an in-specie dividend from EKF Diagnostics Holdings plc. In the prior period the Company received shares
in Trellus Health plc as a result of an in-specie dividend from EKF Diagnostics Holdings PLC. These have been treated as capital income.
3. Investment management fees

|  |  |  | 28 February 2023 |  |  |  |  | 28 February 2022 |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Revenue |  |  | Capital | Total | Revenue |  |  | Capital | Total |
|  |  | £’000 |  | £’000 | £’000 |  | £’000 |  | £’000 | £’000 |
| Investment management fee |  | 650 1,949 2,599 |  |  |  |  | 765 2,296 3,061 |  |  |  |

Octopus provides investment management and accounting and administration services to the Company under a management
agreement which initially ran with Close Investment Limited from 3 February 1998 and was then novated to Octopus for a period of
ﬁve years with eect from 29 July 2008 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 insucient 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 set at 2% of the Company’s
net assets, less deductions outlined below, calculated on a quarterly basis.
During the year Octopus charged gross management fees of £3,067,000 (2022: £3,723,000). When the various allowances detailed
below are included, the net management fees for the year are £2,599,000 (2022: £3,061,000). At the year end there was £580,000
payable to Octopus (2022: £834,000). Octopus received £282,000 as a result of upfront fees charged on allotments of Ordinary
shares (2022: £515,000).
The Company now pays ongoing adviser charges to independent ﬁnancial advisers (‘IFAs’). Ongoing adviser charges are an
ongoing fee of up to 0.5% per annum 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 28 February
2023 the rebate received was £183,000 (2022: £290,000).
Call us on 0800 316 2295
### 56 Octopus AIM VCT plc Annual report 2023
## 
3. Investment management fees continued
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 make sure that the Company is not ﬁnancially
disadvantaged by such payment, a notional ongoing adviser charge equivalent to 0.5% per annum 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 28 February 2023 the rebate received was £202,000 (2022: £272,000).
The Company also receives a reduction in the management fee for the investments into other Octopus managed funds, being
the Multi Cap, Micro Cap and Future Generations products, to ensure the Company is not double charged on these products. This
amounted to £83,000 for the year to 28 February 2023 (2022: £100,000).
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.
4. Other expenses
Accounting policy
All expenses are accounted for on an accruals basis.
The transaction costs incurred when purchasing or selling assets are written o to the income statement in the period that
they occur.
Disclosure

|  | 28 February 2023 |  |  | 28 February 2022 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | £’000 |  |  | £’000 |  |
| IFA charges |  |  | 183 |  | 290 |  |
| Directors' remuneration |  |  | 98 |  |  | 102 |
| Registrars' fees |  |  | 65 |  |  | 55 |
| Audit fees |  |  | 43 |  |  | 36 |
| Printing and postage |  |  | 23 |  |  | 18 |
| VCT monitoring fees |  |  | 13 |  |  | 21 |
| Directors’ and ocers’ liability insurance |  |  | 50 |  |  | 19 |
| Broker’s fees |  |  | 6 |  |  | 6 |
| Other administration expenses |  |  | 208 |  |  | 228 |
|  |  | 689 |  |  |  | 775 |

The fees payable to the Company’s auditor are stated net of VAT and the VAT is included within other administration expenses.
The ongoing charges of the Company were 2.1% of average net assets during the year to 28 February 2023 (2022: 1.9%). Ongoing
charges are calculated using the AIC methodology and exclude exceptional costs and trail commission.
### Octopus AIM VCT plc Annual report 2023 57
5. Directors’ remuneration
Directors were paid £98,000 in the year to 28 February 2023 (2022: £102,000). This excludes Employer’s National Insurance
contributions of £8,000 (2022: £8,000). None of the Directors received any other remuneration, pension contributions or beneﬁts
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
Corporation tax payable is applied to proﬁts chargeable to corporation tax, if any, at the current rate. The tax eect of dierent
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 dierences 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.
The corporation tax charge for the year was £nil (2022: £nil).
Disclosure

|  | 28 February 2023 |  | 28 February 2022 |  |
| --- | --- | --- | --- | --- |
| Tax reconciliation |  | £’000 |  | £’000 |
| Loss before tax |  | (33,414) |  | (19,459) |
| Current tax at 19.0% (2022: 19.0%) |  | (6,349) |  | (3,697) |

Eects of

| Non-taxable income | (199) | (161) |
| --- | --- | --- |
| Non-taxable capital gains | 5,932 | 3,138 |
| Non-deductible expenses | (4) | (3) |
| Excess management expenses on which deferred tax | 620 | 723 |

not recognised
Total tax charge – –
Approved VCTs are exempt from tax on capital gains within the Company. Since the Directors intend that the Company will
continue to conduct its aairs 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.
As at 28 February 2023 there is an unrecognised deferred tax asset of £6,551,000 (2022: £5,758,000) in respect of accumulated
surplus management expenses of £26,204,000 (2022: £23,030,000), based on a prospective corporation 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.
Call us on 0800 316 2295
58

Octopus AIM VCT plc Annual report 2023

## Notes to the financial statements continued

### 7. Dividends

#### Accounting policy

Dividends payable are recognised as distributions in the financial statements when the Company's liability to make 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

|   | 28 February 2023 £'000 | 28 February 2022 £'000  |
| --- | --- | --- |
|  **Dividends paid on Ordinary shares during the year** |  |   |
|  Final dividend – 3.0p paid 12 August 2022 (2022: 3.5p) | 4,775 | 5,035  |
|  Special dividend – Nil (2022: 2.5p) | – | 3,597  |
|  Interim dividend – 2.5p paid 12 January 2023 (2022: 2.5p) | 4,501 | 4,031  |
|   | 9,276 | 12,663  |

During the year £1,761,000 (2022: £2,342,000) of dividends were reinvested under the DRIS, see note 14.

|   | 28 February 2023 £'000 | 28 February 2022 £'000  |
| --- | --- | --- |
|  **Dividends paid and proposed in respect of the year** |  |   |
|  Interim dividend – 2.5p paid 12 January 2023 (2022: 2.5p) | 4,501 | 4,031  |
|  Final dividend proposed : 2.5p payable 10 August 2023 (2022: 3.0p) | 4,462 | 4,795  |
|   | 8,963 | 8,826  |

Under Section 32 of FRS 102 'Events After Balance Sheet Date', dividends payable at year end are not recognised as a liability in the financial statements.

The above proposed final dividend is based on the number of shares in issue at the date of this report. The actual dividend paid may differ from this number as the dividend payable will be based on the number of shares in issue on the record date and will reflect any changes in the share capital between the year end and the record date.

### 8. Earnings per share

|   | 28 February 2023 |   |   | 28 February 2022  |   |   |
| --- | --- | --- | --- | --- | --- | --- |
|   |  Revenue | Capital | Total | Revenue | Capital | Total  |
|  Loss attributable to ordinary shareholders (£'000) | (271) | (33,143) | (33,414) | (780) | (18,679) | (19,459)  |
|  Earnings per ordinary share (p) | (0.2p) | (20.0p) | (20.2p) | (0.5p) | (12.4p) | (12.9p)  |

The earnings per share is based on 165,688,082 Ordinary shares (2022: 151,132,679), being the weighted average number of shares in issue during the year, and the loss on ordinary activities after tax for the year of £33,414,000 (2022: loss £19,459,000).

There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted earnings per share are identical.
### Octopus AIM VCT plc Annual report 2023 59
9. Net asset value per share

|  | 28 February 2023 |  |  |  | 28 February 2022 |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- |
| Net assets (£’000) |  |  | 141,222 |  |  |  | 168,169 |
| Shares in issue |  | 179,802,084 |  |  |  | 160,480,523 |  |
| NAV per share (p) |  |  |  | 78.5 |  |  | 104.8 |

There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted NAV per share are identical.
10. Fixed asset investments
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 FVTPL on the basis that they qualify as a group of assets managed, and
whose performance is evaluated, on a fair value basis in accordance with a documented investment strategy. The Company’s
investments are measured at subsequent reporting dates at fair value.
In the case of investments quoted on a recognised stock exchange, fair value is established by reference to the closing bid price
on the relevant date or the last traded price, depending upon convention of the exchange on which the investment is quoted. In
the case of unquoted investments fair value is established by assessing dierent methods of valuation, such as price of recent
transaction, earnings multiples, discounted cash ﬂows and net assets. Where price of recent investment is used as a starting
point for estimating fair value at subsequent measurement dates, this has been benchmarked using an appropriate valuation
technique. These methodologies are consistent with IPEV guidelines.
Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the income
statement and allocated to the capital reserve unrealised. The Investment Manager reviews changes in fair value of investments
for any permanent reductions in value and will give consideration to whether these losses should be transferred to the capital
reserve realised.
In the preparation of the valuations of assets the Directors are required to make judgements and estimates that are reasonable
and incorporate their knowledge of the performance of the portfolio companies.
Fair value hierarchy
Paragraph 34.22 of FRS 102 recognises 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.
Call us on 0800 316 2295
### 60 Octopus AIM VCT plc Annual report 2023
## 
10. Fixed asset investments continued

|  |  | Level 1: |  |  | Level 3: |  |
| --- | --- | --- | --- | --- | --- | --- |
| Quoted equity |  |  |  | Unquoted |  |  |
|  | investments |  | investments |  |  | Total |
|  |  | £’000 |  |  | £’000 | £’000 |

Cost at 1 March 2022 70,876 4,488 75,364
Opening unrealised gain at 1 March 2022 48,423 5,439 53,862
Valuation at 1 March 2022 119,299 9,927 129,226
Purchases at cost 4,880 – 4,880
In-specie dividend 24 – 24
Disposal proceeds (2,478) – (2,478)
Proﬁt on realisation of investments 207 – 207
Change in fair value in year (27, 879) (1,313) (29,192)
Closing valuation at 28 February 2023 94,053 8,614 102,667
Cost at 28 February 2023 72,846 4,488 7 7,33 4
Closing unrealised gain at 28 February 2023 21,207 4,126 25,333
Valuation at 28 February 2023 94,053 8,614 102,667
The Company received £2,478,000 (2022: 6,260,000) from investments sold in the year. The book cost of these investments when
they were purchased was £2,934,000 (2022: 3,109,000). 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 closing 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 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 dierent assumptions were to be used, dierent valuations could have been attributed to some of the
Company’s investments. Level 3 investments include £600,000 (2022: £600,000) of loan notes held at cost, which is deemed to
be current fair value.
The Company holds six unquoted investments which are classiﬁed as Level 3 in terms of fair value hierarchy. These are valued based
on a range of valuation methodologies, determined on an investment-speciﬁc basis. The price of recent investment is used where a
transaction has occurred suciently 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 cash ﬂows or net assets are used to determine a fair value for the investments. See
below for our analysis:
FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to
reasonable possible alternative assumptions. The Company’s holdings in Hasgrove plc and Popsa Holdings Ltd make up over 95%
of the market value of the Level 3 investments on the balance sheet and therefore we have taken into account these valuations
when considering possible alternative assumptions. Given Popsa Holdings Ltd is based on the price of a recent transaction there
are no variable inputs included in the valuation and as a result there is nothing to adjust. See below for the results of our analysis:
Octopus AIM VCT plc Annual report 2023

61

|  Valuation technique | Portfolio company | Input | Base case | Change in input | Change in fair value of investments (£m)  |
| --- | --- | --- | --- | --- | --- |
|  Revenue multiple | Hasgrove plc | Revenue multiple | 4.5 | 0.5x (0.5x) | 0.4 (0.4)  |
|  EV/Sales multiple | Popsa Holdings Ltd | EV/Sales multiple | 2.0 | 0.2x (0.2x) | 0.3 (0.3)  |

The Board and the Investment Manager believe that the valuations as at 28 February 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 ('fair value through profit and loss'). 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 28 February 2023 there were no commitments in respect of investments approved by the Investment Manager but not yet completed (2022: £nil). The transaction costs incurred when purchasing or selling assets are written off to the income statement in the period that they occur.

## 11. Current asset investments and cash at bank

### 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. 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. This comprises government securities, investment grade bonds and investments in money market funds.

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 readily convertible into cash at the choice of the Company within seven days. The current asset investments are held for trading, are actively managed and the performance is evaluated on a fair value basis in accordance with a documented investment strategy. Information about them has to be provided internally on that basis to the Board.

Call us on 0800 316 2295
### 62 Octopus AIM VCT plc Annual report 2023
## 
11. Current asset investments and cash at bank continued
Disclosure
1
Current asset investments at 28 February 2023 and at 28 February 2022 comprised of money market funds and deposits and
OEICs. These fall into Level 1 of the fair value hierarchy as deﬁned in the ﬁxed asset investment accounting policy in note 10 above.
28 February 2023 28 February 2022
£’000 £’000
OEICs:

| FP Octopus UK Micro Cap Growth Fund | 8,114 | 8,935 |
| --- | --- | --- |
| FP Octopus UK Multi Cap Income Fund | 7,263 | 7,060 |
| FP Octopus UK Future Generations Fund | 811 | 548 |
| Total OEICs 16,188 |  | 16,543 |

1

| Money market funds | 21,433 | 1,326 |
| --- | --- | --- |
| Total current asset investments 37,621 |  | 17,869 |
| Applications cash 3 |  | 246 |
| Cash at bank 1,437 |  | 21,910 |
| Total 39,061 |  | 40,025 |

1
Money market funds represent money held pending investment and can be accessed with one working day’s notice.
12. Debtors

|  | 28 February 2023 |  |  | 28 February 2022 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | £’000 |  |  | £’000 |  |
| Other debtors |  |  | 58 |  |  | 95 |
| Prepayments and accrued income |  |  | 296 |  |  | 234 |
| Total 354 |  |  |  |  |  | 329 |

13. Creditors: amounts falling due within one year

|  | 28 February 2023 |  |  | 28 February 2022 |  |  |
| --- | --- | --- | --- | --- | --- | --- |
|  |  | £’000 |  |  | £’000 |  |
| Accruals |  |  | 827 |  | 1,141 |  |
| Other creditors |  |  | 25 |  | 268 |  |
| Trade creditors |  |  | 8 |  |  | 2 |
| Total 860 |  |  |  |  | 1,411 |  |

Creditors includes £3,000 (2022: £246,000) cash held on behalf of the Company and Octopus AIM VCT 2 plc (also managed by
Octopus Investments). This cash is held in an applications bank account until shares are issued, of this £2,000 (2022: £148,000) is
attributable to the Company.
14. Share capital
28 February 2023 28 February 2022
£’000 £’000
Allotted and fully paid up:
179,802,084 Ordinary shares of 1.0p (2022: 160,480,523) 1,798 1,605
Closing cost and valuation at 28 February 1,798 1,605
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 out on page 20. As the Company is registered as an AIFM, it is subject to externally imposed capital requirements
Octopus AIM VCT plc Annual report 2023

63

of €300,000. 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 (£)  |
| --- | --- | --- | --- |
|  24 March 2022 | 513,628 | 99.2 | 510,000  |
|  21 April 2022 | 220,376 | 99.7 | 220,000  |
|  12 May 2022 | 48,702 | 91.3 | 44,000  |
|  23 June 2022 | 366,396 | 85.8 | 314,000  |
|  27 July 2022 | 317,753 | 86.1 | 274,000  |
|  18 August 2022 | 148,390 | 86.5 | 128,000  |
|  15 September 2022 | 178,462 | 84.8 | 151,000  |
|  27 October 2022 | 809,066 | 76.6 | 620,000  |
|  17 November 2022 | 357,347 | 79.5 | 284,000  |
|  15 December 2022 | 282,998 | 75.3 | 213,000  |
|  19 January 2023 | 678,177 | 75.1 | 509,000  |
|  16 February 2023 | 391,515 | 76.5 | 300,000  |
|  **Total** | **4,312,810** |  | **3,567,000**  |

The total nominal value of the shares repurchased for cancellation was £43,128 representing 2.4% of the issued share capital.

The Company issued the following shares during the year to 28 February 2023:

|  Date | Number of shares | Price per share (p) | Net proceeds of shares issued (£)  |
| --- | --- | --- | --- |
|  14 April 2022^{1} | 144,759 | 110.8 | 151,000  |
|  12 August 2022^{1} | 54,869 | 89.3 | 49,000  |
|  12 August 2022^{1} | 999,538 | 89.3 | 893,000  |
|  14 November 2022 | 21,311,806 | 87 | 17,349,000  |
|  13 January 2023^{1} | 1,123,399 | 77.3 | 868,000  |
|  **Totals** | **23,634,371** |  | **19,310,000**  |

$^{1}$Shares issued as a result of reduced adviser charges, and reduced annual management fee for Octopus employees.

$^{2}$Shares issued under the Dividend Reinvestment Scheme (DRIS).

Excluding the value of shares issued under the DRIS, the total value net of share issue costs was £17,549,000 (2022: £23,315,000). This is shown in the cash flow statement.

Call us on 0800 316 2295
### 64 Octopus AIM VCT plc Annual report 2023
## 
15. Financial instruments and risk management
The Company’s ﬁnancial instruments comprise of 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.
28 February 2023 28 February 2022
£’000 £’000
Financial assets at fair value through proﬁt or loss

| Fixed asset investments | 102,667 | 129,226 |
| --- | --- | --- |
| Money market securities | 21,433 | 1,326 |
| OEICs | 16,188 | 16,543 |
| Total ﬁnancial assets at fair value through proﬁt | 140,288 | 147,095 |

or loss
Financial assets measured at amortised cost

| Cash at bank | 1,440 | 22,156 |  |
| --- | --- | --- | --- |
| Debtors | 354 |  | 329 |
| Total ﬁnancial assets measured at amortised cost 1,794 |  | 22,485 |  |

Financial liabilities measured at amortised cost
Creditors (860) (1,411)
Total ﬁnancial liabilities measured at amortised cost (860) (1,411)
The Company holds six qualifying, unquoted investments: Popsa Holdings Limited, Rated People Limited, Airnow plc, The Food
Marketplace, Eluceda Limited and Hasgrove plc, which delisted from AIM in 2013. The Company also holds one unquoted loan
note investment in Osirium Technologies plc valued at £600,000 held at cost. Unquoted investments and loan notes are included
in ﬁxed asset investments in the table above.
Fixed and current asset investments (see notes 10 and 11) are initially recognised at FVTPL (‘fair value through proﬁt and loss’). For
quoted investments this is 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 eective 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.
16. Financial risk management
In carrying on its investment activities, the Company is exposed to various types of risk associated with the ﬁnancial instruments
and markets in which it invests. The most signiﬁcant types of ﬁnancial risk facing the Company are price risk, interest rate risk,
credit risk and liquidity risk. The Company’s approach to managing these risks is set out below together with a description of the
nature and amount of the ﬁnancial instruments held at the balance sheet date.
Market risk
The Company’s strategy for managing investment risk is determined with regard to the Company’s investment objective, as
outlined on page 20. 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 Statement on pages 33 to 36, having regard to the possible eects of adverse price movements, and other
macroeconomic eects on the market such as the ongoing pandemic and war in Ukraine, 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
### Octopus AIM VCT plc Annual report 2023 65
the portfolio across business sectors and asset classes. The Company’s portfolio is well diversiﬁed with holdings in technology,
industrials, pharmaceuticals, support services and many more growing sectors. 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 in the Investment Manager’s Review on
pages 9 to 11.
By value, 67% (2022: 71%) of the Company’s net assets comprises equity securities listed on the London Stock Exchange or
admitted to trading 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 28 February 2023 would have decreased net assets and the total return for the year by
£18,811,000 (2022: £23,860,000); and an equivalent change in the opposite direction would have increased net assets for the year
by the same amount.
OEIC investments comprised 11% of the Company’s net assets by value (2022: 10%). A 20% decrease (2022: 20%) in the price of
these securities at 28 February 2023 would have decreased net assets by £3,238,000 (2022: £3,309,000); and an equivalent change
in the opposite direction would have increased net assets for the year by the same amount.
Unquoted investments comprised 6% of the Company’s net assets by value (2022: 6%). A 20% decrease (2022: 20%) in the
price of these securities at 28 February 2023 would have decreased net assets by £1,723,000 (2022: £1,985,000); and an equivalent
change in the opposite direction would have increased net assets for the year by the same amount. The Directors consider this
to not be signiﬁcant.
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.
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 4.0% at 28 February 2023 (2022: 0.5%). The amounts held in ﬂoating rate investments
at the balance sheet date were as follows:

|  | 28 February 2023 |  | 28 February 2022 |  |
| --- | --- | --- | --- | --- |
|  |  | £’000 |  | £’000 |
| Money market funds |  | 21,433 |  | 1,326 |
| Cash at bank |  | 1,440 |  | 22,156 |
|  |  | 22,873 |  | 23,482 |

Every 1% increase in the base rate would increase income receivable from these investments for the year by £214,000 (2022:
£235,000).
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. Octopus and the Board carry out a regular review of counterparty risk. The carrying values of
ﬁnancial assets represent the maximum credit risk exposure at the balance sheet date.
Other than cash, loan notes or liquid money market funds, there were no signiﬁcant concentrations of credit risk to counterparties
at 28 February 2023 or 28 February 2022. By value, no individual bank holding or ﬁxed rate note investment exceeded 1% of the
Company’s net assets at 28 February 2023 (2022: 13%).
The Company’s interest-bearing deposit and current accounts are maintained with HSBC and BlackRock. The risk of loss to this
cash is deemed to be low due to the historical credit ratings and a current Moody’s rating of A2 for HSBC and A3 for BlackRock
cash funds. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an
ongoing basis. Should the credit quality or the ﬁnancial position of HSBC or BlackRock deteriorate signiﬁcantly, the Investment
Manager will move the cash holdings to another bank.
Call us on 0800 316 2295
66

Octopus AIM VCT plc Annual report 2023

# Notes to the financial statements continued

### 16. Financial risk management continued

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.

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 or by bankruptcy proceedings.

#### 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 sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. At 28 February 2023 these investments were valued at £39,061,000 (2022: £40,025,000). The Company has no debt, therefore no maturity analysis is required.

### 17. Post balance sheet events

The following events occurred between the balance sheet date and the signing of these financial statements.

- A follow-on investment totalling £600,000 completed in FP Octopus UK Micro Cap Growth Fund.
- A partial disposal of 5,040 shares in Judges Scientific plc for total consideration of £439,000.
- A partial disposal of 172,200 shares in Quixant plc for total consideration of £301,000.
- A partial disposal of 180,000 shares in Genedrive plc for total consideration of £53,000.
- A full disposal of 500,000 shares in Itsarm plc (formerly In The Style Group plc) for total consideration of £2,000.
- A full disposal of 428,811 shares in AdEPT Technology Group plc for total consideration of £862,000.
- A partial disposal of 120,000 shares in Intelligent Ultrasound Group plc for total consideration of £19,000.
- A partial disposal of 152,066 shares in FP Octopus UK Multi Cap Income for total consideration of £180,000.

The following shares have been bought back since the year end:

- 16 March 2023: 459,683 shares at a price of 72.5p per share.
- 20 April 2023: 558,866 shares at a price of 72.5p per share.
- 18 May 2023: 290,881 shares at a price of 71.9p per share.

### 18. Contingencies, guarantees and financial commitments

At 28 February 2023 there were no commitments in respect of investments approved by the Investment Manager but not yet completed (2022: £nil).

### 19. Related party transactions

The Company has employed Octopus throughout the year as Investment Manager. Octopus has also been appointed the custodian of the Company's investments under a custodian agreement.

The Company has paid Octopus £2,599,000 (2022: £3,061,000) in the year as a management fee. The management fee is payable quarterly in arrears and is based on 2.0% of net assets at six-month intervals.
Octopus AIM VCT plc Annual report 2023

67

The Company receives a reduction in the management fee for the investments in other Octopus managed funds, being the Octopus Portfolio Manager, 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 £83,000 in the year to 28 February 2023 (2022: £100,000). For further details please refer to note 3. Details of amounts invested in Octopus managed funds can be found on page 62.

Octopus received £nil (2022: £nil) transaction fees and directors' fees from portfolio companies.

The Company holds £3,000 (2022: £246,000) of cash on behalf of the Company and AIM VCT 2 plc. Of this, £2,000 (2022: £161,000) is attributable to the Company.

In the year, Octopus Investments Nominees Limited ('OINL') purchased Company shares from shareholders to protect their interests after delays or errors with shareholder instructions and other similar administrative issues, on the understanding that shares will be sold back to the Company in subsequent share buybacks.

As at 28 February 2023, Octopus Investments Nominees Limited ('OINL') held 7,598 shares (2022: 889) in the Company as beneficial owner, having purchased these at a cost of £7,000 (2022: £nil). Throughout the period to 28 February 2023 OINL purchased 9,875 shares (2022: 889) at a cost of £9,000 (2022: £1,000) and sold 3,166 shares (2022: nil) for proceeds of £3,000 (2022: £nil). This is classed as a related party transaction as Octopus, the Investment Manager and OINL are part of the same group of companies. Any such future transactions, where OINL takes over the legal and beneficial ownership of Company shares, will be announced to the market and disclosed in annual and half-yearly reports.

Call us on 0800 316 2295
68

Octopus AIM VCT plc Annual report 2023

# Shareholder information and contact details

Octopus AIM VCT plc was launched as Close AIM VCT PLC in the spring of 1998 and raised £10.1 million from private investors through an issue of Ordinary shares.

Between October 2000 and March 2001 a further £20.0 million was raised through an issue of C shares. Furthermore, between 16 March 2004 and final closing on 5 April 2004 the Company raised £3.3 million by way of a D share issue.

The C Shares were merged and converted into Ordinary shares on 31 May 2004 at a conversion ratio determined by a price mechanism related to the respective net assets per share of both the Ordinary shares and C shares at 29 February 2004 (which resulted in C Shareholders receiving 1.0765 Ordinary shares for each C share held).

A further £15.0 million was raised between 6 January 2005 and 8 April 2005 through an issue of new D shares.

On 31 May 2008, the Ordinary shares converted into D shares at a conversion ratio of 0.5448 D shares for each Ordinary share. All of the D shares were then re-designated into new Ordinary shares.

With effect from 1 August 2008, the management of the Company was transferred to Octopus.

On 4 August 2010, the share capital was restructured and each existing Ordinary share of 50p was subdivided into one Ordinary share of 1p and one deferred share of 49p. The deferred shares had no economic value and were bought back by the Company for an aggregate amount of 1p and cancelled.

On 12 August 2010, following approval at the Extraordinary General Meeting on 4 August 2010, shareholders of Octopus Phoenix VCT had their shares converted into Octopus AIM VCT shares on a relative NAV basis using the conversion factor of 0.42972672. On the same day, Octopus Phoenix VCT was placed into members' voluntary liquidation.

The offer for subscription in the prospectus dated 9 July 2010 relating to the issue of new shares in connection with the merger with Octopus Phoenix VCT Plc was extended by a supplemental prospectus and closed on 19 April 2011 raising £10 million. A subsequent offer raised £1.9 million, closing on 5 April 2012.

A further offer was launched on 25 April 2012 and closed on 31 July 2012. The offer resulted in the issue of 2,843,092 new shares, raising a total of £2.6 million.

On 23 October 2012, the Company announced an Enhanced Buyback Facility (EBB) in respect of up to 50% of the issued share capital. The EBB closed on 31 January 2013. As a result of the EBB, the Company repurchased 10,801,537 Ordinary shares and 10,289,443 new Ordinary shares were issued.

An offer for subscription of up to £10 million, which opened on 1 February 2013 and closed on 17 December 2013, raised £9.4 million. The Company opened a non-prospectus offer to raise £4.1 million that opened on 2 February 2014 and closed fully subscribed on 28 March 2014.

A combined fundraise with Octopus AIM VCT 2 plc by way of an issue of new shares was launched on 29 August 2014 to raise up to £12 million with an over-allotment facility of £6 million. This offer closed, fully subscribed, on 1 July 2015.

A further combined fundraise with Octopus AIM VCT 2 plc by way of an issue of new shares was launched on 21 December 2015 to raise up to £12 million with an over-allotment facility of £6 million. This offer closed, fully subscribed, on 3 October 2016.

An offer for subscription to raise up to £4.3 million by way of an issue of new shares was launched on 6 February 2017. This offer closed to new applications, fully subscribed, on 27 February 2017.

A further combined offer for subscription with Octopus AIM VCT 2 plc was launched on 16 June 2017 to raise up to £18 million with an over-allotment of £6 million. This offer closed, fully subscribed, on 10 November 2017.

A combined fund raise with Octopus AIM VCT 2 plc by way of an issue of new shares was launched on 3 August 2018 to raise up to £12 million for the Company with an over-allotment facility of £6 million. This offer closed, fully subscribed, on 28 September 2018.

A combined fund raise with Octopus AIM VCT 2 plc by way of an issue of new shares was launched on 29 November 2019 to raise up to £12 million for the Company with an over-allotment facility of £6 million. This offer closed, fully subscribed, on 27 February 2020.

A combined fund raise with Octopus AIM VCT 2 plc by way of an issue of new shares was launched on 20 August 2020 to raise up to £12 million for the Company with an over-allotment facility of £6 million. This offer closed, fully subscribed, on 30 November 2020.

On 19 August 2021, a prospectus offer was launched alongside Octopus AIM VCT 2 plc to raise a combined total of up to £30 million with a £10 million over-allotment facility. This prospectus offer closed, fully subscribed, 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.
Octopus AIM VCT plc Annual report 2023

69

## 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% upfront 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.

¹A '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.

## 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 sent 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 6325 (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 between 9.00am-5.30pm, Monday to Friday, excluding public holidays in England and Wales), or by writing to them at:

The Registrar
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6ZZ

Call us on 0800 316 2295
### 70 Octopus AIM VCT plc Annual report 2023
## 
The following unaudited table shows the net asset value per share and lists the dividends that have been paid since the launch of the
Company and the dierent share classes that have been issued:

| Dividends |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Phoenix |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| paid during | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary |  |  | Ordinary | Phoenix | Ordinary |
| the period | shares | shares | shares | shares | shares | shares | shares | shares | shares | shares | shares | shares | shares | shares | D shares | C shares | shares | ‘C’ shares | shares |
| ending | 2022/23 | 2021/22 | 2020/21 | 2019/20 | 2018/19 | 2017/18 | 2016/17 | 2015/16 | 2014/15 | 2013/14 | 2012/13 | 2011/12 | 2010/11 | 2009/10 | 2003/04 | 2000/01 | 1997/98 | 2005/06 | 2002/03 |

February 1999 – – – – – – – – – – – – 3.13 – –
February 2000 – – – – – – – – – – – – 37. 25 – –
February 2001 – – – – – – – – – – – 2.55 6.50 – –
February 2002 – – – – – – – – – – – 1.50 3.50 – –
February 2003 – – – – – – – – – – – 0.50 0.50 – 0.15
February 2004 – – – – – – – – – – 0.50 0.50 0.50 – 6.50
February 2005 – – – – – – – – – – 2.25 2.31 2.15 – 1.00
February 2006 – – – – – – – – – – 3.30 7. 2 1 6.70 4.00 9. 35
February 2007 – – – – – – – – – – 5.00 5.38 5.00 5.00 11.00
February 2008 – – – – – – – – – – 5.00 2.93 2.72 4.35 6.00

| February 2009 – – – – – – – – – – 5.00 2.93 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1 | 2.72 1 | 4.05 3.00 |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| February 2010 – – – – – – – – – 2.80 2.50 1.47 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1 | 1.36 1 | 1.53 1 | 1.13 1 |
| February 2011 – – – – – – – – 2.64 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1 | 2.80 | 1 | 2.50 1.47 | 1 | 1.36 1 | 1.53 1 | 1.13 1 |
| February 2012 – – – – – – – 5.18 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1 | 5.29 | 1 | 5.59 | 1 | 5.00 2.93 | 1 | 2.72 1 | 3.05 1 | 2.26 1 |
| February 2013 – – – – – – |  |  |  |  |  |  |  |  |  |  |  | 1 | 5.51 1 | 5.18 | 1 | 5.29 | 1 | 5.59 | 1 | 5.00 2.93 | 1 | 2.72 1 | 3.05 1 | 2.26 1 |
| February 2014 – – – – – |  |  |  |  |  |  |  |  |  |  | 1 | 5.27 1 | 6.06 1 | 5.69 | 1 | 5.81 | 1 | 6.15 | 1 | 5.50 3.23 | 1 | 3.00 1 | 3.27 1 | 2.42 1 |
| February 2015 – – – – |  |  |  |  |  |  |  |  |  | 7.28 | 1 | 8.91 1 | 10.25 1 | 9.63 | 1 | 9.83 | 1 | 10.40 | 1 | 9.30 5.45 | 1 | 5.07 1 | 5.40 1 | 4.00 1 |
| February 2016 – – – 4.34 |  |  |  |  |  |  |  |  | 1 | 3.91 | 1 | 4.79 1 | 5.51 1 | 5.18 | 1 | 5.29 | 1 | 5.59 | 1 | 5.00 2.93 | 1 | 2.72 1 | 2.90 1 | 2.15 1 |
| February 2017 – – 4.97 |  |  |  |  |  |  |  | 1 | 4.77 1 | 4.30 | 1 | 5.27 1 | 6.06 1 | 5.69 | 1 | 5.81 | 1 | 6.15 | 1 | 5.50 3.23 | 1 | 3.00 1 | 3.19 1 | 2.36 1 |
| February 2018 – 4.47 |  |  |  |  |  |  | 1 | 4.97 1 | 4.77 1 | 4.30 | 1 | 5.27 1 | 6.06 1 | 5.69 | 1 | 5.81 | 1 | 6.15 | 1 | 5.50 3.23 | 1 | 3.00 1 | 3.19 1 | 2.36 1 |
| February 2019 4.48 |  |  |  |  |  | 1 | 4.47 1 | 4.97 1 | 4.77 1 | 4.30 | 1 | 5.27 1 | 6.06 1 | 5.69 | 1 | 5.81 | 1 | 6.15 | 1 | 5.50 3.23 | 1 | 3.00 1 | 3.19 1 | 2.36 1 |
| February 2020 7.81 |  |  |  |  | 1 | 6.92 1 | 6.91 1 | 7.69 1 | 7.3 8 1 | 6.65 | 1 | 8.14 1 | 9.37 1 | 8.80 | 1 | 8.99 | 1 | 9.51 | 1 | 8.50 4.99 | 1 | 4.63 1 | 4.93 1 | 3.65 1 |
| February 2021 5.93 |  |  | 1 | 5.06 | 1 | 4.48 1 | 4.47 1 | 4.97 1 | 4.77 1 | 4.30 | 1 | 5.27 1 | 6.06 1 | 5.69 | 1 | 5.81 | 1 | 6.15 | 1 | 5.50 3.23 | 1 | 3.00 1 | 3.19 1 | 2.36 1 |
| February 2022 6.16 |  | 1 | 9.16 1 | 7.81 | 1 | 6.92 1 | 6.91 1 | 7.69 1 | 7.3 8 1 | 6.65 | 1 | 8.14 1 | 9.37 1 | 8.80 | 1 | 8.99 | 1 | 9.51 | 1 | 8.50 4.99 | 1 | 4.63 1 | 4.93 1 | 3.65 1 |
| February 2023 4.96 | 1 | 3.99 1 | 5.93 1 | 5.06 | 1 | 4.48 1 | 4.47 1 | 4.97 1 | 4.77 1 | 4.30 | 1 | 5.27 1 | 6.06 1 | 5.69 | 1 | 5.81 | 1 | 6.15 | 1 | 5.50 3.23 | 1 | 3.00 1 | 3.19 1 | 2.36 1 |

Cumulative
dividends 4.96 10.15 21.01 25.74 27.28 31.71 40.24 42.97 46.01 61.59 76.41 76.92 81.19 88.70 100.35 72.32 113.88 63.96 71.47
paid
Adjusted
NAV as at
28 February
2023 2 70.8 56.9 84.6 72.2 63.9 63.8 71.0 68.1 61.4 75.2 86.5 81.3 83.0 87. 8 78.5 46.0 42.8 45.6 33.7
(assuming
investment
at 100p)
Adjusted
NAV plus
cumulative 75.81 67.08 105.60 9 7. 8 9 91.21 95.53 111.21 111.11 1 07. 4 3 136.78 162.95 158.18 164.18 176.51 178.85 118.36 156.65 109.53 105.20
dividends
paid 3
Following the merger with Octopus Phoenix VCT Plc and various share reorganisations, there is only one share class, Ordinary shares. For
Octopus Phoenix VCT Plc Ordinary shares and C shares, the ﬁgures above represent a notionally adjusted NAV per share in accordance
with the relevant conversion factors listed in the shareholder information sector on the preceding page.
1
Notional dividends adjusting for conversion and assuming an investment at 100p, of Phoenix ‘C’ shares into Phoenix Ordinary shares, and relevant AIM VCT shares into
AIM VCT Ordinary shares.
2
NAV adjusted for conversion of relevant shares into AIM VCT Ordinary shares at the date of each conversion. Phoenix Ordinary shares adjusted as at the date of the merger.
3
NAV plus cumulative dividends based on NAV adjusting for conversion where appropriate, assuming an investment at 100p, showing the notional return to shareholders
based on their original investment share class.
### Octopus AIM VCT plc Annual report 2023 71
The proposed ﬁnal dividend of 2.5p will, if approved by shareholders, be paid on 10 August 2023 to shareholders on the register on
28 July 2023.
The graph below depicts the Net Asset Value (NAV) per share and the dividends that have been paid since the launch of Octopus
AIM VCT Plc for each class of share issued since that date, 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:
220p
200p
30.0p
20.0p
180p 30.0p
30.0p
30.0p
20.0p
160p
30.0p
140p 94.3p
100.4p
30.0p 30.0p 76.4p 83.3p 20.0p 40.0p
30.0p 30.0p 76.9p
120p

|  |  |  |  | 30.0p |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 20.0p |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  | 30.0p |  |  |  | 61.6p |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | 30.0p |  |  |  |  |  |  |  |  |  |  |  | 115.8p |  |  |
| 100p |  |  | 21.01p |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | 30.0p |  |  |  |  |  | 40.24p | 42.97p |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | 25.74p |  |  |  |  | 46.01p |  |  |  |  |  |  |  |  |  |  |
| 80p |  | 30.0p |  |  |  | 31.71p |  |  |  |  |  |  |  |  |  | 72.3p |  |  |  |
|  |  |  |  |  | 27.28p |  |  |  |  |  |  |  |  |  |  |  |  | 64.0p |  |
|  | 4.96p |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 71.5p |
| 60p |  | 10.15p |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  | 84.6p |  |  |  |  |  |  |  | 86.5p |  |  | 87.8p |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  | 81.3p | 83.0p |  |  |  |  |  |  |
|  | 70.8p |  |  |  |  |  | 71.0p |  |  | 75.2p |  |  |  |  | 78.5p |  |  |  |  |
|  |  |  |  | 72.2p |  |  |  | 68.1p |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | 63.9p | 63.8p |  |  | 61.4p |  |  |  |  |  |  |  |  |  |  |
| 40p |  | 56.9p |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 46.0p |  | 45.6p |  |

42.8p
33.7p
20p

| Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus | Octopus |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | AIM VCT | Phoenix | Phoenix |  |
| Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | Ordinary | ‘D’ | ‘C’ | Ordinary | VCT ‘C’ | VCT |  |
| shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 shares | 1 Ordinary |  |
| 2022/23 | 2021/22 | 2020/21 | 2019/20 | 2018/19 | 2017/18 | 2016/17 | 2015/16 | 2014/15 | 2013/14 | 2012/13 | 2011/12 | 2010/11 | 2009/10 | 2003/04 | 2000/01 | 1997/98 | 2005/06 | shares | 1 |

2002/03
Adjusted NAV (p) assuming investment at 100p Cumulative dividends paid (p)
1
Following the merger of Octopus AIM VCT and Octopus Phoenix VCT and various share re-organisations, there is now only one share class, Ordinary shares. For Ordinary
shares, ‘C’ shares and ‘D’ shares together with Octopus Phoenix VCT Ordinary shares and ‘C’ shares, the ﬁgures above represent a 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.
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 re-invest the growth in their shareholdings
and, subject to personal circumstances, beneﬁt from additional income tax reliefs.
240p Any shareholder wishing to reinvest their dividends can request a DRIS instruction form by calling Computershare on
0370 703 6325. The application form and rules can also be found in the Document Library on the Octopus website:
www.octopusinvestments.com/investors/shareholder-information/aim-vct-plc/.
Share price
The Company’s share price can be found on various ﬁnancial websites, such as www.londonstockexchange.com, by typing the
following TIDM/EPIC code in the ‘Quotes search’:
Ordinary shares
Total return (p) TIDM/EPIC code OOA
Latest share price 5 May 2023 70.5p per share
Call us on 0800 316 2295
Income tax relief (p) Cost of investment
72

Octopus AIM VCT plc Annual report 2023

# Shareholder information and contact details continued

## 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 Computershare, under the signature of the registered holder, or via the Computershare online share portal at: www-uk.computershare.com/investor/. Computershare's contact details are provided on page 74.

## 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 Investor, Shareholder Information, Octopus AIM VCT plc. Other statutory information can also be found there. For any queries regarding access to this, please call Octopus on 0800 316 2295.

## 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 a letter or 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 6325. Alternatively you can sign up to receive e-communications via the Computershare online shareholder portal: www-uk.computershare.com/investor/.

## Warning to shareholders

Many companies are aware that their shareholders have received unsolicited phone calls or correspondence concerning investment matters. These are typically from overseas based 'brokers' who target UK shareholders offering to sell them what often turn out to be worthless or high risk shares in US or UK investments. They can be very persistent and extremely persuasive. Shareholders are therefore advised to be wary of any unsolicited advice, offer to buy shares at a discount or offer for free company reports.

Please note that it is very unlikely that either the Company, Octopus or the Registrar would make unsolicited telephone calls to shareholders and that any such calls would relate only to official documentation already circulated to shareholders and would never be in respect of investment advice.

If you are in any doubt about the authenticity of an unsolicited phone call, please call Octopus on 0800 316 2295.

The Financial Conduct Authority have also issued guidelines on how to avoid share fraud and further information can be found on their website: www.fca.org.uk/consumers/scams/investment-scams/share-fraud-and-boiler-room-scams. You can report any share fraud to them by calling 0800 111 6768.
### Octopus AIM VCT plc Annual report 2023 73
## Glossary of terms
Alternative performance measure (APM) Total return (APM)
A ﬁnancial measure of historical or future ﬁnancial performance, Total return is calculated as movement in NAV per share in the
ﬁnancial position, or cash ﬂows, other than a ﬁnancial measure period plus dividends paid in the period, dividend by the NAV per
defined or specified in the applicable financial reporting share at the beginning of the period. Total return on the NAV
framework. These APMs will help shareholders to understand and per share enables shareholders to evaluate more clearly the
assess the Company’s progress. A number of terms within this performance of the Company, as it reﬂects the underlying value
glossary have been identiﬁed as APMs. of the portfolio at the reporting date.
Net asset value or NAV
The value of the Company’s total assets less liabilities. It is equal
to the total shareholders’ funds.
Net asset value per share or NAV per share
The sum of the underlying assets less the liabilities of the
Company divided by the total number of shares in issue.
Ongoing charges ratio (APM)
The ongoing charges ratio has been calculated using the AIC
recommended methodology and excludes irrecoverable VAT,
exceptional costs and trail commission. The ﬁgure shows the
annual percentage reduction in shareholder returns as a result
of recurring operational expenses. It informs shareholders
of the likely costs that will be incurred in managing the fund in
the future.
This is calculated by expressing expenses of £3,067,037 which
includes the expenses listed out in note 4 on page 56 excluding
irrecoverable VAT, exceptional costs and trail commission, as a
percentage of average net assets during the year of £144,905,501.
Call us on 0800 316 2295
### 74 Octopus AIM VCT plc Annual report 2023
## Directors and advisers

| Board of Directors | Independent Auditor |
| --- | --- |
| Neal Ransome (Chair) | BDO LLP |
| Andrew Boteler | 55 Baker Street |
| Stephen Hazell-Smith | London |
| Joanne Parfrey | W1U 7EU |

Company Number
Tax Adviser
Registered in England No: 03477519
PricewaterhouseCoopers LLP
1 Embankment Place
Legal Entity Identiﬁer (LEI)
London
213800C5JHJUQLAFP619
WC2N 6RH
Secretary and Registered Oce
VCT Status Adviser
Octopus Company Secretarial Services Limited
Shoosmiths LLP
33 Holborn
Apex Plaza
London
Forbury Road
EC1N 2HT
Reading
RG1 1SH
Investment and Administration Manager
Octopus Investments Limited
Registrar
33 Holborn
Computershare Investor Services PLC
London
The Pavilions
EC1N 2HT
Bridgwater Road
Tel: 0800 316 2295
Bristol
www.octopusinvestments.com
BS99 6ZZ
Tel: 0370 703 6325
(Calls are charged at the standard geographic rate and will vary
Custodians
by provider. Calls from outside the United Kingdom will
Octopus Investments Limited
be charged at the applicable international rate.)
33 Holborn
www.computershare.com/uk
London
www-uk.computershare.com/investor/
EC1N 2HT
Corporate Broker
Bankers
Panmure Gordon (UK) Limited
HSBC Bank Plc
40 Gracechurch Street
31 Holborn
London
London
EC3V 0BT
EC1N 2HR
Tel: 020 7886 2500
LEI: 213800C5JHJUQLAFP619
Octopus AIM VCT plc Annual report 2023

75

# Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of Octopus AIM VCT plc will be held at 33 Holborn, London, EC1N 2HT on 20 July 2023 at 10.30am for the purposes of considering and, if thought fit, passing the following resolutions, of which Resolutions 1 to 11 and 16 will be proposed as Ordinary Resolutions and Resolutions 12 to 15 will be proposed as Special Resolutions:

## Ordinary Business

1. To receive and adopt the annual report and accounts for the year to 28 February 2023.
2. To approve a final dividend of 2.5p per Ordinary share.
3. To approve the Directors' remuneration policy.
4. To approve the Directors' remuneration report.
5. To re-elect Neal Ransome as a Director.
6. To re-elect Andrew Boteler as a Director.
7. To re-elect Stephen Hazell-Smith as a Director.
8. To re-elect Joanne Parfrey as a Director.
9. 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 10, 11 and 16 as Ordinary Resolutions and Resolutions 12 to 15 as Special Resolutions:

### 10. 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 £356,985 (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 this Resolution (unless previously renewed, varied or revoked by the Company in a general meeting) but so that such authority allows the Company to make offers or agreements before the expiry thereof, which would or might require relevant securities to be allotted after the expiry of such authority.

### 11. 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 £53,547 in connection with the Company's dividend reinvestment scheme (representing approximately 3% of the Ordinary share capital in issue as at the date of this Notice) provided that the authority conferred by this Resolution shall expire on the date falling 15 months from the date of the passing of this Resolution (unless previously renewed, varied or revoked by the Company in general meeting) save that this authority shall allow the Company to make, before the expiry of this authority, any offers or agreements which would or might require shares to be allotted or rights to be granted after such expiry and the Directors may allot shares in pursuance of any such offer or agreement notwithstanding the expiry of such authority.

### 12. Empowerment to make allotments of equity securities

THAT, conditional upon the passing of Resolution 10 above, and in addition to existing authorities, the Directors of the Company be and are hereby empowered pursuant to s571 of the Act to allot or make offers or agreements to allot equity securities (as defined in s560(1) of the Act) for cash pursuant to the authority granted by Resolution 10 as if s561 of the Act did not apply to any such allotment and so that:

(a) reference to allotment of equity securities in this Resolution shall be construed in accordance with s560(2) of the Act; and
(b) the power conferred by this Resolution shall enable the Company to make any offer or agreement before the expiry of the said power which would or might require equity securities to be allotted after the expiry of the said power and the Directors may allot equity securities in pursuance of such offer or agreement notwithstanding the expiry of such power.

The power provided by this Resolution shall expire on the date falling on the earlier of the conclusion of the Company's AGM next following the passing of this Resolution and 15 months from the date of the passing of this Resolution (unless previously renewed, varied or revoked by the Company in general meeting).

Call us on 0800 316 2295
76

Octopus AIM VCT plc Annual report 2023

# Notice of Annual General Meeting continued

13. Empowerment to make allotments of equity securities under the DRIS

THAT, conditional upon the passing of Resolution 11 above and in addition to existing authorities, the Directors of the Company be and hereby are empowered pursuant to Section 571 of the Act to allot or make offers or agreements to allot equity securities (which expression shall have the meaning ascribed to it in Section 560(1) of the Act) for cash pursuant to the authority granted by Resolution 10 above, as if Section 561 of the Act did not apply to any such allotment and so that:

(a) reference to allotment of equity securities in this Resolution shall be construed in accordance with Section 560(2) of the Act; and
(b) the power conferred by this Resolution shall enable the Company to make any offer or agreement before the expiry of the said power which would or might require equity securities to be allotted after the expiry of the said power and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding the expiry of such power.

The power provided by this Resolution shall expire on the date falling 15 months from the date of the passing of this Resolution (unless previously renewed, varied or revoked by the Company in general meeting).

14. 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 1p each in the Company ('Ordinary shares') provided that:

(a) the maximum number of Ordinary shares so authorised to be purchased shall not exceed 26,756,048 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 the higher of (i) 105% of the average of the middle market quotation for an Ordinary share taken from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which the Ordinary share is contracted to be purchased; and (ii) the amount stipulated by Article 5(6) of the Market Abuse Regulation;
(d) the authority conferred comes to an end at the conclusion of the next AGM of the Company or upon the expiry of 15 months from the passing of this Resolution, whichever is the earlier; and
(e) that the Company may enter into a contract to purchase its Ordinary shares under this authority prior to the expiry of this authority which would or might be completed wholly or partly after the expiry of this authority.

15. Cancellation of share premium

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.

16. Continuation of the Company as a VCT

THAT the Company continue as a Venture Capital Trust.

By Order of the Board

Neal Ransome
Chair
6 June 2023
Octopus AIM VCT plc Annual report 2023

77

# **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 6ZZ 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 AimAGM@octopusinvestments.com. The Company may, however, elect to provide answers to questions raised within a reasonable period of days after the conclusion of the AGM.
- (g) Members satisfying the thresholds in Section 527 of the Companies Act 2006 can require the Company to publish a statement on its website setting out any matter relating to (a) the audit of the Company's accounts (including the auditor's report and the conduct of the audit) that are to be laid before the AGM; or (b) any circumstances connected with an auditor of the Company ceasing to hold office since the last AGM, that the members propose to raise at the meeting. The Company cannot require the members requesting the publication to pay its expenses. Any statement required to be placed on the website must also be sent to the Company's auditors no later than the time it makes its statement available on the website. The business which may be dealt with at the meeting includes any statement that the Company has been required to publish on its website.

Call us on 0800 316 2295
### 78 Octopus AIM VCT plc Annual report 2023
## Notice of Annual General Meeting continued
(h) Under Sections 338 and 338A Companies Act 2006, members (i) A copy of the Notice of AGM and the information required
meeting the threshold requirements in those sections have by Section 311A Companies Act 2006 is included on the
the right to require the Company: Company’s website, www.octopusinvestments.com
under Venture Capital Trusts. Copies of the Directors’ letters
(i) to give, to members of the Company entitled to receive of appointment, the register of Directors’ interests in the
notice of the meeting, notice of a resolution which may Ordinary shares of the Company kept in accordance with
properly be moved and is intended to be moved at the the Listing Rules and a copy of the Memorandum and
meeting; and/or Articles of Association of the Company will be available for
(ii) to include in the business to be dealt with at the meeting inspection at the registered oce of the Company during
any matters (other than a proposed resolution) which usual business hours on any weekday from the date of this
may be properly included in the business. notice until the AGM, and at the place of that meeting for at
least 15 minutes prior to the commencement of the meeting
A resolution may properly be moved or a matter may until its conclusion.
properly be included in the business unless:
(j) As at 5 June 2023 (being the last practicable date prior to
the publication of this Notice) the Company’s issued share
(i) (in the case of a resolution only) it would, if passed, be
capital consists of 178,492,654 Ordinary shares, carrying one
ineective (whether by reason of inconsistency with any
vote each. Therefore, the total voting rights in the Company
enactment or the Company’s constitution or otherwise);
as at 5 June 2023 are 178,492,654.
(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.
### Octopus AIM VCT plc Annual report 2023 79
Intentionally blank
Call us on 0800 316 2295
### 80 Octopus AIM VCT plc Annual report 2023
Intentionally blank
### Octopus AIM VCT plc Annual report 2023 81
Intentionally blank
Call us on 0800 316 2295
Octopus AIM VCT plc