OCTOPUS AIM VCT 2 PLC

Annual Report • Mar 12, 2025

1 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Annual report and accounts for the year ended 30 November 2024 Company number: 05528235 For UK investors only Octopus AIM VCT 2 plc Contents Financial summary and key dates 1 Strategic report • Chair’s statement 2 • Investment Manager’s review 4 • The Investment Manager 16 • Section 172 statement 18 • Business review 20 • Risk and risk management 24 Details of Directors 28 Directors’ report 29 Corporate governance report 33 Audit Committee report 37 Directors’ remuneration report 39 Directors’ responsibilities statement 42 Independent auditor’s report 43 Income statement 49 Balance sheet 50 Statement of changes in equity 51 Cash flow statement 52 Notes to the financial statements 53 Information and contact details 68 Glossary of terms 71 Directors and advisers 72 Notice of Annual General Meeting 73 Octopus AIM VCT 2 plc (the ‘Company’) is a Venture Capital Trust (VCT) which aims to provide shareholders with attractive tax-free dividends and long-term capital growth by investing in a diverse portfolio of predominantly AIM-traded companies. The Company is managed by Octopus Investments Limited (‘Octopus’ or the ‘Investment Manager’). 1 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Year to 30 November 2024 Year to 30 November 2023 Net assets (£’000) 79,062 84,690 Loss after tax (£’000) (399) (15,709) Net asset value (NAV) per share (p) 1 40.5 47.9 Dividends per share paid in year (p) 7. 2 4.1 NAV Total return (%) 2 (0.4) (15.6) Final dividend proposed (p) 3 1.8 1.8 Special dividend (p) – 3.6 Ongoing charges (%) 4 2.4 2.2 1 NAV per share is calculated on the underlying assets less liabilities of the Company divided by the number of shares, refer to page 22 for commentary on the movement. 2 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. 3 Subject to shareholder approval at the Annual General Meeting, the proposed final dividend will be paid on 29 May 2025 to shareholders on the register on 25 April 2025. 4 Ongoing charges is an alternative performance measure calculated using the AIC recommended methodology, refer to page 23 for commentary on the movement. Definitions of key terms and alternative performance measures shown above and throughout this report are shown in the Glossary of Terms on page 71. Financial summary Key dates Annual General Meeting 23 May 2025 Final dividend payment date 29 May 2025 Half-yearly results to 31 May 2025 announced August 2025 Annual results to 30 November 2025 announced March 2026 2 Octopus AIM VCT 2 plc Annual report 2024 Chair’s statement Introduction Firstly, I would like to welcome all new shareholders who have joined us in the past year. The year ending 30 November 2024 was marked by contrasting halves. The first six months experienced a positive shift in market sentiment after a prolonged period of depressed markets. Inflation hit its 2% target, UK GDP growth exceeded expectations, consumer confidence rose, and there was a surge in corporate, secondary fundraising and IPO activity, boosting UK capital markets. However, the second half of the year saw market sentiment dampened by widespread uncertainties surrounding the policies of the new Labour Government. The recovery in share prices was notably hindered by the announcement of tax changes reducing Inheritance Tax (IHT) relief on AIM shares, which slowed the rate of IPOs and further fundraisings in UK capital markets. This, coupled with ongoing geo-political conflicts in the Middle East and Europe, prolonged UK fund outflows despite the boost from interest rate cuts in August and November. Despite these challenges, opportunities to invest in innovative, growth-oriented companies persisted. AIM raised a total of £1.8 billion in new capital for both new and existing companies during the year under review, marking a 12.5% increase from the previous year. The majority of fundraisings in 2024 were for existing AIM companies seeking additional capital, totalling £1.5 billion during the review period. The Company made £4.2 million in qualifying investments, representing a 7.1% increase from the previous year. Performance Amidst this backdrop of economic, market, political, and geo- political uncertainty, the year to 30 November 2024 proved challenging for the fund. The net asset value (NAV) of the Company decreased by 0.4%, even after accounting for the 7.2p of dividends paid during the period. Over the review period, the AIM Index grew by 4.6%, compared to a 23.1% increase for the FTSE SmallCap index (excluding investment companies) and a 15.8% rise for the FTSE All-Share Index, all on a total return basis. Despite mixed overall performance, AIM continued to attract capital and support the development of innovative companies, maintaining its role as a crucial platform for small, growing businesses. However, AIM’s significant exposure to growth stocks in the software, technology, and healthcare sectors proved disadvantageous as market sentiment shifted away from smaller growth stocks, in which the portfolio is predominantly invested. However, despite the significant additional investment constraints faced by VCTs, the AIM Index remains the most suitable broad equity market index for comparative purposes, given the nature of the underlying investments. The FTSE SmallCap and All-Share indices provide a broader market context, with the weaker relative performance of AIM underscoring investors’ preference for large companies in more traditional sectors over the past three years. Dividends In November 2024 an interim dividend of 1.8p was paid to all shareholders. The Board is recommending a final dividend in respect of the year to 30 November 2024 of 1.8p per share totalling 3.6p in respect of the year, which is an 8.6% yield on the prior year closing share price of 42.1p, all paid from special distributable reserves. This is in line with our policy of maintaining a minimum annual dividend payment of 3.6p per share or a 5% yield based on the prior year closing share price, whichever is the greater. Subject to the approval of shareholders at the Annual General Meeting (AGM), the final dividend will be paid on 29 May 2025 to shareholders on the register on 25 April 2025. Shareholders are encouraged to ensure that the details held for them by the registrar remain accurate and to check whether they have received all dividends payable to them. This is particularly important for those who move house or change their bank account or email address. We are aware that some dividends remain unclaimed by shareholders, so if you believe you are impacted by this, please contact our registrar, Computershare, at the details provided on page 72. Cancellation of share premium account At the last AGM, shareholders voted to cancel share premium to increase the pool of distributable reserves by the amount of £12.0 million. This is a regular occurrence to enable the continued payment of dividends and buyback of shares. A special resolution to this effect is being proposed at Resolution 12. Dividend reinvestment scheme In common with a number of other VCTs, the Company has established a dividend reinvestment scheme (DRIS) following approval at the AGM in 2014. Some shareholders have already taken advantage of this opportunity. For investors who do not need income, but value the additional tax relief on their reinvested dividends, this is an attractive scheme and I hope that more shareholders will find it useful. Over the course of the year 5,689,493 new shares have been issued under this scheme, returning £2.5 million to the Company. The final dividend referred to above will be eligible for the DRIS. Share buybacks During the year to 30 November 2024 the Company continued to buy back shares in the market from selling shareholders and purchased 5,783,439 Ordinary shares for a total consideration of £2.5 million. We have maintained a discount of approximately 4.5% to NAV (equating to up to a 5% discount to the selling shareholder after costs), which the Board monitors and intends to retain as a policy which fairly balances the interests of both remaining and selling shareholders. Buybacks remain an essential practice for VCTs, as providing a means of selling is an important part of the initial investment decision and has enabled the Company to grow. As such, I hope you will all support the appropriate resolution at the AGM. 3 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Share issues On 23 September 2024, 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. We expect to be fully subscribed by the end of the 2025 tax year. In the year to 30 November 2024 the Company raised a total of £10.7 million after costs and a total of 24,311,327 shares were issued. Liquidity Shareholders may be interested to know that at the year end, 28.2% of the Company’s net assets were held in cash or collective investment funds including funds managed by the team at Octopus and money market funds, providing short-term liquidity. 59.7% was invested in individual quoted shares and 11.6% was held in unquoted single company investments. The proportion of the portfolio represented by unquoted shares has increased over the period, not because of additional investment in the sector, but because of strong individual performances from some of the holdings, notably Hasgrove Limited and Popsa Holdings Ltd. Shareholders should be aware that a proportion of the quoted securities may have limited liquidity owing to the size of the portfolio company and the overall proportion held by the Company. VCT status Shoosmiths LLP provide the Board and Investment Manager with advice concerning continuing compliance with HMRC regulations for VCTs. The Board has been advised that the Company is in compliance with the conditions laid down by HMRC for maintaining approval as a VCT. A key requirement is to maintain at least an 80% qualifying investment level according to HMRC definitions. As at 30 November 2024, the level was 87.1%. Annual General Meeting The AGM will take place on 23 May 2025 at 10.30am. Further information can be found in the Notice of Annual General Meeting on pages 73 to 76. The Investment Manager will provide an update on the Company’s activities and future plans at the AGM. Formal notices will be sent to shareholders by their preferred method (email or post) and shareholders are encouraged to submit their votes by proxy. We always welcome questions from our shareholders at the AGM. Please send these via email to AIMVCT2AGM@octopusinvestments.com by 5.00pm on 20 May 2025 if you are unable to attend the AGM in person. If your shares are held through a nominee account, formal notices will be sent to your nominee. Outlook Despite facing various policy, market, and economic challenges (which are referred to in more detail in the Investment Manager’s Review), AIM has shown remarkable resilience over the past year. However, recent amendments by the new Labour Government to tax reliefs for AIM investors under business relief have dampened market sentiment and reduced the appetite for investing in small growth companies. While the timeline for a potential recovery remains uncertain, the anticipated Mansion House reforms aimed at directing pension funds into UK investments could act as a significant catalyst for revitalising sentiment in UK capital markets. Market commentators continue to express cautious optimism regarding the outlook for UK capital markets in 2025, although ongoing challenges related to fund outflows and their impact on market performance persist. A more stable economic environment, supported by expected interest rate cuts in the coming months, should provide a favourable backdrop for potential market recovery. The portfolio contains 83 holdings across a range of sectors with exposure to some exciting new technologies in the environmental and healthcare sectors. Although the current market environment remains challenging for those companies in need of further funding, this can provide the Investment Manager with good opportunities to invest newly raised cash at attractive valuations. The balance of the portfolio towards profitable companies remains, with the majority of these now trading at a significant valuation discount to their long-term averages. Keith Mullins Chair 10 March 2025 4 Octopus AIM VCT 2 plc Annual report 2024 Introduction Building on a positive first half of the year, investor sentiment remained optimistic (albeit cautiously) at the start of the second half of the year, buoyed by improved UK macroeconomic data. The threat of recession diminished, inflation concerns had eased, and interest rates had finally peaked. The UK economy’s return to growth, driven by the service and manufacturing sectors, rising consumer confidence, and a robust employment market, strengthened the market recovery outlook. In August 2024, the Bank of England cut interest rates for the first time in four years, further boosting market confidence. Additionally, the new Labour Government’s commitment to a growth agenda was well received by the market. However, in the lead-up to the Autumn Budget sentiment tempered due to uncertainty over Business Property Relief (BPR) changes and its potential impact on AIM and UK capital markets. The 2024 Autumn Budget introduced significant changes to BPR, impacting inheritance tax planning and the UK capital markets. AIM-listed shares, which previously qualified for 100% BPR, will now only qualify for 50% relief, regardless of their value. The reduction in BPR for AIM shares has led to increased uncertainty among investors, particularly those focused on growth stocks. Initially, there was a sense of relief among investors that the BPR was not entirely removed. This relief led to a brief rally, with the FTSE AIM All-Share Index rising by nearly 4% on the day of the announcement. Despite the relief, there remain concerns about the reduction of this relief and its long-term impact on AIM. On a more positive note, the stable UK macroeconomic environment has improved operational performance for many portfolio companies. Furthermore, confidence in further interest rate cuts has grown and inflation remains stable, close to the Bank of England target level of 2%, providing a much-needed foundation for the growth of small companies. UK equities remain significantly undervalued compared to global peers, despite the intermittent signs of market recovery during the year under review, evidenced by increased opportunistic corporate activity, particularly on AIM. The rise in IPOs and further fundraisings has renewed interest in UK equity markets that had not been seen for a while and has encouragingly continued since the year end. The Alternative Investment Market AIM has a high exposure to growth stocks in the software, technology and healthcare sectors, which counted against it as sentiment moved against highly rated growth stocks as inflationary and recessionary pressures intensified. Although VCTs have additional investment constraints, the AIM Index is considered to be the most appropriate broad equity market index for comparative purposes, given the nature of the underlying investments. The FTSE SmallCap and All-Share indices provide wider market context. The continued movement away from growth and momentum-driven shares and subsequent weak performance of AIM versus its market peers, highlighted that investors sought value in more traditional sectors which has been the case for the last three years. The rate of IPOs on AIM remained slow, while the number of companies leaving the market throughout 2024 picked up pace. There was a total of nine IPOs on AIM over the year, compared to 14 the previous financial year. AIM ended the year with 690 companies, which was down 9.5% on the previous year. We still believe in the importance of functioning equity markets as a driver of growth in the UK, particularly at the smaller, growth company end, where the Company invests. The pipeline for new issues remains active in the new financial year and the significance of VCTs as a critical funding platform for smaller companies remains, which is evident by the flow of further fundraisings on AIM, albeit at a slower speed than previous years. In the year to 30 November 2024 AIM raised £1.8 billion of new capital for both new and existing companies, which compares to a figure of £1.6 billion the previous year. The following graph shows total fundraising by AIM companies each month throughout the year to 30 November 2024. Investment Manager’s review 5 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Funds raised on AIM (£m): December 2023-November 2024 0 50 100 150 200 250 300 350 400 NovemberOctoberSeptemberAugustJulyJuneMayAprilMarchFebruaryJanuaryDecember Year Ended Nov 2024 Year Ended Nov 2023 Source: London Stock Exchange. Performance Adding back the 7.2p of dividends paid in the year, the NAV total return was -0.4%. This compares with a rise in the FTSE AIM All-Share Index of 4.6%, a rise in the FTSE SmallCap (excluding investment companies) of 23.1% and a rise in the FTSE All-Share Index of 15.8% all on a total return basis. Poor market sentiment towards AIM growth stocks persisted in the period and the portfolio was not immune to this, though there were also company specific factors that impacted valuations. UK equity markets proved to be a particularly unforgiving place for those who failed to show financial discipline and control costs, highlighting the current lack of risk appetite, something we expect the recent and anticipated interest rate cuts this year should start to reverse. Equipmake Holdings plc was the biggest detractor to the portfolio’s performance over the year. While successful in growing revenue and getting many of its retrofit buses into operation the business struggled against the headwind of component cost volatility, incurring significantly more cost than anticipated therefore, widening losses and significantly shortening the cash runway, resulting in a need to raise further capital at dilutive levels. Scientific Digital Imaging plc saw growth stall due to a challenging macroeconomic backdrop resulting in a significant drop in its rating. Lunglife AI Inc continued to make meaningful clinical progress with successful validation of its LungLB test through a multi-site trial. Despite meeting the major milestones set out at IPO, commercialisation of this technology has taken longer than hoped, resulting in the need for cost saving measures and further fundraising. Haydale Graphene Industries plc were unable to meet revenue forecasts for the period; in response to this the business has refocused its efforts on near-term commercial opportunities and raised further capital to support them through this transition. Verici Dx plc achieved significant milestones in their agreement with Thermo Fischer generating a significant uplift in revenue for the year. Their share price fell sharply on news of a delay in local coverage determination for its Tutivia test, causing a delay to those revenues but this appears a minor setback and the long-term opportunity remains intact. Next 15 Group plc saw the loss of its largest customer for portfolio business Mach49; this was both unexpected and material to the Group causing a significant downgrade to forecasts. This setback is frustrating, but the business remains one with a global reach and strong brand portfolio capable of delivering growth going forward. 6 Octopus AIM VCT 2 plc Annual report 2024 On the positive side, many companies in the portfolio reported solid trading performances, which was reflected in their share prices and contributed positively to the portfolio’s performance. This included Breedon Group plc who traded robustly in their major regions despite difficult conditions; the business also took the long-anticipated step of expansion into the United States with the acquisition of BMC Enterprises Inc. This transaction provides the opportunity to launch a scalable third platform, in what is a growing but still fragmented market. Craneware plc saw continued growth in revenue and profits, benefitting from improved confidence in US hospitals and healthcare. The growth opportunity remains significant having formed a strategic alliance between Microsoft for a joint go to market approach, further expanding their reach. Beeks Financial Cloud Group plc delivered excellent growth in revenue and profitability, announcing significant new contract wins and extensions for its Exchange Cloud product with a number of global exchanges. The business remains in the enviable position of having new jurisdictions to target as well as being able to expand sales into their existing customers. GB Group plc made good progress against their cost and simplification initiatives, improving revenue growth, profitability and reducing net debt. Animalcare Group plc has continued to implement its growth strategy, delivering good revenue growth while maintaining margins. The most transformational element of this year for the business was the sale of Identicare and a minority stake of STEM Animal Health Inc, giving management sufficient balance sheet strength to pursue M&A opportunities. A conditional acquisition of Randlab, an Australian based equine veterinary business, was announced shortly after the Company year end. In our private company holdings, Hasgrove Limited’s valuation increased over the year due to strong operational performance and continued growth in ARR. Popsa Holdings Ltd also saw its valuation rise, having traded ahead of expectations, leading to an upgrade to the budget. The bases of valuation for unquoted holdings are set out in note 10 to the financial statements. Portfolio activity Having made seven qualifying investments at a total cost of £2.5 million in the first half of the year, we added one new qualifying investment of £0.2 million as well as four follow-on qualifying investments totalling £1.5 million in the second half of the year. We added seven new non-qualifying investments totalling £2.7 million in the second half of the year. This made a total investment of £6.9 million, of which £4.2 million was qualifying for the year, an increase on last year’s £3.9 million. Post the year end, we have invested a further £2.8 million. Of the seven first half investments, two were new investments in Strip Tinning Holdings plc and Alusid Limited. Five were follow-on investments in GenInCode plc, Verici Dx plc, Equipmake Holdings plc, PCI Pal plc and Cambridge Cognition Holdings plc. We invested in one new issue in the second half of the year, Getech Group plc. We made an investment of £0.2 million, this business provides data rich products and geographic information system solutions to support the exploration of subsurface resources, which are vital for the global energy transition. The four follow-on investments into existing holdings were Ixico plc, Rosslyn Data Technologies plc, Abingdon Health plc and Haydale Graphene Industries plc. We invested £0.4 million into Ixico plc, a leading neuroscience imaging business. We supported Rosslyn Data Technologies plc, a United Kingdom based provider of a cloud-based enterprise data analytics platform with an investment of £0.2 million. We invested £0.7 million into Abingdon Health plc, a leading international lateral flow contract research and contract development and manufacturing organisation, and a follow-on investment in Haydale Graphene Industries plc of £0.2 million, who engage in the integration of graphene and other nanomaterials into next generation industrial materials. We also invested £2.7 million into non-qualifying, main list stocks primarily to manage liquidity but also providing increased UK equity market exposure. We invested £0.4 million into GSK plc, a multinational pharmaceutical and biotechnology company; £0.4 million into Cranswick plc, a leading UK food producer; £0.4 million into WISE plc, a global payments solutions business; £0.3 million into Bytes Technology Group plc, an IT solutions and services business; £0.4 million into JTC plc, a global professional services business; £0.4 million into Ricardo plc, a global strategic, environmental and engineering consultancy group and £0.4 million into Bloomsbury Publishing plc, a leading independent publisher. During the year we sold partial holdings in three companies, two of these where we took profits into rising share prices, Beeks Financial Cloud Group plc and Judges Scientific plc. We also had full disposals of ten holdings being LoopUp Group plc, Cordel Group, Mattioli Woods plc, Renalytix plc, Cirata plc, Polarean Imaging plc, Eluceda Limited, Spectral AI Inc, Velocys plc and Clean Power Hydrogen plc. Total disposals made a £2.8 million loss over original cost and generated £2.2 million of cash proceeds. Non-qualifying investments are used to manage liquidity while awaiting new qualifying investment opportunities. We continue to hold some existing non-qualifying AIM holdings where we see the opportunity for further share price progress. During the year we increased our holdings in the FP Octopus Micro Cap Fund and the FP Octopus Future Generations Fund, investing a total of £0.9 million over the period and disposed of part of our holding in FP Octopus UK Multi Cap Income Fund for £0.5 million. Investment Manager’s review continued 7 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 VCT regulations There have been no further changes to the VCT regulations since publication of the previous set of audited accounts, however the sunset clause was extended to 2035 in the recent Autumn statement. As a reminder, the current requirements are that 30% of any funds raised should be invested in qualifying holdings within twelve months of the end of the accounting period in which the shares were issued, and the Company has to maintain a minimum of 80% of the portfolio (at HMRC value) invested in qualifying holdings. We are determined to maintain a threshold of quality and to invest where we see the potential for returns from growth. At present there has been only gradual change to the profile of the portfolio as we continue to hold the larger market capitalisation companies in which we invested several years ago as qualifying companies, or which we bought in the market prior to the rule changes, where we see the potential for them to continue to grow. In order to qualify, companies must: • have fewer than 250 full time equivalent employees; • 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 its first commercial sale (or ten years if a knowledge intensive company) if raising state aided (i.e. VCT) funds for the first time; • not receive more than £5 million state aided funds in the previous twelve months (£10 million for a knowledge intensive company from 6 April 2018), or more than the lifetime limit of £12 million (£20 million for a knowledge intensive company); and • produce a business plan to show that the funds are being raised for growth and development. Outlook and future prospects Over the past year, the AIM IPO and fundraising market has shown modest signs of recovery, a trend that has continued into the post-year-end period. The current environment presents unique opportunities to invest in innovative and growth-oriented companies at attractive valuations. The deal pipeline remains active, and we are confident that we will continue to identify compelling investments that can deliver solid capital growth over time. While the timeline for consistent market recovery remains uncertain, the anticipated Mansion House reforms aimed at directing pension funds into UK investments could serve as a significant catalyst for boosting market sentiment. Additionally, the ongoing news of takeovers involving AIM companies, along with the transition of companies from AIM to the Main Market, highlights the urgent need for participants in the UK capital markets, including regulatory bodies and the Government, to explore new and impactful initiatives that support AIM. As Europe’s largest market for small growth companies, AIM plays a crucial role in fostering innovation and economic growth in the UK and beyond. We await news of more broader capital reform initiatives in the coming months. The Octopus Quoted Companies team Octopus Investments Limited 10 March 2025 8 Octopus AIM VCT 2 plc Annual report 2024 Investment portfolio Portfolio company Sector Book cost as at 30 November 2024 £’000 Cumulative change in fair value £’000 Fair value as at 30 November 2024 £’000 Fair value movement in year £’000 % equity held by Octopus AIM VCT 2 plc % equity held by all funds managed by Octopus Fair value as a % of Octopus AIM VCT 2 plc NAV Quoted investments Breedon Group plc Construction & Building 573 3,828 4,401 1,098 0.28% 0.73% 5.57% Craneware plc Health Care Providers 479 3,131 3,610 1,078 0.44% 7.52% 4.57% Learning Technologies Group plc Support Services 701 2,101 2,802 564 0.39% 8.23% 3.54% Judges Scientific plc Electronic and Electrical Equipment 157 1,965 2,122 (152) 0.38% 0.95% 2.68% Animalcare Group plc Pharmaceuticals & Biotech 824 1,293 2,117 613 1.27% 2.07% 2.68% Netcall plc Telecommunication Services 356 1,761 2,117 540 1.31% 3.43% 2.68% IDOX plc Software & Computer Services 314 1,786 2,100 12 0.72% 13.56% 2.66% GB Group plc Software & Computer Services 337 1,742 2,079 807 0.22% 6.74% 2.63% Intelligent Ultrasound Group plc Engineering & Machinery 1,437 212 1,649 466 4.33% 10.83% 2.09% PCI-Pal plc Software & Computer Services 863 606 1,469 467 3.12% 8.90% 1.86% Beeks Financial Cloud Group plc Software & Computer Services 269 1,157 1,426 893 0.81% 2.02% 1.81% Brooks Macdonald Group plc Specialty & Other Finance 610 537 1,147 (265) 0.44% 14.37% 1.45% Vertu Motors plc General Retailers 777 340 1,117 (476) 0.57% 1.37% 1.41% Diaceutics plc Pharmaceuticals & Biotech 620 334 954 212 0.96% 2.83% 1.21% SDI Group plc Technology Hardware 119 774 893 (655) 0.00% 0.00% 1.13% EKF Diagnostics Holdings plc Health 737 155 892 (102) 0.80% 1.76% 1.13% Maxcyte Inc Pharmaceuticals & Biotech 690 199 889 (329) 0.31% 1.23% 1.12% Ixico plc Health 1,101 (292) 809 44 7. 27% 18.18% 1.02% Gamma Communications plc Telecommunication Services 183 574 757 254 0.05% 6.51% 0.96% Sosandar plc General Retailers 1,235 (535) 700 (427) 3.24% 10.74% 0.89% Pulsar Group plc Software & Computer Services 501 156 657 23 0.89% 2.13% 0.83% Eden Research plc Industrial 1,080 (449) 631 (100) 3.12% 7.79% 0.80% Next 15 Group plc Media & Entertainment 302 311 613 (465) 0.14% 11.29% 0.78% Equipmake Holdings plc Electronic and Electrical Equipment 1,414 (854) 560 (2,258) 2.98% 7.4 4% 0.71% Abingdon Health plc Medical Equipment and Services 1,077 (528) 549 (214) 4.05% 10.13% 0.69% Itaconix plc Industrial 1,059 (540) 519 (42) 3.08% 10.73% 0.66% Nexteq plc Technology Hardware 338 176 514 (220) 1.21% 3.03% 0.65% WISE plc Industrial 404 101 505 99 0.01% 0.02% 0.64% GENinCode plc Medical Equipment and Services 1,334 (834) 500 (143) 7.06% 17.66% 0.63% Cranswick plc Food Producers & Processors 404 43 447 43 0.02% 0.07% 0.56% JTC plc Investment Banking & Brokerage Services 401 21 422 21 0.02% 0.46% 0.53% Gear4music Holdings plc General Retailers 353 66 419 56 1.21% 3.02% 0.53% Bloomsbury Publishing Plc Media & Entertainment 419 (22) 397 (22) 0.07% 0.92% 0.50% Investment Manager’s review continued 9 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Portfolio company Sector Book cost as at 30 November 2024 £’000 Cumulative change in fair value £’000 Fair value as at 30 November 2024 £’000 Fair value movement in year £’000 % equity held by Octopus AIM VCT 2 plc % equity held by all funds managed by Octopus Fair value as a % of Octopus AIM VCT 2 plc NAV Oberon Investments Group plc Investment Banking & Brokerage Services 576 (208) 368 – 1.79% 8.34% 0.47% Cambridge Cognition Holdings plc Health 717 (349) 368 (251) 3.25% 8.67% 0.47% Restore plc Support Services 171 168 339 54 0.09% 12.67% 0.43% GSK plc Pharmaceuticals & Biotech 402 (66) 336 (66) 0.00% 0.00% 0.43% Ricardo plc Construction & Building 402 (73) 329 (73) 0.13% 2.30% 0.42% TPXimpact Holdings plc Support Services 653 (325) 328 (9) 0.96% 2.39% 0.41% DP Poland plc Leisure & Hotels 678 (362) 316 (16) 0.34% 0.86% 0.40% Gooch & Housego plc Electronic & Electrical 281 22 303 (44) 0.27% 11.06% 0.38% Ilika plc Energy 706 (424) 282 (338) 0.84% 2.10% 0.36% Tan Delta Systems plc Electronic and Electrical Equipment 302 (35) 267 – 1.59% 3.97% 0.34% Bytes Technology Group plc Software & Computer Services 326 (59) 267 (59) 0.03% 0.09% 0.34% RWS Holdings plc Support Services 99 160 259 (150) 0.05% 5.77% 0.33% Verici Dx plc Pharmaceuticals & Biotech 1,044 (785) 259 (498) 3.56% 8.86% 0.33% Advanced Medical Solutions Group plc Health 190 57 247 10 0.05% 13.01% 0.31% Haydale Graphene Industries plc Chemicals 1,238 (1,036) 202 (521) 4.47% 11.18% 0.26% GETECH Group plc Oil Services 200 – 200 – 6.56% 16.40% 0.25% Rosslyn Data Technologies plc Software & Computer Services 779 (581) 198 (137) 5.70% 14.26% 0.25% MyCelx Technologies Corporation Oil Services 980 (785) 195 (87) 2.23% 23.55% 0.25% Velocity Composites plc Engineering & Machinery 533 (401) 132 (100) 1.17% 2.93% 0.17% Feedback plc Software & Computer Services 1,000 (872) 128 (342) 1.53% 4.46% 0.16% Northcoders Group plc Software and Computer Services 253 (127) 126 25 1.05% 2.63% 0.16% Creo Medical Group plc Pharmaceuticals & Biotech 981 (857) 124 (128) 0.19% 1.49% 0.16% KRM22 plc Software & Computer Services 454 (331) 123 (18) 1.27% 3.18% 0.15% Crimson Tide plc Software and Computer Services 378 (258) 120 (63) 1.92% 4.79% 0.15% Gelion plc Electronic and Electrical Equipment 760 (671) 89 (39) 0.35% 0.88% 0.11% Mears Group plc Support Services 51 16 67 16 0.02% 0.16% 0.08% LungLife AI Inc Pharmaceuticals & Biotech 1,386 (1,319) 67 (563) 2.57% 6.42% 0.08% Strip Tinning Holdings plc Electronic and Electrical Equipment 337 (275) 62 (11) 1.00% 2.50% 0.08% ENGAGE XR Holdings plc Software & Computer Services 1,253 (1,196) 57 (170) 1.96% 12.14% 0.07% XP Factory plc Leisure & Hotels 659 (605) 54 (12) 0.28% 0.70% 0.07% TheraCryf plc Pharmaceuticals, Biotechnology and Marijuana Producers 700 (656) 44 (96) 2.04% 5.09% 0.06% 1Spatial plc Support Services 200 (157) 43 13 0.06% 3.61% 0.05% DXS International plc Software & Computer Services 200 (173) 27 (35) 3.90% 9.76% 0.03% Enteq Upstream plc Oil Services 687 (661) 26 (46) 0.66% 1.65% 0.03% Investment portfolio continued 10 Octopus AIM VCT 2 plc Annual report 2024 Portfolio company Sector Book cost as at 30 November 2024 £’000 Cumulative change in fair value £’000 Fair value as at 30 November 2024 £’000 Fair value movement in year £’000 % equity held by Octopus AIM VCT 2 plc % equity held by all funds managed by Octopus Fair value as a % of Octopus AIM VCT 2 plc NAV Fusion Antibodies plc Pharmaceuticals & Biotech 497 (472) 25 (14) 0.62% 1.56% 0.03% Tasty plc Leisure & Hotels 336 (326) 10 (1) 0.56% 1.19% 0.01% Genedrive plc Pharmaceuticals & Biotech 145 (141) 4 (7) 0.03% 0.08% 0.00% Microsaic Systems plc Engineering & Machinery 922 (922) – (1) 0.02% 0.04% 0.00% Sorted Group Holdings Plc Software & Computer Services 509 (509) – – 0.00% 0.00% 0.00% The British Honey Company plc General Retailers 880 (880) – – 4.74% 11.86% 0.00% Cloudified Holdings Limited Software & Computer Services 600 (600) – (13) 1.34% 3.36% 0.00% ReNeuron Group plc Pharmaceuticals & Biotech 990 (990) – (46) 2.02% 5.06% 0.00% Trackwise Designs plc Electronic & Electrical 1,289 (1,289) – – 0.28% 0.70% 0.00% Libertine Holdings plc Industrial Engineering 2,000 (2,000) – (250) 7.18% 17.96% 0.00% Total quoted investments 49,212 (2,038) 47,174 (2,666) 59.68% Unquoted equity investments Hasgrove plc 153 6,645 6,798 1,697 2.74% 17.08% 8.60% Popsa Holdings Ltd 1,060 1,109 2,169 187 4.16% 10.39% 2.74% Alusid Limited 200 – 200 – 2.09% 5.23% 0.25% Airnow plc 838 (838) – – 0.00% 0.00% 0.00% Rated People Ltd 236 (236) – – 0.07% 0.32% 0.00% The Food Marketplace Ltd 200 (200) – (55) 4.40% 10.99% 0.00% Total unquoted equity investments 2,687 6,480 9,167 1,829 11.59% Loan notes Strip Tinning Holdings plc (Loan) 600 – 600 – N/A N/A 0.76% Haydale Graphene Industries plc (Loan) 200 – 200 – N/A N/A 0.25% Total loan notes 800 – 800 – 1.01% Current asset investments FP Octopus UK Micro Cap Growth Fund 5,412 486 5,898 348 7.46% FP Octopus UK Multi Cap Income Fund 2,389 502 2,891 420 3.66% FP Octopus UK Future Generations Fund 1,384 (27) 1,357 113 1.72% Total current asset investments 9,185 961 10,146 881 12.84% Total fixed and current asset investments 67,287 Money market funds 10,564 Cash at bank 1,595 Debtors less creditors (384) Total net assets 79,062 Investment portfolio continued Investment Manager’s review continued 11 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Top ten holdings Listed below are the ten largest investments by value, comprised of eight quoted level 1 investments which are valued at bid price and two level 3 investments which are valued in accordance with International Private Equity and Venture Capital Valuation (IPEV) guidelines and approach set out in note 10 on pages 59 to 61, as at 30 November 2024: Hasgrove Limited (unquoted) Hasgrove is a provider of digital communication services. The company is the owner of Interact, a software company that provides a range of products and services to improve communication and collaboration within large organisations. The company operates globally with a growing customer base across Europe, North America and Australia. Initial investment date: Cost: Valuation – see note 10 to the financial statements: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last audited accounts: Revenue: Profit before tax: Net assets: Dividends received in year: November 2008 £153,000 £6,798,000 2.74% 8.60% 31 December 2023 £37 million £9.9 million £13.3 million £nil Breedon Group plc Breedon Group is a supplier of a wide range of materials to the construction industry. Breedon is a leading independent construction materials group, operating in the UK, Ireland and the USA. The company produces cement, aggregates, asphalt, ready mixed concrete, Welsh slate and specialist concrete clay products. The company benefited from a series of acquisitions and now employs 4,450 people with more than 320 operational sites. Breedon’s strategy is to continue growing through organic improvement and consolidation of the UK’s building materials sector. Initial investment date: Cost: Valuation at bid price: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last audited accounts: Revenue: Profit before tax: Net assets: Dividends received in year: August 2010 £573,000 £4,401,000 0.28% 5.57% 31 December 2023 £1,487.5 million £134.4 million £1,043.8 million £0.13 million 12 Octopus AIM VCT 2 plc Annual report 2024 Craneware plc Craneware is the leading provider of optimal operational performance systems and services for the US Healthcare industry. The company engages in the provision of software and support services for the healthcare industry, and aims to transform healthcare businesses through its applications and industry-leading team of experts who examine operational, financial, and clinical data to provide valuable insights. The company’s services and solutions include patient engagement, charge capture and pricing, claims analysis, revenue recovery and retention, and cost analytics. Initial investment date: Cost: Valuation at bid price: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last audited accounts: Revenue: Profit before tax: Net assets: Dividends received in year: September 2007 £479,000 £3,610,000 0.44% 4.57% 30 June 2024 $189.3 million $15.7 million $363.9 million £0.05 million Learning Technologies Group plc Learning Technologies is a group of businesses who provide innovative learning technology solutions. The company’s businesses are at the forefront of innovation and best practice in the learning technology sector, and have received numerous awards for their exceptional performance. Through its portfolio of brands, the company offers large organisations a new approach to digital learning and talent management. The company benefited from a series of material acquisitions and now has several locations across the UK, Europe, the United States, Asia-Pacific and South America. Initial investment date: Cost: Valuation at bid price: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last audited accounts: Revenue: Profit before tax: Net assets: Dividends received in year: June 2011 £701,000 £2,802,000 0.39% 3.54% 31 December 2023 £562.3 million £45.6 million £427.2 million £0.05 million Popsa Holdings Ltd (unquoted) Popsa is a developer of consumer mobile applications for printing photos in photobooks and other gifting products. The app is now available in 50 countries around the globe and has been translated into 10 different languages. Popsa is a pioneer in the use of narrow AI technology for the personalised gift market. Initial investment date: Cost: Valuation – see note 10 to the financial statements: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last audited accounts: Revenue: Loss before tax: Net assets: Dividends received in year: February 2018 £1,060,000 £2,169,000 4.16% 2.74% 31 December 2023 £27.5 million £0.9 million £11.2 million £nil Top ten holdings continued Investment Manager’s review continued 13 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Judges Scientific plc Judges Scientific specialises in the acquisition and development of a portfolio of scientific instrument businesses. The Group’s companies are primarily UK based with products sold worldwide to a diverse range of markets including: higher education institutions, manufacturers and regulatory authorities. The Group is made up of over 20 businesses offering the design, manufacture, and sale of highly specialised scientific instruments. It has an excellent track record of delivering organic and acquisitive growth. Its approach is to bring profitable companies with niche products and established reputations under the Group umbrella and provide the environment in which to thrive and grow. Initial investment date: Cost: Valuation at bid price: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last audited accounts: Revenue: Profit before tax: Net assets: Dividends received in year: May 2012 £157,000 £2,122,000 0.38% 2.68% 31 December 2023 £136.1 million £13.4 million £82.6 million £0.03 million Animalcare Group plc Animalcare Group is an international animal health business which operates primarily in the veterinary pharmaceutical and services sectors. The company has a direct commercial presence in seven European countries and exports to around 40 countries in Europe and worldwide. Initial investment date: Cost: Valuation at bid price: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last published accounts: Revenue: Profit before tax: Net assets: Dividends received in year: December 2007 £824,000 £2,117,000 1.27% 2.68% 31 December 2023 £74.4 million £3.5 million £77.9 million £0.04 million Netcall plc Netcall is a UK-based enterprise software company is a leading provider of intelligent automation and customer engagement software and helps organisations achieve digital transformation by automating workflows and managing customer interactions to enable significant cost savings and better experiences. Initial investment date: Cost: Valuation at bid price: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last audited accounts: Revenue: Profit before tax: Net assets: Dividends received in year: July 2010 £356,000 £2,117,000 1.31% 2.68% 30 June 2024 £39.1 million £6.3 million £40.5 million £0.02 million Top ten holdings continued 14 Octopus AIM VCT 2 plc Annual report 2024 IDOX plc IDOX engages in the development and supply of information and knowledge management products and services. It operates through Public Sector Software and Engineering Information segments. The Public Sector Software segment focuses on delivering specialist information management solutions and services to the public sector. The Engineering Information Management is involved in engineering document management and control solutions to asset intensive industry sectors. Initial investment date: Cost: Valuation at bid price: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last published accounts: Revenue: Profit before tax: Net assets: Dividends received in year: May 2008 £314,000 £2,100,000 0.72% 2.66% 31 October 2024 £73.3 million £7.8 million £73.3 million £0.02 million GB Group plc GB Group is a leading specialist in identity (ID) verification. Recognised as a global leader, GB Group is a technology specialist in fraud, location and identity data intelligence. Its software helps companies and governments to fight fraud and cybercrime, lower the cost of compliance and improve the experience for onboarding new customers in today’s digital economy. Initial investment date: Cost: Valuation at bid price: Equity held by Octopus AIM VCT 2 plc: Fair value as a % of NAV: Last audited accounts: Revenue: Loss before tax: Net assets: Dividends received in year: November 2011 £337,000 £2,079,000 0.22% 2.63% 31 March 2024 £277.3 million £50.4 million £625.1 million £0.02 million Top ten holdings continued Investment Manager’s review continued 15 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Sector analysis The graph below shows the top ten sectors the equity portfolio was invested in by value as at 30 November 2024. It also shows the sectors of the AIM market as a whole as at 30 November 2024: 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% AIM market AIM VCT 2 plc Other 1 Retailers Health Care Providers Food Producers Pharmaceuticals, and Biotechnology Telecommunications Service Providers Electronic and Electrical Equipment Industrial Support Services Construction and Materials Software and Computer Services The graph below shows the top ten sectors the equity portfolio was invested in by value as at 30 November 2023. It also shows the sectors of the AIM market as a whole as at 30 November 2023: 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% AIM market AIM VCT 2 plc Other Industrial Support Services Media Investment Banking and Brokerage Services Retailers Construction and Materials Medical Equipment and Services Pharmaceuticals and Biotechnology Health Care Providers Electronic and Electrical Equipment Software and Computer Services 1 Other sectors include Technology Hardware and Equipment, Finance and Credit Services, Investment Banking and Brokerage Services, Oil, Gas and Coal, Travel and Leisure, Alternative Energy, Chemicals. 16 Octopus AIM VCT 2 plc Annual report 2024 The Investment Manager Personal service Octopus was established in 2000 and has a strong commitment to both smaller companies and to VCTs. Octopus also acts as Investment Manager to four other listed investment companies and has a total of over £10 billion of funds under management across all products. If you have any questions about this report, or if it would help to speak to one of the fund managers, please do not hesitate to contact us on 0800 316 2295. The Quoted Companies team of Octopus comprises: Freda Isingoma Freda is the lead manager of the Octopus AIM VCTs. Freda started her career as an investment analyst at Charterhouse CCF before joining Close Brothers in 2001 focused on managing the AIM VCT, inheritance tax and smaller companies portfolios. In 2008 she moved to South Africa to join Investec Asset Management, where she co-managed the Africa Fund (a listed equity portfolio investing across Africa). In 2010 she ventured into entrepreneurship launching a beauty service brand in South Africa, and more recently a UK based art investment business specialising in providing ecosystem impact solutions for the African art market. She joined Octopus in January 2022 and is focused primarily on the AIM VCT portfolios. Freda also provides investment management support across all the Quoted Companies team products. Kate Tidbury Kate is a senior fund manager on the Quoted Companies team 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 (now Panmure Liberum). 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 products. 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 products. Martin Jager Martin is an Investment Analyst on the Octopus Quoted Companies team, primarily providing analytical and investment management support across the AIM VCTs as well as assisting on all wider team mandates. He initially joined Octopus in 2021 as a member of the Finance team and is a Chartered Accountant and graduate from the University of Manchester with a degree in International Management with American Business Studies. Dominic Weller Dominic is a senior 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. Richard Power With overall responsibility for the Quoted Companies team at Octopus, Richard has over 25 years’ experience of smaller company investing. He is lead manager of the FP Octopus UK Micro Cap Growth Fund, also oversees the investment process of the team which includes the AIM IHT portfolios, and AIM VCTs. Richard is also a co-manager on the FP Octopus UK Multi Cap Income and FP Octopus UK Future Generation Funds. Richard started his career in 1995 at Duncan Lawrie, where he managed a small companies fund. He subsequently joined Close Brothers to manage a smaller companies investment trust before moving to Octopus Investments Limited to head up the Quoted Companies team in 2004. Richard was awarded Trustnet FE fundinfo Alpha Manager status in 2022 acknowledging his proven track record. Chris McVey Chris is a Senior Fund Manager within the Octopus Quoted Companies team. He works across all desk portfolios and is lead manager on the FP Octopus UK Multi Cap Income Fund, and a co-manager on the FP Octopus UK Micro Cap Growth and FP Octopus UK Future Generation Funds. He has been a specialist within the quoted UK Smaller Company market for over 20 years. In 2016 he joined Octopus from Citigroup where he led the UK Small and Mid-Cap Equity research team focusing across a variety of sectors. Prior to this he spent almost seven years on the Smaller Companies team at Gartmore Investment Management as an analyst and investment manager. Chris was awarded Trustnet FE fundinfo Alpha Manager status in 2023. Edward Griffiths Edward is an experienced portfolio manager, with a City career spanning over 21 years. Having previously worked at Schroders Investment Management Pension Funds and State Street, he joined Octopus Investments in 2004 to launch the Company’s AIM Inheritance Tax Service. Edward is involved primarily in the management of the AIM Inheritance Tax Service portfolios for private individuals and provides investment management and trading support across all the Quoted Companies team products. Jessica Bourdon-Pierre 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. 17 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Charles Lucas Charles joined Octopus in 2011 from LV= Asset Management, having previously worked in the Personal Pensions and SIPP space for GE Life and LV=. Charles initially joined Octopus as a member of the operations team, later working as a Project Manager for MiFID II. He joined the Quoted Companies team as a Product Development Analyst to enhance trading capabilities and performance analytics. Ross MacSween Ross is a Junior Investment Analyst on the Octopus Quoted Companies team, primarily providing analytical and investment management support across the OEIC offerings as well as assisting on all wider team mandates. He is an Accounting and Finance graduate from Edinburgh University and initially joined Octopus in 2022 on a sales and operations rotation programme. Ben Tyson Ben is a Product Analyst on the Octopus Quoted Companies team and is focused on strengthening the team’s trading capabilities, performance analytics and operational efficiencies. Ben joined Octopus Investments in 2017, as a member of the operations team. He joined from PwC’s Investment Management Tax team and previously worked within the Share Dealing and Share Plans businesses at Capita. He joined the Quoted Companies team in December 2023 having moved from the Investment Operations team where he was a Settlements Subject Matter Expert (SME). The Investment Manager and Responsible Investment Octopus is an accredited B Corp and signatory to the internationally recognised Principles for Responsible Investment, demonstrating Octopus’ commitment to responsible investment and to creating a more sustainable financial system. The Investment Manager believes that in the future, some of the most successful companies will be a force for good, and that in today’s hyperconnected transparent world, how a company behaves is just as important as what it does. Mission While the Company doesn’t target specific sustainability goals or objectives, the Investment Manager looks for companies which will play an integral role in our future. The purpose of a VCT is to provide capital for small growth companies. Companies exposed to the new economy and technologies make up a significant proportion of the portfolio, which includes those focused on building a sustainable planet, revitalising healthcare, and empowering people. Examples of this include: • Gelion – global energy storage innovator specialising in the next generation of safe stationary storage technology to maximise reliable energy storage solutions to stand alone power systems. • Mycelx – provider of clean water technology equipment and related services to the oil and gas, power, marine, and heavy manufacturing sectors. • Learning Technologies – a market leader in the fast-growing workplace digital learning and talent management market. • Diaceutics – provider of end-to-end solutions for the launch of precision medicine diagnostics. Materiality of risks to investments As part of the investment process, the Investment Manager incorporates a material risk review of sustainability issues. These risks include: • Environmental: emissions, energy management, waste, ecological impact; • Social: privacy, security, product quality, selling practices; • Human: labour, health and safety, diversity; • Business model: product design, supply chain, material sourcing and • Leadership: ethics, competitive behaviour, regulatory, critical incidents, and risk management. The Investment Manager considers the exposure to these risks and how well portfolio companies are managing them. Disclosures relating to climate risks are set out in ‘climate-related matters’ on pages 26 and 27. Responsibility As part of the investment management approach, the Investment Manager’s team discuss the portfolio companies’ strategy, financial performance, data disclosures, capital structure and corporate governance with their management teams. Existing governance structures may not be mature (given the small size of portfolio companies), so the team assess whether weaknesses exist and if the company management can address these weaknesses. The team take part in consultations on remuneration and challenge portfolio companies’ Non- Executive Directors to align with company objectives, aiming to influence by giving feedback to corporate advisers and meeting with Non-Executive Directors and voting on resolutions at general meetings. When it comes to voting, all holdings are covered by Institutional Shareholder Services (ISS), a leading global advisory firm. The team consider the independent research ISS provides and discuss votes as a team to create long-term shareholder value. 18 Octopus AIM VCT 2 plc Annual report 2024 Introduction The purpose of the report is to provide shareholders with sufficient information to enable them to assess the extent to which the Directors have performed their legal duty to act in good faith and to promote the success of the Company in accordance with Section 172 of the Companies Act 2006 for the benefit of shareholders as a whole, as set out in the strategic report. KPIs on performance are on pages 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 requires a director to have regard, amongst other matters, to the: • likely consequences of any decisions in the long term; • need to act fairly as between members of the company; • need to foster the company’s business relationships with suppliers, customers and others; • impact of the company’s operations on the community and environment; • desirability of the company maintaining a reputation for high standards of business conduct; and • interests of the company’s employees. In discharging the Board’s Section 172 duties regard has been given to the above factors. The Board also has regard to other factors where relevant. By considering the Company’s purpose and objectives together with its strategic priorities and having a process in place for decision-making, the Board aims to ensure that decision making is consistent and predictable. As a Venture Capital Trust, Octopus AIM VCT 2 plc has no employees. However, the Directors also assessed the impact of the Company’s activities on other stakeholders. The Company considers its shareholders, the Investment Manager, portfolio companies and other service providers to be its key stakeholders. Shareholder engagement Shareholder engagement is given high priority by the Board. The Company engages with its shareholders via various media including, but not limited to, the AGM, the Investment Manager shareholder presentation provided at the AGM, the annual and half-year reports 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. The voting results from all General Meetings are published on the Company’s website. The Board regularly disseminates information to shareholders, including a weekly NAV and through RNS releases on the London Stock Exchange. Shareholders receive the annual report and accounts which aims to provide a full understanding of the Company’s activities and results. This information, together with the half-yearly reports, prospectus and other shareholder information, is published via the London Stock Exchange and on the Octopus website at www.octopusinvestments.com. The Board always welcome questions from our shareholders at the AGM. To ensure we are able to respond to any questions you may have, for either the Investment Manager or the Board, we would request that you please send these via email to AIMVCT2AGM@octopusinvestments.com by 5.00pm on 20 May 2025. 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, ensuring an open dialogue. At every Board meeting a review of financial and operational performance, as well as legal and regulatory compliance, is undertaken. The Board also reviews other areas over the course of the financial year, including: the Company’s business strategy; key risks; stakeholder-related matters; diversity and inclusivity; environmental matters; corporate responsibility; and governance. The Board formally reviews the performance of the Investment Manager on an annual basis. All Board members complete a questionnaire and discuss the findings before concluding. Engagement with portfolio companies The Company’s performance is directly linked to the performance of its underlying portfolio companies. The Board has delegated the monitoring of its portfolio companies to the Investment Manager which engages with portfolio companies through a programme of regular company meetings as part of its investment process. The Board has also given the Investment Manager discretionary authority to vote on portfolio company resolutions on its behalf as part of its approach to corporate governance. Section 172 statement 19 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Engagement with other key stakeholders and environment The Investment Manager is a key business partner with responsibility for the provision of investment management, administration, custody and company secretarial services. During the period the Board received sufficient information to assist in understanding the interests and views of the Company’s key stakeholders, investors, portfolio companies and service providers to the Company, including the auditor, lawyers and registrar. The Board recognises the importance of responsible investment and the Octopus Group, of which the Investment Manager forms a part, was certified as a B Corp in February 2021. B Corp certification is a designation that a business is meeting high standards of verified performance, accountability and transparency on factors from employee benefits and charitable giving to supply chain practices and input materials. Certified B Corps are recognised as leaders in the global movement for an inclusive, equitable and regenerative economy. The Investment Manager is continuing to develop processes and practices that deliver on its approach to responsible investment, as set out in the responsible investment policy. This includes the development and implementation of internal processes and checks in line with the UN Principles of Responsible Investing. The Investment Manager continues to monitor the ESG practices of existing portfolio companies and over the coming year the Investment Manager shall review our portfolio to confirm our compliance with these expectations. An example of this is the ongoing assessment of the carbon emission levels of companies within the portfolio, and their progression towards furthering sustainability and environmental goals regarding net zero ambition and decarbonisation. Key decisions made during the year Some of the key decisions made by the Company during the year that required the Board to take into consideration Section 172 factors include: • In line with the Company’s objectives, on 23 September 2024, the Board issued an offer for subscription of shares. This was discussed with the Investment Manager, and allowed new and existing shareholders to invest in the Company. • The Company continued to buy back shares, providing liquidity to shareholders who wished to sell their shares. The Board maintained a discount of approximately 4.5% to NAV, therefore balancing the interests of both remaining and selling shareholders. • The Board looks to create shareholder value. During the year, following targets agreed with the Investment Manager, dividends totalling 7.2p were paid to shareholders (comprising a final dividend of 1.8p and special dividend of 3.6p, in respect of the previous financial year, and an interim dividend of 1.8p). 20 Octopus AIM VCT 2 plc Annual report 2024 The Company’s objective The objective of the Company is to invest in a broad range of Alternative Investment Market (AIM) or Aquis Stock Exchange (AQSE) traded companies in order to provide shareholders with attractive tax-free dividends and long-term capital growth. Investments are made selectively across a range of sectors in companies that have the potential to grow and enhance their value. The Company has been approved as a Venture Capital Trust by HMRC under Section 259 of the Income Tax Act 2007, as amended. The shares of the Company were first admitted to the Official List of the UK Listing Authority and trading on the London Stock Exchange on 25 January 2006 and can be found under the TIDM code ‘OSEC’. The Company is main market premium listed. Investment policy The Company’s investment policy has been designed to enable it to comply with the VCT qualifying conditions. The Board intends that the long-term disposition of the Company’s assets will be not less than 85% in a portfolio of qualifying AIM, AQSE exchange traded investments or unquoted companies where in the short to medium term, the management is planning an initial public offering (IPO) on AIM or AQSE. The non-qualifying balance will be invested in permitted investments held for short-term liquidity, generally comprising short-term cash or money market deposits with a minimum Moody’s long-term debt rating of ‘A’, authorised funds, including those managed by Octopus, or directly in equity investments and bonds. This provides a reserve of liquidity which should maximise the Company’s flexibility as to the timing of investments, disposals, dividend payments and share buybacks. Risk is spread by investing in a number of different businesses across a range of industry sectors. The maximum amount invested in any one company is limited to the amount permitted pursuant to VCT legislation in a fiscal year and no more than 15% of the value of its investment at the time of investment. The value of an individual investment is expected to increase over time as a result of trading progress and a continuous assessment is made of its suitability for sale. However, shareholders should be aware that the Company’s qualifying investments are held with a view to long-term capital growth as well as income and will often have limited marketability; as a result it is possible that individual holdings may grow in value to the point where they represent a significantly higher proportion of total assets prior to a realisation opportunity being available. The Company’s Articles permit borrowings of amounts up to 10% of the adjusted share capital and reserves (as defined in the Company’s Articles). However, investments will normally be made using the Company’s equity shareholders’ funds and it is not intended that the Company will take on any borrowings. No material changes may be made to the Company’s investment policy described above without the prior approval of shareholders by the passing of an Ordinary Resolution. The Directors will continually monitor the investment process and ensure compliance with the investment policy. Future prospects The Company’s longer-term stewardship of assets has allowed the Company to maintain the dividend payments to shareholders in line with the dividend policy set out on page 2. The Board believes the Company’s business model will enable it to continue to deliver the targeted regular tax-free annual dividends referred to in the Chair’s Statement. The Company has a strong cash position which enables investment in new companies and support for existing companies. The outlook statements in both the Chair’s Statement and the Investment Manager’s Review, on pages 3 and 7 respectively, provide further details on the more immediate prospects of the Company. Performance The Board is responsible for the Company’s investment strategy and performance, although the management of the Company’s investment portfolio is delegated to Octopus through the investment management agreement, as referred to in the Directors’ Report. The graph on page 21 compares the total return of the Company over the period from 1 March 2006 to 30 November 2024 with the total return from notional investments in the FTSE AIM All-Share Index, FTSE All-Share index, and the FTSE SmallCap (ex-investment companies) Index over the same period. The FTSE AIM All-Share Index is a stock market index consisting of all companies quoted on the Alternative Investment Market and the FTSE SmallCap Index is an index of small market capitalisation companies. The Directors consider these to be the most appropriate in helping shareholders benchmark returns from the Company but would remind investors that approximately 15% of the FTSE AIM All- Share Index is attributable to resources, mining, investment companies and property stocks which VCTs cannot invest in. VCTs are also limited to investing into companies with certain size and age restrictions. The inclusion of the FTSE All-Share Index is to provide a wider stock market context. Investors should be reminded that shares in VCTs generally continue to trade at a discount to the NAV of the company. Business review 21 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Comparative portfolio performance 310 290 270 250 230 210 190 170 150 130 110 90 70 50 30 Value of £100 investment (£) FTSE All-Share total return, based on £100 notional investment on 1 March 2006 and the reinvestment of all income FTSE SmallCap ex investment trusts total return, based on £100 notional investment on 1 March 2006 and the reinvestment of all income FTSE AIM All-Share total return, based on £100 notional investment on 1 March 2006 and the reinvestment of all income NAV return plus reinvestment of all dividends (excluding up-front tax relief), based on notional investment of £100 on 1 March 2006 Nov 06 Nov 07 Nov 08 Nov 09 Nov 10 Nov 11 Nov 12 Nov 13 Nov 14 Nov 15 Nov 16 Nov 17 Nov 18 Nov 19 Nov 20 Nov 21 Nov 22 Nov 23 Nov 24 – – – – – – – – – – – – – – – – – – – Results and dividends Year ended 30 November 2024 £’000 Year ended 30 November 2023 £’000 Loss attributable to shareholders (399) (15,709) Distributions: Interim dividend paid 1.8p (2023 – 1.8p) 3,502 2,927 Special dividend paid nil (2023 – 3.6p) – 6,605 Final dividend proposed/paid 1.8p (2023 – 1.8p) 3,517 3,302 The proposed final dividend of 1.8p for the year ended 30 November 2024 will be paid on 29 May 2025 to shareholders on the register on 25 April 2025 subject to approval at the AGM being held on 23 May 2025. The above proposed final dividend is based on the number of shares in issue at the date of this report. 22 Octopus AIM VCT 2 plc Annual report 2024 Key performance indicators (KPIs) As a VCT, the Company’s objective is to provide shareholders with attractive dividends and capital return by investing its funds in a broad spread of predominantly quoted UK companies which meet the relevant criteria for VCTs. The Board has identified five key performance measures to assess the Company’s success in meeting these objectives. Some of these are classified as alternative performance measures (APMs 1 ) in line with Financial Reporting Council (FRC) guidance. The Glossary of terms on page 71 has further details: 1. NAV per share; 2. Total return per share 1 ; 3. dividends per share paid in the year; 4. total ongoing charges 1 ; and 5. qualifying % under VCT rules. 1. NAV per share The NAV per share of the Company is the sum of the underlying assets less the liabilities of the Company divided by the total number of shares in issue. Current year (pence per share) Prior year (pence per share) Reason for movement 40.5 47.9 The NAV per share has decreased by 7.4p from last year’s value of 47.9p to 40.5p. This decrease of 15.4% is largely the result of dividends paid out in the period. 2. Total return per share 1 Total return is calculated as movement in NAV per share in the period plus dividends paid in the period, divided by the NAV per share at the beginning of the period. Total return on the NAV per share enables shareholders to evaluate more clearly the performance of the Company, as it reflects the underlying value of the portfolio at the reporting date. This is the most widely used measure of performance in the VCT sector. Current year % Prior year % Reason for movement (0.4) (15.6) As previously considered, the NAV per share has decreased from last year’s value of 47.9p to 40.5p. This gave a total return of -0.4% or a loss of 0.2p per share, after adding back dividends of 7.2p paid in the year. 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 page 21. In the year under review the FTSE SmallCap Index increased by 23.1% and the FTSE All-Share Index rose by 15.8%, all on a total return basis. These indices have been adopted as comparative indices. Further details on performance can be found within the Investment Manager’s Review on pages 4 to 15. 3. Dividends per share paid in the year The Company has a target of paying an annual dividend of 3.6p per share or a 5% yield based on the prior year-end share price, whichever is greater at the time. Current year (pence per share) Prior year (pence per share) Reason for movement 7.2 4.1 This year the dividends paid were higher due to a special dividend of 3.6p made following a large sale from the portfolio in the year. The 3.6p of dividends paid in the year maintains the minimum of 5% dividend yield target. The proposed final dividend of 1.8p gives a total dividend in respect of the year of 3.6p, which is a yield of 8.6% based on the share price of 42.1p at the prior year end, 1 These KPIs are defined as alternative performance measures (APMs) and are defined in more detail on the Glossary of terms on page 71. Business review continued 23 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 in line with the Board’s policy of paying the higher of a 5% yield or 3.6p of dividends in the year. Dividends are paid semi-annually. It remains the intention of the Board to continue this policy, subject to available cash and distributable reserves. However, this is not a guarantee, and no projection or forecast is expressed or implied. 4. Ongoing charges 1 The ongoing charges ratio has been calculated using the AIC recommended methodology and excludes exceptional costs and trail commission. Current year % Prior year % Reason for movement 2.4 2.2 The ongoing charges ratio has increased from the previous year due to decreased net assets. There are a number of costs involved in operating a VCT, these expenses are outlined in note 4 on page 56. The Company has an expense cap of 3.5%. The ongoing charges have been lower than the expense cap for the current and prior year, which is in line with the Board’s expectations. 5. Qualifying % under VCT rules The Company must comply with VCT legislation laid down by HMRC. A key requirement is to maintain at least an 80% qualifying investment level. This percentage is calculated using a formula based on HMRC rules. Current year % Prior year % Reason for movement 87.1 85.4 87.1% (as measured by HMRC rules) by value of the Company’s investments by shares or securities comprised in qualifying holdings of the Company. The qualification level has increased by 1.7% due to higher deployment and lower disposals made in the current year, so more investments are contributing to the 80% qualifying investment level. Further details on VCT regulations can be found within the Investment Manager’s Review on page 7. The Company has continued to meet the 80% qualification investment level. There continues to be sufficient investment opportunities to enable the Investment Manager to comply with these ratios. The Chair’s Statement, on pages 2 and 3, includes a review of the Company’s activities and future prospects; further details are also provided within the Investment Manager’s Review on pages 4 to 15. Viability statement As part of their continuing programme of monitoring risk the Directors have assessed the prospects of the Company over a longer period than the minimum of twelve months required by the ‘going concern’ provision. The Board conducted this review for a period of five years, which was considered to be a reasonable time horizon given that the Company has raised funds under an offer for subscription and, under VCT rules, subscribing investors are required to hold their investment for a five-year period in order to benefit from the associated tax reliefs. The Board regularly considers the Company’s strategy, including investor demand for the Company’s shares, and a five-year period is considered to be a reasonable time horizon for this. The Board carried out a robust assessment of the emerging and principal risks facing the Company and its current position. This includes the impact of economic, market, political, and geo-political uncertainty and any other risks which may adversely impact its business model such as future performance, solvency or liquidity. Particular consideration was given to the Company’s reliance on, and close working relationship with, the Investment Manager and the ability to raise new capital. The principal risks faced by the Company and the procedures in place to monitor and mitigate them are set out on pages 24 and 25. The Board has also considered the liquidity of the underlying investments and the Company’s cash flow projections and found these to be realistic and reasonable. The Company’s cash flow includes cash equivalents which are short-term, highly liquid investments. Based on the above assessment the Board confirms that it has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the five-year period to 30 November 2029. 1 These KPIs are defined as alternative performance measures (APMs) and are defined in more detail on the Glossary of terms on page 71. 24 Octopus AIM VCT 2 plc Annual report 2024 Principal risks, risk management and regulatory environment The Board carries out a regular review of the risk environment in which the Company operates. The Board seeks to mitigate risks by setting policy, reviewing performance and monitoring progress and compliance. In the mitigation and management of these risks, the Board applies the principles detailed in the Financial Reporting Council’s Guidance on Risk Management, Internal Control and Related Financial and Business reporting. Detailed below are what the Board deems to be the principal risks of the Company and the mitigating actions in relation to those risks. Risk Mitigation Investment risk: The focus of the Company’s investments is into VCT qualifying companies quoted on AIM and the AQSE exchange, which by their nature entail a higher level of risk and lower liquidity than investments in larger quoted companies. The Investment Manager has significant experience and a strong track record of investing in AIM and AQSE companies, and appropriate due diligence is undertaken on every new investment. The overall risk in the portfolio is mitigated by maintaining a wide spread of holdings in terms of financing stage, age, industry sector and business models. The Board reviews the investment portfolio with the Investment Manager on a regular basis. VCT qualifying status risk: The Company is required at all times to observe the conditions for the maintenance of HMRC-approved VCT status. The loss of such approval could lead to the Company and its investors losing access to the tax benefits associated with VCT status and, in certain circumstances, to investors being required to repay the initial income tax relief on their investment. Prior to investment, the Investment Manager seeks assurance that the investment will meet the legislative requirements for VCT investments. On an ongoing basis, the Investment Manager monitors the Company’s compliance with VCT regulations on a current and forecast basis to ensure ongoing compliance with VCT legislation. Regular updates are provided to the Board throughout the year. The VCT status adviser formally reviews the Company’s compliance with VCT regulations on a bi-annual basis and reports its results to the Board and Investment Manager. Operational risk: The Board is reliant on the Investment Manager to manage investments effectively, and manage the services of a number of third parties, in particular the registrar and tax advisers. A failure of the systems or controls at the Investment Manager or third-party providers could lead to an inability to provide accurate reporting and to ensure adherence to VCT and other regulatory rules. The Board reviews the system of internal control, both financial and non-financial, operated by the Investment Manager (to the extent the latter are relevant to the Company’s internal controls). These include controls that are designed to ensure that the Company’s assets are safeguarded and that proper accounting records are maintained, as well as any regulatory reporting. Feedback on other third parties is reported to the Board on at least an annual basis, including adherence to service level agreements where relevant. Information security: A loss of key data could result in a data breach and fines. The Board is reliant on the Investment Manager and third parties to take appropriate measures to prevent a loss of confidential customer information. Annual due diligence is conducted on third parties by the Investment Manager which includes a review of their controls for information security. The Investment Manager has a dedicated information security team and a third party is engaged to provide continual protection in this area. A security framework is in place to help prevent malicious events. The Investment Manager reports to the Board on an annual basis to update them on relevant information security arrangements. Significant and relevant information security breaches are escalated to the Board when they occur. Economic: Events such as an economic recession, movement in interest rates, inflation, political instability and rising living costs could cause volatility in the market, adversely impacting the valuation of investments. This could result in a reduction in the value of the Company’s assets. The Company invests in a diverse portfolio of companies across a range of sectors, which helps to mitigate against the impact of poor performance in any one sector. The Company also maintains adequate liquidity to ensure that it can continue to provide follow-on investment to those portfolio companies which require it and which is supported by the individual investment case. The Investment Manager monitors the impact of macroeconomic conditions on an ongoing basis and provides updates to the Board at least quarterly. Risk and risk management 25 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Legislative: A change to the VCT regulations could adversely impact the Company by restricting the companies the Company can invest in under its current strategy. Similarly, changes to VCT tax reliefs for investors could make VCTs less attractive and impact the Company’s ability to raise further funds. Failure to adhere with other relevant legislation and regulation could result in reputational damage and/or fines. The Investment Manager engages with HM Treasury and industry bodies to demonstrate the positive benefits of VCTs in terms of growing UK companies, creating jobs and increasing tax revenue, and to help shape any change to VCT legislation. The Investment Manager employs individuals with expertise across the legislation and regulation relevant to the Company. Individuals receive ongoing training and external experts are engaged where required. Liquidity: The risk that the Company’s available cash will not be sufficient to meet its financial obligations. The Company invests into smaller companies, quoted on the AIM and AQSE exchanges, and private companies which are inherently less liquid than stocks on the main market. Therefore, these may be difficult to realise for their fair market value at short notice. The Investment Manager prepares cash flow forecasts to ensure cash levels are maintained in accordance with policies agreed with the Board. The Company’s overall liquidity levels are monitored on a quarterly basis by the Board, with close monitoring of available cash resources. The Company maintains sufficient cash and readily realisable securities, including MMFs and OEICs, which can be accessed at short notice. At 30 November 2024, 15.4% of net assets was held in cash and MMFs, realisable within one business day, and 12.8% in open-ended investment companies (OEICs), realisable in seven business days. Valuation: For smaller companies or illiquid shares, establishing a fair value can be difficult due to the lack of readily available market data for similar shares, resulting in a limited number of external reference points. Investments in companies traded on AIM and AQSE exchange are valued by the Investment Manager using closing bid prices as reported on Bloomberg. Where investments are in unquoted companies or where there are indicators the bid price is not appropriate, alternative valuation techniques are used in accordance with the IPEV guidelines. Valuations of unquoted portfolio companies are performed by appropriately experienced staff, with detailed knowledge of both the portfolio company and the market in which it operates. These valuations are then subject to review and approval by the Octopus Valuations Committee, comprised of staff who are independent of the Investment team and with relevant knowledge of unquoted company valuations. The Board reviews valuations after they have been agreed by the Octopus Valuations Committee. Emerging risks The Board has considered emerging risks. The Board seeks to mitigate emerging risks and those noted below by setting policy, regular review of performance and monitoring progress and compliance. The following are some of the potential emerging risks management and the Board are currently monitoring: • adverse changes in global macroeconomic environment; • geo-political tensions; and • climate change. 26 Octopus AIM VCT 2 plc Annual report 2024 Gender and diversity The Board of Directors currently comprises one female and three male Non-Executive Directors with considerable experience of the VCT industry and a broad range of skills and backgrounds. All appointments to the Board are made on the basis of ability and knowledge. The composition of the Board, including gender and diversity, is reviewed on an annual basis. As at 30 November 2024 the Company has not met the UK Listing Rule 6.6.6R (9)(a) target of the Board comprising 40% women. The target of at least one member of the Board being from a minority ethnic background was not met during the year. The Board believes in the value and importance of diversity in the boardroom but does not consider that it is in the best interests of the Company and its shareholders to set prescriptive targets for gender or ethnicity on the Board. As the Company is externally managed the roles of CEO or CFO do not exist. Please see the tables below which report on gender identity/sex and ethnic background for completeness as at 30 November 2024. Gender identity or sex Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, SID and Chair) Men 3 75% Not applicable 1 Women 1 25% Not specified/prefer not to say – – 1 This column is not applicable as the Company is externally managed and does not have executive management functions, specifically it does not have a CEO or CFO. The Company considers that the role of Chair and Chair of the Audit Committee are senior positions. Of these two senior positions, both are performed by men. Ethnic background Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, SID and Chair) White British or other White (including minority white groups) 4 100% Not applicable 2 Mixed/Multiple Ethnic Groups – – Asian/Asian British – – Black/African/Caribbean/Black British – – Other ethnic group – – Not specified/prefer not to say – – 2 This column is not applicable as the Company is externally managed and does not have executive management functions, specifically it does not have a CEO or CFO. The Company considers that the role of Chair and Chair of the Audit Committee are senior positions. Of these two senior positions, both are performed by those from a White British background. Employee, human rights, social and community issues, environment policy and greenhouse gas emissions The Board’s policy on employee, human rights, social and community issues, environment policy and greenhouse gas emissions is discussed in the Directors’ Report on page 30. Climate-related matters Octopus has chosen to continue evolving its responsible investment disclosures in alignment with industry-recognised regulatory and reporting frameworks, such as the Task Force on Climate Related Financial Disclosures (TCFD). Importantly, due to its structure, the Company is voluntarily disclosing this information, as opposed to it being a mandated ‘in-scope’ fund. In alignment with the spirit of the TCFD framework, some initial disclosures have been outlined under the categorisations below, but do not cover the full set of requirements as per the TCFD framework. Future changes are anticipated as regulatory and reporting frameworks continue to evolve. • Governance: Day-to-day management of the portfolio, and oversight of investment decisions, sits within the Investment Manager’s governance structures. Risk and risk management continued 27 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 • Strategy: The Company makes investments into a range of sectors but the companies receiving funding are small companies primarily listed on AIM. Exposure to climate-related risks is assessed on a deal-by-deal basis by the Investment Manager. The analysis considers transition risks and the physical risks and impacts of climate change for industries and sectors where this has been identified as a material issue. The Investment Manager is also focused on identifying investment opportunities in companies that are well positioned to benefit from the transition to a lower carbon economy. • Risk management: The investment team use guidance from the Sustainability Accounting Standards Board (‘SASB’) to identify climate-related risks. Where potential material climate-related risks have been identified, the Investment Manager assesses how well the risk is managed by the portfolio company through further due diligence. • Metrics: Where relevant for the industry and sector, the team review metrics reported by the portfolio company to understand material exposures, how they are being managed and company performance. This includes areas such as energy management, energy use, carbon footprint disclosures and commitments to appropriate carbon reduction pathways for the sector and industry. On an aggregated level, the Company’s most material climate risk relates to carbon emission; this is due to the underlying portfolio companies having to adapt their business models to successfully transition to a lower/zero carbon footprint. As such, the Investment Manager has taken steps to measure Scope 1 and 2 greenhouse gas emissions. Scope 1 emissions are those directly from company- owned and controlled resources. Scope 2 emissions are indirect emissions from the generation of purchased energy, from a utility provider. Scope 3 emissions are all indirect emissions, not included in Scope 2. While the ultimate goal is to reduce portfolio emissions to minimise these risks, the immediate goal is to increase data coverage. The data coverage is currently 74% (2023: 74%), however, 76% of this data is modelled by ISS instead of reported by the companies in their annual or sustainability reports. We will engage with the companies to report on their emissions, to allow for more accurate data, and encourage them to set targets. Furthermore, Octopus Group are in the process of submitting Science-Based targets using guidance from the Science-Based Targets initiative (SBTi). Therefore, engaging with the Company to reduce emissions forms part of the Octopus Group targets. Given the intricate modelling, lack of data and calculations involved, we regard the analysis as indicative. Current greenhouse gas (GHG) emissions: Metrics for equity holdings Octopus AIM VCT 2 plc 30 November 2024 AIM All-Share 30 November 2024 Variance to index 30 November 2024 Scope 1 & 2 emissions (tCO₂e) 5,545 8,992 (38%) Scope 3 emissions (tCO₂e) 4,177 25,334 (84%) Scope 1 & 2 footprint (tCO₂e/mGBP invested) 70 114 (38%) Scope 1 & 2 weighted average carbon intensity (tCO₂e/mGBP revenue) 112 122 (8%) Percentage of issuer emission data coverage (including estimates) 87% 71% 22% Consumer Duty The Directors are aware of the Investment Manager’s obligations to comply with the FCA’s Consumer Duty rules and principles which came into force in 2023. Firms subject to Consumer Duty must ensure they are acting to deliver good outcomes for consumers and that this is reflected in their strategies, governance, leadership, and policies. The Investment Manager undertook a review of its practices to identify and uplift areas of its operations in order to comply with the Consumer Duty principles which concluded ahead of the Consumer Duty principles coming into force. The Company is not directly captured by Consumer Duty, however the Directors will receive updates from the Investment Manager in order to monitor how the Investment Manager is meeting its obligations. The Strategic Report was approved on behalf of the Board by: Keith Mullins Chair 10 March 2025 28 Octopus AIM VCT 2 plc Annual report 2024 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. Keith Mullins (Chair) Keith Mullins joined SG Warburg’s investment management division in 1978. The division later developed into Mercury Asset Management and subsequently became Merrill Lynch Investment Managers upon its acquisition by Merrill Lynch in 1998. He therefore has many years’ experience as a specialist UK equity fund manager. During this time he was responsible for establishing and managing the team specialising in small and medium-sized pension fund portfolios, and from 2000 he was head of pension fund asset allocation. He left as a managing director of Merrill Lynch Investment Managers in 2001. Keith became a Director of the Company on 14 September 2005. Andy Raynor FCA Andy is the non-executive Chair of Potter Clarkson LLP, a leading full-service intellectual property law firm based in the UK and Europe. Andy retired from the position of Chief Executive of Shakespeare Martineau LLP in January 2019, an expanding Midlands and London law firm that he led from 2015 through a period of significant growth in turnover and profits. In addition to Potter Clarkson he also has a portfolio of senior advisory roles in the professional and financial services sector and has held other corporate non-executive roles over many years. Andy joined RSM Tenon Group PLC (‘RSM Tenon’) in 2001 after its acquisition of the independent partnership formerly known as BDO Stoy Hayward – East Midlands. Andy led the company to win National Firm of the Year 2011 in the British Accountancy Awards. Prior to joining RSM Tenon, he spent almost 20 years with BDO Stoy Hayward – East Midlands, where he was managing partner. Andy became a Director of the Company on 14 September 2005. Brad Ormsby CA Brad Ormsby has been Chief Financial Officer at Judges Scientific plc (‘Judges Scientific’), the AIM-listed buy and build scientific instruments group since 2015. He is a Chartered Accountant with significant senior financial and operational experience acquired during his time at PwC and Eurovestech plc, a technology venture capital fund. Prior to joining Judges Scientific he was CFO at Kalibrate Technologies plc where he led the company’s IPO onto AIM. Brad became a Director of the Company on 1 January 2022. Virginia (Connelly) Bull Virginia has almost 20 years of PLC Advisory and Corporate Broking experience working with AIM and Main Market companies. Virginia is a nominated adviser to AIM companies. Currently, Virginia is a Director in the Investec Bank plc Corporate Broking team, focused on partnering with Tech and Media companies along their growth journey. Virginia became a Director of the Company on 1 January 2024. 29 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Directors’ report The Directors present their report and the audited financial statements for the year ended 30 November 2024. The Corporate Governance Report on pages 33 to 36 and the Audit Committee Report on pages 37 and 38 form part of this Directors’ Report. The Directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s position, performance, business model and strategy. Directors Brief biographical notes on the Directors are given on page 28. In accordance with the Articles of Association of the Company, Keith Mullins and Brad Ormsby will retire as Directors at the AGM and, being eligible, offer themselves for re-election. Following a formal performance evaluation as part of the Board evaluation, the Board believes that all the Directors continue to be effective Non-Executive Directors, providing considerable experience and continuity to the Company and demonstrating commitment to their roles. In addition the Board has discussed succession planning, and further details of both of these matters can be found on page 34. Directors’ and officers’ liability insurance The Company has, as permitted by s236 of the Companies Act 2006, maintained insurance cover on behalf of the Directors and Secretary indemnifying them against certain liabilities which may be incurred by them in relation to the Company. VCT regulations Compliance with required rules and regulations is considered when all investment decisions are made. The Company is further monitored on a continual basis to ensure compliance. The main criteria which the Company must adhere to are detailed on page 68. The Company will continue to ensure its compliance with the qualification requirements. Going concern The Company’s business activities and the factors likely to affect its future development, performance and position are set out in the Chair’s Statement and Investment Manager’s Review on pages 2 and 3 and pages 4 to 15. Further details on the management of financial risk may be found in the Business Review on page 20 and in note 17 to the financial statements. The Board receives regular reports from the Investment Manager and the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for a period at least 12 months from the date of approval of the financial statements. As discussed in the Viability Statement on page 23, the Directors have considered the Company’s cash flow projections in a range of scenarios, including both continuation of normal levels of fundraising as well as potential ‘no fundraise’ scenarios. In all scenarios the Board is confident in the ability of the Company to maintain its VCT status and meet its liabilities as they fall due. Some of the ways in which the Board could manage the operations of the Company include adjusting investment strategy and careful consideration of non- committed cash outflows, including dividends and buybacks. They are satisfied that no material uncertainties leading to significant doubt about going concern have been identified. It is appropriate to continue to adopt the going concern basis in preparing the financial statements. The assets of the Company include securities, a large proportion of which are readily realisable and, accordingly, the Company has adequate financial resources to continue to satisfy the expenses of commitments under share buybacks and to remain in operational existence for a period of at least 12 months. A resolution will be put to the Company’s AGM, details on page 73, to approve the Company continuing as a Venture Capital Trust. A continuation vote has been approved by shareholders annually since 2009. Dividend The proposed final dividend of 1.8p for the year ended 30 November 2024 will be paid on 29 May 2025 to shareholders on the register on 25 April 2025 subject to approval at the AGM being held on 23 May 2025, as set out in the Strategic Report. Management The Company has in place an agreement with Octopus to act as Investment Manager which is central to the ability of the Company to continue in business. The principal terms of the Company’s management agreement with Octopus are set out in note 3 to the financial statements. The Investment Manager also provides secretarial, administrative and custodian services to the Company. There are no other contracts which are deemed to be essential to the business of the Company. As required by the UK Listing Rules, the Directors confirm that, in their opinion, the continuing appointment of Octopus as Investment Manager is in the best interest of the shareholders as a whole. In reaching this conclusion the Directors have taken into account the performance of the investment portfolio and the ability of the Investment Manager to produce satisfactory investment performance in the future. No Director has an interest in any contract to which the Company is a party. The Board has delegated the routine management decisions such as the payment of standard running costs to Octopus. Investment decisions are discussed with the Board. Whistleblowing The Board has considered the arrangements implemented by the Investment Manager to encourage staff of the Investment Manager or Company Secretary of the Company to raise concerns, in confidence, within their organisation about possible improprieties in matters of financial reporting or other matters. 30 Octopus AIM VCT 2 plc Annual report 2024 It is satisfied that adequate arrangements are in place to allow an independent investigation, and follow-on action where necessary, to take place within the organisation. Employee, human rights, social and community issues The Board seeks to conduct the Company’s affairs responsibly. The Company is required by company law to provide details of employee, human rights, social and community issues, including information about any policies it has in relation to these matters and the effectiveness of such policies. As an externally managed investment company with no employees the Company does not maintain specific policies in relation to these matters. Environment policy and greenhouse gas emissions The Board has no specific environmental policy; however, the Company recognises the need to conduct its business, including investment decisions, in a manner that is environmentally responsible wherever possible. The Company does not produce any reportable emissions as the fund management is outsourced to the Investment Manager with no physical assets or property held by the Company. As the Company has no employees or operations, it is not responsible for any direct emissions, and as it uses less than 40,000 kWh of energy during the reporting year it is exempt from Streamlined Energy and Carbon Reporting (SECR) requirements. Financial risk management The most significant financial risks arising from the Company’s financial instruments are market risk, interest rate risk, credit risk and liquidity risk. The policies for managing these risks are regularly reviewed by the Board and full details can be found in note 17 to the financial statements. Bribery Act Octopus has an Anti-Bribery policy which includes robust procedures to ensure full compliance with the Bribery Act 2010 and to ensure that the highest standards of professional ethical conduct are maintained. All Octopus employees and those working for, or on behalf of, the Investment Manager are aware of their legal obligations when conducting Company business. Share capital The Company’s Ordinary share capital as at 30 November 2024 comprised 195,403,293 Ordinary shares of 0.01p each. The voting rights of the Ordinary shares on a show of hands are one vote for each member present or represented, the voting rights on a poll are one vote for each share held. There are no restrictions on the transfer of the Ordinary shares and there are no shares that carry special rights with regard to the control of the Company. Share issues On 23 September 2024, 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. In the year, 24,311,327 shares were issued, raising £10.7 million after costs. This was allocated as follows: During the year 9,191,581 shares were issued under the fundraise that launched in 2023 raising £4.4 million after costs. During the year 9,394,966 shares were issued under the fundraise that launched on 23 September 2024, raising £3.9 million after costs. During the year 5,689,493 shares were issued to those shareholders who elected to receive shares under the Dividend Reinvestment Scheme as an alternative to dividends. This raised £2.4 million. An additional 35,287 shares were issued to shareholders as a result of reduced adviser charges. 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 5,783,439 Ordinary shares with a nominal value of 0.01p for cancellation at a weighted average price of 43.8p per share (2023: 6,011,097 shares at a weighted average price of 51.2p per share) for a total consideration of £2.5 million (2023: £3.1 million). This represents 3% of the closing share capital. These were repurchased in accordance with the Company’s share buyback facility in an attempt to assist the marketability of the shares and prevent the shares trading at a wide discount to the NAV. Post balance sheet events A full list of post balance sheet events since 30 November 2024 can be found in note 18 to the financial statements on page 67. Rights attaching to the shares and restrictions on voting and transfer Subject to any suspension or abrogation of rights pursuant to relevant law or the Company’s Articles of Association, the Ordinary shares confer on their holders (other than the Company in respect of any Treasury shares) the following principal rights: (a) the right to receive profits available for distribution, such dividends as may be agreed to be paid (in the case of a final dividend in an amount not exceeding the amount recommended by the Board as approved by shareholders in a general meeting or in the case of an interim dividend in an amount determined by the Board). All dividends unclaimed Directors’ report continued 31 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 for a period of 12 years after having become due for payment are forfeited automatically and cease to remain owing by the Company; (b) the right, on a return of assets on a liquidation, reduction of capital or otherwise, to share in the surplus assets of the Company remaining after payment of its liabilities pari passu with the other holders of Ordinary shares; and (c) the right to receive notice of and to attend and speak and vote in person or by proxy at any general meeting of the Company. On a show of hands, every member present or represented and voting has one vote, and on a poll, every member present or represented and voting has one vote for every share of which that member is the holder. The appointment of a proxy must be received not less than 48 hours before the time of the holding of the relevant meeting or adjourned meeting or, in the case of a poll taken otherwise than at or on the same day as the relevant meeting or adjourned meeting, be received after the poll has been demanded and not less than 24 hours before the time appointed for the taking of the poll. These rights can be suspended. If a member, or any other person appearing to be interested in shares held by that member, has failed to comply within the time limits specified in the Company’s Articles of Association with a notice pursuant to s793 of the Companies Act 2006 (notice by the Company requiring information about interests in its shares), the Company can, until the default ceases, suspend the right to attend and speak and vote at a general meeting. If the shares represent at least 0.25% of their class the Company can also withhold any dividend or other money payable in respect of the shares (without any obligation to pay interest) and refuse to accept certain transfers of the relevant shares. Shareholders, either alone or with other shareholders, have other rights as set out in the Company’s Articles of Association and in company law (principally the Companies Act 2006). A member may choose whether their shares are evidenced by share certificates (certificated shares) or held in electronic (uncertificated) form in CREST (the UK electronic settlement system). Any member may transfer all or any of their shares, subject in the case of certificated shares to the rules set out in the Company’s Articles of Association or in the case of uncertificated shares to the regulations governing the operation of CREST (which allow the Directors to refuse to register a transfer as therein set out); the transferor remains the holder of the shares until the name of the transferee is entered in the Register of Members. The Directors may refuse to register a transfer of certificated shares in favour of more than four persons jointly or where there is no adequate evidence of ownership or the transfer is not duly stamped (if so required). The Directors may also refuse to register an Ordinary share transfer if it is in respect of a certificated share which is not fully paid up or on which the Company has a lien provided that, where the share transfer is in respect of any share admitted to the Official List maintained by the UK Listing Authority, any such discretion may not be exercised so as to prevent dealings taking place on an open and proper basis, or if, in the opinion of the Directors (and with the concurrence of the UK Listing Authority), exceptional circumstances so warrant, provided that the exercise of such power will not disturb the market in those shares. Whilst there are no squeeze-out and sell-out rules relating to the shares in the Company’s Articles of Association, shareholders are subject to the compulsory acquisition provisions in s974 to s991 of the Companies Act 2006. Independent auditor and disclosure of information to auditor BDO LLP is the appointed auditor of the Company and offer themselves for re-appointment. A resolution to re-appoint BDO LLP as auditor and authorise the Directors to determine their remuneration will be proposed at the forthcoming AGM. As far as the Directors are aware, there is no relevant audit information of which the auditor is unaware and the Directors have taken all the steps they ought to have taken as Directors in order to make them aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Resolutions being put to shareholders in 2025 Directors’ authority to allot shares, to disapply pre-emption rights The authority proposed under Resolution 7 is required so that the Directors may issue shares in connection with offers, if the Directors believe this to be in the best interests of the Company and the shareholders as a whole. Any issue proceeds will be available for investment in line with the Company’s investment policy and may be used, in whole or part, to purchase Ordinary shares in the market. Resolution 7 renews the Directors’ authority to allot Ordinary shares (representing approximately 20% of the Company’s issued share capital at the date of the Notice of AGM). The authority conferred by this Resolution will expire on the date falling 15 months after the date of the passing of the Resolution or, if earlier, at the conclusion of the next AGM of the Company. Any shares allotted under this authority would be issued at prices at or above NAV. Resolution 8 authorises the Directors to allot Ordinary shares in connection with the Dividend Re-investment Scheme (‘DRIS’), up to 5% 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. Resolutions 9 and 10 renew and extend the Directors’ authority to allot equity securities for cash without pre-emption rights applying in certain circumstances. The Resolutions will authorise the Directors, until the date falling 15 months after the date of the passing of the Resolutions or, if earlier, the conclusion of the next AGM of the Company, to issue Ordinary shares for cash without pre-emption rights applying by way of an offer to existing 32 Octopus AIM VCT 2 plc Annual report 2024 shareholders. These powers will be exercised only if, in the opinion of the Directors, it would be in the interests of shareholders as a whole. Any shares allotted under this authority would be issued at prices at or above NAV. Directors’ authority to make market purchases of its own shares The authority proposed under Resolution 11 is required so that the Directors may make purchases of up to 30,239,764 Ordinary shares (representing approximately 14.99% of the Company’s issued share capital at the date of the Notice of AGM) and the Resolution seeks renewal of such authority until the next AGM (or the expiry of 15 months, if earlier). Any shares bought back under this authority will be at a price determined by the Board, (subject to a minimum of 0.01p (being the nominal value of such shares) and a maximum of 5% above the average mid-market quotation for such shares on the London Stock Exchange and the applicable regulations thereunder). This power will be exercised only if, in the opinion of the Directors, a repurchase would be in the best interests of shareholders as a whole. Any shares repurchased under this authority will either be cancelled or held in Treasury for future re-sale in appropriate market conditions. Cancellation of share premium account The Board considers it appropriate to obtain shareholders’ approval for the cancellation of the remaining amount standing to the share premium account of the Company to create (subject to Court approval) a pool of distributable reserves. A Special Resolution to this effect is being proposed at Resolution 12. Substantial shareholdings As at the date of this report, no disclosures of major shareholdings had been made to the Company under Disclosure Guidance and Transparency Rule 5 (Vote Holder and Issuer Notification Rules). On behalf of the Board Keith Mullins Chair 10 March 2025 Directors’ report continued 33 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Corporate governance report The Board of the Company has considered the principles and recommendations of the Association of Investment Companies Code of Corporate Governance (‘AIC Code’). The AIC Code addresses the Principles and Provisions set out in the UK Corporate Governance Code (‘UK Code’), as well as setting out additional Provisions on issues that are of specific relevance to the Company. The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the Financial Reporting Council, provides more relevant information to shareholders. Corporate governance within the closed-ended investment company industry differs from that of other companies. In addition, VCTs differ from most other investment companies in that they have, developed over many years, a complex range of additional legal, tax and regulatory requirements. Octopus AIM VCT 2 plc, as a VCT and closed-ended investment company, has particular factors which have an impact on its governance arrangements. The Company: • outsources all day-to-day activities (such as portfolio management, administration, accounting, custody and company secretarial). This means that it is governed entirely by a Board of Non-Executive Directors. In these circumstances, the proper oversight of these relationships is the key aspect of achieving good corporate governance; • does not have executive directors or employees. As a consequence, the only ‘corporate memory’ is that of the Non-Executive Directors; and • does not have customers, only shareholders. The AIC Code deals with matters such as the relationship with the Investment Manager and other service providers. In practice, most of the time spent by the Board of a well-functioning investment company should be spent on matters of general corporate governance (e.g. the investment strategy, policy and performance) which is what we do.1 The Company is committed to maintaining high standards in corporate governance. The Directors consider that the Company has, throughout the year under review, complied with the provisions set out in the AIC Code with the exceptions set out in the Compliance Statement on page 36. Board of Directors The Company has a Board of four Non-Executive Directors, all of whom are considered by the Board to be independent. The Board meets at least four times a year, and on other occasions as required, to review the investment performance and monitor compliance with the investment policy laid down by the Board. Virginia (Connelly) Bull joined the Board on 1 January 2024. Trust Associates Limited, who are independent of the Company, were engaged for the recruitment. The Board has a formal schedule of matters specifically reserved for its decision which include: • the consideration and approval of future developments or changes to the investment policy, including risk and asset allocation; • consideration of corporate strategy; • approval of the appropriate dividend to be paid to the shareholders; • the appointment, evaluation, removal and remuneration of the Investment Manager; • the performance of the Company, including monitoring of the discount of the NAV to the share price; and • monitoring shareholder profiles and considering shareholder communications. The Chair leads the Board in the determination of its strategy and in the achievement of its objectives. The Chair is responsible for organising the business of the Board, ensuring its effectiveness and setting its agenda, and has no involvement in the day-to-day business of the Company. He facilitates the effective contribution of the Directors and makes sure that they receive accurate, timely and clear information and that they communicate effectively with shareholders. The Company Secretarial function is discharged by Octopus Company Secretarial Services Limited which is responsible for advising the Board, through the Chair, on all governance matters. All of the Directors have access to the advice and services of the Company Secretary, which has administrative responsibility for the meetings of the Board and its committees. Directors may also take independent professional advice at the Company’s expense where necessary in the performance of their duties. As all of the Directors are non-executive, it is not considered necessary to identify a member of the Board as the senior independent director of the Company. The Company’s Articles of Association and the schedule of matters reserved for the Board for decision provide that the appointment and removal of the Company Secretary is a matter for the full Board. 1 Please see the AIC Code at www.theaic.co.uk. 34 Octopus AIM VCT 2 plc Annual report 2024 During the year the following meetings were held as part of the regular programme of meetings: Full Board meetings held No. of meetings attended Audit Committee meetings held Audit Committee meetings attended Keith Mullins 6 6 3 3 Elizabeth Kennedy1 6 3 3 1 Andy Raynor 6 6 3 3 Brad Ormsby 6 5 3 3 Virginia (Connelly) Bull2 6 4 3 2 1Elizabeth Kennedy resigned as a Non-Executive Director on 16 May 2024. 2Virginia (Connelly) Bull was appointed as a Non-Executive Director on 1 January 2024. Additional meetings were held as required to address specific issues, including approval of the Company’s annual reports and accounts, half-yearly results and fundraising. Performance evaluation and independence of Directors Each year a formal performance evaluation is undertaken of the Board, its Committees and the Directors in the form of a questionnaire completed by each Director. The Chair provides a summary of the findings to the Board, which is discussed and an action plan agreed. During the year no issues were identified requiring an action plan. The performance of the Chair is evaluated by the other Directors. Brad Ormsby is the Chief Financial Officer and a shareholder of Judges Scientific plc, in which the Company has an investment, and so absents himself from any Board decisions relating to that investment. Judges Scientific plc are a client of Investec Bank plc and consequently Virginia (Connelly) Bull as a Director of the Investec Bank plc Corporate Broking team was known to Brad Ormsby before her appointment to the Board. As part of the recruitment process the Board were satisfied this does not present a conflict. We believe that, in line with the AIC Code, all members of the Board are independent in character and judgement with respect to their duties to the shareholders. Keith Mullins, Chair of the Company, has served on the Board for 19 years since his initial appointment. He is still considered to be independent in the absence of a connection with the Investment Manager or any of the Company’s advisers. Andy Raynor, who was appointed in 2005, is also considered independent. The Board are in the process of finalising plans that will ensure the maintenance of requisite skills and experience and an appropriate balance between continuity and succession of the Directors. Details will be shared during the course of the financial year ending 30 November 2025. Length of service Date of original appointment Date of last election/re-election Keith Mullins 14 September 2005 AGM 2022 Andy Raynor 14 September 2005 AGM 2024 Brad Ormsby 1 January 2022 AGM 2022 Virginia (Connelly) Bull 1 January 2024 AGM 2024 Length of service of the Chair and other Directors is one of a number of factors taken into account when considering the contribution and ongoing independence of the Board, both individually and in terms of overall composition, and when considering succession planning. The Board considers the experience, range of skills, knowledge of the Company and its operating environment and diversity of the Directors. Accordingly, the Board’s policy on tenure is that the term the Chair and other Directors serve on the Board should not be restricted to a fixed time limit in order to ensure sufficient corporate memory and consistent adherence to strategy. Powers of the Directors Subject to the provisions of the Companies Act 2006, the Memorandum and Articles of Association of the Company and any directions given by shareholders by Special Resolution, the Articles of Association specify that the business of the Company is to be managed by the Directors, who may exercise all the powers of the Company, whether relating to the management of the business or not. In particular the Directors may exercise on behalf of the Company its powers to purchase its own shares to the extent permitted by shareholders. Authority was given at the Company’s 2024 AGM to make market purchases of up to 14.99% of the issued Ordinary share capital at any time up to the 2025 AGM and otherwise on the terms set out in the relevant resolution and renewed authority is being sought at the 2025 AGM as set out in the notice of meeting. Corporate governance report continued 35 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Board committees It should be noted that there is no formal Management Engagement Committee as matters of this nature are dealt with by the independent Non-Executive Directors. The Board does not have a separate Remuneration Committee as the Company has no employees or executive directors. Detailed information relating to the remuneration of Directors is given in the Directors’ Remuneration Report on pages 39 to 41. The Board does not have a separate Nomination Committee as there has not been a requirement for a Committee. Whilst diversity considerations would normally be a function of a Nomination Committee, these are dealt with by the Board as a whole on an annual basis. The Board considers its composition to be appropriate with due regard for the benefits of diversity and gender. Audit Committee Andy Raynor is Chair of the Audit Committee and all Directors are members of this Committee, including the Chair, which is considered appropriate based on the limited number of Directors. The Board confirms that, in accordance with the recommendation of the AIC Code, at least one member of the Audit Committee has recent and relevant financial experience. Both Andy Raynor, as Chair, and Brad Ormsby are Chartered Accountants and have recent and relevant financial experience. The Board is confident that the Committee as a whole has competence relevant to the sector in which the Company operates. The Audit Committee Report is given on pages 37 and 38. Internal controls The purpose of these controls is to ensure that proper accounting records are maintained, the Company’s assets are safeguarded and the financial information used within the business and for publication is accurate and reliable; such a system can only provide reasonable and not absolute assurance against material misstatement or loss. The system of internal controls is designed to manage rather than eliminate the risk of failure to achieve the business objectives. The Board regularly reviews financial results and investment performance with its Investment Manager. The Board delegates the identification of appropriate opportunities and the investment of funds to the Investment Manager. The Board regularly review reports upon the investments made and on the status of existing investments. The Investment Manager is also engaged to carry out the accounting and custodian functions of the Company. All quoted investments are held in CREST. Unquoted investments are held in certificated form. The Directors confirm that they have established a continuing process throughout the year and up to the date of this report for identifying, evaluating and managing the significant potential risks faced by the Company and have reviewed and were satisfied with the effectiveness of the internal control systems. As part of this process, an annual review of the Investment Manager’s internal control systems is carried out, by Octopus, in accordance with the Financial Reporting Council’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting. As explained in the Audit Committee Report, the Board does not consider it necessary to maintain an internal audit function. Internal control systems include the production and review of monthly bank reconciliations and management accounts. All outflows made from the VCT’s accounts require the authority of two signatories from Octopus. The Investment Manager is subject to ongoing review by the Octopus Compliance Department. Financial risk management objectives and policies The Company is exposed to the risks arising from its operational and investment activities. Further details can be found in note 17 to the financial statements. Statement of voting at the Annual General Meeting The most significant portion of the votes cast against a resolution at the 2024 AGM were for the resolutions relating to the re-election of Andy Raynor as a Director (9.04% of votes cast) and the approval of the Directors’ Remuneration Report (7.8% of votes cast). No communication was received from shareholders giving reasons for the votes against the resolutions. Shareholders’ views are always welcomed and considered by the Board. The methods of contacting the Board are set out below. Relations with shareholders The Investment Manager will provide an update on the Company’s activities and future plans at the AGM to be held on 23 May 2025. 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 23 May 2025 at 10.30am. To ensure we are able to respond to any questions you may have for either the Investment Manager or AIM VCT 2 Board, please send these via email to AIMVCT2AGM@octopusinvestments.com by 5.00pm on 20 May 2025. Alternatively, please contact the team at Octopus to answer any queries. They can be contacted on 0800 316 2295. Corporate Governance Code The Board are aware of the revised UK Corporate Governance Code as published by the FRC on 22 January 2024, which will apply to accounting periods beginning on or after 1 January 2025, with the exception of a new provision (29) relating to risk management and internal controls, which will be applicable for accounting periods beginning on or after 1 January 2026. The Board are further aware of the updated Association of Investment Companies Code of Corporate Governance as published in August 2024, which applies to accounting periods beginning on or after 1 January 2025, with the exception of provision 34 which will be applicable for accounting periods beginning on or after 1 January 2026. 36 Octopus AIM VCT 2 plc Annual report 2024 Compliance statement The Board recognises the importance of good governance. With the exception of the limited items outlined below, the Board believes, for the year ended 30 November 2024, the Company has complied with the principles and provisions of the AIC Code: 1. the Company does not have a senior independent director. The Board does not consider this necessary for the size of the Company; 2. the Company does not have a separate Nomination Committee due to the relatively small size and structure of the Company. Appointments are dealt with by the full Board as and when appropriate; 3. the Company does not have a Remuneration Committee given the size of the Company and as it does not have any executive directors. The whole Board deals with any matters pertaining to remuneration; 4. the Company has no major shareholders therefore shareholders are not given the opportunity to meet any Non-Executive Directors at a specific meeting other than the AGM, but are welcome to contact the Board or Octopus at any time; and 5. the Directors are not subject to annual re-election. This is to ensure experience is retained on the Board. As highlighted earlier, the Board considers all the Directors to be independent. By Order of the Board Keith Mullins Chair 10 March 2025 Corporate governance report continued 37 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Audit Committee report This report is submitted in accordance with The AIC Code in respect of the year ended 30 November 2024 and describes the work of the Audit Committee in discharging its responsibilities. The Committee’s key objective is the provision of effective governance of the appropriateness of the Company’s financial reporting, the performance of the auditor and the management of the internal control and business risk systems. The Directors forming the Audit Committee can be found on page 28. Matters considered by the Audit Committee in the year The Audit Committee’s terms of reference include the following responsibilities: • reviewing and making recommendations to the Board in relation to the Company’s published financial statements and other formal announcements relating to the Company’s financial performance; • reviewing and making recommendations to the Board in relation to the Octopus internal controls (including internal financial control) and risk management systems to the extent they are relevant to the Company’s internal controls; • periodically considering the need for an internal audit function; • making recommendations to the Board in relation to the appointment, re-appointment and removal of the external auditor and approving the remuneration and terms of engagement of the external auditor; • reviewing and monitoring the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into consideration relevant UK professional regulatory requirements; • monitoring the extent to which the external auditor is engaged to supply non-audit services; and • ensuring that the Investment Manager has arrangements in place for the investigation and follow-up of any concerns raised confidentially by staff in relation to propriety of financial reporting or other matters. The Committee reviews its terms of reference and its effectiveness annually and recommends to the Board any changes required as a result of the review. The terms of reference are available on request from the Company Secretary. The Committee meets at least twice per year and has direct access to BDO LLP, the Company’s external auditor. Auditor appointment The Audit Committee undertook a competitive audit tender process in 2018 as required for all Public Interest Entities who have had the same auditor for ten years, following which BDO LLP were re-appointed. When considering whether to recommend the re-appointment of the external auditor, the Committee take into account the tenure of the current auditor in addition to comparing the fees charged to similar sized VCTs. The current auditor was appointed in 2008 under the name of PKF (UK) LLP, which subsequently merged with BDO LLP, and has held the position for seventeen years. Under FRC ethical standards an audit tender will be mandatory for the year ended 30 November 2027. The year ended 30 November 2024 represents Elizabeth Hooper’s second year as audit partner. Independence and objectivity of the auditor Non-audit services were not provided by the external auditor during the period. The external auditor confirmed that they have not identified any other relationships or threats that may reasonably be thought to bear on their objectivity and independence which was agreed by the Audit Committee. When considering the effectiveness of the external audit, the Board considered the quality and content of the Audit Plan and Report provided to the Committee by the auditor and the resultant reporting and discussions on topics raised. Further consideration is also given as part of the annual Board evaluation. Auditor evaluation The effectiveness of the external audit is assessed as part of the Board evaluation conducted annually and by the quality and content of the Audit Plan and Report provided to the Committee by the auditor and the resultant discussions on topics raised. The Committee also engages with the auditor when present at a Committee meeting, if appropriate. The Audit Committee is satisfied that BDO LLP provided effective challenge in carrying out its responsibilities. Once the Committee has made a recommendation to the Board, in relation to the appointment of the external auditor, this is then ratified at the AGM through an Ordinary Resolution. Internal audit The Company does not have an independent internal audit function as it is not deemed appropriate given the size of the Company and the nature of the Company’s business. However, the Committee considers annually whether there is a need for such a function and if so would recommend this to the Board. Octopus has an internal audit team, which is supported as required by external consultants. The Octopus Compliance Department reports to the Board on the outcome of the internal audits that have taken place insofar as these relate to the Company and confirms the absence of any issues relating to internal audit of which the Board should be aware. Octopus undertakes to immediately raise to the Committee any significant issues arising from the Octopus internal audit that affect the Company. The Committee will monitor the significant risks at each meeting and Octopus will work closely with the internal auditor to mitigate the risks and the resultant impact. 38 Octopus AIM VCT 2 plc Annual report 2024 Financial reporting matters The Audit Committee is responsible for considering issues in relation to the financial statements, which are either significant financial reporting matters or other financial reporting matters. The Committee has identified the most significant financial reporting matter for the Company as: • Valuation and existence of investments: The Committee gives special audit consideration to the valuation of investments and supporting data provided by Octopus. The impact of this risk would be a large gain or loss in the Company’s results. The valuations are supported variously by stock market quotations, portfolio company audited accounts, third party evidence and (where relevant for unquoted investments) valuations confirmed to be in accordance with IPEV guidelines. These, together with reconciliations and independent confirmations performed by the auditor give comfort to the Audit Committee. The Committee has identified the following as other financial reporting matters: • Management override of financial controls: The Committee specifically review all significant accounting estimates that form part of the financial statements and consider any material judgements applied by management during the completion of the financial statements. • Recognition and categorisation of revenue from investments: Investment income is the Company’s main source of revenue. The revenue return is recognised when the Company’s right to the return is established in accordance with the Statement of Recommended Practice, as either revenue or capital income. Octopus confirms to the Audit Committee that the revenues are recognised appropriately. In addition to the above, the Committee has also considered the implications of inflation and higher interest rates. As at the date of issuing this Report, whilst the Committee anticipates further market volatility affecting the underlying investments, it does not consider that this will have an impact upon the long-term viability of the Company. This is discussed further in the Viability Statement on page 23. These issues were discussed with Octopus and the auditor at the conclusion of the audit of the financial statements. The Committee has considered the annual report and accounts for the year ended 30 November 2024 and has reported to the Board that it considers them to be fair, balanced and understandable, providing the information necessary for shareholders to assess the Company’s position, performance, business model and strategy. The Audit Committee is also responsible for considering and reporting on any significant issues that arise in relation to the audit of the financial statements. The Audit Committee can confirm that there were no significant issues to report to the shareholders in respect of the audit of the financial statements to 30 November 2024. Andy Raynor Audit Committee Chair 10 March 2025 Audit Committee report continued 39 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Directors’ remuneration report Introduction This report is submitted in accordance with Regulation 3 of the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (‘Regulations’) in respect of the year ended 30 November 2024. The Company’s auditor, BDO LLP, is required to give their opinion on certain information included in this report; comprising the Directors’ emoluments section and the Directors’ interest in shares below as set out on pages 40 and 41. Consideration by the Directors of matters relating to Directors’ remuneration The Board as a whole considers Directors’ remuneration and has not appointed a separate committee in this respect. The Board has not sought advice or services from any external person in respect of its consideration of Directors’ remuneration during the year although the Directors expect from time to time to review the fees against those paid to the boards of directors of other VCTs. The Company does not have a chief executive officer, senior management or any employees. Directors’ remuneration policy report The Board consists entirely of Non-Executive Directors, who meet at least quarterly and on other occasions as necessary, to deal with the important aspects of the Company’s affairs. Directors are appointed with the expectation that they will serve for a period of at least three years. All Directors are subject to election at the first AGM after their appointment and one third of all Directors are subject to retirement by rotation at the AGMs. Re-election will be recommended by the Board but is dependent upon shareholder votes. Each Director receives a letter of appointment. A Director may resign by notice in writing to the Board at any time giving three months’ notice. None of the Directors are entitled to compensation payable upon early termination of their contract other than in respect of any unexpired notice period. The Company’s policy is that the fees payable to the Directors should reflect the time spent by the Board on the Company’s affairs and the responsibilities borne by the Directors. They should be sufficient to attract candidates of high calibre to be recruited. The policy is for the Chair of the Board and the Chair of the Audit Committee to be paid higher fees than the other Directors in recognition of their more onerous roles. The Remuneration policy is to review the Directors’ fees from time to time, benchmarking the fees against other VCT boards, although such review will not necessarily result in any changes. Due to the nature of the Company, there are no employees other than the Directors and therefore no such issues to consider when determining the Directors’ remuneration. The Company’s policy is for the Directors to be remunerated in the form of fees, payable monthly in arrears. The fees are not specifically related to the Directors’ performance, either individually or collectively. There are no long-term incentive schemes, share option schemes or pension schemes in place. The Board is also entitled to be repaid all reasonable travelling, subsistence and other expenses incurred by them respectively whilst conducting their duties as Directors. No other remuneration or compensation was paid or payable by the Company during the year to any of the current Directors. There will be no payment for loss of office unless approved by a separate shareholder resolution. An Ordinary Resolution to approve the remuneration policy of the Company was put to, and approved by, shareholders at the 2023 AGM and will remain in force for a three-year period. The Board will review the remuneration of the Directors if thought appropriate and monitors competitors in the VCT industry on an annual basis. Annual remuneration report This section of the report is subject to approval by a simple majority of shareholders at the AGM on 23 May 2025, as in previous years. Statement of voting at the Annual General Meeting on remuneration matters The 2023 Remuneration Report was presented to the AGM held on 16 May 2024 and received shareholder approval following voting by way of a poll. 92.13% of the votes cast were in favour of the Remuneration Report or at the Chair’s discretion, 7.8% were against the resolution and 99,573 votes were withheld. The proxy forms returned to the Registrars contained no explanation for the votes against the resolution. The Remuneration Policy was approved at the AGM held on 26 April 2023. Shareholders’ views are always considered by the Board, and the methods of contacting the Board are set out on page 35. Company performance The Board is responsible for the Company’s investment strategy and performance, although the management of the Company’s investment portfolio is delegated to Octopus through the investment management agreement, as referred to in the Directors’ Report. The performance graph on page 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. 40 Octopus AIM VCT 2 plc Annual report 2024 Directors’ fees (audited) The amount of each Director’s fees for the year were: Year ended 30 November 2024 £ Year ended 30 November 2023 £ Keith Mullins 30,250 29,104 Andy Raynor 27,250 26,208 Elizabeth Kennedy1 12,375 24,229 Brad Ormsby 24,750 23,813 Virginia (Connelly) Bull2 22,688 n/a Total 117,313 103,354 1 Retired from the Board on 16 May 2024. 2 Appointed to the Board on 1 January 2024 and received fees for 11 months of the year ended 30 November 2024. 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. Directors’ fees are considered annually. These were last increased with effect from 1 May 2023. There has been no increase in Directors’ fees in the reporting period. 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. Directors’ fees annual percentage change 2024 % Increase/ (Decrease) 2023 % Increase/ (Decrease) 2022 % Increase/ (Decrease) 2021 % Increase/ (Decrease) 2020 % Increase/ (Decrease) Keith Mullins 3.9 3.6 7.7 4.0 0.0 Andy Raynor 4.0 4.0 4.2 4.3 0.0 Elizabeth Kennedy (48.9) 9.1 4.8 5.0 0.0 Brad Ormsby 3.9 14.3 n/a n/a n/a Virginia (Connelly) Bull n/a n/a n/a n/a n/a Relative importance of spend on pay The actual expenditure in the current year is as follows: Year ended 30 November 2024 £’000 Year ended 30 November 2023 £’000 Total dividends paid 13,409 6,673 Total buybacks 2,533 3,076 Total Directors’ fees 117 103 The Directors do not consider there to be any other significant distributions during the year relevant to understanding the relative importance of spend on pay. Directors’ remuneration report continued 41 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Directors’ interest in shares (audited) There are no guidelines or requirements for Directors to own shares in the Company. The interests of the Directors, and their connected persons, in shares of the Company during the year (in respect of which transactions are notifiable under Disclosure Guidance and Transparency Rule 3.1.2) in the issued Ordinary shares of 0.01p are shown in the table below: Ordinary shares of 0.01p each 30 November 2024 Ordinary shares of 0.01p each 30 November 2023 Keith Mullins 416,929 416,929 Andy Raynor 21,080 21,080 Elizabeth Kennedy1 n/a 37,380 Brad Ormsby – – Virginia (Connelly) Bull2 – – 1 Elizabeth Kennedy resigned as a Director on 16 May 2024. 2 Virginia (Connelly) Bull was appointed as a Director on 1 January 2024. All of the shares held by the Directors, or their connected persons, were held beneficially, either in their own name or through a nominee company. There have been no changes in the Directors’ share interests between 30 November 2024 and the date of this report. Shareholders’ proxy voting information As required by Schedule 8:23 of the Regulations, the votes received for the Directors’ Remuneration Policy (approved at the AGM in 2023) and the Directors’ Remuneration Report (approved at the AGM in 2024) were as follows: For (including discretionary) Against No. of Shares % No. of Shares % Approval of Directors’ Remuneration Policy (approved at the AGM held in 2023) 2,635,271 93.02 197,73 4 6.98 Approval of Directors’ Remuneration Report (approved at the AGM held in 2024) 3,598,840 92.13 307,296 7.87 By Order of the Board Keith Mullins Chair 10 March 2025 42 Octopus AIM VCT 2 plc Annual report 2024 The Directors are responsible for preparing the Strategic Report, the Directors’ Report, the Directors’ Remuneration Report and the financial statements in accordance with applicable laws and regulations. They are also responsible for ensuring that the annual report and accounts include information required by the Listing Rules of the Financial Conduct Authority. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (GAAP), including Financial Reporting Standard 102 – ‘The Financial Reporting Standard Applicable in the United Kingdom and Republic of Ireland’ (FRS 102), (United Kingdom accounting standards and applicable law). Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable UK accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business; and • prepare a Strategic Report, a Directors’ Report and Directors’ Remuneration Report which comply with the requirements of the Companies Act 2006. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions, to disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for ensuring that the annual report and accounts, taken as a whole, are fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s performance, business model and strategy. In so far as each of the Directors is aware: • there is no relevant audit information of which the Company’s auditor is unaware; and • the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. The Directors are responsible for preparing the annual report and accounts in accordance with applicable laws and regulations. Having taken advice from the Audit Committee, the Directors are of the opinion that this report as a whole provides the necessary information to assess the Company’s performance, business model and strategy and is fair, balanced and understandable. The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors confirm that, to the best of their knowledge: • the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including FRS 102, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and • the annual report and accounts (including the Strategic Report), give a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces. On behalf of the Board Keith Mullins Chair 10 March 2025 Directors’ responsibilities statement 43 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Opinion on the financial statements In our opinion the financial statements: • give a true and fair view of the state of the Company’s affairs as at 30 November 2024 and of its loss for the year then ended; • have been properly prepared in accordance with having been prepared in accordance with United Kingdom Generally Accepted Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements of Octopus AIM VCT 2 Plc (the ‘Company’) for the year ended 30 November 2024 which comprise the Income statement, the Balance sheet, the Statement of changes in equity, the Statement of cash flows and Notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice). Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit opinion is consistent with the additional report to the audit committee. Independence Following the recommendation of the audit committee, we were appointed by the Board of Directors to audit the financial statements for the year ended 30 November 2008 and subsequent financial periods. The period of total uninterrupted engagement including retenders and reappointments is 17 years, covering the years ended 30 November 2008 to 30 November 2024. We remain independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services prohibited by that standard were not provided to the Company. Conclusions relating to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Company’s ability to continue to adopt the going concern basis of accounting included: • Obtaining the VCT compliance reports during the year and as at year end and reviewing the calculations therein to check that the Company was meeting its requirements to retain VCT status; • Consideration of the Company’s expected future compliance with VCT legislation, the absence of bank debt, contingencies and commitments and any market or reputational risks; • Reviewing the forecasted cash flows that support the Directors’ assessment of going concern, challenging assumptions and judgements made in the forecasts, and assessing them for reasonableness. In particular, we considered the available cash resources relative to the forecast expenditure which was assessed against the prior year for reasonableness; and • Evaluating the Directors’ method of assessing the going concern in light of market conditions. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Independent auditor’s report to the members of Octopus AIM VCT 2 plc 44 Octopus AIM VCT 2 plc Annual report 2024 Overview 2024 2023 Key audit matters Valuation and existence of investments 3 3 Materiality £790,000 (2023: £846,000) based on 1% (2023: 1%) of Net assets. An overview of the scope of our audit Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How the scope of our audit addressed the key audit matter Valuation and Existence of investments (Notes 1 and 10 of the financial statements) The investment portfolio comprises of level 1 quoted equity and level 3 unquoted investments. The Investment Manager’s fee is based on the value of the net assets of the fund, as shown in note 3. As the Investment Manager is also responsible for preparing the valuation of investments for the financial statements, there is a potential risk of misstatement in the investment valuations. There is a risk that the investment balance includes investments which are no longer owned by the Company or the holdings % may have changed or that the bid price used to value the level 1 quoted equity investments is incorrect. There is a high level of estimation uncertainty involved in determining the unquoted investment valuations. There is an inherent risk of management override arising from the unquoted investment valuations being prepared by the Investment Manager, who is remunerated based on a percentage of the value of the net assets of the fund, as shown in note 3. We assessed the design and implementation of controls in relation to the valuation of investments. In respect of 100% of level 1 quoted equity investments, we responded to this matter by testing the valuation and existence of the whole portfolio of quoted investments. We performed the following procedures: • Confirmed the year-end bid price was used by agreeing to externally quoted prices; • Assessed if there were contra indicators, such as liquidity considerations, to suggest bid price is not the most appropriate indication of fair value; • Recalculating the valuation by multiplying the number of shares held per the statement obtained from the custodian by the valuation per share; and • Obtained direct confirmation from the custodian and agreed all investments held at the balance sheet date to CREST records. On a sample basis covering 98% (by value) of the unquoted investments, we have: • Challenged and corroborated the inputs to the valuation with reference to management information of investee companies, market data and our own understanding and assessed the impact of the estimation uncertainty concerning these assumptions and the disclosure of these uncertainties in the financial statements; • Obtained share capital tables directly from the investee company to confirm ownership at year end and recalculated the value attributable to the Company; • Reviewed the historical financial statements and any recent management information available to support assumptions about maintainable revenues, earnings or cash flows used in the valuations; • Considered the revenue or earnings multiples applied and the discounts applied by reference to observable listed company market data; and Independent auditor’s report to the members of Octopus AIM VCT 2 plc continued 45 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Quoted Investments: £47 million (83%) of the fixed asset investments held at fair value through profit and loss are quoted investments. Unquoted investments: £10 million (17%) of the fixed asset investments held at fair value through profit and loss are unquoted and are valued using more subjective techniques (level 3). For these reasons we considered the valuation and existence of unquoted and quoted investments to be a key audit matter. • Challenged the consistency and appropriateness of adjustments made to such market data in establishing the revenue, cash flow or earnings multiple applied in arriving at the valuations adopted by considering the individual performance of investee companies against plan and relative to the peer group, the market and sector in which the investee company operates and other factors as appropriate. Where appropriate, we performed a sensitivity analysis by developing our own point estimate where we considered that alternative input assumptions could reasonably have been applied and we considered the overall impact of such sensitivities on the portfolio of investments in determining whether the valuations as a whole are reasonable and free from bias. Key observations: Based on the procedures performed we did not identify any matters to suggest the valuation or existence of the investments was not appropriate and we are satisfied that the estimates and judgements made in the unquoted investment valuations are appropriate considering the level of estimation uncertainty. Our application of materiality We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users that are taken on the basis of the financial statements. In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as follows: Company Financial statements 2024 2023 Materiality £790,000 £846,000 Basis for determining materiality 1% of net assets. Rationale for the benchmark applied Net asset value is the primary measure used by the users in assessing the performance of the Company as an investment entity. In setting materiality, we have had regard to the nature and disposition of the investment portfolio. Given that the VCT’s portfolio is comprised primarily of quoted investments, we have applied a percentage of 1% of net assets value. Performance materiality £592,000 £634,000 Basis for determining performance materiality 75% of materiality (2023: 75% of materiality). Rationale for the percentage applied for performance materiality The level of performance materiality applied was set after having considered a number of factors including the expected total value of known and likely misstatements and the level of transactions in the year. Reporting threshold We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £39,000 (2023: £42,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. 46 Octopus AIM VCT 2 plc Annual report 2024 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 UK Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate Governance Code specified for our review. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance Statement is materially consistent with the financial statements or our knowledge obtained during the audit. Going concern and longer-term viability • The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material uncertainties identified as set out on page 29; and • The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and why the period is appropriate as set out on page 23. Other Code provisions • Directors’ statement on fair, balanced and understandable as set out on page 42; • Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks as set out on page 24; • The section of the annual report that describes the review of effectiveness of risk management and internal control systems as set out on page 35; and • The section describing the work of the audit committee as set out on page 37. 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. Independent auditor’s report to the members of Octopus AIM VCT 2 plc continued 47 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 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’ responsibilities statement, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Extent to which the audit was capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below: Non-compliance with laws and regulations Based on: • our understanding of the Company and the industry in which it operates; • discussion with management and those charged with governance; and • obtaining an understanding of the Company’s policies and procedures regarding compliance with laws and regulations; we considered the significant laws and regulations to be Companies Act 2006, the UK Listing Rules and Disclosure Guidance and Transparency Rules, the principles of the UK Corporate Governance Code, industry practice represented by the SORP and the applicable financial reporting framework. We also considered the Company’s qualification as a VCT under UK tax legislation. Our procedures in respect of the above included: • obtaining an understanding of the control environment in monitoring compliance with laws and regulations; • reviewing minutes of meeting of those charged with governance for instances of non-compliance with laws and regulations; • enquiries of management and those charged with governance relating to the existence of any non-compliance with laws and regulations; • agreement of the financial statement disclosures to underlying supporting documentation; and • 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. 48 Octopus AIM VCT 2 plc Annual report 2024 Fraud We assessed the susceptibility of the financial statement to material misstatement including fraud. Our risk assessment procedures included: • Enquiry with management and those charged with governance regarding any known or suspected instances of fraud; • Obtaining an understanding of the Company’s policies and procedures relating to: • Detecting and responding to the risks of fraud; and • Internal controls established to mitigate risks related to fraud. • Review of minutes of meeting of those charged with governance for any known or suspected instances of fraud; and • Discussion amongst the engagement team as to how and where fraud might occur in the financial statements. Based on our risk assessment, we considered the areas most susceptible to be management override of controls and the valuation of unquoted investments. Our procedures in respect of the above included but were not limited to: • The procedures set out in the Key Audit Matters section above relating to valuation of the unquoted investments; • Review of estimates and judgements applied by management in the financial statements to assess their appropriateness and the existence of any systematic bias; • Review and consideration of the appropriateness of adjustments made in the preparation of the financial statements; and • Review of unadjusted audit differences, if any, for indication of bias or deliberate misstatement. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members who were all deemed to have appropriate competence and capabilities and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we are to become aware of it. A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities This description forms part of our auditor’s report. Use of our report This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Elizabeth Hooper (Senior Statutory Auditor) For and on behalf of BDO LLP, Statutory Auditor London, UK 10 March 2025 BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). Independent auditor’s report to the members of Octopus AIM VCT 2 plc continued 49 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Income statement Year to 30 November 2024 Year to 30 November 2023 Notes Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 (Loss)/Gain on disposal of fixed asset investments 10 – (30) (30) – 668 668 Gain/(loss) on disposal of current asset investments – 57 57 – (91) (91) Loss on valuation of fixed asset investments 10 – (837) (837) – (14,333) (14,333) Gain/(loss) on valuation of current asset investments – 881 881 – (1,047) (1,047) Investment income 2 1,588 – 1,588 1,194 – 1,194 Investment management fees 3 (353) (1,058) (1,411) (393) (1,179) (1,572) Other expenses 4 (647) – (647) (528) – (528) Profit/(loss) before tax 588 (987) (399) 273 (15,982) (15,709) Tax 6 – – – – – – Total comprehensive income/ (loss) after tax 588 (987) (399) 273 (15,982) (15,709) Earnings per share – basic and diluted 8 0.3p (0.5p) (0.2p) 0.2p (9.8p) (9.6p) • The ‘Total’ column of this statement represents the statutory income statement of the Company prepared in accordance with the accounting policies detailed in the Notes to the financial statements; the supplementary revenue return and capital return columns have been prepared in accordance with the AIC Statement of Recommended Practice. • All revenue and capital items in the above statement derive from continuing operations. • The Company has only one class of business and derives its income from investments made in shares and securities and money market funds, as well as OEIC funds. The Company has no recognised gains or losses other than the results for the period as set out above. Accordingly, a statement of comprehensive income is not required. The accompanying notes on pages 53 to 67 form an integral part of the financial statements. 50 Octopus AIM VCT 2 plc Annual report 2024 As at 30 November 2024 As at 30 November 2023 Notes £’000 £’000 £’000 £’000 Fixed asset investments 10 57,141 53,288 Current assets: Investments 11 10,146 8,796 Money market funds 11 10,564 21,893 Debtors 12 152 152 Cash at bank 11 1,595 1,045 22,457 31,886 Creditors: amounts falling due within one year 13 (536) (484) Net current assets 21,921 31,402 Total assets less current liabilities 79,062 84,690 Called up equity share capital 14 20 18 Share premium 6,314 7,619 Capital redemption reserve 4 3 Special distributable reserve 76,116 80,043 Capital reserve realised (13,501) (5,400) Capital reserve unrealised 11,879 4,765 Revenue reserve (1,770) (2,358) Total equity shareholders’ funds 79,062 84,690 NAV per share – basic and diluted 9 40.5p 47.9p The statements were approved by the Directors and authorised for issue on 10 March 2025 and are signed on their behalf by: Keith Mullins Chair Company No: 05528235 The accompanying notes on pages 53 to 67 form an integral part of the financial statements. Balance sheet 51 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Share capital £’000 Share premium £’000 Capital redemption reserve £’000 Special distributable reserves 1 £’000 Capital reserve realised 1 £’000 Capital reserve unrealised £’000 Revenue reserve 1 £’000 Total £’000 Balance as at 1 December 2023 18 7,619 3 80,043 (5,400) 4,765 (2,358) 84,690 Comprehensive income/(loss) for the year: Management fee allocated as capital expenditure – – – – (1,058) – – (1,058) Current year net gain on disposal – – – – 27 – – 27 Current year gain on fair value of investments – – – – – 44 – 44 Profit after tax – – – – – – 588 588 Total comprehensive loss for the year – – – – (1,031) 44 588 (399) Contributions by and distributions to owners: Repurchase and cancellation of own shares (1) – 1 (2,533) – – – (2,533) Issue of shares 3 11,264 – – – – – 11,267 Share issue costs – (554) – – – – – (554) Dividends paid – – – (13,409) – – – (13,409) Total contributions by and distributions to owners 2 10,710 1 (15,942) – – – (5,229) Other movements: Cancellation of share premium – (12,015) – 12,015 – – – – Prior years’ holding loss now realised – – – – (7,070) 7,070 – – Total other movements – (12,015) – 12,015 (7,070) 7,070 – – Balance as at 30 November 2024 20 6,314 4 76,116 (13,501) 11,879 (1,770) 79,062 Share capital £’000 Share premium £’000 Capital redemption reserve £’000 Special distributable reserves 1 £’000 Capital reserve realised 1 £’000 Capital reserve unrealised £’000 Revenue reserve 1 £’000 Total £’000 As at 1 December 2022 17 12,904 3 76,154 (5,843) 21,190 (2,631) 101,794 Comprehensive income/(loss) for the year: Management fee allocated as capital expenditure – – – – (1,179) – – (1,179) Current year net gain on disposal – – – – 577 – – 577 Current year loss on fair value of investments – – – – – (15,380) – (15,380) Profit after tax – – – – – – 273 273 Total comprehensive loss for the year – – – – (602) (15,380) 273 (15,709) Contributions by and distributions to owners: Repurchase and cancellation of own shares – – – (3,076) – – – (3,076) Issue of shares 1 8,821 – – – – – 8,822 Share issue costs – (468) – – – – – (468) Dividends paid – – – (6,673) – – – (6,673) Total contributions by and distributions to owners 1 8,353 – (9,749) – – – (1,395) Other movements: Cancellation of share premium – (13,638) – 13,638 – – – – Prior years’ holding gains now realised – – – – 3,215 (3,215) – – Transfer between reserves – – – – (2,170) 2,170 – – Total other movements – (13,638) – 13,638 1,045 (1,045) – – Balance as at 30 November 2023 18 7,619 3 80,043 (5,400) 4,765 (2,358) 84,690 1 Included within these reserves is an amount of £60,845,000 (2023: £72,285,000) which is considered distributable to shareholders under Companies Act rules. The Income Taxes Act 2007 restricts distribution of capital from reserves created by the conversion of the share premium account into a special distributable reserve until the third anniversary of the share allotment that led to the creation of that part of the share premium account. As at 30 November 2024, £20,921,000 of the special reserve is distributable under this restriction. The accompanying notes on pages 53 to 67 form an integral part of the financial statements. Statement of changes in equity 52 Octopus AIM VCT 2 plc Annual report 2024 Notes Year to 30 November 2024 £’000 Year to 30 November 2023 £’000 Cash flows from operating activities Loss on ordinary activities before tax (399) (15,709) Adjustments for: Decrease in debtors 12 – 53 Increase/(decrease) in creditors 13 52 (82) Loss/(gain) on disposal of fixed assets 10 30 (668) (Gain)/loss on disposal of current asset investments (57) 91 Loss on valuation of fixed asset investments 10 837 14,333 (Gain)/loss on valuation of current asset investments (881) 1,047 Net cash utilised in operating activities (418) (935) Cash flows from investing activities Purchase of fixed asset investments 10 (6,934) (4,086) Proceeds from sale of fixed asset investments 10 2,214 9,157 Purchase of current asset investments (924) (2,040) Proceeds from sale of current asset investments 512 1,505 Net cash flows (utilised in)/generated from investing activities (5,132) 4,536 Cash flows from financing activities Purchase of own shares 14 (2,533) (3,076) Share issues net of DRIS 14 8,815 7,519 Share issue costs net of DRIS 14 (554) (468) Dividends paid net of DRIS (10,957) (5,370) Net cash flows utilised in financing activities (5,229) (1,395) (Decrease)/increase in cash and cash equivalents (10,779) 2,206 Opening cash and cash equivalents 22,938 20,732 Closing cash and cash equivalents 12,159 22,938 Closing cash and cash equivalents is represented by: Cash at bank 11 1,595 1,045 Money market funds 11 10,564 21,893 Total cash and cash equivalents 12,159 22,938 The accompanying notes on pages 53 to 67 form an integral part of the financial statements. Cash flow statement 53 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 1. Significant accounting policies The Company is a Public Limited Company (plc) incorporated in England and Wales and its registered office is 6th Floor, 33 Holborn, London, EC1N 2HT. The Company’s principal activity is to invest in a diverse portfolio of predominantly AIM-traded companies with the objective of providing shareholders with attractive tax-free dividends and long-term capital growth. Basis of preparation The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of certain financial instruments, and in accordance with UK Generally Accepted Accounting Practice (GAAP), including Financial Reporting Standard 102 – ‘The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland’ (FRS 102), and with the Companies Act 2006 and the Statement of Recommended Practice (SORP) ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts (issued 2014 and updated in July 2022).’ The significant accounting policies have remained unchanged since those set out in the Company’s 2023 annual report and accounts. A summary of the principal accounting policies is set out below. FRS 102 sections 11 and 12 have been adopted with regard to the Company’s financial instruments. The Company held all fixed asset investments at fair value through profit or loss (‘FVTPL’); therefore all gains and losses arising from such investments held are attributable to financial assets held at FVTPL. Accordingly, all interest income, fee income, expenses and gains and losses on investments are attributable to assets held at FVTPL. Going concern After reviewing the Company’s forecasts and expectations, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. The annual expenses of the Company are around £2.1 million and the Company had £22.3 million in cash at bank and readily realisable securities, including MMFs and OEICs at the year end. The annual expenses do not include outflows related to share buybacks or dividends but the ability to retain cash is largely in the Company’s control as it can shift investment strategy to ensure it has a sufficient cash buffer. The Company therefore continues to adopt the going concern basis in preparing its financial statements. In reaching this conclusion the Directors have had regard to the potential impact of economic instability on the Company. See the Directors’ Report on pages 29 to 32 for further details. Revenue and capital The Company presents its Income Statement in a three column format to give shareholders additional detail of the performance of the Company, split between items of a revenue or capital nature as required by the SORP. The revenue column of the Income Statement includes all income and revenue expenses of the Company. The capital column includes gains and losses on disposal of investments, and gains and losses on the revaluation of investments. Upon disposal of investments, gains or losses relating to the assets are transferred from the unrealised capital reserve to the realised capital reserve. Investment management fees are split between revenue (25%) and capital (75%), 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. Key judgements and estimates The preparation of the financial statements requires the Board to make judgements and estimates that affect the application of policies and reported amounts of assets and liabilities. Estimates and assumptions mainly relate to the fair valuation of the fixed asset investments, particularly unquoted investments. Estimates are based on historical experience and other assumptions that are considered reasonable under the circumstances. The estimates and the assumptions are under continuous review with particular attention paid to the carrying value of the investments. Investment valuation policies are important to the depiction of the Company’s financial position and require the application of subjective and complex judgements, notably with regard to unquoted holdings, often as a result of the need to make estimates about the effects of matters that are inherently uncertain and may change in subsequent periods. The main accounting and valuation policies used by the Company are disclosed below. Investments are regularly reviewed to ensure that the fair values are appropriately stated. Unquoted investments are valued in accordance with current IPEV guidelines, although this does rely on subjective estimates such as appropriate sector earnings multiples, forecast results of portfolio companies, asset values of the subsidiary companies of portfolio companies and liquidity or marketability of the investments held. Although the Company believes that the assumptions concerning the business environment and estimate of future cash flows are appropriate, changes in estimates and assumptions could require changes in the stated values. This could lead to additional changes in fair value in the future (see note 10). Notes to the financial statements 54 Octopus AIM VCT 2 plc Annual report 2024 1. Significant accounting policies continued Financial instruments The Company’s principal financial assets are its investments and the policies in relation to those assets are set out above and in note 10. Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are debited direct to equity. The Company’s trade receivables are initially recognised at fair value which is normally transaction cost and subsequently measured at amortised cost. Cash and liquid resources For the purpose of the Cash Flow Statement, cash and cash equivalents comprises, cash at bank and money market funds. 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. Investments in OEICs and MMFs are subject to insignificant changes in fair value. Financing strategy and capital structure We define capital as shareholders’ funds and our financial strategy in the medium term is to manage a level of cash that balances the risks of the business with optimising the return on equity. The Company currently has no borrowings nor does it anticipate that it will have any borrowing facilities in the future to fund the acquisition of investments. The Company does not have any externally imposed capital requirements. The Board considers the distributable reserves and the total return for the year when recommending a dividend. In addition, the Board is authorised to make market purchases up to a maximum of 14.99% of the issued Ordinary share capital in accordance with Special Resolution 11 in order to maintain sufficient liquidity in the Company’s shares. Reserves Called up equity share capital – represents the nominal value of shares that have been issued. Share premium account – includes any premiums received on issue of share capital. Any transaction costs associated with the issuing of shares are deducted from share premium. Capital redemption reserve – includes nominal share capital which has been bought back by the Company for cancellation and cannot be distributed to shareholders. 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. This reserve is available for distribution. 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. Revenue reserve – includes all net revenue profits and losses of the Company. When in surplus this reserve is available for distribution. Functional and presentational currency The financial statements are presented in sterling (£). The functional currency is also sterling (£). 2. Income Accounting policy Investment income includes interest earned on money market securities and shown net of income tax withheld at source. Dividend income is shown net of any related tax credit. Dividends are allocated to revenue or capital depending on whether the dividend is of a revenue or capital nature. Dividends receivable are recognised when the Company’s right to receive payment is established and it is probable that payment will be received. Fixed returns on debt and money market securities are recognised on a time apportionment basis so as to reflect the effective yield, provided there is no reasonable doubt that payment will be received in due course. Notes to the financial statements continued 55 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 2. Income continued Disclosure 30 November 2024 £’000 30 November 2023 £’000 Dividends receivable from fixed asset investments 590 563 Loan note interest receivable 67 20 Income receivable on money market securities 931 611 1,588 1,194 3. Investment management fees 30 November 2024 30 November 2023 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Investment management fees 353 1,058 1,411 393 1,179 1,572 Octopus provides investment management and accounting and administration services to the Company under a management agreement which may be terminated at any time thereafter by not less than 12 months’ notice given by either party. No compensation is payable in the event of terminating the agreement by either party, if the required notice period is given. The fee payable, should insufficient notice be given, will be equal to the fee that would have been paid should continuous service be provided, or the required notice period was given. The management fee is an annual charge and is set at 2% of the Company’s net assets. The Investment Manager is not entitled to any annual performance incentive scheme. During the year Octopus charged gross management fees of £1,708,000 (2023: £1,860,000). When the various allowances detailed below are included, the net management fee for the year is £1,411,000 (2023: £1,572,000). At the year end £379,000 was payable to Octopus (2023: £356,000). Octopus received £189,000 as a result of upfront fees charged on allotments of Ordinary shares (2023: £154,000). The increase in upfront fees this year has proportionately increased in line with the value of allotments in the year. The Company pays ongoing adviser charges to independent financial advisers (IFAs). Ongoing adviser charges are an ongoing fee of up to 0.5% per annum of the amount invested for a maximum of nine years paid to Advisers who are on an advised and ongoing fee structure. The Company is rebated for this cost by way of a reduction in the annual management fee. For the year to 30 November 2024 the rebate received was £108,000 (2023: £105,000). The Company also facilitates upfront fees to IFAs where an investor has invested through a financial adviser and has received upfront advice. Where an investor agrees to an upfront fee only, the Company can facilitate a payment of an initial adviser charge of up to 4.5% of the investment amount. If the investor chooses to pay their intermediary/adviser less than the maximum initial adviser charge, the remaining amount will be used for the issue and allotment of additional new shares for the investor. In these circumstances the Company does not facilitate ongoing annual payments. To ensure that the Company is not financially disadvantaged by such payment, a notional ongoing adviser charge equivalent to 0.5% per annum of the amount invested will be deemed to have been paid by the Company for a period of nine years. The Company is rebated for this cost, also by way of a reduction in the annual management fee. For the year to 30 November 2024 the rebate received was £134,000 (2023: £127,000). The Company also receives a reduction in the management fee for the investments in other Octopus managed funds, being the Multi Cap, Micro Cap Growth and Future Generations products, to ensure the Company is not double charged on these products. This amounted to £55,000 for the year to 30 November 2024 (2023: £56,000). 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. 56 Octopus AIM VCT 2 plc Annual report 2024 4. Other expenses Accounting policy All expenses are accounted for on an accruals basis and are charged wholly to revenue, apart from management fees which are charged 25% to revenue and 75% to capital. The transaction costs incurred when purchasing or selling assets are written off to the Income Statement in the period that they occur. Disclosure 30 November 2024 £’000 30 November 2023 £’000 IFA charges 108 105 Directors’ remuneration 117 103 Audit fees 51 51 Registrar fees 55 49 Printing and postage 15 22 VCT monitoring fees 18 20 Legal and professional fees 15 14 Directors’ and officers’ liability insurance 43 13 Brokers’ fees 6 6 Other administration expenses 219 145 647 528 The fees payable to the Company’s auditor above are stated net of VAT and the VAT is included within other administration expenses. No non-audit services were provided by the Company’s auditor. The ongoing charges of the Company were 2.4% of average net assets during the year to 30 November 2024 (2023: 2.2%). 5. Directors’ remuneration Total Directors’ fees during the year were £117,000 (2023: £103,000). This excludes Employer’s National Insurance contributions of £10,300 (2023: £9,500) which have been included within other administration expenses. The highest paid Director received £30,250 (2023: £29,000). None of the Directors received any other remuneration or benefit from the Company during the year. The Company has no employees other than Non-Executive Directors. The average number of Non-Executive Directors in the year was five (2023: four). 6. Tax Accounting policy Current tax is recognised for the amount of income tax payable in respect of the taxable profit/(loss) for the current or past reporting periods using the current UK corporation tax rate. The tax effect of different items of income/gain and expenditure/loss is allocated between capital and revenue return on the ‘marginal’ basis as recommended in the SORP. Deferred tax is recognised on an undiscounted basis in respect of all timing differences that have originated but not reversed at the balance sheet date, except as otherwise indicated. Deferred tax assets are only recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Notes to the financial statements continued 57 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 6. Tax continued Disclosure The corporation tax charge for the year was £nil (2023: £nil). 30 November 2024 £’000 30 November 2023 £’000 Loss before tax (399) (15,709) Current tax at 25% (2023: 23.0%) (100) (3,615) Effects of Non-taxable income (380) (270) Non-taxable capital gains (18) 3,406 Non-deductible expenses 10 3 Excess management expenses on which deferred tax not recognised 488 476 Total tax charge – – Approved VCTs are exempt from tax on capital gains within the Company. Since the Board intends that the Company will continue to conduct its affairs so as to maintain its approval as a VCT, no deferred tax has been provided in respect of any capital gains or losses arising on the revaluation or disposal of investments. As at 30 November 2024, there is an unrecognised deferred tax asset of £5,450,000 (2023: £5,118,000) in respect of surplus management expenses of £21,800,000 (2023: £20,500,000), based on a prospective tax rate of 25% (2023: 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 surplus management expenses will be utilised and that the Company will obtain any benefit from this asset. 7. Dividends Accounting policy Dividends payable are recognised as distributions in the financial statements when the Company’s liability to make a payment has been established. This liability is established on the record date, the date on which those shareholders on the share register are entitled to the dividend. Disclosure 30 November 2024 £’000 30 November 2023 £’000 Dividends paid on Ordinary shares during the year 2023 Final dividend – 1.8p per share paid 27 June 2024 (2022: 2.3p per share) 3,302 3,746 2023 Special dividend – 3.6p per share paid 27 June 2024 (2022: Nil) 6,605 2024 Interim dividend – 1.8p per share paid 28 November 2024 (2023: 1.8p per share) 3,502 2,927 Total 13,409 6,673 During the year £2,452,000 (2023: £1,303,000) of dividends were reinvested under the DRIS, see note 14. 58 Octopus AIM VCT 2 plc Annual report 2024 7. Dividends continued Under Section 32 of FRS 102 ‘Events After the end of the Reporting Period’, dividends payable at year end are not recognised as a liability. Details of these dividends and all other dividends declared in the year are set out below. 30 November 2024 £’000 30 November 2023 £’000 Dividends paid and proposed 2023 Special dividend – 3.6p per share paid 27 June 2024 (2022: Nil) 6,605 6,639 2024 Interim dividend – 1.8p per share paid 28 November 2024 (2023: 1.8p per share) 3,502 2,927 2024 Final dividend proposed – 1.8p per share payable 29 May 2025 (2023: 1.8p per share) 3,517 3,328 13,624 12,894 The above proposed final dividend is based on the number of shares in issue at the date of this report. The actual dividend paid may differ from this number as the dividend payable will be based on the number of shares in issue on the record date and will reflect any changes in the share capital between the year end and the record date. 8. Earnings per share 30 November 2024 30 November 2023 Revenue £’000 Capital £’000 Total £’000 Revenue £’000 Capital £’000 Total £’000 Profit/(loss) attributable to Ordinary shareholders 588 (987) (399) 273 (15,982) (15,709) Earnings per Ordinary share 0.3p (0.5p) (0.2p) 0.2p (9.8p) (9.6p) The profit/(loss) per share is based on 184,864,715 (2023: 164,257,336) Ordinary shares, being the weighted average number of Ordinary shares in issue during the year, and the loss on ordinary activities after tax for the year of £399,000 (2023: loss of £15,709,000). There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted earnings per share are identical. 9. Net asset value per share 30 November 2024 30 November 2023 Net assets (£’000) 79,062 84,690 Shares in issue 195,403,293 176,875,405 NAV per share (p) 40.5 47.9 There are no potentially dilutive capital instruments in issue and, as such, the basic and diluted NAV per share are identical. Notes to the financial statements continued 59 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 10. Fixed asset investments Accounting policy The Company’s principal financial assets are its investments and the policies in relation to those assets are set out below. Purchases and sales of investments are recognised in the financial statements at the date of the transaction (trade date). These investments will be managed and their performance evaluated on a fair value basis in accordance with a documented investment strategy and information about them has to be provided internally on that basis to the Board. Accordingly, as permitted by FRS 102, the investments are measured as being FVTPL on the basis that they qualify as a group of assets managed, and whose performance is evaluated, on a fair value basis in accordance with a documented investment strategy. The Company’s investments are measured at subsequent reporting dates at fair value. In the case of investments quoted on a recognised stock exchange, fair value is established by reference to the closing bid price on the relevant date or the last traded price, depending upon convention of the exchange on which the investment is quoted. In the case of unquoted investments and loan notes, fair value is established by assessing different methods of valuation, such as price of recent transaction, earnings or revenue-based multiples, discounted cash flows and net assets. Where price of recent investment is used as a starting point for estimating fair value at subsequent measurement dates, this has been benchmarked using an appropriate valuation technique. These methodologies are consistent with IPEV guidelines. Gains and losses arising from changes in fair value of investments are recognised as part of the capital return within the Income Statement and allocated to the capital reserve unrealised. The Investment Manager reviews changes in fair value of investments for any permanent reductions in value and will give consideration to whether these losses should be transferred to the capital reserve realised. In the preparation of the valuations of assets the Directors are required to make judgements and estimates that are reasonable and incorporate their knowledge of the performance of the portfolio companies. Fair value hierarchy Paragraph 34.22 of FRS 102 recommends following a hierarchy of fair value measurements, for financial instruments measured at fair value in the balance sheet, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). This methodology is adopted by the Company and requires disclosure of financial instruments to be dependent on the lowest significant applicable input, as laid out below: Level 1: The unadjusted, fully accessible and current quoted price in an active market for identical assets or liabilities that an entity can access at the measurement date. Level 2: Inputs for similar assets or liabilities other than the quoted prices included in Level 1 that are directly or indirectly observable, which exist for the duration of the period of investment. Level 3: This is where inputs are unobservable, where no active market is available and recent transactions for identical instruments do not provide a good estimate of fair value for the asset or liability. 60 Octopus AIM VCT 2 plc Annual report 2024 10. Fixed asset investments continued Level 1: Quoted equity investments £’000 Level 2: Quoted equity investments £’000 Level 3: Unquoted investments £’000 Total £’000 Opening cost at 1 December 2023 47,922 – 2,807 50,729 Opening unrealised (loss)/gain as at 1 December 2023 (1,903) – 4,462 2,559 Valuation as at 1 December 2023 46,019 – 7,269 53,288 Purchases at cost 5,934 – 1,000 6,934 Disposal proceeds (2,089) – (125) (2,214) Loss on realisation of investments (24) – (6) (30) Change in fair value in year (2,666) – 1,829 (837) Closing valuation as at 30 November 2024 47,174 – 9,967 57,141 Closing cost as at 30 November 2024 49,212 – 3,487 52,699 Closing unrealised (loss)/gain as at 30 November 2024 (2,038) – 6,480 4,442 Valuation as at 30 November 2024 47,174 – 9,967 57,141 The Company received £2,214,000 (2023: £9,157,000) from investments sold in the year. The book cost of these investments when they were purchased was £4,965,000 (2023: £5,332,000). These investments have been revalued over time and until they were sold any unrealised gains/losses were included in the fair value of the investments. Level 1 valuations are valued in accordance with the bid price on the relevant date. Further details of the fixed asset investments held by the Company are shown within the Investment Manager’s Review. Level 2 investments are valued using other observable inputs not included in Level 1. The Company holds no level 2 investments. Level 3 investments are reported at Fair Value in accordance with FRS 102 sections 11 and 12, which is determined in accordance with the latest IPEV guidelines. In estimating Fair Value, there is an element of judgement, notably in deriving reasonable assumptions, and it is possible that, if different assumptions were to be used, different valuations could have been attributed to some of the Company’s investments. The Company holds six unquoted investments and two loan note stocks, which are classified as level 3 in terms of fair value hierarchy. These are valued based on a range of valuation methodologies, determined on an investment specific basis. The price of recent investment is used where a transaction has occurred sufficiently close to the reporting date to make this the most reliable indicator of fair value. Where recent investment is not deemed to indicate the most reliable indicator of fair value i.e. the most recent investment is too distant from the reporting date for this to be deemed a reasonable indicator, other market based approaches including earnings multiples, annualised recurring revenues, discounted cash flows or net assets are used to determine a fair value for the investments. FRS 102 requires the Directors to consider the impact of changing one or more of the inputs used as part of the valuation process to reasonable possible alternative assumptions. The Company’s holdings in Hasgrove Limited and Popsa Holdings Ltd make up 98% of the market value of the level 3 investments on the balance sheet and therefore we have taken into account these valuations when considering possible alternative assumptions. See below for the results of our analysis: Notes to the financial statements continued 61 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 10. Fixed asset investments continued Valuation technique Portfolio company Input Input selected Change in input Change in fair value of investments (£m) Change in NAV (pence per share) Revenue multiple Hasgrove Ltd ARR multiple 6.67 +0.5x +0.5 +0.26 -0.5x -0.5 -0.26 Revenue multiple Popsa Holdings Ltd EV/Sales multiple 1.80 +0.2x +0.2 +0.10 -0.2x -0.2 -0.10 The Board and the Investment Manager believe that the valuations as at 30 November 2024 reflect the most reasonable assumptions at that date, giving due regard to all information available from each portfolio company. All capital gains or losses on investments are classified at FVTPL. Given the nature of the Company’s venture capital investments, the changes in fair value of such investments recognised in these financial statements are not considered to be readily convertible to cash in full at the balance sheet date and accordingly these gains are treated as holding gains or losses. There have been no transfers between these classifications in the year (2023: none). 11. Current asset investments, cash and cash equivalents Accounting policy For the purpose of the Cash Flow Statement, cash and cash equivalents comprise of cash at bank and money market funds. 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. They are also subject to insignificant risk of valuation changes. Current asset investments on the Balance Sheet comprise OEICs, which are valued on a FVTPL basis. 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. Money market funds are carried at fair value at the latest published price. The current asset investments are readily convertible into cash at the option of the Company, within seven days. The current asset investments are held for trading, are actively managed and the performance is evaluated in accordance with a documented investment strategy. Disclosure As at 30 November 2024 and 30 November 2023, current asset investments, money market funds and cash at bank fall into Level 1 of the fair value hierarchy as defined in the fixed asset investment accounting policy in note 10 above. 30 November 2024 £’000 30 November 2023 £’000 OEICs: FP Octopus UK Micro Cap Growth Fund 5,898 5,150 FP Octopus UK Multi Cap Income Fund 2,891 2,925 FP Octopus UK Future Generations Fund 1,357 721 Total current asset investments 10,146 8,796 Money market funds 10,564 21,893 Total current asset investments and money market funds 20,710 30,689 Cash at bank 1,595 1,045 Total current asset investments and cash and cash equivalents 22,305 31,734 62 Octopus AIM VCT 2 plc Annual report 2024 12. Debtors 30 November 2024 £’000 30 November 2023 £’000 Prepayments 17 21 Accrued income 135 131 152 152 13. Creditors: Amounts falling due within one year 30 November 2024 £’000 30 November 2023 £’000 Trade creditors 30 4 Accruals 504 479 Other 2 1 536 484 14. Share capital 30 November 2024 £’000 30 November 2023 £’000 Allotted and fully paid up: 195,403,293 Ordinary shares of 0.01p (2023: 176,875,405) 20 18 The capital of the Company is managed in accordance with its investment policy with a view to the achievement of its investment objective as set on page 20. As the Company is registered as an Alternative Investment Fund Manager (AIFM), it is subject to externally imposed capital requirements, namely if the value of assets under management (AUM) exceeds €250 million then an additional amount of Company funds equal to 0.02% of the excess over €250 million (subject to a cap of €10 million capital requirement) will be required. During the year the Company repurchased the following shares to be cancelled: Date Number of shares Price per share (p) Total cost of shares repurchased (£) 14 December 2023 791,619 45.9 363,000 18 January 2024 408,110 46.6 190,000 22 February 2024 448,271 46.8 210,000 21 March 2024 280,039 48.0 134,000 25 April 2024 504,889 47. 3 239,000 23 May 2024 201,620 48.9 98,000 20 June 2024 430,789 42.4 183,000 18 July 2024 253,990 42.8 109,000 15 August 2024 712,121 42.3 301,000 12 September 2024 430,621 42.1 181,000 10 October 2024 514,128 40.8 210,000 14 November 2024 8 07, 242 39.0 315,000 Totals 5,783,439 2,533,000 Notes to the financial statements continued 63 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 14. Share capital continued The total nominal value of the shares repurchased for cancellation was £578 representing 3% of the issued share capital (2023: 6,011,097 shares with a nominal value of £601 representing 3.4% of the issued share capital). The Company issued the following shares during the year: Date Number of shares Price per share (p) Net proceeds of shares issued (£) 14 December 2023 5,635,893 47. 2 2,662,000 11 January 2024 3,555,688 48.3 1,716,000 16 May 2024 1 35,287 50.2 18,000 27 June 2024 2 4,047,663 44.2 1,790,000 29 October 2024 9,394,966 41.1 3,865,000 28 November 2024 2 1,641,830 40.3 662,000 Totals 24,311,327 10,713,000 1 Shares issued as a result of reduced adviser charges. 2 Shares issued under the Dividend Reinvestment Scheme (DRIS). Excluding the value of shares issued under the DRIS, the total value of shares issued net of share issue costs was £8,261,000 (2023: £7,519,000). This is shown in the Cash Flow Statement. 15. Reconciliation of movements in equity Notes 30 November 2024 £’000 30 November 2023 £’000 Shareholders’ funds at start of year 84,690 101,794 Total comprehensive loss (399) (15,709) Share capital bought back 14 (2,533) (3,076) Issue of shares (net of issue costs) 14 10,713 8,354 Dividends paid 7 (13,409) (6,673) Shareholders’ funds at end of year 79,062 84,690 Included within these reserves is an amount of £60,845,000 (2023: £72,285,000) which is considered distributable to shareholders under Companies Act rules. The Income Taxes Act 2007 restricts distribution of capital from reserves created by the conversion of the share premium account into a special distributable reserve until the third anniversary of the share allotment that led to the creation of that part of the share premium account. As at 30 November 2024, £20,921,000 of the special reserve is distributable under this restriction. During the year there was a share premium cancellation amounting to £12,015,000 (2023: £13,638,000). This was carried out with the approval of shareholders for the purpose of creating additional distributable reserves. 64 Octopus AIM VCT 2 plc Annual report 2024 16. Financial instruments The Company’s financial instruments comprise equity investments, loan notes, OEICs, cash balances, investments in money market funds and debtors and creditors. The Company holds financial assets in accordance with its investment policy of investing mainly in a portfolio of VCT qualifying AIM-traded securities whilst holding a proportion of its assets in cash or near-cash investments in order to provide a reserve of liquidity. 30 November 2024 £’000 30 November 2023 £’000 Financial assets at fair value through profit or loss Fixed asset investments 57,141 53,288 Money market securities 10,564 21,893 OEICs 10,146 8,796 Total financial assets at fair value through profit or loss 77,851 83,977 Financial assets measured at amortised cost Cash at bank 1,595 1,045 Accrued dividends and interest receivable 135 131 Total financial assets measured at amortised cost 1,730 1,176 Financial liabilities measured at amortised cost Creditors 536 484 Total financial liabilities measured at amortised cost 536 484 The Company holds six qualifying, unquoted investments; Airnow plc, Hasgrove Limited, Popsa Holdings Limited, Rated People Limited, The Food Marketplace Limited and Alusid Limited. The Company also holds two unquoted loan note investments, held at price of recent investment, in Strip Tinning Holdings plc valued at £600,000 and Haydale Graphene Industries plc valued at £200,000. 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. For quoted investments this is the bid price. The Directors believe that the fair value of the assets held at the year end is equal to their book value. Unquoted investments are valued in accordance with IPEV guidelines. The Company’s creditors and debtors are initially recognised at fair value which is usually the transaction cost and subsequently measured at amortised cost using the effective interest method. The fair value of all other financial assets and liabilities is represented by their carrying value in the balance sheet. The Directors believe that the fair value of the assets held at the year end is equal to their book value. Notes to the financial statements continued 65 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 17. Financial risk management In carrying on its investment activities, the Company is exposed to various types of risk associated with the financial instruments and markets in which it invests. The most significant types of financial risk facing the Company are market risk, interest rate risk, credit risk and liquidity risk. The Company’s approach to managing these risks is set out below together with a description of the nature and amount of the financial instruments held at the balance sheet date. Market risk The Company’s strategy for managing investment risk is determined with regard to the Company’s investment objective, as outlined on page 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 Report on pages 33 to 36, having regard to the possible effects of adverse price movements, and other macroeconomic effects on the market such as economic recession, movement in interest rates, inflation, political instability and rising living costs with the objective of maximising overall returns to shareholders. Investments in smaller companies, by their nature, usually involve a higher degree of risk than investments in larger companies quoted on a recognised stock exchange, though the risk can be mitigated to a certain extent by diversifying the portfolio across business sectors and asset classes. The overall disposition of the Company’s assets is regularly monitored by the Board. Details of the Company’s investment portfolio at the balance sheet date are set out on pages 8 to 10. By value, 59.7% (2023: 54.3%) of the Company’s net assets comprised equity securities listed on the London Stock Exchange, Aquis, NASDAQ or quoted on AIM. In the context of the continued short-term market volatility caused by the unstable economic environment, we have maintained the sensitivity analysis at 20%, consistent with 2023. Therefore, a decrease in the bid price of these securities as at 30 November 2024 would have decreased net assets and the total return for the year by £9,435,000 (2023: £9,204,000 decrease); and an equivalent change in the opposite direction would have increased net assets for the year by the same amount. OEIC investments comprised 12.8% of the Company’s net assets by value (2023: 10.4%). A 20% decrease (2023: 20%) in the price of these securities at 30 November 2024 would have decreased net assets by £2,029,000 (30 November 2023: £1,759,000 decrease); and an equivalent change in the opposite direction would have increased net assets for the year by the same amount. Unquoted investments comprised 12.6% of the Company’s net assets by value (2023: 8.6%). A 20% decrease (2023: 20%) in the multiple or price of recent investment used in the valuation of these securities as at 30 November 2024 would have decreased net assets by £1,993,000 (2023: £1,454,000 decrease); and an equivalent change in the opposite direction would have increased net assets for the year by the same amount. Interest rate risk Some of the Company’s financial assets are interest bearing. As a result, the Company is exposed to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates. 66 Octopus AIM VCT 2 plc Annual report 2024 17. Financial risk management continued Floating rate The Company’s floating rate investments comprise cash held on 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 4.75% at 30 November 2024 (2023: 5.25%). The amounts held in floating rate investments at the balance sheet date were as follows: 30 November 2024 £’000 30 November 2023 £’000 Money market funds 10,564 21,893 10,564 21,893 A 1% increase in the base rate would increase income receivable from these investments and the total return for the year by £106,000 (2023: £219,000). Credit risk Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager and the Board carry out a regular review of counterparty risk. Where financial assets expose the Company to credit risk, the maximum exposure is represented by their carrying value. 30 November 2024 £’000 30 November 2023 £’000 Investments in interest bearing instruments 800 120 Cash on deposit 1,595 1,045 Debtors 152 152 Money market funds 10,564 21,893 13,111 23,210 By value, no individual bank holding or fixed rate note investment exceeded 13% of the Company’s net assets at 30 November 2024 (2023: 9%). The Company’s interest-bearing deposit and current accounts are maintained with HSBC and Money Market Funds held with BlackRock, HSBC and JP Morgan. The risk of loss to this balance is deemed to be low due to the historical credit ratings and a current Moody’s rating of Aaa (2023: Aaa) for HSBC, JP Morgan and BlackRock Money Market Funds. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. Should the credit quality or the financial position of these counterparties deteriorate significantly, the Investment Manager will move the cash holdings to another bank. Credit risk relating to listed money market securities is mitigated by investing in a portfolio of investment instruments of high credit quality, comprising securities issued by the UK Government and major UK companies and institutions. Credit risk relating to loans to and shares in unquoted companies is considered to be part of market risk. Those assets of the Company which are traded on recognised stock exchanges are held on the Company’s behalf by third party sub-custodians (for example, BlackRock in the case of listed money market securities and Octopus Investments Limited in the case of quoted equity securities). Bankruptcy or insolvency of a custodian could cause the Company’s rights with respect to securities held by the custodian to be delayed or limited by bankruptcy proceedings. Credit risk arising on the sale of investments, accrued dividends and interest receivable is considered to be small due to the short settlement and the contracted agreements in place with the settlement lawyers. Notes to the financial statements continued 67 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 17. Financial risk management continued Liquidity risk The Company’s financial assets include investments in AIM-traded companies, which by their nature involve a higher degree of risk than investments on the main market, as well as unquoted securities which are not traded on a recognised stock exchange and which generally may be illiquid. As a result, the Company may not be able to realise some of its investments in these instruments quickly at an amount close to their fair value in order to meet its liquidity requirements, or to respond to specific events such as deterioration in the creditworthiness of any particular issuer. The Company’s listed money market securities are considered to be readily realisable as they are of high credit quality as outlined above. The Company’s OEIC investments are considered to be readily realisable as under the terms of the product funds can be withdrawn at any point and received within seven working days. There is a risk that the value of the investment will fall, but this is monitored continually by the Investment Manager. The Company’s liquidity risk is managed on a continuing basis by the Investment Manager in accordance with policies and procedures laid down by the Board. The Company’s overall liquidity risks are monitored on a quarterly basis by the Board. The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses. At 30 November 2024 these investments were valued at £22,305,000 (2023: £31,734,000). The Company has no debt, therefore no maturity analysis is required as all financial liabilities fall due within twelve months. 18. Events after the end of the reporting period The following events occurred between the balance sheet date and the signing of these financial statements: The following shares have been allotted since the year end: • 12 December 2024: 5,310,639 Ordinary shares at a price of 43.1p per share. • 23 January 2025: 2,927,288 Ordinary shares at a price of 42.6p per share. The following shares have been bought back since the year end: • 18 December 2024: 560,613 shares at a price of 39.1p per share. • 30 January 2025: 802,694 shares at a price of 38.4p per share. • 20 February 2025: 544,996 shares at a price of 38.5p per share. 19. Contingencies, guarantees and financial commitments There were no contingencies, guarantees or financial commitments as at 30 November 2024 (2023: nil). 20. Transactions with the Investment Manager The Company has employed Octopus Investments Limited (‘Octopus’ or ‘the Investment Manager’) throughout the period as Investment Manager. Octopus has also been appointed as Custodian of the Company’s investments under a Custodian Agreement. The Company has been charged £1,411,000 by Octopus as a management fee in the year to 30 November 2024 (2023: £1,572,000). The management fee is payable quarterly and is based on 2% of net assets at quarterly intervals. The Company receives a reduction in the management fee for the investments in other Octopus managed funds, being the Multi Cap Income Fund, Micro Cap Growth Fund and Future Generations Fund, to ensure the Company is not double charged on these products. This amounted to £55,000 in the year to 30 November 2024 (2023: £56,000). For further details please refer to note 3. Details of amounts invested in Octopus managed funds can be found on page 10. 21. Related party transactions As at 30 November 2024, Octopus Investments Nominees Limited (OINL) held nil shares (2023: nil) in the Company as beneficial owner, having purchased these at a cost of £nil (2023: £nil) from shareholders to protect their interests after delays or errors with shareholder instructions and other similar administrative tasks. Throughout the period to 30 November 2024 OINL purchased nil shares (2023: nil) at a cost of £nil (2023: £nil) and sold nil shares (2023: 4,284) for proceeds of £nil (2023: £2,000). In accordance with the listing rules, this is classed as a related party transaction as Octopus, the Investment Manager, and OINL are part of the same group of companies. Any such future transactions, where OINL takes over the legal and beneficial ownership of Company shares will be announced to the market and disclosed in annual and half-yearly reports. Details of the Directors, their remuneration and shareholdings can be found in the Directors’ Remuneration Report on pages 39 to 41. 68 Octopus AIM VCT 2 plc Annual report 2024 Octopus AIM VCT 2 plc was launched as Close IHT AIM VCT plc in March 2006 and raised £25 million through an offer for subscription. On 12 August 2010 the Company acquired the assets and liabilities of Octopus Third AIM VCT plc (formerly Octopus Second AIM VCT plc) (‘the merger’) and changed its name from Octopus IHT AIM VCT plc to Octopus Second AIM VCT plc. Shareholders of Octopus Third AIM VCT plc received 0.48356191 Ordinary shares in the Company for each Ordinary share they had prior to the merger. On 30 January 2015, the Company name changed to Octopus AIM VCT 2 plc. An offer, launched on 6 February 2012 and which closed on 5 April 2012, raised £1.3 million for the Company. An offer launched on 25 April 2012, closed on 31 July 2012 and raised a further £0.5 million for the Company. An Enhanced Buyback Facility opened on 23 October 2012 and closed on 28 December 2012. 10,470,985 existing shares were tendered and 9,974,094 new shares were issued. An offer for subscription of up to £10 million, which opened on 1 February 2013 and closed on 17 January 2014, raised £5.9 million. Since the company has raised additional investment through further fundraise as follows: • Combined total up to £12.1 million with a £4 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2014; • Combined total up to £8 million with a £4 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2016; • Combined total up to £14.3 million with a £4 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2017; • Combined total up to £20 million with a £10 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2018; • Combined total up to £20 million with a £10 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2019; • Combined total up to £20 million with a £10 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2020; • Combined total up to £20 million with a £10 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2021; • Combined total up to £20 million with a £10 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2022; • Combined total up to £20 million with a £10 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2023; and • Combined total up to £20 million with a £10 million over- allotment facility was launched alongside Octopus AIM VCT during the year to 30 November 2024. About VCTs VCTs were introduced in the Finance Act 1995 to provide a means for private individuals to invest in unlisted companies in the UK. Subsequent Finance Acts have introduced changes to VCT legislation. The tax benefits currently available to eligible new investors in VCTs include: • up to 30% up-front income tax relief; • exemption from income tax on dividends paid; and • exemption from capital gains tax on disposals of shares in VCTs. The Company has been approved as a VCT by HMRC. In order to maintain its approval, the Company must comply with certain requirements on a continuing basis including the provisions of chapter 3 of the Income Tax Act 2007, in particular s280A: • at least 80% of the Company’s investments must comprise ‘qualifying holdings’1 (as defined in the legislation); • at least 70% of the qualifying holdings must be invested into Ordinary shares with no preferential rights (30% for funds invested before 6 April 2011); • no single investment made can exceed 15% of the total Company value at the time of investment; and • a minimum of 10% of each qualifying investment must be in Ordinary shares with no preferential rights. 1 A ‘qualifying holding’ consists of up to £5 million invested in any one year in new shares or securities in a company admitted to trading on AIM (or an unquoted UK company) which is carrying on a qualifying trade and whose gross assets do not exceed a prescribed limit at the time of investment. The definition of a ‘qualifying trade’ excludes certain activities such as property investment and development, financial services and asset leasing. Dividends Dividends will be paid by the registrar on behalf of the Company. Shareholders who wish to have dividends paid directly into their bank account rather than by cheque to their registered address can complete a mandate form for this purpose or complete an instruction electronically by visiting the Computershare Investor Centre at: www-uk.computershare.com/investor/. Queries relating to dividends, shareholdings or requests for mandate forms should be directed to Computershare by calling 0370 703 6326 (calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate. Lines are open Monday-Friday 9.00am-5.30pm), or by writing to them at: The Registrar Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ Information and contact details 69 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Dividend Reinvestment Scheme (DRIS) The Company established a DRIS in 2014, under which shareholders are given the opportunity to automatically reinvest future dividend payments by subscribing for new Ordinary shares. This allows participating shareholders to reinvest the growth in their shareholdings and, subject to personal circumstances, benefit from additional income tax reliefs. Any shareholder wishing to reinvest their dividends can request a DRIS instruction form by calling Computershare on 0370 703 6326 or complete an instruction electronically by visiting the Computershare Investor Centre at: www-uk.computershare.com/investor/. The application form and rules can also be found in the Document Library on the Octopus website: www.octopusinvestments.com/investor/ our-products/venture-capital-trusts/octopus-aim-vcts/. Share price The Company’s share price can be found on various financial websites including www.londonstockexchange.com, with the following TIDM/EPIC code: Ordinary shares TIDM/EPIC code OSEC Latest share price 7 March 2025 37.2 pence per share Buying and selling shares The Company’s Ordinary shares can be bought and sold in the same way as any other company quoted on the London Stock Exchange via a stockbroker. There may be tax implications in respect of selling all or part of your holdings, so shareholders should contact their independent financial adviser if they have any queries. Buyback of shares The Company operates a policy of buying its own shares for cancellation as they become available, and envisages that purchases will be made at up to a 5% discount to the prevailing NAV. The Company is, however, unable to buy back shares directly from shareholders. If you are considering selling your shares or trading in the secondary market, please contact Panmure Liberum Limited, the Company’s broker. Panmure Liberum 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 Liberum Limited can be contacted as follows: Chris Lloyd 020 7886 2716 chris.lloyd@panmureliberum.com Paul Nolan 020 7886 2717 paul.nolan@panmureliberum.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; and • no need to include VCT dividends in annual tax returns. The UK tax treatment of VCTs is on a first in and first out basis and therefore tax advice should be obtained before shareholders dispose of their shares. Notification of change of address Communications with shareholders are mailed to the registered address held on the share register. In the event of a change of address or other amendment, this should be notified to the Company’s registrar, Computershare, under the signature of the registered holder or via the Computershare Investor Centre at: www-uk.computershare.com/investor/. Computershare’s contact details are provided on page 72. Other information for shareholders Previously published annual reports and half-yearly reports are available for viewing on the Investment Manager’s website at https://octopusinvestments.com/our-products/venture- capital-trusts/octopus-aim-vcts/shareholder-information/ by navigating to Products, Venture Capital Trusts, Octopus AIM VCTs, Shareholder Information. If your shares are held via a nominee company, you won’t receive communications regarding annual reports and half-yearly reports directly from us or the Registrars. You’ll need to speak to your nominee company about this or you can find latest published reports on the Investment Manager’s website. Other statutory information about the Company can also be found on this page. Electronic communications We also publish reports and accounts and all other correspondence electronically. This cuts the cost of print and reduces the impact on the environment. If, in future, you would prefer to receive an email telling you a report is available to view or to receive documents by email, please contact Octopus on 0800 316 2295 or Computershare on 0370 703 6326. Alternatively you can sign up to receive e-communications via the Computershare Investor Centre at: www-uk.computershare.com/investor/. 70 Octopus AIM VCT 2 plc Annual report 2024 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. Information and contact details continued 71 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Alternative performance measure (APM) A financial measure of historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. These APMs will help shareholders to understand and assess the Company’s progress. A number of terms within this glossary have been identified as APMs. Net asset value or NAV The value of the VCT’s total assets less liabilities. It is equal to the total shareholders’ funds. Net asset value per share or NAV per share The NAV per share of the Company is the sum of the underlying assets less the liabilities of the Company divided by the total number of shares in issue. Ongoing Charges Ratio (APM) The Ongoing Charges ratio has been calculated using the AIC recommended methodology and excludes exceptional costs and trail commission. The figure shows the annual percentage reduction in shareholder returns as a result of recurring operational expenses. It informs shareholders of the likely costs that will be incurred in managing the Company in the future. This is calculated by dividing the expenses of £2,058,000 which includes the management fee in note 3 on page 55 and the expenses listed out in note 4 on page 56 excluding irrecoverable VAT, exceptional costs and trail commission, by average net assets of £85,005,000. Total return (APM) Total return is calculated as movement in NAV per share in the period plus dividends paid in the period. Total return per share enables shareholders to evaluate more clearly the performance of the Company, as it reflects the underlying value of the portfolio at the reporting date. Total return % (APM) Total return % is calculated as movement in NAV per share in the period plus dividends paid in the period, divided by the NAV per share at the beginning of the period. Total return % on the NAV per share enables shareholders to evaluate more clearly the performance of the Company, as it reflects the underlying value of the portfolio at the reporting date. Money Market Fund (MMF) A mutual fund that invests in highly liquid, short term instruments. These instruments include cash, cash equivalent securities, and high credit rating debt based securities with a short term maturity. They are intended to offer investors high liquidity with a low level of risk. Open Ended Investment Company (OEIC) A type of investment fund that invests in equities, bonds and other securities. The price of the shares is based on the underlying assets of the fund. These are highly liquid as new shares can be created to meet investor demand and the fund will cancel shares of investors who exit the fund. Glossary of terms 72 Octopus AIM VCT 2 plc Annual report 2024 The Board of Directors Keith Mullins (Chair) Andy Raynor FCA Brad Ormsby CA Virginia (Connelly) Bull Company Number Registered in England No: 05528235 Legal Entity Identifier (LEI) 213800BW27BKJCI35L17 Secretary and Registered office Octopus Company Secretarial Services Limited 33 Holborn London EC1N 2HT Investment and Administration Manager Octopus Investments Limited 33 Holborn London EC1N 2HT Tel: 0800 316 2295 www.octopusinvestments.com Custodians Octopus Investments Limited 33 Holborn London EC1N 2HT Bankers HSBC Bank plc 31 Holborn London EC1N 2HR Independent Auditor BDO LLP 55 Baker Street London W1U 7EU Tax Adviser James Cowper Kreston The White Building 1-4 Cumberland Place Southampton SO15 2NP VCT Status Adviser Shoosmiths LLP Apex Plaza Forbury Road Reading RG1 1AX Registrar Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol BS99 6ZZ Tel: 0370 703 6326 (Calls are charged at the standard geographic rate and will vary by provider. Calls from outside the United Kingdom will be charged at the applicable international rate.) www.computershare.com/uk www-uk.computershare.com/investor/ Corporate Broker Panmure Liberum Limited Ropemaker Place, Level 12 25 Ropemaker Street London EC2Y 9LY Tel: +44 (0)20 3100 2000 Directors and advisers 73 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Notice is hereby given that the Annual General Meeting of Octopus AIM VCT 2 plc will be held at 33 Holborn, London, EC1N 2HT on 23 May 2025 at 10.30am for the purposes of considering, and if thought fit, passing the following resolutions of which Resolutions 1 to 8 and 13 will be proposed as Ordinary Resolutions and Resolutions 9 to 12 will be proposed as Special Resolutions: Ordinary Business 1. To receive and adopt the annual report and audited financial statements for the year to 30 November 2024. 2. To approve a final dividend of 1.8p per Ordinary share. 3. To approve the Directors’ Remuneration Report. 4. To re-elect Keith Mullins as a Director. 5. To re-elect Brad Ormsby as a Director. 6. To re-appoint BDO LLP as auditor of the Company in accordance with section 489 of the Companies Act 2006 (the ‘Act’), until the conclusion of the next general meeting of the Company at which audited accounts are laid before members, and to authorise the Directors to determine their remuneration. Special Business To consider and if thought fit, pass Resolutions 7 to 8 and 13 as Ordinary Resolutions and Resolutions 9 to 12, as Special Resolutions: 7. Authority to allot relevant securities THAT, in addition to existing authorities, the Directors be and are generally and unconditionally authorised in accordance with s551 of the Act to exercise all the powers of the Company to allot shares in the Company up to a maximum nominal amount of £4,035 (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 next AGM following the passing of this Resolution and the expiry of 15 months from the passing of the relevant Resolution (unless previously renewed, varied or revoked by the Company in a general meeting) but so that such authority allows the Company to make offers or agreements before the expiry thereof, which would or might require relevant securities to be allotted after the expiry of such authority. 8. Authority to allot relevant securities under the DRIS THAT, in addition to existing authorities, the Directors of the Company be and hereby are generally and unconditionally authorised in accordance with Section 551 of the Act to exercise all the powers of the Company to allot shares in the Company up to a maximum nominal amount of £1,009 in connection with the Company’s dividend reinvestment scheme (representing approximately 5% of the Ordinary share capital in issue as at the date of this Notice) provided that the authority conferred by this Resolution shall expire on the date falling 15 months from the date of the passing of this Resolution (unless previously renewed, varied or revoked by the Company in general meeting) save that this authority shall allow the Company to make, before the expiry of this authority, any offers or agreements which would or might require Shares to be allotted or rights to be granted after such expiry and the Directors may allot Shares in pursuance of any such offer or agreement notwithstanding the expiry of such authority. 9. Empowerment to make allotments of equity securities THAT, conditional upon the passing of Resolution 7 above, and in addition to existing authorities, the Directors of the Company be and are hereby empowered pursuant to s571 of the Act to allot or make offers or agreements to allot equity securities (as defined in s560(1) of the Act) for cash pursuant to the authority granted by Resolution 7 as if s561 of the Act did not apply to any such allotment and so that: (a) reference to allotment of equity securities in this Resolution shall be construed in accordance with s560(2) of the Act; and (b) the power conferred by this Resolution shall enable the Company to make any offer or agreement before the expiry of the said power which would or might require equity securities to be allotted after the expiry of the said power and the Directors may allot equity securities in pursuance of such offer or agreement notwithstanding the expiry of such power. The power provided by this Resolution shall expire on the earlier of the conclusion of the Company’s next AGM following the passing of this Resolution and the date falling 15 months from the date of the passing of this Resolution (unless previously renewed, varied or revoked by the Company in a general meeting). Notice of Annual General Meeting 74 Octopus AIM VCT 2 plc Annual report 2024 10. Empowerment to make allotments of equity securities under the DRIS THAT, conditional upon the passing of Resolution 8 above and in addition to existing authorities, the directors of the Company be and hereby are empowered pursuant to Section 571 of the Act to allot or make offers or agreements to allot equity securities (which expression shall have the meaning ascribed to it in Section 560(1) of the Act) for cash pursuant to the authority granted by Resolution 8 above, as if Section 561 of the Act did not apply to any such allotment and so that: (a) reference to allotment of equity securities in this Resolution shall be construed in accordance with Section 560(2) of the Act; and (b) the power conferred by this Resolution shall enable the Company to make any offer or agreement before the expiry of the said power which would or might require equity securities to be allotted after the expiry of the said power and the Directors may allot equity securities in pursuance of any such offer or agreement notwithstanding the expiry of such power. The power provided by this Resolution shall expire on the date falling 15 months from the date of the passing of this Resolution (unless previously renewed, varied or revoked by the Company in general meeting). 11. Authority to make market purchases THAT, in addition to existing authorities, the Company be and is hereby generally and unconditionally authorised to make market purchases (within the meaning of s693(4) of the Act) of Ordinary shares of 0.01p each in the Company (‘Ordinary shares’) provided that: (a) the maximum number of Ordinary shares so authorised to be purchased shall not exceed 30,239,764 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. 12. Cancellation of Share Premium Account THAT, subject to the sanction of the High Court, the amount standing to the credit of the share premium account of the Company, at the date an order is made confirming such cancellation by the Court, be and hereby is cancelled, and the amount by which the share capital is so reduced be credited to a reserve of the Company. 13. Continuation of the Company as a VCT THAT the Company continue in being as a Venture Capital Trust. By Order of the Board Keith Mullins Chair 10 March 2025 Notice of Annual General Meeting continued 75 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Notes: (a) A member entitled to attend and vote at the AGM may appoint one or more proxies to attend and vote on his or her behalf. A proxy need not be a member. (b) Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, entitlement to attend and vote at the meeting and the number of votes which may be cast thereat will be determined by reference to the Register of Members of the Company at close of business on the day which is two days before the day of the meeting. Changes to entries on the Register of Members after that time shall be disregarded in determining the rights of any person to attend and vote at the meeting. (c) A form of proxy is enclosed which, to be effective, must be completed and delivered to the Company’s registrars, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY or alternatively, you may register your proxy electronically at www.investorcentre.co.uk/eproxy, in each case, so as to be received by no later than 48 hours before the time the AGM is scheduled to begin. To vote electronically, you will be asked to provide your Control Number, Shareholder Reference Number and PIN which are detailed on your proxy form. Appointment of a proxy, or any CREST proxy instruction (as described in paragraph (d) below) will not preclude a member from subsequently attending and voting at the meeting should he or she choose to do so. This is the only acceptable means by which proxy instructions may be submitted electronically. (d) To appoint one or more proxies or to give an instruction to a proxy (whether previously appointed or otherwise) via the CREST system, CREST messages must be received by the issuer’s agent (ID number 3RA50) not later than 48 hours (excluding non-working days) before the time appointed for holding the meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp generated by the CREST system) from which the issuer’s agent is able to retrieve the message. After this time any change of instructions to a proxy appointed through CREST should be communicated to the proxy by other means. CREST personal members or other CREST sponsored members, and those CREST members who have appointed voting service provider(s) should contact their CREST sponsor or voting service provider(s) for assistance with appointing proxies via CREST. For further information on CREST procedures, limitations and system timings please refer to the CREST manual. The Company may treat as invalid a proxy appointment sent by CREST in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001. (e) Any person receiving a copy of the Notice as a person nominated by a member to enjoy information rights under section 146 of the Companies Act 2006 (a ‘Nominated Person’) should note that the provisions in Notes (a) and (b) above concerning the appointment of a proxy or proxies to attend the meeting in place of a member, do not apply to a Nominated Person as only shareholders have the right to appoint a proxy. However, a Nominated Person may have a right under an agreement between the Nominated Person and the member by whom he or she was nominated to be appointed, or to have someone else appointed, as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may have a right under such an agreement to give instructions to the member as to the exercise of voting rights at the meeting. (f) Section 319A of the Companies Act 2006 requires the Directors to answer any question raised at the AGM which relates to the business of the meeting although no answer need be given (a) if to do so would interfere unduly with the preparation of the meeting or involve disclosure of confidential information; (b) if the answer has already been given on the Company’s website; or (c) if it is undesirable in the best interests of the Company or the good order of the meeting. Questions from our shareholders in relation to the AGM can be sent via email to AIMVCT2AGM@octopusinvestments.com. The Company may, however, elect to provide answers to questions raised within a reasonable period of days after the conclusion of the AGM. (g) Members satisfying the thresholds in section 527 of the Companies Act 2006 can require the Company to publish a statement on its website setting out any matter relating to (a) the audit of the Company’s accounts (including the auditor’s report and the conduct of the audit) that are to be laid before the AGM; or (b) any circumstances connected with an auditor of the Company ceasing to hold office since the last AGM, that the members propose to raise at the meeting. The Company cannot require the members requesting the publication to pay its expenses. Any statement required to be placed on the website must also be sent to the Company’s auditors no later than the time it makes its statement available on the website. The business which may be dealt with at the meeting includes any statement that the Company has been required to publish on its website. (h) Under sections 338 and 338A Companies Act 2006, members meeting the threshold requirements in those sections have the right to require the Company: (i) To give, to members of the Company entitled to receive notice of the meeting, notice of a resolution which may 76 Octopus AIM VCT 2 plc Annual report 2024 properly be moved and is intended to be moved at the meeting, and/or (ii) To include the business to be dealt with at the meeting any matters (other than a proposed resolution) which may be properly included in the business. A resolution may properly be moved or a matter may properly be included in the business unless: (i) (In the case of a resolution only) it would, if passed, be ineffective (whether by reason of inconsistency with any enactment or the Company’s constitution or otherwise); (ii) It is defamatory of any person; or (iii) It is frivolous or vexatious. Such a request may be in hard copy form or in electronic form, and must identify the resolution of which notice is to be given or the matter to be included in the business, must be authorised by the person or persons making it, must be received by the Company not later than six weeks before the meeting, and (in the case of a matter to be included in the business only) must be accompanied by a statement setting out the grounds for the request. (i) A copy of the Notice of AGM and the information required by Section 311A Companies Act 2006 is included on the Company’s website, www.octopusinvestments.com under VCTs. Copies of the Directors’ Letters of Appointment, the Register of Directors’ Interests in the Ordinary shares of the Company kept in accordance with the UK Listing Rules and a copy of the Memorandum and Articles of Association of the Company will be available for inspection at the registered office of the Company during usual business hours on any weekday from the date of this notice until the AGM, and at the place of that meeting for at least 15 minutes prior to the commencement of the meeting until its conclusion. (j) As at 7 March 2025 (being the last practicable date prior to the publication of this Notice) the Company’s issued share capital consists of 201,732,917 Ordinary shares, carrying one vote each. Therefore, the total voting rights in the Company as at 7 March 2025 are 201,732,917. Notice of Annual General Meeting continued 77 Octopus AIM VCT 2 plc Annual report 2024 Call us on 0800 316 2295 Intentionally Blank 78 Octopus AIM VCT 2 plc Annual report 2024 Octopus AIM VCT 2 plc