Final Results

Octopus Titan VCT 2 plc

Final Results


3 February 2010


Octopus Titan VCT 2 plc, managed by Octopus Investments Limited, today announces
the final results for the year ended 31 October 2009.


These results were approved by the Board of Directors on 3 February 2010.


You may view the Annual Report in full at www.octopusinvestments.com
<

http://www.octopusinvestments.com/> by navigating to Services, Investor
Services, Venture Capital Trusts, Octopus Titan VCT 2. All other statutory
information will also be found there.


About Octopus Titan VCT 2 plc

Octopus Titan VCT 2 plc ('Titan 2', 'Company' or 'Fund') is a venture capital
trust which aims to provide shareholders with attractive tax-free dividends and
long-term capital growth, by investing in a diverse portfolio of predominately
unquoted companies. The Company is managed by Octopus Investments Limited
('Octopus' or 'Manager').


Titan 2 was incorporated on 12 October 2007 with the first allotment of equity
being 19 December 2007. In collaboration with Octopus Titan VCT 1 plc ('Titan
1'), the Funds raised over £30.8 million in aggregate (£29.5 million net of
expenses) through an Offer for subscription which closed on 16 May 2008. Titan
2 invests primarily in unquoted UK smaller companies and aims to deliver
absolute returns on its investments.


Further details of the Fund's progress are discussed in the Chairman's Statement
and Investment Manager's Review on pages 6 to 17.


Venture Capital Trusts (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-front income tax relief of 30%

  * exemption from income tax on dividends paid

  * exemption from capital gains tax on disposals of shares in VCTs


The Company has been provisionally approved as a VCT by HM Revenue & Customs. In
order to maintain its approval the Company must comply with certain requirements
on a continuing basis. By the end of the Company's third accounting period at
least 70% of the Company's investments must comprise 'qualifying holdings' of
which at least 30% must be in eligible Ordinary shares. A 'qualifying holding'
consists of up to £1 million invested in any one year in new shares or
securities in an unquoted company (including companies listed on AIM) which is
carrying on a qualifying trade and whose gross assets do not exceed £7 million
at the time of investment, and whose total number of employees is less than 50,
also at the time of investment. The Company will continue to ensure its
compliance with these qualification requirements.

Financial Summary


+----------------------------------+---------------------+---------------------+
|                                  |As at 31 October 2009|As at 31 October 2008|
+----------------------------------+---------------------+---------------------+
+----------------------------------+---------------------+---------------------+
|Net assets (£'000s)               |               15,014|               14,036|
+----------------------------------+---------------------+---------------------+
|Return   on   ordinary  activities|                1,133|                (722)|
|after tax (£'000s)                |                     |                     |
+----------------------------------+---------------------+---------------------+
|Net asset value per share         |                96.1p|                89.9p|
+----------------------------------+---------------------+---------------------+
|Dividend  per  share  -  paid  and|                 1.5p|                 0.5p|
|proposed since launch             |                     |                     |
+----------------------------------+---------------------+---------------------+


Chairman's Statement

I am pleased to present the Company's second Annual Report for the year ended
31 October 2009.


Performance

I am delighted to be able to report a positive total return (being the change in
NAV plus cumulative dividends paid) for the year of 8.0% comprising an increase
in Net Asset Value of 6.2p to 96.1p, plus dividends paid of 1.0p. This has been
driven primarily by a recovery in the value of the Company's liquid resources,
as well as a strong overall performance in the two Octopus Open-Ended Investment
Companies ('OEICs'), offset by the reduction in fair values of three
investments.


The Fund is now invested in ten unquoted companies and one AIM-quoted company
(including the investment held in The Key Revolution which is currently in
administration). The focus continues to be to invest in a broad range of
unquoted UK smaller companies with the potential for high growth in order to
generate income and capital growth over the long-term. By value, 26.0% of the
Company's net assets are in unquoted investments, 3.2% in AIM-quoted investments
and 32.4% in Octopus OEICS, leaving 38.4% currently in cash or cash equivalents.


Investment Portfolio

The year under review, particularly the first half, has been challenging for
many businesses, with the impact of the credit crunch combining with a worsening
of the economic environment. Inevitably, this has had an impact on the portfolio
and, as a result, three investments have had reductions in fair value. That
said, we are optimistic about both the progress and potential of our portfolio
companies but as yet it is too early to recognise any significant uplift in
value in all but two of these.


During the year, the Fund made eight new investments totalling £2.47 million and
two follow-on investments into The Key Revolution and True Knowledge for
£230,000 and £350,000 respectively. All of these investments are discussed in
more detail in the Investment Manager's Review on pages 8 to 17 in which you
will see that we have made investments in a diverse range of companies in some
exciting market sectors. In the case of Zoopla, we have been able to recognise
an uplift in value following the new investment but, unfortunately, we have had
to make a reduction in fair value (to £nil) in respect of our investment in The
Key Revolution, following the appointment of Administrators in December. On
balance however, the Investment Manager is encouraged by the performance of the
portfolio and the good flow of investment opportunities which it is seeing.


Further details about the portfolio, including new investments can be found in
the Investment Manager's Review on pages 8 to 17.

Cash and Liquid Resources

Since the unprecedented market turmoil we saw in the second half of 2008 and
first quarter of 2009, I am delighted to report that our portfolio of bonds,
floating rate notes and cash-plus funds has significantly recovered in value, up
more than 7% over the year.  As you may recall, we created such a portfolio to
invest your cash whilst awaiting deployment into suitable qualifying
investments.  As I reported in my first Annual Report, the values of some of
these instruments had fallen in 2008.   With advice from our cash manager,
Goldman Sachs, we have continued to hold these investments and propose to do so
until maturity which is in line with the timetable for making investments to
achieve our qualifying threshold.  Indeed, at the time of writing, two of our
bonds have successfully matured at par.


The yield on our cash, which is held in highly liquid, low risk cash funds, has
reduced due to the continued decline in UK interest rates.  Unfortunately, this
is just a factor of the historically low interest rate environment we find
ourselves in. Given our requirements over the coming months for liquidity to
make new investments, the Board has taken the view that it is in the best
interest of shareholders to preserve capital by keeping a high level of cash in
such low risk money market funds.


Open Ended Investment Companies (OEICs)

The Company's investments in the two Octopus Partner OEICs have also seen
significant uplifts in valuation over the year to 31 October 2009.  The Absolute
Return Fund and the UK Smaller Companies Fund have increased in value 46% and
34% respectively.  The Absolute Return Fund is the number one performing fund in
its sector, and indeed has gained 81% since Titan 2 first invested in March
2008, when that particular OEIC launched.  The Board has met with the respective
fund managers and believe it is in the best interests to continue to hold
investments in these OEICs for the foreseeable future, as set out in the
original prospectus.  Further details of these OEICs may be found at
www.octopusinvestments.com <

http://www.octopusinvestments.com/> where monthly
factsheets are available.


Dividend

It is your Board's policy to strive to maintain a regular dividend flow where
possible. Our primary aim is to create distributable capital gains. We
anticipate declaring modest dividends in the early years although these are
likely to be smaller than originally envisaged due to the substantial reduction
in interest rates during the last 12 months. Taking this into account, for the
year ended 31 October 2009, a final dividend of 0.5p per share has been
proposed. Subject to shareholder approval at the Annual General Meeting, this
dividend will be paid on 23 April 2010 to those shareholders on the register on
5 March 2010. This will take dividends for the year ended 31 October 2009 to
1.0p per share (2008: 0.5p per share).


VCT Qualifying Status

PricewaterhouseCoopers LLP provides the Board and Investment Manager with advice
concerning ongoing compliance with Her Majesty's Revenue & Customs (HMRC) rules
and regulations concerning VCTs. The Board has been advised that Titan 2 is in
compliance with the conditions laid down by HMRC for maintaining approval as a
VCT. This is discussed further on page 5.


A key requirement now is to achieve the 70% qualifying investment level prior to
31 October 2010. As at 31 October 2009, over 35.0% of the portfolio, as measured
by HMRC rules, was invested in VCT qualifying investments. In view of the
current investment activity, the Board continues to be confident that the 70%
target will be met by the required date.


Investment Management Agreement

The Board announced on 20 October 2009 that the Investment Management Agreement
between Titan 2 and Octopus Ventures Limited had been novated to Octopus
Investments Limited.  This change was made as a result of an internal
reorganisation of the Octopus group and the terms of the Investment Management
Agreement and the composition of the fund management team within Octopus
responsible for managing the Company's assets remain unchanged.


Annual General Meeting

The Company's Annual General Meeting will take place on 31 March 2010 at 2.30
p.m. I look forward to welcoming you to the meeting which will be held at the
Company's registered office, and the offices of Octopus Investments Limited, at
8 Angel Court, London, EC2R 7HP.


Outlook

Octopus launched a further Fund (Octopus Titan VCT 3 plc) in 2008 and has
recently launched a fourth Fund (Octopus Titan VCT 4 plc) during the current tax
year. This will give the Titan VCT family a significant presence in the
marketplace which we believe will be an advantage for all of us. The Octopus
team now has uncommitted resources of £39 million for investment in emerging
companies in our defined market sectors.


Despite the recent improvement in stock markets, we remain cautious about the
wider economic environment and the impact this may have on portfolio companies.
This could be reflected directly through trading performance or indirectly
through the availability of credit. We also need to ensure that, where
appropriate, our portfolio companies have sufficient resources to take advantage
of the opportunities that will present themselves. Our Investment Manager is
seeing a high level of new investment opportunities and we will continue to
maintain our strategy of seeking to keep an appropriate level of liquidity in
the Fund to provide support for the existing portfolio.


John Hustler

Chairman

3 February 2010


Investment Manager's Review


Personal Service

At Octopus, we focus on both managing your investments and keeping you informed
throughout the investment process. We are committed to providing our investors
with regular and open communication. Our updates are designed to keep you
informed about the progress of your investment. During this time of economic
upheaval, we consider it particularly important to be in regular contact with
our investors and are working hard to manage your money in the current climate.


Octopus Investments Limited was established in 2000 and has a strong commitment
to both smaller companies and to VCTs. We currently manage 17 VCTs, including
this Company, and manage over £230m in the VCT sector. Octopus has over 100
employees and has been voted as 'Best VCT Provider of the Year' by the financial
adviser community for the last four years.


Investment Policy

The investment approach of Titan 2 is not designed to deliver a return that is
measured against a stock market index. Instead, the focus of Titan 2 is on
generating absolute returns over the medium-term. In order to achieve this goal,
the Fund will focus on providing early stage, development and expansion funding
to unquoted companies with a typical deal size of £0.25 million to £1 million.

Investment Strategy

The investee companies are those that we believe have great potential but need
some financial support to realise it. Each company that we target will have the
potential to create a large business by taking a relatively modest market share.
We are particularly interested in businesses that address current market trends
and aim to create a balanced investment portfolio spanning multiple industries
and business sectors.


We expect that the portfolio of holdings built by Titan 2 will encompass
investments in 20-25 predominantly unquoted companies, with a focus on the
environmental, technology, media, telecoms and consumer lifestyle and wellbeing
sectors. It is envisaged that, at the end of the three year initial investment
period, 75-85% of the proceeds of the Offer will be invested in a range of
qualifying investments with 15-25% invested in a combination of cash, Open Ended
Investment Companies ("OEICs")* managed by Octopus and money market securities
managed by third party specialists.


*Titan 2 has invested in two OEICs managed by Octopus, the CF Octopus Partner
Fund - (Absolute Return) and the CF Octopus Partner Fund - (UK Smaller
Companies).


Portfolio Review

As at 31 October 2009 the NAV stood at 96.1p, compared to 89.9p at 31 October
2008, and when adding back the 1p of cumulative dividends, this represents a
positive total return of 8.0%. Recent improvements in the economy have created a
better environment for the companies in the portfolio. There is a sense that the
worst of the recession is over and that we may be on the road to recovery. We
are excited about the potential in the market for smaller private companies,
including those in your portfolio.


At this point in time, small growing businesses have an opportunity to work
nimbly in a rocky economic landscape and both grow and take market share. We
work with each company, providing expertise and guidance to help them achieve
their goals. As an example of a business taking advantage of the economic
environment, portfolio company Zoopla recently made a series of acquisitions,
including the websites Hot Property, Think Property and the Property Finder
Group, which have added significantly to Zoopla's proposition, user base and
brand profile. Given the company's progress, we made a further investment into
Zoopla in October of £205,000.


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

  * 8 January 2010: £499,998 investment into Calastone

  * 9 January 2010: A previous £201,440 non-qualifying investment in Zoopla
    became a qualifying investment.

Outlook
At the time of writing, we are actively engaged with a number of new businesses
and expect to be completing
these investments early in 2010. Historically, a time of great pressure for
small business is frequently the first two quarters coming out of recession. It
is at this time that cash flow remains constrained, but there is the opportunity
to return to growth. As a result, this is a good time to be making investments
and providing financial capital to those businesses that we believe have the
opportunity to grow significantly. Times of disruption in industries are also
the times when there are the greatest opportunities to make a significant
difference to the way in which an industry is structured, or a service is
delivered. There are, and will always be, significant challenges as a result of
the size and nature of the businesses we invest into. They are often at the
forefront of new ideas within their industry sectors, which can leave them
exposed, and we recognise the risks associated with investing into such
businesses. However, it is precisely these sorts of businesses that can change
the way in which we live our lives, or the way in which we do business, thus
creating large successful businesses from our investment. As a result, we look
forward with expectation to the coming year.

If you have any questions on any aspect of your investment, please call one of
the team on 0800 316 2347.


Alex Macpherson

Octopus Investments Limited

3 February 2010


Investment Portfolio

+---------------+------------------+----------+---------+-------+------+-------+
|               |                  |Investment|         |   Fair|     %|      %|
|               |                  |   at cost| Movement|  value|equity| equity|
|Qualifying     |Sector            |31 October|       in| at 31 |  held|managed|
|investments    |                  |     2009 |valuation|October|    by|     by|
|               |                  |   (£'000)|         |   2009| Titan|Octopus|
|               |                  |          |         |       |     2|       |
+---------------+------------------+----------+---------+-------+------+-------+
|Zoopla Limited |Media             |       764|      277|  1,041|  5.0%|  16.7%|
+---------------+------------------+----------+---------+-------+------+-------+
|True Knowledge |Media             |          |         |       |      |       |
|Limited        |                  |     1,032|        -|  1,032|  3.1%|  38.8%|
+---------------+------------------+----------+---------+-------+------+-------+
|Calastone      |Technology        |          |         |       |      |       |
|Limited        |                  |       635|        -|    635|  7.5%|  23.5%|
+---------------+------------------+----------+---------+-------+------+-------+
|e-Therapeutics |Consumer lifestyle|          |         |       |      |       |
|plc            |& wellbeing       |       450|       27|    477|  0.3%|   5.1%|
+---------------+------------------+----------+---------+-------+------+-------+
|Surrey         |Technology        |          |         |       |      |       |
|Nanosystems    |                  |          |         |       |      |       |
|Limited        |                  |       300|        -|    300|  4.9%|  28.5%|
+---------------+------------------+----------+---------+-------+------+-------+
|GetOptics      |Consumer lifestyle|          |         |       |      |       |
|Limited        |& wellbeing       |       285|        -|    285|  4.9%|  27.1%|
+---------------+------------------+----------+---------+-------+------+-------+
|Nature         |Consumer lifestyle|          |         |       |      |       |
|Delivered      |& wellbeing       |          |         |       |      |       |
|Limited        |                  |       275|        -|    275|  4.8%|  24.2%|
+---------------+------------------+----------+---------+-------+------+-------+
|Phase Vision   |Technology        |          |         |       |      |       |
|Limited        |                  |       200|        -|    200|  8.9%|  49.0%|
+---------------+------------------+----------+---------+-------+------+-------+
|Phasor         |Technology        |          |         |       |      |       |
|Solutions      |                  |          |         |       |      |       |
|Limited        |                  |       100|     (25)|     75|  2.0%|  30.7%|
+---------------+------------------+----------+---------+-------+------+-------+
|The Skills     |Technology        |          |         |       |      |       |
|Market Limited |                  |       100|     (50)|     50|  4.9%|  15.7%|
+---------------+------------------+----------+---------+-------+------+-------+
|The Key        |Telecommunications|          |         |       |      |       |
|Revolution     |                  |          |         |       |      |       |
|Limited        |                  |       641|    (641)|      -| 12.4%|  35.9%|
+---------------+------------------+----------+---------+-------+------+-------+
|Total qualifying investments      |     4,782|    (412)|  4,370|      |       |
+----------------------------------+----------+---------+-------+------+-------+
|Money market securities           |     5,242|     (35)|  5,207|      |       |
+----------------------------------+----------+---------+-------+------+-------+
|OEICs                             |     3,542|    1,320|  4,862|      |       |
+----------------------------------+----------+---------+-------+------+-------+
|Cash at bank                      |       578|        -|    573|      |       |
+----------------------------------+----------+---------+-------+------+-------+
|Total investments                 |    14,144|      873| 15,012|      |       |
+----------------------------------+----------+---------+-------+------+-------+
|Net current assets                |         -|        -|      2|      |       |
+----------------------------------+----------+---------+-------+------+-------+
|Total net assets                  |          |         | 15,014|      |       |
+----------------------------------+----------+---------+-------+------+-------+



Review of Investments

During the year, the Fund made eight new investments amounting to £2,474,000 and
two follow-on investments into The Key Revolution and True Knowledge for
£230,000 and £350,000 respectively.


Quoted and unquoted investments are valued in accordance with the accounting
policy set out on page 37, which takes account of current industry guidelines
for the valuation of venture capital portfolios and is compliant with
International Private Equity and Venture Capital Valuations guidelines and
current financial reporting standards.


Zoopla Limited

Zoopla is an award-winning online property information service and community
website, presenting information on house pricing and free valuation estimates,
for sale listings, and local community information. Zoopla has become the UK's
leading website for house prices and value data, as it provides the most
comprehensive source of residential property market information. It is also the
UK's most active property community, with over a million user contributions to
its website in 2008. It recently launched estate agent listings on a
pay-for-performance basis and expects to become one of the premier UK websites
for those interested in the property market. We would encourage you to view the
website at www.zoopla.co.uk <

http://www.zoopla.co.uk/>.


In August, Zoopla announced the purchase of The PropertyFinder Group, from News
International Ltd and REA Group, which includes propertyfinder.com, one of the
best-known and most-visited property websites in the country, with over 2
million unique visitors per month, as well as other online property assets
including HotProperty.co.uk and UKPropertyshop.co.uk. This purchase comes hot on
the heels of its acquisition in July of ThinkProperty.com from Guardian Media
Group. The integration of the two companies took place in the Autumn of 2009.
These acquisitions have accelerated the company's growth and Zoopla currently
holds the number 2 slot in Nielson's analysis of property portals.


Initial investment date: January 2009

Cost: £764,206

Valuation: £1,041,696

Equity held: 5.0%

Equity held by all funds managed by Octopus: 16.7%

Last audited accounts: N/A


True Knowledge Limited

True Knowledge has developed an internet search engine website that answers
questions. Finding information on the internet currently involves a process of
trial and error, hoping that the search engine retrieves the information you're
looking for. True Knowledge has devised technology that resolves this
fundamental problem by operating along a more intuitive system. It intelligently
answers questions asked on any topic in plain English. It can be used just like
a conventional search engine, but users can also add knowledge directly to it.
There are currently over 220 million facts in the database, which is being
continually expanded.



The company has launched a plug in for the Mozilla Firefox browser where True
Knowledge sits on top of the search results provided by Google. Having
dramatically improved performance response times, the company's focus is now on
securing paying customers. There has also been considerable interest in True
Knowledge's ability to answer questions in relation to local search and the
company is now providing information to Siri for its local search solution on
the iPhone.


Initial investment date: July 2008

Cost: £1,031,783

Valuation: £1,031,783

Equity held: 3.1%

Equity held by all funds managed by Octopus: 38.8%

Last audited accounts: 31 July 2009

Loss before interest & tax: (£1,478,219)

Net current assets: £462,892


Calastone Limited

Calastone is the UK's only independent transaction service for the mutual fund
industry. It enables buyers and sellers of mutual funds on different platforms
to communicate orders electronically by providing a universal message
communication and 'translation' service. This is being welcomed in an industry
which has not previously been able to invest in the real-time exchange of
information between participants. Orders are commonly communicated by fax or
telephone with a high level of manual re-keying and manual error correction.
Calastone's 'translation' service means that neither the transmitter nor
receiver need purchase additional technology or change their existing systems.
Furthermore, there is no barrier or cost of entry.



Over the last few months, the company has been signing clients on a regular
basis and, during August 2009, was able to announce a significant milestone in
sending its one millionth message across its network. Calastone has also
recently announced an offering into the settlement market further extending its
services to its client base.



Initial investment date: October 2008

Cost: £634,746

Valuation: £634,746

Equity held: 7.5%

Equity held by all funds managed by Octopus: 23.5%

Last audited accounts: N/A


e-Therapeutics plc

e-Therapeutics is an AIM-listed, drug discovery and development company. It
focuses on three core areas: the discovery of new drugs; discovering novel uses
for existing drugs; and analysis of the interactions between different drugs.
The company has developed a unique drug discovery technology that enables it to
assess drug candidates for high efficacy and safety ahead of clinical trials.
The use of this technology dramatically reduces the time between drug discovery
and market applicability, and reduces the risks associated with clinical trials.

The company is currently progressing with the preclinical and clinical
development of a number of innovative drug candidates to which the new
technology was applied. The treatments are now at an advanced stage of testing,
validating the therapeutic attributes that e-Therapeutics' drug discovery system
predicted for each candidate. The development and commercialisation of the
company's drug candidates that have generated clinical data will be supported
initially by licensing these to partners operating in smaller pharmaceutical
markets.



e-Therapeutics announced their results in July with news of the continued
development of its drug pipeline. The company has also announced a placing of
approximately 10% of the issued shares to Gartmore at 38p per share, a premium
to the Fund's entry price of 26%.


Initial investment date: March 2009

Cost: £450,000

Valuation: £477,000

Equity held: 0.3%

Equity held by all funds managed by Octopus: 5.1%

Last audited accounts: 24 July 2009

Loss before tax: (£1,957,000)

Net assets: £947,000


Surrey NanoSystems Limited

Surrey NanoSystems was founded in November 2006 in partnership with the
University of Surrey's Advanced Technology Institute. The company is a pioneer
in the development of highly advanced equipment and processes for growing carbon
nanotubes (CNTs). CNTs are molecular-scale tubes of graphitic carbon that
possess extraordinary electronic and mechanical properties.



Surrey NanoSystems is unique in its ability to consistently grow CNTs at
temperatures as low as 350°C. Historically, nanotechnology specialists have been
unable to grow CNTs below 700°C, preventing their use in a range of other
applications, due to the damage high temperatures cause to other materials used
in semiconductor chips. For this reason, NanoGrowth(®), the company's unique
growth technology, represents a major breakthrough for the rapidly developing
field of nanoelectronics, the future manufacture of high performance
semiconductor chips and their use in a far broader range of sectors.


Initial investment date: July 2009

Cost: £300,009

Valuation: £300,009

Equity held: 4.9%

Equity held by all funds managed by Octopus: 28.5%

Last audited accounts: N/A


GetOptics Limited

GetOptics is an online retailer of contact lenses. It is a new company formed to
acquire Getlenses and Postoptics. Following the investment, GetOptics is the
largest online retailer of contact lenses in the UK. With a turnover of £6.5
million and 25-30% market share of the online market, the company will have
unrivalled buying power in the e-commerce lens market, founded on very good
relations with contact lens manufacturers.



As a result of the combination, GetOptics will have the opportunity to grow with
minimal capital expenditure over the coming years and the chance to roll out
best practices learned across the business in marketing, business development,
supply chain management and systems.


Initial investment date: September 2009

Cost: £285,000

Valuation: £285,000

Equity held: 4.9%

Equity held by all funds managed by Octopus: 27.1%

Last audited accounts: N/A

Nature Delivered Limited (trading as Graze)

Graze is the first UK company to deliver healthy and nutritionally balanced food
by post straight to the home or office. The company was founded in April 2007
and has over 15,000 existing customers who regularly place orders via its
website. Graze's snack boxes cost only £2.99 and are sent by Royal Mail for next
day delivery.



The Graze product range includes over 100 products to choose from, all free from
artificial colourings, flavourings and preservatives. Customers can also place
orders for personalised boxes, specifically tailored to meet their tastes,
dietary and nutritional requirements.



Graze promotes a varied and balanced diet through facilitating the intake of a
wide variety of smaller portions of natural, high-energy foods throughout the
day. Its boxes contain up to three portions of fruit and vegetables, in line
with the National Health Service's recognised 'five-a-day' scheme. Its product
is very much in tune with customer needs and the demands of modern living, as
people become ever more conscious of health and convenience.


Initial investment date: June 2009

Cost: £275,000

Valuation: £275,000

Equity held: 4.8%

Equity held by all funds managed by Octopus: 24.2%

Last audited accounts: N/A


Phase Vision Limited

Phase Vision is a manufacturer of optical inspection solutions for high-speed,
three-dimensional shape measurement with micro-scale accuracy. The company has
developed (and patented) a unique optical approach to the measurement of very
large (>100cm) industrial items with free-form or curved surfaces, such as ship
propellers and aircraft wings to tighten manufacturing tolerances, increase
throughput and reduce waste. Phase Vision's metrology solutions are more cost
efficient than current laser processes, and accurately measure mechanical
systems to micron level, thus providing superior performance.



Phase Vision's systems use a fringe projection approach and comprise of one or
more projector/camera units that project, and image, patterns of light onto the
object to be measured. Sophisticated algorithms are then used to accurately
calculate the dimension of the object.  Phase Vision's clients include some of
the biggest names in the automotive, aerospace, chemical and medical device
engineering sectors. The market for large-scale measurement with micro-scale
accuracy is estimated to be worth around £2 billion per year, with growth of
around 6% per annum.



Since Octopus' investment, the business has strengthened its organisational
structure, and built more robust manufacturing and financial controls into its
processes. Development of the product continues and nears completion, while the
management are also gaining increased traction with another large tier one
potential customer.


Initial investment date: May 2009

Cost: £199,984

Valuation: £199,984

Equity held: 8.9%

Equity held by all funds managed by Octopus: 49.0%

Last audited accounts: N/A


Phasor Solutions Limited

Phasor provides flat panel phased array antennae at a fraction of the cost
associated with traditional phased array technology. Phased array products are
groups of antennae constituting a radar system that enhances and controls signal
strength. They are used across many industries, including travel and engineering
and can facilitate communication signals. Phasor has the potential to transform
the 'communication on the move' market through its phased array product
offering. Phasor develops phased array antennae with multiple commercial uses,
which include enabling moving host units, such as trains and airplanes, to
deliver broadband Internet access and high-speed communications. Additionally,
Phasor's product range, which will be expanded to include radars, has numerous
other applications in both the aerospace and military sectors.



Phasor received its first production chips from the foundry and the team have
been testing these together with a specialist semiconductor design consultancy.
Whilst this is a time delay, the effect on cash flow is less significant than
expected.


Initial investment date: March 2009

Cost: £99,992

Valuation: £74,994

Equity held: 2.0%

Equity held by all funds managed by Octopus: 30.7%

Last audited accounts: N/A


The Skills Market Limited (Trading as iProfile)
The company, formerly known as SkillsMarket, works with recruiters to make the
business of finding and placing the right people a lot simpler and quicker. The
company's website enables candidates to transform any static CV into a dynamic
professional profile kept up-to-date by candidates themselves. The aim of
iProfile is to bring the traditional CV template into the 21st Century.

Recruiters save time and money on CV processing by searching up-to-date
databases and unleash the potential of candidate information - making it more
accurate and responsive, with the ability to search and sort in real-time,
transforming the efficiency of recruitment processes.


The company was affected by the economic environment and therefore required an
injection of capital. Titan 2 invested at this time in order to take advantage
of a turnaround in the company and the general recruiting market.


Initial investment date: July 2009

Cost: £100,000

Valuation: £50,000

Equity held: 4.9%

Equity held by all funds managed by Octopus: 15.7%

Last audited accounts: N/A


The Key Revolution Limited

The work of The Key Revolution heralded the move towards 'cloud computing'. Its
patented technology enables internet users to securely authenticate themselves
and access their own files on any computer, then clear their text or data. The
highly innovative Mobiu key device combines both SIM card and chip and pin
features. Lost or stolen Mobiu keys can also be deactivated, ensuring total
security.



Unfortunately, it took The Key Revolution longer to establish itself in the
market place than previously anticipated, predominantly due to the poor economic
environment and the company struggled to make sales. Titan 2 loaned the business
£75,000 in August 2009 to afford it time to secure additional funding from an
alternative investor. Unfortunately, despite initial positive messages, no
funding was found. As such, the company has unfortunately had to take the
decision to be placed into administration in December 2009.


Initial investment date: May 2008

Cost: £641,026

Valuation: £-

Equity held: 12.4%

Equity held by all funds managed by Octopus: 35.9%

Last audited accounts: 31 March 2009

Loss before interest: (£1,317,418)

Net assets: £173,595


Directors' Responsibility Statement


The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable laws and regulations.


Company law requires the Directors to prepare financial statements for each
financial year which give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company. Under that law the
Directors have elected to prepare financial statements in accordance with United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting
Practice).


In preparing these financial statements, the Directors are required to:


<li> select suitable accounting policies and then apply them consistently;


<li> make judgments and estimates that are reasonable and prudent;


<li> state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and


<li> prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.


The Directors are responsible for keeping adequate accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.


The Directors are responsible for 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.


In so far as each of the Director's is aware;


<li> there is no relevant audit information of which the Company's auditor is
unaware;


<li> 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;


To the best of my knowledge;


<li> the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company; and


<li> the management report includes 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

John Hustler

Chairman

3 February 2010


+----------------------------------------------------++---------------+----+
|Income Statement                                    ||               |    |
+----------------------------------------------+-----++---------------+----+
|                                              |     | Year to 31 October  |
|                                              |     |        2009         |
+----------------------------------------------+-----+-------+-------+-----+
|                                              |     |Revenue|Capital|Total|
+----------------------------------------------+-----+-------+-------+-----+
|                                              |Notes|  £'000|  £'000|£'000|
+----------------------------------------------+-----+-------+-------+-----+
+----------------------------------------------+-----+-------+-------+-----+
|Loss on disposal of fixed asset investments   | 10  |      -|  (315)|(315)|
+----------------------------------------------+-----+-------+-------+-----+
|Gain on disposal of current asset investments | 12  |      -|     45|   45|
+----------------------------------------------+-----+-------+-------+-----+
+----------------------------------------------+-----+-------+-------+-----+
|Loss on valuation of fixed asset investments  | 10  |      -|  (206)|(206)|
+----------------------------------------------+-----+-------+-------+-----+
|Gain on valuation of current asset investments| 12  |      -|  1,676|1,676|
+----------------------------------------------+-----+-------+-------+-----+
+----------------------------------------------+-----+-------+-------+-----+
|Income                                        |  2  |    437|      -|  437|
+----------------------------------------------+-----+-------+-------+-----+
+----------------------------------------------+-----+-------+-------+-----+
|Investment management fees                    |  3  |   (73)|  (208)|(281)|
+----------------------------------------------+-----+-------+-------+-----+
|Other expenses                                |  4  |  (223)|      -|(223)|
+----------------------------------------------+-----+-------+-------+-----+
+----------------------------------------------+-----+-------+-------+-----+
|Return on ordinary activities before tax      |     |    141|    992|1,133|
+----------------------------------------------+-----+-------+-------+-----+
+----------------------------------------------+-----+-------+-------+-----+
|Taxation on return on ordinary activities     |  6  |      -|      -|    -|
+----------------------------------------------+-----+-------+-------+-----+
+----------------------------------------------+-----+-------+-------+-----+
|Return on ordinary activities after tax       |     |    141|    992|1,133|
+----------------------------------------------+-----+-------+-------+-----+
|Earnings per share - basic and diluted        |  8  |   0.9p|   6.4p| 7.3p|
+----------------------------------------------+-----+-------+-------+-----+


  * 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 financial statements

  * The Company has only one class of business and derives its income from
    investments made in shares and securities and from bank and money market
    funds

The Company has no recognised gains or losses other than the results for the
year as set out above.


Income Statement



+----------------------------------------------+-----+----------------------+
|                                              |     | Period to 31 October |
|                                              |     |         2008         |
+----------------------------------------------+-----+-------+-------+------+
|                                              |     |Revenue|Capital| Total|
+----------------------------------------------+-----+-------+-------+------+
|                                              |Notes|  £'000|  £'000| £'000|
+----------------------------------------------+-----+-------+-------+------+
+----------------------------------------------+-----+-------+-------+------+
|Loss on valuation of fixed asset investments  | 10  |      -|  (215)| (215)|
+----------------------------------------------+-----+-------+-------+------+
|Loss on valuation of current asset investments| 12  |      -|  (437)| (437)|
+----------------------------------------------+-----+-------+-------+------+
+----------------------------------------------+-----+-------+-------+------+
|Income                                        |  2  |    326|      -|   326|
+----------------------------------------------+-----+-------+-------+------+
+----------------------------------------------+-----+-------+-------+------+
|Investment management fees                    |  3  |   (55)|  (164)| (219)|
+----------------------------------------------+-----+-------+-------+------+
|Other expenses                                |  4  |  (177)|      -| (177)|
+----------------------------------------------+-----+-------+-------+------+
+----------------------------------------------+-----+-------+-------+------+
|Return on ordinary activities before tax      |     |     94|  (816)| (722)|
+----------------------------------------------+-----+-------+-------+------+
+----------------------------------------------+-----+-------+-------+------+
|Taxation on return on ordinary activities     |  6  |      -|      -|     -|
+----------------------------------------------+-----+-------+-------+------+
+----------------------------------------------+-----+-------+-------+------+
|Return on ordinary activities after tax       |     |     94|  (816)| (722)|
+----------------------------------------------+-----+-------+-------+------+
|Earnings per share - basic and diluted        |  8  |   1.0p| (8.3)p|(7.3)p|
+----------------------------------------------+-----+-------+-------+------+


  * 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 financial statements.

  * The Company has only one class of business and derives its income from
    investments made in shares and securities and from bank and money market
    funds.


The Company has no recognised gains or losses other than the results for the
year as set out above.


+------------------------------------------------+-----------------------+-----+
|Reconciliation of Movements in                  |                       |     |
|                                                |                       |     |
|Shareholders' Funds                             |                       |     |
+-------------------------+----------------------+-----------------------+-----+
|                         | Year ended 31 October|Period ended 31 October|     |
|                         |                  2009|                   2008|     |
+-------------------------+----------------------+-----------------------+-----+
|                         |                 £'000|                  £'000|     |
+-------------------------+----------------------+-----------------------+-----+
|Shareholders' funds at   |                      |                       |     |
|start of year            |                14,036|                      -|     |
+-------------------------+----------------------+-----------------------+-----+
|Return on ordinary       |                      |                       |     |
|activities after tax     |                 1,132|                  (722)|     |
+-------------------------+----------------------+-----------------------+-----+
|Issue of equity (net of  |                      |                       |     |
|expenses)                |                     -|                 14,758|     |
+-------------------------+----------------------+-----------------------+-----+
|Dividends paid           |                 (155)|                      -|     |
+-------------------------+----------------------+-----------------------+-----+
|Shareholders' funds at   |                      |                       |     |
|end of period            |                15,014|                 14,036|     |
+-------------------------+----------------------+-----------------------+-----+
|Balance Sheet                                                                 |
+------------------------+-----+-----------------------+-----------------------+
|                        |     |  As at 31 October 2009|  As at 31 October 2008|
+------------------------+-----+------+----------------+------+----------------+
|                        |Notes| £'000|           £'000| £'000|           £'000|
+------------------------+-----+------+----------------+------+----------------+
+------------------------+-----+------+----------------+------+----------------+
|Fixed asset investments*| 10  |      |           4,370|      |           1,837|
+------------------------+-----+------+----------------+------+----------------+
|Current assets:         |     |      |                |      |                |
+------------------------+-----+------+----------------+------+----------------+
|Debtors                 | 11  |    96|                |   162|                |
+------------------------+-----+------+----------------+------+----------------+
|Investments*            | 12  |10,069|                |11,663|                |
+------------------------+-----+------+----------------+------+----------------+
|Cash at bank            |     |   573|                |   461|                |
+------------------------+-----+------+----------------+------+----------------+
|                        |     |10,738|                |12,286|                |
+------------------------+-----+------+----------------+------+----------------+
|Creditors: amounts      |     |      |                |      |                |
|falling due within one  | 13  |  (94)|                |  (87)|                |
|year                    |     |      |                |      |                |
+------------------------+-----+------+----------------+------+----------------+
|Net current assets      |     |      |          10,644|      |          12,199|
+------------------------+-----+------+----------------+------+----------------+
+------------------------+-----+------+----------------+------+----------------+
|Net assets              |     |      |          15,014|      |          14,036|
+------------------------+-----+------+----------------+------+----------------+
+------------------------+-----+------+----------------+------+----------------+
|Called up equity share  | 14  | 1,562|                | 1,562|                |
|capital                 |     |      |                |      |                |
+------------------------+-----+------+----------------+------+----------------+
|Share premium           | 15  |     -|                |13,196|                |
+------------------------+-----+------+----------------+------+----------------+
|Special distributable   | 15  |13,196|                |     -|                |
|reserve                 |     |      |                |      |                |
+------------------------+-----+------+----------------+------+----------------+
|Capital reserve - gains | 15  | (407)|                | (164)|                |
|and losses on disposals |     |      |                |      |                |
+------------------------+-----+------+----------------+------+----------------+
|- holding gains and     | 15  |   583|                | (652)|                |
|losses                  |     |      |                |      |                |
+------------------------+-----+------+----------------+------+----------------+
|Revenue reserve         | 15  |    80|                |    94|                |
+------------------------+-----+------+----------------+------+----------------+
|Total equity            |     |      |          15,014|      |          14,036|
|shareholders' funds     |     |      |                |      |                |
+------------------------+-----+------+----------------+------+----------------+
|Net asset value per     |  9  |      |           96.1p|      |           89.9p|
|share                   |     |      |                |      |                |
+------------------------+-----+------+----------------+------+----------------+



*At fair value through profit and loss

The accompanying notes are an integral part of the financial statements.

The statements were approved by the Directors and authorised for issue on 3
February 2010 and are signed on their behalf by:

John Hustler

Chairman

Company No: 6397765


+--------------------------------------------------------+---------------------+
|Cash Flow Statement                                     |                     |
+-----------------------------+-----+--------------------+---------------------+
|                             |     |  Year to 31 October| Period to 31 October|
|                             |     |                2009|                 2008|
+-----------------------------+-----+--------------------+---------------------+
|                             |Notes|               £'000|                £'000|
+-----------------------------+-----+--------------------+---------------------+
+-----------------------------+-----+--------------------+---------------------+
|Net cash inflow/(outflow)    |     |                    |                     |
|from operating activities    |     |                   6|                (145)|
+-----------------------------+-----+--------------------+---------------------+
+-----------------------------+-----+--------------------+---------------------+
|Financial investment:        |     |                    |                     |
+-----------------------------+-----+--------------------+---------------------+
|Purchase of fixed asset      | 10  |             (3,054)|              (2,052)|
|investments                  |     |                    |                     |
+-----------------------------+-----+--------------------+---------------------+
+-----------------------------+-----+--------------------+---------------------+
|Management of funds:         |     |                    |                     |
+-----------------------------+-----+--------------------+---------------------+
|Purchase of current asset    | 12  |             (2,146)|             (24,433)|
|investments                  |     |                    |                     |
+-----------------------------+-----+--------------------+---------------------+
|Sale of current asset        | 12  |               5,461|               12,333|
|investments                  |     |                    |                     |
+-----------------------------+-----+--------------------+---------------------+
+-----------------------------+-----+--------------------+---------------------+
|Dividends paid               |     |               (155)|                    -|
+-----------------------------+-----+--------------------+---------------------+
+-----------------------------+-----+--------------------+---------------------+
|Financing:                   |     |                    |                     |
+-----------------------------+-----+--------------------+---------------------+
|Issue of shares              |     |                   -|               15,443|
+-----------------------------+-----+--------------------+---------------------+
|Share issue expense          |     |                   -|                (685)|
+-----------------------------+-----+--------------------+---------------------+
|Increase in cash resources at|     |                 112|                  461|
|bank                         |     |                    |                     |
+-----------------------------+-----+--------------------+---------------------+



+-----------------------------------------------------+------------------------+
|Reconciliation of Net Cash Flow to Movement in Net   |                        |
|Funds                                                |                        |
+----------------------------++-----------------------+------------------------+
|                            ||Year to 31 October 2009|    Period to 31 October|
|                            ||                       |                    2008|
+----------------------------++-----------------------+------------------------+
|                            ||                  £'000|                   £'000|
+----------------------------++-----------------------+------------------------+
|Increase in cash resources  ||                       |                        |
|at bank                     ||                    112|                     461|
+----------------------------++-----------------------+------------------------+
|Movement in cash equivalent ||                       |                        |
|securities                  ||                (1,594)|                  11,663|
+----------------------------++-----------------------+------------------------+
|Opening net funds           ||                 12,124|                       -|
+----------------------------++-----------------------+------------------------+
|Net funds at 31 October     ||                 10,642|                  12,124|
+----------------------------++-----------------------+------------------------+



Net funds at 31 October comprised:

+----------------------------------+---------------------+---------------------+
|                                  |   Year to 31 October| Period to 31 October|
|                                  |                 2009|                 2008|
+----------------------------------+---------------------+---------------------+
|                                  |                £'000|                £'000|
+----------------------------------+---------------------+---------------------+
|Cash at bank                      |                  573|                  461|
+----------------------------------+---------------------+---------------------+
|Bonds                             |                4,083|                6,701|
+----------------------------------+---------------------+---------------------+
|Money market funds                |                1,124|                1,529|
+----------------------------------+---------------------+---------------------+
|OEICs                             |                4,862|                3,433|
+----------------------------------+---------------------+---------------------+
|Net funds at 31 October           |               10,642|               12,124|
+----------------------------------+---------------------+--------------------++
|Reconciliation of Operating profit/(loss) before        |                    ||
|Taxation to Cash Flow from Operating Activities         |                    ||
+---------------------------------++---------------------+--------------------++
|                                 ||   Year to 31 October|Period to 31 October||
|                                 ||                 2009|                2008||
+---------------------------------++---------------------+--------------------++
|                                 ||                £'000|               £'000||
+---------------------------------++---------------------+--------------------++
|Return on ordinary activities    ||                     |                    ||
|before tax                       ||                1,133|               (722)||
+---------------------------------++---------------------+--------------------++
|Loss on disposal of fixed asset  ||                     |                    ||
|investments                      ||                  315|                   -||
+---------------------------------++---------------------+--------------------++
|Gain on disposal of current asset||                     |                    ||
|investments                      ||                 (45)|                   -||
+---------------------------------++---------------------+--------------------++
|Loss on valuation of fixed asset ||                     |                    ||
|investments                      ||                  206|                 215||
+---------------------------------++---------------------+--------------------++
|(Gain)/loss on valuation of      ||                     |                    ||
|current asset investments        ||              (1,676)|                 437||
+---------------------------------++---------------------+--------------------++
|Decrease/(Increase) in debtors   ||                   66|               (162)||
+---------------------------------++---------------------+--------------------++
|Increase in creditors            ||                    7|                  87||
+---------------------------------++---------------------+--------------------++
|Inflow/(outflow) from operating  ||                     |                    ||
|activities                       ||                    6|               (145)||
+---------------------------------++---------------------+--------------------++


Notes to the Financial Statements


1. Principal Accounting Policies


Basis of accounting

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
(UK GAAP), and the Statement of Recommended Practice (SORP) "Financial
Statements of Investment Trust Companies" (revised 2009).


The principal accounting policies have remained unchanged from those set out in
the Company's 2008 Annual Report and financial statements. A summary of the
principal accounting policies is set out below.


The Company has designated all fixed asset investments as being held at fair
value through profit and loss; therefore all gains and losses arising from
investments held are attributable to financial assets held at fair value through
profit and loss.  Accordingly, all interest income, fee income, expenses and
impairment losses are attributable to assets designated as being at fair value
through profit and loss.


The preparation of the financial statements requires Management to make
judgements and estimates that affect the application of policies and reported
amounts of assets, liabilities, income and expenses. 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.


Capital valuation policies are those that are most important to the depiction of
the Company's financial position and that require the application of subjective
and complex judgements, 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 critical accounting policies that are declared will not
necessarily result in material changes to the financial statements in any given
period but rather contain a potential for material change. The main accounting
and valuation policies used by the Company are disclosed below. Whilst not all
of the significant accounting policies require subjective or complex judgements,
the Company considers that the following accounting policies should be
considered critical.


Investments are regularly reviewed to ensure that the fair values are
appropriately stated. Quoted investments are valued in accordance with the
bid-price on the relevant date, unquoted investments are valued in accordance
with current International Private Equity and Venture Capital ('IPEVC')
valuation guidelines, although this does rely on subjective estimates such as
appropriate sector earnings multiples, forecast results of investee companies,
asset values of subsidiary 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.


Investments

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 26, the investments will be designated as fair
value through profit and loss (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. This is consistent with the International Private Equity
and Venture Capital (IPEVC) guidelines.


In the case of unquoted investments, fair value is established by using measures
of value such as the price of recent transactions, earnings multiple and net
assets. This is consistent with IPEVC valuation 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 - holding gains/(losses).


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 investee companies.


Current asset investments

Current asset investments comprise money market funds, bonds and OEICs and are
designated as FVTPL. 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 - gains/(losses) on disposal.


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


Income

Investment income includes interest earned on bank balances and money market
securities and includes income tax withheld at source. Dividend income is shown
net of any related tax credit.


Dividends receivable are brought into account when the Company's right to
receive payment is established and there is no reasonable doubt 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.


Expenses

All expenses are accounted for on an accruals basis. Expenses are charged wholly
to revenue with the exception of the investment management fee, which has been
charged 25% to the revenue account and 75% to the capital reserve to reflect, in
the Directors' opinion, the expected long-term split of returns in the form of
income and capital gains respectively from the investment portfolio.


Revenue and capital

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 and holding gains and losses on investments. 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 appropriate capital
reserve on the basis of whether they are readily convertible to cash in full at
the balance sheet date.


Taxation

Corporation tax payable is applied to profits chargeable to corporation tax, if
any, at the current 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.
Where transactions or events have occurred at that date that will result in an
obligation to pay more, or a right to pay less tax, with the exception that
deferred tax assets are recognised only to the extent that the Directors
consider that it is more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing can be deducted.


Cash and liquid resources

Cash, for the purposes of the cash flow statement, comprises cash in hand and
deposits repayable on demand, less overdrafts payable on demand. Liquid
resources 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.
Liquid resources comprise term deposits of less than one year (other than cash),
government securities, investment grade bonds and investments in money market
managed funds, as well as OEICs.


Loans and receivables

The Company's loans and receivables are initially recognised at cost and
subsequently measured at fair value, being amortised cost using the effective
interest rate method.


Financing strategy and capital structure

FRS 29 'Financial Instruments: Disclosures' comprises disclosures' relating to
financial instruments.


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 drawdown any borrowing facilities in the
future to fund the acquisition of investments.


Financial instruments

The Company's principal financial assets are its investments and the policies in
relation to those assets are set out above. 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.


Capital management is monitored and controlled using the internal control
procedures set out on page 26 of this report. The capital being managed includes
equity and fixed-interest investments, cash balances and liquid resources
including debtors and creditors.


The company does not have any externally imposed capital requirements.


Dividends

Dividends payable are recognised as distributions in the financial statements
when the Company's liability to make payment has been established. This
liability is established for interim dividends when they are declared by the
Board, and for final dividends when they are approved by the shareholders.


2. Income


+----------------------------+-----------------------+-------------------------+
|                            |Year to 31 October 2009|Period to 31 October 2008|
+----------------------------+-----------------------+-------------------------+
|                            |                  £'000|                    £'000|
+----------------------------+-----------------------+-------------------------+
|Money market funds & OEICs  |                    311|                      174|
+----------------------------+-----------------------+-------------------------+
|Bond interest receivable    |                    118|                      107|
+----------------------------+-----------------------+-------------------------+
|Bank interest receivable    |                      -|                       45|
+----------------------------+-----------------------+-------------------------+
|Loan      note      interest|                      8|                        -|
|receivable                  |                       |                         |
+----------------------------+-----------------------+-------------------------+
|                            |                    437|                      326|
+----------------------------+-----------------------+-------------------------+



3. Investment Management Fees


+-------------------------+---------------------+---------------------+
|                         | Year to 31 October  |Period to 31 October |
|                         |        2009         |        2008         |
+-------------------------+-------+-------+-----+-------+-------+-----+
|                         |Revenue|Capital|Total|Revenue|Capital|Total|
+-------------------------+-------+-------+-----+-------+-------+-----+
|                         |  £'000|  £'000|£'000|  £'000|  £'000|£'000|
+-------------------------+-------+-------+-----+-------+-------+-----+
|Investment management fee|     73|    208|  281|     45|    135|  180|
+-------------------------+-------+-------+-----+-------+-------+-----+
|Irrecoverable VAT thereon|      -|      -|    -|     10|     29|   39|
+-------------------------+-------+-------+-----+-------+-------+-----+
|Total fees               |     73|    208|  281|     55|    164|  219|
+-------------------------+-------+-------+-----+-------+-------+-----+



For the purposes of the revenue and capital columns in the income statement, the
management fee has been allocated 25% to revenue and 75% to capital, in line
with the Board's expected long-term return in the form of income and capital
gains respectively from the Company's investment portfolio.


Octopus provides investment management and accounting and administration
services to the Company under a management agreement. This agreement runs for a
period of five years with effect from 2 November 2007 and may be terminated at
any time thereafter by not less than 12 months' notice given by either party. No
compensation is payable in the event of terminating the agreement by either
party, if the required notice period is given. The fee payable, should
insufficient notice be given, will be equal to the fee that would have been paid
should continuous service be provided, or the required notice period was given.
The basis upon which the management fee is calculated is disclosed within note
19 to the financial statements.


In his budget statement on 12 March 2008, the Chancellor of the Exchequer
announced that the Finance Act 2008 would contain draft legislation exempting
VCTs from VAT on management fees with effect from 1 October 2008. This
legislation was passed in October 2008 and, as such, all VCTs are now exempt
from paying VAT on management fees from this date.


4. Other Expenses


+------------------------------+-----------------------+-----------------------+
|                              |Year to 31 October 2009|   Period to 31 October|
|                              |                       |                   2008|
+------------------------------+-----------------------+-----------------------+
|                              |                  £'000|                  £'000|
+------------------------------+-----------------------+-----------------------+
|Accounting and administration |                     46|                       |
|services                      |                       |                     32|
+------------------------------+-----------------------+-----------------------+
|Directors' remuneration       |                     33|                     28|
+------------------------------+-----------------------+-----------------------+
|Fees payable to the Company's |                       |                       |
|auditor for the audit of the  |                      9|                       |
|financial statements          |                       |                      8|
+------------------------------+-----------------------+-----------------------+
|Fees payable to the Company's |                       |                       |
|auditor for other services -  |                      2|                       |
|tax compliance                |                       |                      2|
+------------------------------+-----------------------+-----------------------+
|Legal and professional        |                      1|                       |
|expenses                      |                       |                     38|
+------------------------------+-----------------------+-----------------------+
|Trail commission              |                     78|                     46|
+------------------------------+-----------------------+-----------------------+
|Other expenses                |                     54|                     23|
+------------------------------+-----------------------+-----------------------+
|                              |                    223|                    177|
+------------------------------+-----------------------+-----------------------+


Total  annual  running  costs  are  capped  at  3.2% of  net  assets  (excluding
irrecoverable VAT). For the year to 31 October 2009 the running costs were 2.7%
(2008: 2.1%) of net assets.


5. Directors' Remuneration

+-----------------------+-----------------------+-------------------------+
|                       |Year to 31 October 2009|Period to 31 October 2008|
+-----------------------+-----------------------+-------------------------+
|                       |                       |                    £'000|
+-----------------------+-----------------------+-------------------------+
|Directors' emoluments  |                       |                         |
+-----------------------+-----------------------+-------------------------+
|John Hustler (Chairman)|                     15|                       13|
+-----------------------+-----------------------+-------------------------+
|Mark Falkner           |                     10|                        8|
+-----------------------+-----------------------+-------------------------+
|Matt Cooper            |                      8|                        7|
+-----------------------+-----------------------+-------------------------+
|                       |                     33|                       28|
+-----------------------+-----------------------+-------------------------+


None of the Directors received any other remuneration 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 three (2008: three).


6. Tax on Ordinary Activities

The corporation tax charge for the period was £nil (2008: £nill)


Factors affecting the tax charge for the current year:

The current tax charge for the period differs from the standard rate of
corporation tax in the UK of 28% (2008: 29%).


The differences are explained below.


+-------------------------------+-----------------------+----------------------+
|Current tax reconciliation:    |Year to 31 October 2009|  Period to 31 October|
|                               |                       |                  2008|
+-------------------------------+-----------------------+----------------------+
|                               |                  £'000|                 £'000|
+-------------------------------+-----------------------+----------------------+
|Return  on  ordinary activities|                  1,133|                 (722)|
|before tax                     |                       |                      |
+-------------------------------+-----------------------+----------------------+
|Current tax at 28% (2008: 29%) |                    318|                 (209)|
+-------------------------------+-----------------------+----------------------+
|Income   not  taxable  for  tax|                  (366)|                     -|
|purposes                       |                       |                      |
+-------------------------------+-----------------------+----------------------+
|Expenses not deductible for tax|                      -|                   188|
|purposes                       |                       |                      |
+-------------------------------+-----------------------+----------------------+
|Unrelieved tax losses          |                     48|                    21|
+-------------------------------+-----------------------+----------------------+
|Total current tax charge       |                      -|                     -|
+-------------------------------+-----------------------+----------------------+


Excess management charges of £241,000 (2008: £69,000) have been carried forward
at 31 October 2009 and are available for offset against future taxable income
subject to agreement with HMRC. The company has not recognised the deferred tax
asset of £67,000 (2008: £19,000) in respect of these excess management charges.


Approved VCTs are exempt from tax on capital gains within the Company. Since the
Directors intend that the Company will continue to conduct its affairs so as to
maintain its approval as a VCT, no current deferred tax has been provided in
respect of any capital gains or losses arising on the revaluation or disposal of
investments.


7. Dividends


+------------------------------+-----------------------+-----------------------+
|                              |Year to 31 October 2009|   Period to 31 October|
|                              |                       |                   2008|
+------------------------------+-----------------------+-----------------------+
|                              |                  £'000|                  £'000|
+------------------------------+-----------------------+-----------------------+
|Recognised as distributions in|                       |                       |
|the financial statements for  |                       |                       |
|the period                    |                       |                       |
+------------------------------+-----------------------+-----------------------+
|Previous year's final dividend|                     78|                      -|
+------------------------------+-----------------------+-----------------------+
|Current period's interim      |                     77|                      -|
|dividend                      |                       |                       |
+------------------------------+-----------------------+-----------------------+
|                              |                    155|                      -|
+------------------------------+-----------------------+-----------------------+
|Paid and proposed in respect  |                       |                       |
|of the period                 |                       |                       |
+------------------------------+-----------------------+-----------------------+
|Interim dividend paid - 0.5p  |                       |                       |
|per share (2008: 0.0p per     |                     78|                      -|
|share)                        |                       |                       |
+------------------------------+-----------------------+-----------------------+
|Proposed final dividend -     |                       |                       |
|0.5p per share (2008: 0.5p per|                     78|                     78|
|share)                        |                       |                       |
+------------------------------+-----------------------+-----------------------+
|                              |                    156|                     78|
+------------------------------+-----------------------+-----------------------+



The final dividend of 0.5p per share for the year ended 31 October 2009, subject
to shareholder approval at the Annual General Meeting, will be paid on 23 April
2010 to those shareholders on the register on 5 March 2010.


8. Earnings per Share

The total earnings per share is based on 15,616,881 (31 October
2008: 9,832,696) shares, being the weighted average number of shares in issue
during the year, and a return for the year totalling £1,134,000 (31 October
2008: £(722,000)).


The revenue and capital earnings per share are based on 15,616,881 (31 October
2008: 9,382,696) shares, being the weighted average number of shares in issue
during the year, and a revenue return for the year totalling £142,000 (31
October 2008: £94,000) and a capital return for the year totalling £992,000 (31
October 2008: £(816,000)).


There are no potentially dilutive capital instruments in issue and, therefore no
diluted returns per share figures are relevant. The basic and diluted earnings
per share are therefore identical.


9. Net Asset Value per Share

The calculation of NAV per share as at 31 October 2009 is based on 15,616,881
(31 October 2008: 15,616,881) Ordinary shares in issue at that date.


10. Fixed Asset Investments

+-------------------------------------+-------+-------+
|                                     | £'000 | £'000 |
+-------------------------------------+-------+-------+
| Valuation and net book amount:      |       |       |
+-------------------------------------+-------+-------+
| Book cost as 1 November 2008        | 2,052 |       |
+-------------------------------------+-------+-------+
| Cumulative revaluation              | (215) |       |
+-------------------------------------+-------+-------+
| Valuation at 1 November 2008        |       | 1,837 |
+-------------------------------------+-------+-------+
| Movement in the year:               |       |       |
+-------------------------------------+-------+-------+
| Purchases at cost                   | 3,054 |       |
+-------------------------------------+-------+-------+
| Disposal                            |     - |       |
+-------------------------------------+-------+-------+
| Loss on realisation of investments  | (315) |       |
+-------------------------------------+-------+-------+
| Revaluation in year                 | (206) |       |
+-------------------------------------+-------+-------+
| Valuation at 31 October 2009        |       | 4,370 |
+-------------------------------------+-------+-------+
| Book cost at 31 October 2009:       |       |       |
+-------------------------------------+-------+-------+
| - Ordinary shares                   | 3,641 |       |
+-------------------------------------+-------+-------+
| - Loan notes/other securities       | 1,140 |       |
+-------------------------------------+-------+-------+
+-------------------------------------+-------+-------+
| Revaluation to 31 October 2009:     |       |       |
+-------------------------------------+-------+-------+
| - Ordinary shares                   | (259) |       |
+-------------------------------------+-------+-------+
| - Loan notes/other securities       | (152) |       |
+-------------------------------------+-------+-------+
| Valuation at 31 October 2009        |       | 4,370 |
+-------------------------------------+-------+-------+


Further details of the fixed asset investments held by the Company are shown
within the Investment Manager's Review on pages 8 to 17.


All investments are designated as fair value through profit or loss at the time
of acquisition, and all capital gains or losses on investments so designated.
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.


When the Company revalues the investments still held during the period, any
gains or losses arising are credited / charged to the Capital reserve - holding
gains/(losses).


When an investment is sold any balance held on the Capital reserve - holding
gains/(losses) is transferred to the Capital reserve - gains/(losses) on
disposal as a movement in reserves.


At 31 October 2009 there were no commitments in respect of investments approved
by the Manager but not yet completed.


11. Debtors

+--------------------------------+-----------------+-----------------+
|                                | 31 October 2009 | 31 October 2008 |
+--------------------------------+-----------------+-----------------+
|                                |           £'000 |           £'000 |
+--------------------------------+-----------------+-----------------+
| Prepayments and accrued income |              96 |             162 |
+--------------------------------+-----------------+-----------------+


12. Current Asset Investments

Current asset investments at 31 October 2009 comprised bonds, money market funds
and OEICs.

+------------------------------------------------------+---------+---------+
|                                                      |   £'000 |   £'000 |
+------------------------------------------------------+---------+---------+
| Valuation and net book amount:                       |         |         |
+------------------------------------------------------+---------+---------+
| Book cost as 1 November 2008                         |         |         |
+------------------------------------------------------+---------+---------+
| - Bonds                                              |   5,442 |         |
+------------------------------------------------------+---------+---------+
| - Money Market Funds                                 |   3,116 |         |
+------------------------------------------------------+---------+---------+
| - OEICs                                              |   3,542 |         |
+------------------------------------------------------+---------+---------+
|                                                      |         |  12,100 |
+------------------------------------------------------+---------+---------+
| Revaluation as at 1 November 2008                    |         |         |
+------------------------------------------------------+---------+---------+
| - Bonds                                              |   (232) |         |
+------------------------------------------------------+---------+---------+
| - Money Market Funds                                 |    (96) |         |
+------------------------------------------------------+---------+---------+
| - OEICs                                              |   (109) |         |
+------------------------------------------------------+---------+---------+
|                                                      |         |   (437) |
+------------------------------------------------------+---------+---------+
| Valuation as at 31 October 2009                      |         |  11,663 |
+------------------------------------------------------+---------+---------+
| Purchase at cost:                                    |         |         |
+------------------------------------------------------+---------+---------+
| - Bonds                                              |       - |         |
+------------------------------------------------------+---------+---------+
| - Money Market Funds                                 |   2,146 |         |
+------------------------------------------------------+---------+---------+
| - OEICs                                              |       - |         |
+------------------------------------------------------+---------+---------+
|                                                      |         |   2,146 |
+------------------------------------------------------+---------+---------+
| Disposal proceeds                                    |         |         |
+------------------------------------------------------+---------+---------+
| - Bonds                                              | (1,512) |         |
+------------------------------------------------------+---------+---------+
| - Money Market Funds                                 | (3,949) |         |
+------------------------------------------------------+---------+---------+
| - OEICs                                              |       - |         |
+------------------------------------------------------+---------+---------+
|                                                      |         | (5,461) |
+------------------------------------------------------+---------+---------+
| Profit/(loss) in year on realisation of investments: |         |         |
+------------------------------------------------------+---------+---------+
| - Bonds                                              |      86 |         |
+------------------------------------------------------+---------+---------+
| - Money Market Funds                                 |    (41) |         |
+------------------------------------------------------+---------+---------+
| - OEICs                                              |       - |         |
+------------------------------------------------------+---------+---------+
|                                                      |         |      45 |
+------------------------------------------------------+---------+---------+
| Revaluation in the year                              |         |         |
+------------------------------------------------------+---------+---------+
| - Bonds                                              |     298 |         |
+------------------------------------------------------+---------+---------+
| - Money Market Funds                                 |    (51) |         |
+------------------------------------------------------+---------+---------+
| - OEICs                                              |   1,429 |         |
+------------------------------------------------------+---------+---------+
|                                                      |         |   1,676 |
+------------------------------------------------------+---------+---------+
| Valuation as at 31 October 2009                      |         |  10,069 |
+------------------------------------------------------+---------+---------+
| Book cost as 31 October 2009                         |         |         |
+------------------------------------------------------+---------+---------+
| - Bonds                                              |   3,930 |         |
+------------------------------------------------------+---------+---------+
| - Money Market Funds                                 |   1,120 |         |
+------------------------------------------------------+---------+---------+
| - OEICs                                              |   3,542 |         |
+------------------------------------------------------+---------+---------+
|                                                      |         |   8,592 |
+------------------------------------------------------+---------+---------+
| Revaluation as at 31 October 2009                    |         |         |
+------------------------------------------------------+---------+---------+
| - Bonds                                              |     153 |         |
+------------------------------------------------------+---------+---------+
| - Money Market Funds                                 |       4 |         |
+------------------------------------------------------+---------+---------+
| - OEICs                                              |   1,320 |         |
+------------------------------------------------------+---------+---------+
|                                                      |         |   1,477 |
+------------------------------------------------------+---------+---------+
| Valuation as at 31 October 2009                      |         |  10,069 |
+------------------------------------------------------+---------+---------+


13. Creditors: Amounts Falling Due Within One Year

+-----------------+++-----------------+-----------------+
|                 ||| 31 October 2009 | 31 October 2008 |
+-----------------+++-----------------+-----------------+
|                 |||           £'000 |           £'000 |
+-----------------+++-----------------+-----------------+
| Accruals        |||              94 |              79 |
+-----------------+++-----------------+-----------------+
| Other creditors |||               - |               8 |
+-----------------+++-----------------+-----------------+
|                 |||              94 |              87 |
+-----------------+++-----------------+-----------------+


14. Share Capital

+------------------------------------++-----------------+-----------------+
|                                    || 31 October 2009 | 31 October 2008 |
+------------------------------------++-----------------+-----------------+
|                                    ||           £'000 |           £'000 |
+------------------------------------++-----------------+-----------------+
| Authorised:                        ||                 |                 |
+------------------------------------++-----------------+-----------------+
| 50,000,000 Ordinary shares of 10p  ||           5,000 |           5,000 |
+------------------------------------++-----------------+-----------------+
| Allotted and fully paid up:        ||                 |                 |
+------------------------------------++-----------------+-----------------+
| 15,616,881 Ordinary shares of 10p  ||           1,562 |           1,562 |
+------------------------------------++-----------------+-----------------+


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.
The Company is not subject to any externally imposed capital requirements.


15. Reserves

+------------+--------+-------------+--------------+--------------+-------+------+
|            |        |      Special|       Capital|       Capital|       |      |
|            |   Share|distributable|       reserve|       reserve|Revenue| Total|
|            |Premium |      reserve|gains/(losses)|       holding|reserve|      |
|            |        |             |   on disposal|gains/(losses)|       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|            |   £'000|        £'000|         £'000|         £'000|  £'000| £'000|
+------------+--------+-------------+--------------+--------------+-------+------+
|As at 1     |        |             |              |              |       |      |
|November    |  13,196|            -|         (164)|         (652)|     94|12,474|
|2008        |        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|Return for  |       -|            -|             -|             -|    141|   141|
|the year    |        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|Management  |        |             |              |              |       |      |
|fees        |        |             |              |              |       |      |
|allocated as|       -|            -|         (208)|             -|      -| (208)|
|capital     |        |             |              |              |       |      |
|expenditure |        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|Share       |        |             |              |              |       |      |
|premium     |(13,196)|       13,196|              |             -|       |      |
|account     |        |             |              |              |       |      |
|cancelled   |        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|Current     |        |             |              |              |       |      |
|period      |       -|            -|         (270)|             -|      -| (270)|
|gains/losses|        |             |              |              |       |      |
|on disposal |        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|Prior period|        |             |              |              |       |      |
|holding     |        |             |              |              |       |      |
|gains/losses|       -|            -|          (10)|            10|      -|     -|
|now         |        |             |              |              |       |      |
|crystallised|        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|Current     |        |             |              |              |       |      |
|period      |        |             |              |              |       |      |
|gains/losses|       -|            -|           245|         1,225|      -| 1,470|
|on fair     |        |             |              |              |       |      |
|value of    |        |             |              |              |       |      |
|investments |        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|Dividends   |       -|            -|             -|             -|  (155)| (155)|
|paid        |        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+
|Balance as  |        |             |              |              |       |      |
|at 31       |       -|       13,196|         (407)|           583|     80|13,452|
|October 2009|        |             |              |              |       |      |
+------------+--------+-------------+--------------+--------------+-------+------+


When the Company revalues its investments during the period, any gains or losses
arising are credited/ charged to the income statement. Changes in fair value of
investments held are then transferred to the capital reserve - holding
gains/(losses). When an investment is sold any balance held on the capital
reserve - holding gains/(losses) reserve is transferred to the capital reserve -
gains/(losses) on disposal as a movement in reserves.



Following the company's petition which was heard on 19 August 2009, the
Companies Court ordered that the special resolution passed by the shareholders
on 17 October 2007 to effect the cancellation of the share premium account be
confirmed. The Order relating to the same was duly registered by the Registrar
of Companies on 20 August 2009. The purpose of the cancellation was to create a
reserve which will be capable of being used by the Company for the purpose of
making repurchases of its own shares in the market with a view to narrowing the
discount at which the Company's Ordinary shares trade to net asset value. This
reserve can also be used to pay capital dividends.


16. Financial Instruments and Risk Management


The Company's financial instruments comprise equity and fixed interest
investments, cash balances and liquid resources including debtors and creditors.
The Company holds financial assets in accordance with its investment policy of
investing mainly in a portfolio of VCT-qualifying unquoted securities whilst
holding a proportion of its assets in cash or near-cash investments in order to
provide a reserve of liquidity.


Fixed asset investments (see note 10) are valued at fair value. Unquoted
investments are carried at fair value as determined by the Directors in
accordance with current venture capital industry guidelines. 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 are held at the year end is equal to their book value.


In carrying on its investment activities, the Company is exposed to various
types of risk associated with the financial instruments and markets in which it
invests. The most significant types of financial risk facing the Company are
price risk, interest rate risk, credit risk and liquidity risk. The Company's
approach to managing these risks is set out below together with a description of
the nature and amount of the financial instruments held at the balance sheet
date.


Market risk

The Company's strategy for managing investment risk is determined with regard to
the Company's investment objective, as outlined on page 20. The management of
market risk is part of the investment management process and is a central
feature of venture capital investment. The Company's portfolio is managed with
regard to the possible effects of adverse price movements and with the objective
of maximising overall returns to shareholders. Investments in unquoted
companies, by their nature, usually involve a higher degree of risk than
investments in 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 page 8 to 17. An analysis of investments between debt and equity
instruments is given in note 10.


29.2% (2008: 13.1%) by value of the Company's net assets comprises investments
in unquoted companies held at fair value. The valuation methods used by the
Company include the application of a price/earnings ratio derived from listed
companies with similar characteristics, and consequently the value of the
unquoted element of the portfolio can be indirectly affected by price movements
on the London Stock Exchange. A 10% overall increase in the valuation of the
unquoted investments at 31 October 2009 would have increased net assets and the
total return for the year by £437,000 (2008: £183,700) an equivalent change in
the opposite direction would have reduced net assets and the total return for
the year by the same amount.


67.3% (2008: 83.1%) by value of the Company's net assets comprises of OEICs and
Money Market Securities held at fair value. A 10% overall increase in the
valuation of the OEICs and Money Market Securities at 31 October 2009 would have
increased net assets and the total return for the year by £1,007,000 (2008:
£1,166,000) an equivalent change in the opposite direction would have reduced
net assets and the total return for the year by the same amount.


Interest rate risk

Some of the Company's financial assets are interest-bearing, of which some are
at fixed rates and some variable. As a result, the Company is exposed to fair
value interest rate risk due to fluctuations in the prevailing levels of market
interest rates.


Fixed rate

The table below summarises weighted average effective interest rates for the
fixed interest-bearing financial instruments:

+----------------+------------------------------+------------------------------+
|                |    As at 31 October 2009     |    As at 31 October 2009     |
+----------------+----------+---------+---------+----------+---------+---------+
|                |     Total|         | Weighted|     Total|         | Weighted|
|                |fixed rate| Weighted|  average|fixed rate| Weighted|  average|
|                |          | average | time for|          | average | time for|
|                | portfolio|         |    which| portfolio|         |    which|
|                |  by value| interest|  rate is|  by value| interest|  rate is|
|                |     £'000|   rate %| fixed in|     £'000|   rate %| fixed in|
|                |          |         |    years|          |         |    years|
+----------------+----------+---------+---------+----------+---------+---------+
+----------------+----------+---------+---------+----------+---------+---------+
|Listed          |          |         |         |          |         |         |
|fixed-interest  |     2,483|    4.90%|     0.6 |     3,680|    4.85%|     1.2 |
|investments     |          |         |         |          |         |         |
+----------------+----------+---------+---------+----------+---------+---------+
|Fixed-rate      |          |         |         |          |         |         |
|investments in  |       987|    10.6%|      3.5|       160|   10.00%|      5.0|
|unquoted        |          |         |         |          |         |         |
|companies       |          |         |         |          |         |         |
+----------------+----------+---------+---------+----------+---------+---------+
|                |     3,470|         |         |     3,840|         |         |
+----------------+----------+---------+---------+----------+---------+---------+


Due to the relatively short period to maturity of the fixed rate investments
held within the portfolio, it is considered that an increase or decrease of 1%
in interest rates as at the reporting date would not have had a significant
effect on the Company's net assets or total return for the period.


Floating rate

The Company's floating rate investments comprise cash held on interest-bearing
deposit accounts, libor rate on one loan note and, where appropriate, within
interest bearing money market securities. The benchmark rate which determines
the rate of interest receivable on such investments is the bank base rate, which
was 0.5% at 31 October 2009. The amounts held in floating rate investments at
the balance sheet date were as follows:


+---------------------------------------------+---------------++---------------+
|                                             |31 October 2009||31 October 2008|
|                                             |               ||               |
|                                             |           £000||           £000|
+---------------------------------------------+---------------++---------------+
+---------------------------------------------+---------------++---------------+
|Floating rate notes                          |          1,599||          1,529|
+---------------------------------------------+---------------++---------------+
|Floating-rate investments in unquoted        |               ||               |
|companies                                    |            315||              -|
+---------------------------------------------+---------------++---------------+
|Cash on deposit & money market funds         |          2,234||          3,481|
+---------------------------------------------+---------------++---------------+
|                                             |          4,148||          5,010|
+---------------------------------------------+---------------++---------------+


A 1% increase in the base rate would increase income receivable from these
investments and the total return for the period by £41,000.


Credit risk

There were no significant concentrations of credit risk to counterparties at 31
October 2009. By cost, no individual investment exceeded 10.9% (2008: 11.2%) of
the Company's net assets at 31 October 2009.


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. The carrying values of financial assets represent the maximum
credit risk exposure at the balance sheet date.


At 31 October 2009 the Company's financial assets exposed to credit risk
comprised the following:


+--------------------------------------------+---------------++---------------+
|                                            |31 October 2009||31 October 2009|
|                                            |               ||               |
|                                            |           £000||           £000|
+--------------------------------------------+---------------++---------------+
+--------------------------------------------+---------------++---------------+
|Investments in fixed interest instruments   |          2,483||          3,680|
+--------------------------------------------+---------------++---------------+
|Investments in floating rate instruments    |          1,599||          1,529|
+--------------------------------------------+---------------++---------------+
|Cash on deposit & money market funds        |          2,229||          3,481|
+--------------------------------------------+---------------++---------------+
|Fixed rate investments in unquoted companies|            987||            160|
+--------------------------------------------+---------------++---------------+
|Accrued dividends and interest receivable   |             89||            157|
+--------------------------------------------+---------------++---------------+
|                                            |          7,392||          9,007|
+--------------------------------------------+---------------++---------------+


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 preference 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 custodians (Goldman Sachs
International in the case of listed money market securities and Charles Stanley
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.


Credit risk arising on the sale of investments is considered to be small due to
the short settlement and the contracted agreements in place with the settlement
lawyers.


The Company's interest-bearing deposit and current accounts are maintained with
Goldman Sachs International and HSBC PLC.


Liquidity risk

The Company's financial assets include investments in unquoted equity securities
which are not traded on a recognised stock exchange and which generally may be
illiquid. They also include investments in AIM-quoted companies, which, by their
nature, involve a higher degree of risk than investments on the main market. 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 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 31 October 2009
these investments were valued at £10,600,000.


17. Post Balance Sheet Events

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

  * 8 January 2010: £499,998 investment into Calastone

  * 9 January 2010: A previous £201,440 non-qualifying investment in Zoopla
    became a qualifying investment.


18. Contingencies, Guarantees and Financial Commitments

Provided that the intermediary continues to act for the client and the client
continues to be the beneficial owner of the shares, intermediaries will be paid
an annual trail commission of 0.5% of the initial net asset value.


There were no other contingencies, guarantees or financial commitments as at 31
October 2009.


19. Related Party Transactions

Octopus Titan VCT 2 plc has employed Octopus Investments Limited since 20
October 2009 as the Investment Manager, prior to this, the agreement was held
with Octopus Ventures Limited. Matt Cooper, a non executive Director of Octopus
Titan VCT 2 plc, is also Chairman of Octopus Investments. Octopus Titan VCT 2
plc has paid Octopus £281,000 (2008: £180,000) in the year as a management fee
and there is £nil outstanding at the balance sheet date. The management fee is
payable quarterly in advance and is based on 2.0% of the net asset value
calculated at annual intervals as at 31 October.


Octopus Investments Limited provides accounting, administrative and company
secretarial services to the Company, payable quarterly in advance for a fee of
0.3% of the net asset value calculated at annual intervals as at 31 October.
During the year £46,000 (2008: £32,000) was paid to Octopus Investments Limited
and there is £nil outstanding at the balance sheet date, for the accounting and
administrative services.


In addition, Octopus is entitled to performance related incentive fees. The
incentive fees are designed to ensure that there are significant tax-free
dividend payments made to Shareholders as well as strong performance in terms of
capital and income growth, before any performance related incentive fee payment
is made. Therefore, only if by the end of a financial year (commencing no
earlier than close of the 2011 financial year), declared distributions per Share
have reached 40p in aggregate and if the Performance Value at that date exceeds
130p per Share, a performance incentive fee equal to 20% of the excess of such
Performance Value over 100p per Share will be payable to Octopus.


If, on a subsequent financial year end, the Performance Value of Octopus Titan
VCT 2 plc falls short of the Performance Value on the previous financial year
end, no incentive fee will arise. If, on a subsequent financial year end, the
performance exceeds the previous best Performance Value of Octopus Titan VCT 2
plc, the Investment Manager will be entitled to 20% of such excess in aggregate.


For further information please contact:


Celia Whitten, Company Secretary

020 7710 2849




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