OCTOPUS AIM VCT 2 PLC. Unaudited Half-Yearly Report for the Six Months Ended 31 May Registered Number: FOR UK INVESTORS ONLY

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1 OCTOPUS AIM VCT 2 PLC Unaudited Half-Yearly Report for the Six Months Ended 31 May 2016 Registered Number: FOR UK INVESTORS ONLY octopusinvestments.com

2 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Contents About Octopus AIM VCT 2 PLC 1 Financial Summary 2 Chairman s Statement 3 Investment Portfolio 8 Responsibility Statement of the Directors 12 Income Statement 13 Statement of changes in equity 14 Balance Sheet 16 Cash Flow Statement 17 Notes to the half-yearly Report 18 Details of Advisers 26 Financial Headlines 78.5p Net asset value per share as at 31 May 2016 (2015: 80.0p) 2.0p Interim dividend declared for the half-year to 31 May 2016 (2015: 2.0p) 5.4% Annualised Dividend Yield on share price as at 31 May 2016 (2015: 5.2%) 2

3 Octopus AIM VCT 2 plc Half-Yearly Report About Octopus AIM VCT 2 PLC Octopus AIM VCT 2 PLC (the Company or Fund ) is a venture capital trust ( VCT ) which aims to provide shareholders with attractive tax-free dividends and long-term capital growth. The Investment Manager is Octopus Investments Limited ( Octopus or Manager ). The Company was launched as Close IHT AIM VCT PLC and raised 25 million in March 2006 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 received Ordinary shares in the Company for each Ordinary share they held prior to the merger. Prior to July 2009 Octopus Third AIM had two classes of shares, Ordinary and C shares. The C shares converted into Ordinary shares in July 2009 and C shareholders received Ordinary shares for each C share held. The prospectus also raised a total of 6.4 million for the Company. A Top-up offer launched on 6 February 2012, which closed on 5 April 2012 and raised 1.3 million. A Top-up offer launched on 25 April 2012 and closed on 31 July 2012, raising a further 0.5 million. On 1 February 2013, the Board launched an offer for subscription with the target of raising 10.0 million. The offer closed on 17 January 2014, having raised 5.9 million. On 30 January 2014, the Company name changed to Octopus AIM VCT 2 plc. A combined new share offer was launched on 3 February 2014 to raise up to 4.1 million. This closed on 28 March 2014, fully subscribed. A combined fundraise with Octopus AIM VCT plc was launched on 29 August 2014 to raise up to 8 million with an over-allotment facility of 4 million. This offer closed on 10 August 2015, having raised 11.4 million. The Board decided to open a further Offer for subscription, again combined with Octopus AIM VCT plc, to raise up to 8 million with an over-allotment facility of 4 million. This Offer was launched on 21 December 2015 and to date 9,998,805 shares have been issued for 7.8 million. Call us on

4 2 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Financial Summary Six months to 31 May 2016 Six months to 31 May 2015 Year to 30 November 2015 Net assets (s) 56,631 49,478 52,317 Net profit/(loss) after tax (s) 138 2,353 4,047 Net asset value per share ( NAV ) p 80.6p Dividends paid 2.0p 2.0p 4.0p Special Dividend paid 2.0p 2.0p Proposed Interim dividend * 2.0p 2.0p 2.0p * The interim dividend will be paid on 30 September 2016 to shareholders on the register on 16 September

5 Octopus AIM VCT 2 plc Half-Yearly Report Chairman s Statement OVERVIEW The six months to 31 May 2016 was another unsettled period for the stock market, with attention moving from the international stage and fears about a slowdown in the Chinese economy at the beginning of the period to issues of domestic policy and the impending UK referendum on Europe in the second quarter of the year. Despite all of this noise and some sharp movements in share prices, the market was surprisingly resilient overall and the indices finished the period very little changed from their level at the end of November AIM continued to raise money for companies, albeit at a slower rate than in 2014 and The fall in prices early in 2016 caused some potential new issues to delay their market debut although others did manage to raise money and float, with a notable pick-up in activity in May. Once again, further fundraisings for existing businesses exceeded those for new issues, demonstrating that AIM continues to support its existing members. VCTs have also been getting to grips with the new legislation which was introduced in November with the Royal Assent of the second Finance Bill. PERFORMANCE Adding back the 2p paid out in dividends in the period, the Net Asset Value was broadly unchanged over the six months. This compares with a 2.6% rise in the Smaller Companies Index (ex Investment Trusts), a 0.1% increase in the FTSE All Share Index and a 1.0% rise in AIM, all on a total return basis. Smaller companies performed slightly better than the FTSE 100 as the latter was held back by its international exposure at a time of fears about slowing international growth. However, the cautious tone of the market also impacted the share prices of early stage companies not yet making a profit, of which we hold a number in the portfolio, particularly in the pharmaceutical, medical device and technology sectors. Poor performers in this category in the six months included Midatech Pharma, Nektan, Microsaic and Cambridge Cognition, but there were others such as Escher Group, Fusionex and Ergomed which remain profitable but have had downgrades to forecasts as a result of pursuing a more aggressive growth strategy and which have also suffered from weak share prices. Among the more mature and profitable businesses which still account for more than 80% of the equity investments in the VCT there was also a more mixed performance than had been the case previously. As the Referendum approached, a few of the larger established businesses such as Staffline and Vertu Motors saw their share prices decline as the market began to worry about the effect that an exit result could have on companies exposed to the consumer. Staffline in particular is seen as being in the wrong sector as well as sourcing a large percentage of factory and other Call us on

6 4 Octopus AIM VCT 2 plc Half-Yearly Report 2016 workers for customers from Europe. Vertu Motors shares have also been under pressure as a supplier of high ticket consumer goods even though most of its profit comes from servicing and second hand car sales rather than new car sales. The Managers do not share the market s current pessimism about these companies which have been held in the portfolio for a number of years and where the management teams have successfully dealt with economic challenges in the past. There were also a number of good contributors to performance in the six months, among them Idox, Quixant, GB Group, Breedon, Skyepharma and TLA. Skyepharma and TLA were both the subject of takeover bids, with the former now resulting (post the period end) in a shareholding in Vectura Group and the latter due to list on Nasdaq later this year. GB Group, Quixant, Tasty and Breedon all continued to grow in their different markets helped by some significant acquisitions. In the period, the Company made two new qualifying investments totalling 970,000. The new investments were Yu Group plc and Osirium Technologies. Yu Group trades as Yu Energy and is an independent supplier of gas and electricity to UK small and medium sized enterprises. Osirium is a UK based cyber-security software provider that protects the critical IT infrastructure of companies from attacks targeting privileged user accounts. Your management continued to use non-qualifying investments to manage liquidity while awaiting new qualifying investment opportunities. Existing holdings for this purpose include some AIM non-qualifying stocks, but under the new rules new AIM non-qualifying purchases are no longer permitted and to the extent that we use direct equity holdings we will in future use fully listed stocks. In view of these rule changes, since the period end we have invested a further 4 million of the cash balances into Octopus managed portfolios of mixed equity and bond funds, adding to the individual investments already held with the objective of obtaining a better return on our cash. The only disposal during the period was Tangent Communications for net proceeds of 154,000, a net loss of 231,000. Its attempt to turn itself into an on-line printing business had not been a success and the management team bought the business and took it private. SHARE BUY-BACKS In the six months to May 2016, the Company bought back 1,132,116 Ordinary shares. It is evident from the conversations which your Managers have that this facility remains an important consideration to investors. Your Board remains committed to maintaining its policy of buying back shares at a 5% discount to NAV. 4

7 Octopus AIM VCT 2 plc Half-Yearly Report DIVIDEND The Board has declared an interim dividend of 2p. This will be paid on 30 September 2016 to shareholders on the register on 16 September On 20 May 2016, the Company paid 2p of dividends, being the final dividend for the year ended 30 November It remains the Board s intention to maintain a minimum annual dividend payment of 3.6p per share or a 5% yield based on average share price, whichever is the greater, which we would expect to pay in two instalments each year. NEW VCT REGULATIONS VCTs have always been subject to UK regulations, not least as they confer tax benefits on investors. In recent years these regulations have become subject themselves to European State Aid rules. The Chancellor proposed new rules in his Summer Budget in July 2015 and, following discussions with European authorities in Brussels, these became law following the granting of Royal Assent in November These are in addition to existing rules which already limited investment to companies with gross assets of no more than 15 million, 250 employees and where no more than 5 million of State Aided funds had been raised within the past 12 months. The new rules now in force relate to the age of companies receiving a first investment, a lifetime limit on State Aided funds and rules designed to target any funds raised on a company s growth. They also recognise that there is a class of company which is knowledge intensive and therefore hungrier for capital, and some of the limits are more generous for these types of companies. To summarise the changes, in order to qualify companies must: have fewer than 250 full time equivalent employees; and have less than 15 million of gross assets at the time of investment and no more than 16 million immediately post investment; and be less than seven years old (or 10 years if a knowledge intensive company) if raising State Aided funds for the first time; and have raised no more than 5 million of State Aided funds in the previous 12 months and less than the lifetime limit of 12 million (or 20 million if a knowledge intensive company); and produce a business plan to show that its funds are being raised for growth. Call us on

8 6 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Follow-on investments are allowed to provide further capital for an existing investment up to the lifetime limit, and in certain circumstances a company may obtain clearance to raise money to develop a new business or market. Money raised from VCTs is not allowed to be used for acquisitions (unless they qualify too), or to buy out debt or existing equity. In addition, nonqualifying purchases of AIM shares are no longer allowed. Draft clarification notes to go with the VCT legislation have only been published relatively recently and so it is still too early to come to any firm conclusions about what effect these new rules will have on VCT qualifying deal flow for AIM companies. Your VCT has made two investments since the rules became law and has seen a steady flow of qualifying opportunities. At 90%, the VCT is well above the minimum 70% qualifying requirement and therefore under no immediate pressure to invest its cash. FUNDRAISING The current prospectus offer to raise up to 12 million, launched as part of a combined fundraise with the Octopus AIM VCT in December 2015, remains open with 4.2 million of capacity remaining at the time of writing. OUTLOOK The current headlines are dominated by speculation about the likely effect of the Referendum result on our economy in both the short and longer term as well as the shape of our eventual relationship with Europe and the rest of the world. The initial political turmoil post the announcement of a majority vote to leave Europe was unhelpful to share prices and your VCT s NAV suffered. The political situation has now found some firmer foundations with the swift appointment of a new Prime Minister and this has calmed the markets and allowed share prices to recover some of their losses. These questions are unlikely to be settled quickly and it seems therefore that investors have to be prepared for continued bouts of uncertainty. However, we have seen a number of encouraging trading statements from companies in the portfolio in the past two months with more news to come with the interim results season in September. The portfolio now contains 70 holdings across a range of sectors including several such as Craneware, Fusionex and GB Group that have significant international exposure. Domestic companies such as Breedon, Vertu and Staffline have already demonstrated their management s ability to grow their businesses successfully in difficult economic conditions. The balance of the portfolio towards profitable companies remains, and the cash available for new investments will be able to take advantage of any weakness in share prices 6

9 Octopus AIM VCT 2 plc Half-Yearly Report that may result from the current uncertainty. With the VCT 90% invested in qualifying companies for HMRC purposes your Manager can afford to be selective about new investments. Keith Mullins Chairman 8 August 2016 Call us on

10 8 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Investment Portfolio Investments Sector Book cost as at 31 May 2016 () Cumulative change in fair value () Fair Value at 31 May 2016 () Movement in the period to 31 May 2016 () % equity held by AIM VCT 2 plc % equity held by all funds managed by Octopus Breedon Aggregates Limited Construction & 573 2,840 3, % 1.63% Materials GB Group plc Software 477 1,824 2, % 8.63% Idox plc Software 356 1,911 2, % 3.53% Quixant plc Technology Hardware 465 1,705 2, % 6.39% Animalcare Group plc Pharmaceuticals & 824 1,258 2, % 6.78% Biotech Tasty plc Travel & Leisure 336 1,628 1,964 (78) 2.09% 5.20% TLA Worldwide plc Media , % 4.69% Staffline Recruitment plc Support Services 225 1,122 1,347 (479) 0.44% 11.23% Brooks MacDonald Group plc General Financial ,264 (130) 0.54% 8.78% Netcall plc Software ,228 (64) 1.85% 4.47% Craneware plc Software ,211 (23) 0.58% 1.85% Learning Technologies Group plc Support Services , % 2.32% Vertu Motors plc General Retail ,092 (361) 0.47% 4.94% Adept Telecom plc Fixed Line (36) 1.59% 3.77% Telecommunications RWS Holdings plc Support Services % 6.77% Skyepharma plc Pharmaceuticals & % 0.53% Biotech Ergomed plc Pharmaceuticals & 960 (146) 814 (166) 1.49% 7.67% Biotech Restore plc Support Services % 9.53% Plastics Capital plc Chemicals (14) 2.05% 8.76% CityFibre Infrastructure Holdings plc Fixed Line Telecommunications 739 (7) 732 (94) 0.44% 1.59% Gooch & Housego plc Electronic & Electrical % 12.41% DP Poland plc Travel & Leisure % 4.66% Escher Group Holdings plc Software 753 (67) 686 (243) 2.36% 5.51% Vianet Group plc Support Services 867 (185) 682 (14) 2.57% 4.54% Brady plc Software (112) 1.23% 3.02% Abcam plc Pharmaceuticals & % 2.22% Biotech Advanced Medical Solutions plc Healthcare % 8.04% Equipment Osirium Technologies plc Software % 15.42% Oxford Pharmascience Pharmaceuticals & 900 (293) % 3.50% Group plc Biotech Nektan Limited Travel & Leisure 893 (289) 604 (320) 1.75% 16.21% Next Fifteen Plc Media % 6.92% 8

11 Octopus AIM VCT 2 plc Half-Yearly Report Investments Sector Book cost as at 31 May 2016 () Cumulative change in fair value () Fair Value at 31 May 2016 () Movement in the period to 31 May 2016 () % equity held by AIM VCT 2 plc % equity held by all funds managed by Octopus Yu Group Plc Electronic & Electrical % 9.60% Clinigen Group plc Pharmaceuticals & 625 (51) 574 (119) 0.09% 3.42% Biotech Nasstar plc Software % 7.06% EKF Diagnostics plc Healthcare 864 (377) 487 (22) 0.95% 2.15% Equipment Judges Scientific plc Electronic & Electrical % 1.38% Access Intelligence plc Software % 5.18% Omega Diagnostics Group plc Healthcare % 6.15% Equipment SQS Software plc Software (118) 0.30% 13.76% Tyratech plc Chemicals % 19.87% Cello Group plc Media % 5.29% Ideagen plc Software % 5.29% Haydale Plc Chemicals (5) 1.64% 8.99% Sinclair Pharma plc Pharmaceuticals & (28) 0.22% 0.55% Biotech Gamma Communications plc Mobile (11) 0.09% 7.62% Telecommunications Bond International Software plc Software (58) 0.98% 2.97% Gear4Music plc Leisure Goods 372 (24) 348 (35) 1.33% 5.10% Mattioli Woods plc General Financial % 2.32% Iomart Group plc Software (29) 0.09% 8.49% Sphere Medical Holding plc Healthcare 400 (144) % 4.41% Equipment Cambridge Cognition Holdings Healthcare 400 (183) 217 (269) 2.80% 14.59% plc Equipment Proxama plc Software 509 (296) % 11.85% Fusionex International plc Software (236) 0.26% 1.22% Midatech plc Pharmaceuticals & 400 (196) 204 (186) 0.45% 2.96% Biotech Scientific Digital Imaging plc Healthcare (7) 2.32% 12.00% Equipment WANdisco plc Software 160 (14) % 0.63% ReNeuron Group plc Pharmaceuticals & 216 (76) % 1.17% Biotech TP Group plc Industrial Engineering 452 (314) % 6.30% Futura Medical plc Pharmaceuticals & 408 (287) 121 (47) 0.72% 5.17% Biotech MyCelx Technologies plc Oil Equipment 980 (890) 90 (126) 2.89% 9.19% Microsaic Systems plc Electronic & Electrical 416 (332) 84 (185) 1.53% 8.57% Call us on

12 10 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Investments Sector Book cost as at 31 May 2016 () Cumulative change in fair value () Fair Value at 31 May 2016 () Movement in the period to 31 May 2016 () % equity held by AIM VCT 2 plc % equity held by all funds managed by Octopus Enteq Upstream plc Oil Equipment 687 (605) % 3.70% Mears Group plc Support Services (10) 0.02% 0.14% Lombard Medical Technologies Healthcare 589 (542) 47 (1) 0.25% 0.53% plc Equipment Altitude Group plc Support Services % 4.53% 1Spatial plc Support Services 200 (172) 28 (5) 0.09% 0.23% Work Group plc Support Services 473 (458) 15 (12) 2.05% 6.15% Clean Air Power Limited Automobiles & Parts 323 (323) 1.31% 8.78% Total quoted investments 30,757 15,267 46, Rated People Limited Software 236 (178) % 1.49% Hasgrove plc Media 153 (9) % 4.38% Total unquoted investments 389 (187) Total fixed asset investments 31,146 15,080 46, Money market funds 5,410 Total fixed asset investments 51,636 and money market funds Cash at bank 5,168 Debtors less creditors (173) Total net assets 56,631 10

13 Octopus AIM VCT 2 plc Half-Yearly Report SECTOR ANALYSIS The graph below shows the sectors the Fund is invested in by value. Investments by Sector as at 31 May 2016: Software 26% Other 20% Pharmaceuticals & Biotech 14% Support Services 11% Travel & Leisure 7% Construction & Materials 7% Healthcare Equipment 5% Media 6% General Financial 4% Investments by Sector as at 31 May 2015: Software 28% Other 19% Pharmaceuticals & Biotech 12% Support Services 10% Travel & Leisure 8% Healthcare Equipment 7% Construction & Materials 6% Media 6% General Financial 4% Call us on

14 12 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Responsibility Statement of the Directors in respect of the half-yearly report We confirm that to the best of our knowledge: the half-yearly financial statements have been prepared in accordance with the statement Interim Financial Reports issued by the Financial Reporting Council; the half-yearly report includes a fair review of the information required by the Financial Services Authority Disclosure and Transparency Rules, being: an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements. a description of the principal risks and uncertainties for the remaining six months of the year; and a description of related party transactions that have taken place in the first six months of the current financial year, that may have materially affected the financial position or performance of the Company during that period and any changes in the related party transactions described in the last annual report that could do so. On behalf of the Board. Keith Mullins Chairman 8 August

15 Octopus AIM VCT 2 plc Half-Yearly Report Income Statement Six months to 31 May 2016 Six months to 31 May 2015 Year to 30 November 2015 Revenue Capital Total Revenue Capital Total Revenue Capital Total Gain/(loss) on (11) (11) disposal of fixed asset investments Gain on valuation ,768 2,768 4,555 4,555 of fixed asset investments Income Investment (104) (312) (416) (115) (346) (461) (230) (689) (919) management fees Other expenses (177) (177) (141) (141) (308) (308) Profit/(loss) on (58) 2,411 2, ,038 4,047 ordinary activities before tax Taxation on profit/ (loss) on ordinary activities Profit/(loss) on (58) 2,411 2, ,038 4,047 ordinary activities after tax Return per share basic and diluted 0.0p 0.2p 0.2p (0.1)p 4.1p 4.0p 0.0p 6.6p 6.6p the Total column of this statement is the profit and loss account of the Company; the supplementary revenue return and capital return columns have been prepared under guidance published by the Association of Investment Companies. all revenue and capital items in the above statement derive from continuing operations. the accompanying notes are an integral part of the half-yearly report. the Company has no recognised gains or losses other than those disclosed in the income statement. Call us on

16 14 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Statement of Changes in Equity Share Capital Share Premium Special distributable reserves Capital reserve realised Capital reserve unrealised Revenue reserve Total As at 1 December ,979 34,183 (10,457) 12,452 (147) 45,016 Management fee allocated as (346) (346) capital expenditure Current period loss on disposal (11) (11) Current period gains on fair value 2,768 2,768 of investments Prior periods holding gains/losses 2,608 (2,608) now realised Loss on ordinary activities after tax (58) (58) Total other comprehensive income for the period Contributions by and distributions to owners: Repurchase and cancellation of (525) (525) own shares Issue of shares 5,463 5,463 Share issue costs (352) (352) Cash received for shares to be issued Dividends paid (2,477) (2,477) Balance as at 31 May ,090 31,181 (8,206) 12,612 (205) 49,478 As at 1 December ,979 34,183 (10,457) 12,452 (147) 45,016 Management fee allocated as (689) (689) capital expenditure Current period gains on disposal Current period gain on fair value of 4,555 4,555 investments Prior periods holding gains/losses 2,601 (2,601) now realised Loss on ordinary activities after tax 9 9 Total other comprehensive income for the period Contributions by and distributions to owners: Repurchase and cancellation of (925) (925) own shares Cancellation of Share Premium (5,362) 5,362 Issue of shares 8,320 8,320 Share issue costs (362) (362) Dividends paid (3,779) (3,779) Balance as at 30 November ,575 34,841 (8,373) 14,406 (138) 52,317 14

17 Octopus AIM VCT 2 plc Half-Yearly Report Share Capital Share Premium Special distributable reserves Capital reserve realised Capital reserve unrealised Revenue reserve Total As at 1 December ,575 34,841 (8,373) 14,406 (138) 52,317 Management fee allocated as (312) (312) capital expenditure Current period gains on disposal Current period gain on fair value of investments Prior periods holding gains/losses (318) 318 now realised Loss on ordinary activities after tax 8 8 Total other comprehensive income for the period Contributions by and distributions to owners: Repurchase and cancellation of (849) (849) own shares Issue of shares 1 6,675 6,676 Share issue costs (218) (218) Dividends paid (1,433) (1,433) Balance as at 31 May ,032 32,559 (8,916) 15,079 (130) 56,631 Call us on

18 16 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Balance Sheet Fixed asset investments held at fair value through profit and loss Current assets: Current asset investments held at fair value through profit and loss As at 31 May 2016 As at 31 May 2015 As at 30 November ,226 38,683 44,968 5, ,397 Debtors Cash at bank 5,168 12,889 2,010 10,640 13,490 7,461 Creditors: amounts falling due within one year (235) (2,695) (112) Net current assets 10,405 10,795 7,349 Net assets 56,631 49,478 52,317 Called up equity share capital Share premium 18,032 14,090 11,575 Special distributable reserve 32,559 31,181 34,841 Capital reserve realised (8,916) (8,206) (8,373) unrealised 15,079 12,612 14,406 Revenue reserve (130) (205) (138) Total equity shareholders Funds 56,631 49,478 52,317 Net asset value per share 78.5p 80.0p 80.6p The statements were approved by the Directors and authorised for issue on 8 August 2016 and are signed on their behalf by: Keith Mullins Chairman Company Number:

19 Octopus AIM VCT 2 plc Half-Yearly Report Cash Flow Statement Cash flows from operating activities Six months to 31 May 2016 Six months to 31 May 2015 Year to 30 November 2015 Return on ordinary activities before tax 138 2,353 4,047 Adjustments for: (Increase)/decrease in debtors (8) Increase in creditors 123 2,588 5 (Gain)/loss on disposal of fixed assets (87) 11 (172) Gain on valuation of fixed asset (355) (2,768) (4,555) investments Cash from operations (189) 2,569 (332) Income taxes paid Net cash generated from operating activities (189) 2,569 (332) Cash flows from investing activities Purchase of fixed asset investments (970) (3,359) (8,883) Sale of fixed asset investments 155 4,177 5,387 Net cash flows from investing activities (815) 818 (3,496) Cash flows from financing activities Purchase of own shares (849) (525) (925) Share issues 6,457 5,111 7,958 Dividends Paid (1,433) (2,477) (3,779) Net cash flows from financing activities 4,175 2,109 3,254 Increase/(decrease) in cash and cash 3,171 5,496 (574) equivalents Opening cash and cash equivalents 7,407 7,982 7,981 Closing cash and cash equivalents 10,578 13,478 7,407 Cash and cash equivalents comprise Cash at Bank 5,168 12,889 2,010 Money Market Funds 5, ,397 10,578 13,478 7,407 Call us on

20 18 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Notes to the Half-Yearly Report 1. BASIS OF PREPARATION The unaudited half-yearly results which cover the six months to 31 May 2016 have been prepared in accordance with the Financial Reporting Council s (FRC) Financial Reporting Standard 104 Interim Financial Reporting (March 2015) and the Statement of Recommended Practice (SORP) for Investment Companies re-issued by the Association of Investment Companies in November PUBLICATION OF NON-STATUTORY ACCOUNTS The unaudited half-yearly results for the six months ended 31 May 2016 do not constitute statutory accounts within the meaning of Section 415 of the Companies Act The comparative figures for the year ended 30 November 2015 have been extracted from the audited financial statements for that year, which have been delivered to the Registrar of Companies. The independent auditor s report on those financial statements, in accordance with chapter 3, part 16 of the Companies Act 2006, was unqualified. This half-yearly report has not been reviewed by the Company s auditor. 3. EARNINGS PER SHARE The earnings per share at 31 May 2016 are calculated on the basis of 67,932,426 (31 May 2015: 58,460,955 and 30 November 2015: 61,318,461) shares, being the weighted average number of Ordinary shares in issue during the period. There are no potentially dilutive capital instruments in issue and, therefore, no diluted returns per share figures are relevant. 4. NET ASSET VALUE PER SHARE The net asset value per share is based on net assets as at 31 May 2016 divided by 72,175,291 (31 May 2015: 61,885,583 and 30 November 2015: 64,934,873) Ordinary shares in issue at that date. 5. DIVIDENDS The Directors have declared a dividend of 2 pence per Ordinary share, payable from the special distributable reserve. This dividend will be paid on 30 September 2016 to those shareholders on the register at 16 September

21 Octopus AIM VCT 2 plc Half-Yearly Report BUYBACKS/SHARES ISSUED During the six months ended 31 May 2016 the Company repurchased the following shares: Date No. of shares Price (p) 23 December , February , March , April , May , The weighted average price of all buybacks during the period was 75.0 pence per share. During the six months ended 31 May 2016 the Company issued the following shares: Date No. of shares Price (p) 04 February ,356, February 2016 (DRIS) March ,172, March ,109, April ,523, April , May , May 2016 (DRIS) 190, The weighted average allotment price of all shares issued during the period was 81.9 pence per share. 7. PRINCIPAL RISKS AND UNCERTAINTIES The Company s assets consist of equity, cash and liquid resources. Its principal risks are therefore market risk, credit risk and liquidity risk. Other risks faced by the Company include economic, loss of approval as a VCT, investment and strategic, regulatory, reputational, operational and financial risks. These risks, and the way in which they are managed, are described in more detail in the Company s Annual Report and Accounts for the year ended 30 November The Company s principal risks and uncertainties have not changed materially since the date of that report. Call us on

22 20 Octopus AIM VCT 2 plc Half-Yearly Report RELATED PARTY TRANSACTIONS The Company has employed Octopus Investments Limited 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 paid Octopus Investments 416,000 as a management fee in the period to 31 May 2016 (31 May 2015: 461,000 and 30 November 2015: 919,000). The management fee is payable quarterly in advance and is based on 2.0% of net assets at quarterly intervals. 9. POST BALANCE SHEET EVENTS Since 31 May 2016 the Company has made the following investments: Company Date Cost ( ) Octopus Portfolio Manager Profile 3 * 9 June ,000 Octopus Portfolio Manager Profile 4 * 9 June ,000 Octopus Portfolio Manager Profile 3 * 16 June ,000 Octopus Portfolio Manager Profile 4 * 16 June ,000 Octopus Portfolio Manager Profile 3 * 27 June ,000 Octopus Portfolio Manager Profile 4 * 27 June ,000 Genedrive plc (formerly Epistem Holdings) 8 July ,000 * Octopus Portfolio Manager Profile 3 and Profile 4 refer to the Defensive Capital Growth and Conservative Capital Growth portfolios, respectively. These funds are managed by Octopus. The investment into the Octopus managed portfolios was carried out with the objective of obtaining a better return on the cash held by the VCT. This came about as a result of new VCT rules, as discussed in the Chairman s statement on pages 3 to 7. Since 31 May 2016 the Company has bought back the following shares: Date No. of shares Price (p) 1 July , July ,

23 Octopus AIM VCT 2 plc Half-Yearly Report Since 31 May 2016 the Company has issued the following shares: Date No. of shares Price (p) 22 June , August 216 1,031, ADDITIONAL INFORMATION Copies of this report are available from the registered office of the Company at 33 Holborn, London, EC1N 2HT. Call us on

24 22 Octopus AIM VCT 2 plc Half-Yearly Report 2016 The tables below depict the Net Asset Value (NAV) per share and the dividends that have been paid since the launch of Octopus AIM VCT 2 plc for the different share classes. The figures represent the NAV, rebased to assume investment (including initial charge) at 100p, and adjusted in accordance with the relevant conversion factors. Investment has been assumed at the first allotment of each tax year: 180p NAV plus cumulative dividends paid plus initial tax break (p) 160p 140p 120p 100p 80p 60p 40p 20p 0p 30.0p 30.0p 30.0p 30.0p 24.8p 31.6p 40.0p 30.0p 30.0p 25.8p 30.0p 20.1p 2.4p 9.3p 12.8p 31.9p 93.6p 91.1p 83.6p 101.9p 113.8p 105.5p 112.9p 78.5p 40.0p 36.2p Adjusted NAV (p) Total dividends paid and payable (p) Income tax relief (p) Cost of investment Octopus Second AIM VCT Ordinary shares 2016/17 Octopus Second AIM VCT Ordinary shares 2015/16 Octopus Second AIM VCT Ordinary shares 2014/15 Octopus Second AIM VCT Ordinary shares 2013/14 Octopus Second AIM VCT Ordinary shares 2012/13 Octopus Second AIM VCT Ordinary shares 2011/12 Octopus Second AIM VCT Ordinary shares 2010/11 Octopus Second AIM VCT (formerly Octopus IHT AIM VCT A&B shares) 2005/06 Octopus Third AIM VCT C&D shares 2005/06 (formerly Octopus Second AIM VCT) Octopus Third AIM Ordinary shares 2000/01 shares (formerly Octopus Second AIM VCT plc) 92.3p 20.0p 35.4p 38.0p 22

25 Octopus AIM VCT 2 plc Half-Yearly Report Dividends paid during financial year ending November Octopus AIM VCT 2 Ordinary shares 2016/17 Octopus AIM VCT 2 Ordinary shares 2015/16 Octopus AIM VCT 2 Ordinary shares 2014/15 Octopus AIM VCT 2 Ordinary shares 2013/14 Octopus AIM VCT 2 Ordinary shares 2012/13 Octopus AIM VCT 2 Ordinary shares 2011/12 Octopus AIM VCT 2 Ordinary shares 2010/11 Octopus Second AIM VCT (formerly Octopus IHT AIM VCT A&B shares 2005/06 Octopus Third AIM VCT C&D shares 2005/6 (formerly Octopus Second AIM VCT) Octopus Third AIM Ordinary shares 2000/1 shares (formerly Octopus Second AIM VCT plc) * 1.6 * * 4.3 * 4.6 * * 1.5 * * 5.1 * 4.7 * 5.0 * * 1.7 * * 5.2 * 5.8 * 5.4 * 5.8 * * 1.9 * * 6.4 * 7.8 * 8.7 * 8.3 * 8.6 * * 2.9 * * 2.3 * 2.1 * 2.6 * 2.9 * 2.9 * 2.9 * * 1.0 * Cumulative dividends 2.4 * * 20.1 * 24.8 * 25.8 * 31.6 * * 41.0 * paid (p) Adjusted NAV as at 31 May 93.6 ** 91.1 ** 83.6 ** ** ** ** ** ** 38.0 ** 2016 (p) Adjusted NAV plus cumulative dividends paid (p) 95.9 *** *** 96.4 *** *** *** *** *** *** 79.0 *** Following the merger with Octopus Third AIM VCT plc and various share re-organisations, there is now only one share class, Ordinary shares. For Octopus Third AIM VCT Ordinary shares and C & D shares, the figures above represent a notionally adjusted NAV per share in accordance with the relevant conversion factors. * Notional dividends assuming investment at 100p and adjusting for conversion of various share classes into Octopus AIM VCT 2 plc Ordinary shares. ** NAV assuming investment at 100p and adjusting for conversion of various share classes into Octopus AIM VCT 2 plc Ordinary shares. *** NAV plus cumulative dividends adjusting for conversion, assuming investment at 100p showing the notional return to shareholders based on their original investment share class. Call us on

26 24 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Notes Octopus Third AIM VCT D shares converted into C shares in May 2009, in accordance with a conversion factor of 1 C share for each D share. Octopus Third AIM VCT C shares converted into Octopus Third AIM VCT Ordinary shares in May 2009, in accordance with a conversion factor of Ordinary shares for each C share. Octopus AIM VCT 2 plc (previously Octopus IHT AIM VCT) B shares converted into A shares in May 2009, in accordance with a conversion factor of 1 A share for each B share. Octopus Third AIM Ordinary shares converted into Octopus AIM 2 (post August 2010) Ordinary shares in August 2010, in accordance with a conversion factor of Octopus AIM 2 Ordinary share (post August 2010), for each Octopus Third AIM Ordinary share. In August 2010, Octopus IHT AIM VCT was renamed Octopus Second AIM VCT, and subsequently changed its name to Octopus AIM VCT 2 plc. 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 80 per cent in a portfolio of qualifying AIM, ISDX Growth Market traded investments or unquoted companies where the management view an initial public offering (IPO) on AIM or the ISDX Growth Market is a short to medium term objective. With the qualifying target achieved, the Board intends that approximately 20 per cent of its funds will be invested in non-qualifying investments generally comprising gilts, floating rate securities and short-term money market funds with, or issued by, major companies and institutions with a minimum Moody s long term debt rating of A. A proportion of the 20 per cent could be invested in authorised funds managed by Octopus or direct in equity investments and bonds. This provides a reserve of liquidity which should maximise the Company s flexibility as to the timing of investment acquisitions and disposals, dividend payments and share buybacks. Risk is spread by investing in a number of different businesses across a range of industry sectors using a mixture of securities. The maximum amount invested in any one company is limited to the amount permitted pursuant to VCT legislation in a fiscal year and no more than 15 per cent of the Company s assets, at cost, will be invested in the same company. 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 24

27 Octopus AIM VCT 2 plc Half-Yearly Report prior to a realisation opportunity being available. 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. The Company s Articles permit borrowings of amounts up to 10 per cent of the sum equal to the aggregate of the amount paid up on the allotted or issued share capital of the Company and the amount standing to the credit of the capital and revenue reserves of the Company (whether or not distributable) after adding thereto or deducting therefrom any balance to the credit or debit of the profit and loss account. 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. Call us on

28 26 Octopus AIM VCT 2 plc Half-Yearly Report 2016 Details of Advisers BOARD OF DIRECTORS Keith Richard Mullins (Chairman) Andrew Paul Raynor FCA Elizabeth Anita Kennedy Alastair James Ritchie SECRETARY AND REGISTERED OFFICE Nicola Board ACIS 33 Holborn London EC1N 2HT INVESTMENT AND ADMINISTRATION MANAGER Octopus Investments Limited 33 Holborn London EC1N 2HT Tel: CUSTODIANS Octopus Investments Limited 33 Holborn London EC1N 2HT BANKERS HSBC Bank plc 31 Holborn London EC1N 2HR INDEPENDENT AUDITOR BDO LLP Farringdon Place 20 Farringdon Road London EC1M 3AP TAXATION ADVISOR PricewaterhouseCoopers UK 1 Embankment Place London WC2N 6RH VCT STATUS ADVISER PricewaterhouseCoopers LLP 1 Embankment Place London WC2N 6RH REGISTRAR Capita Asset Services The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Tel: (calls cost 10p per minute plus network extras) 26

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32 30 Octopus AIM VCT 2 plc Half-Yearly Report 2016 CALL US US info@octopusinvestments.com VISIT US Octopus Investments, 33 Holborn, London EC1N 2HT WEBSITE octopusinvestments.com 30