Annual
Report
for the year ended
31 December 2016
British Smaller Companies VCT2 plc
Transforming small businesses bscfunds.com ABOUT US
Investment Adviser British Smaller Companies VCT2 plc (“the Company”) is advised by YFM Private Equity Limited 
(“the Investment Adviser”) which is a wholly owned subsidiary of YFM Equity Partners LLP and is
authorised and regulated by the Financial Conduct Authority. 
Investment Policy The investment strategy of the Company is to create a portfolio with a mix of companies operating in
traditional industries and those that offer opportunities in the development and application of
innovation.The Company invests in UK businesses across a broad range of sectors including Software,
IT & Telecommunications, Business Services, Manufacturing & Industrial Services, Retail & Brands
and Healthcare and these investments will primarily be in unquoted companies. Investments will be
made with regard to the VCT regulations so as to maintain the Company’s venture capital trust status.
Wherever possible the Company invests in a combination of equities, preference shares and loan stock
to enhance the security of the portfolio. Further details of the Company’s investment policy can be
found in the Strategic Report on page 10.
Dividend Policy Your Board remains committed to achieving a consistent dividend but this depends upon the level of
investment income and realisations that the Company is able to make or achieve in any one period
and cannot be guaranteed.The tax reliefs that are available for an investment in a VCT are of
particular benefit for qualifying shareholders as there is no income tax payable on the dividend
received, or need to declare them in a tax return. 
Share Buy-Backs Share buy-backs enable shareholders to obtain some liquidity in an otherwise illiquid market when
there is a need to dispose of shares. This policy is kept under active review to ensure that any
decisions taken are in the interests of shareholders as a whole. The current rate of discount at which
ordinary shares will be bought back is targeted to be no more than five per cent of the latest reported
net asset value.
Dividend Re-Investment The Company operates a DRIS which gives shareholders the opportunity to re-invest any cash
Scheme (“DRIS”) dividends. Currently dividends are re-invested at a 5 per cent discount to the latest reported net asset
value as adjusted for the relevant dividend in question if this has not already been recognised. Any
dividends that are re-invested by qualifying shareholders are eligible for income tax relief at 30 per
cent of the amount invested subject to an annual investment limit of £200,000. The Finance Act 2014
confirmed that shares acquired at any time under dividend re-investment schemes will not impact
tax relief on sales of or subscriptions for VCT shares, unless in the latter case it results in a breach 
of the £200,000 investment limit.
British Smaller Companies VCT2 plc was formed in 2000 and invests in a
combination of mature businesses operating in traditional industries and
emerging businesses offering opportunities in the application and 
development of innovation. 
A diverse existing portfolio of 41 active investments reduces the exposure 
to particular markets and individual companies. To date British Smaller
Companies VCT2 plc has in total realised 39 investments generating total
proceeds of £25.7 million. The current investment portfolio has an audited
valuation of £39.3 million as at 31 December 2016. 
ABOUT US
BRITISH SMALLER COMPANIES VCT2 PLC
2 Annual Report and Accounts for the year ended 31 December 2016
3
Financial Overview
Financial Highlights 4
Financial Calendar 5
Five Year Summary 5
Strategic Report
Chairman’s Statement 7
Objectives and Key Policies 10
Processes and Operations 11
Key Performance Indicators 12
Investment Performance 15
Investment Review 16
Investment Portfolio Summary at 31 December 2016 19
Disposal History to 31 December 2016 20
Summary of Investment Portfolio Movement since 31 December 2015 21
Investee Company Information 22
Risk Factors 29
Other Matters 31
Corporate Governance
Directors 32
Directors’ Report 33
Corporate Governance 36
Directors’ Remuneration Report 42
Directors’ Responsibilities Statement 45
Auditor’s Report
Independent Auditor’s Report 46
Financial Statements
Statement of Comprehensive Income 50
Balance Sheet 51
Statement of Changes in Equity 52
Statement of Cash Flows 54
Notes to the Financial Statements 55
Annual General Meeting
Notice of the Annual General Meeting 76
Form of Proxy 81
Advisers to the Company
Company Advisers 83
CONTENTS BRITISH SMALLER COMPANIES VCT2 PLC
4
Total Return increased by 2.1 per cent over opening net 
asset value
Since 31 December 2015 your Company’s total return has increased by 1.3 pence, from 
110.9 pence per ordinary share to 112.2 pence per ordinary share, which includes 
cumulative dividends paid of 52.5 pence per ordinary share.
Investment Growth
The underlying growth in the investment portfolio was £1.04 million, which represents 
an increase of 2.8 per cent. 
Dividends for the Year
Total dividends paid during the year ended 31 December 2016 were 4.5 pence per ordinary
share, which equates to 7.2 per cent of the opening 31 December 2015 net asset value per
share. This comprises a final dividend relating to the year to 31 December 2015 of 2.5 pence
and an interim dividend for the year to 31 December 2016 of 2.0 pence per ordinary share.
New investments
Four new investments amounting to £4.3 million were made in the year.
Fundraising
Offer for subscription fully subscribed and closed within 15 days of launch, 
raising net proceeds of £3.5 million.
112.2
pence
4.5
pence
£4.3
million
£3.5
million
2.8%
FINANCIAL HIGHLIGHTS Financial Overview
Annual Report and Accounts for the year ended 31 December 2016
5
FINANCIAL CALENDAR
Results Announced 21 March 2017
Ex-dividend Date 30 March 2017
Record Date 31 March 2017
DRIS Election Date 18 April 2017
Annual General Meeting 10 May 2017
Dividend Paid 12 May 2017
FIVE YEAR SUMMARY
Year ended Year ended Year ended Year ended Year ended
31 December 31December 31December 31December 31December
2016 2015 2014 2013 2012
Income £’000 1,937 1,953 1,272 689 594
Profit before and after taxation £’000 1,412 4,132 1,157 2,131 852
Profit per ordinary share 1.51p 4.96p 2.00p 4.73p 2.39p
Dividends per ordinary share paid in the year 4.5p 4.5p 4.5p 4.5p 4.5p
Cumulative dividends paid per ordinary share 52.5p 48.0p 43.5p 39.0p 34.5p
Net assets attributable to ordinary shares £’000 56,109 54,850 39,333 30,458 27,152
Net asset value per ordinary share 59.7p 62.9p 62.9p 65.6p 65.5p
Total Return per ordinary share 112.2p 110.9p 106.4p 104.6p 100.0p
Increase in Total Return per ordinary share 1.3p 4.5p 1.8p 4.6p 1.5p
Cumulative 5 year increase in Total Return 
per ordinary share 13.7p BRITISH SMALLER COMPANIES VCT2 PLC
6
STRATEGIC REPORT
The Company is pleased to present its Strategic Report 
for the year ended 31 December 2016. The purpose of 
this report is to inform shareholders and help them to
assess how the Directors have performed in their duty 
to promote the success of the Company. This Report 
has been prepared by the Directors in accordance 
with section 414 of the Companies Act 2006. Pence per 
ordinary share £000
NAV at 31 December 2015 62.9 54,850
Net underlying increase in portfolio 1.1 1,043
Net income after expenses 0.4 369
Issue/buy-back of new shares (0.2) 4,038
1.3 5,450
Dividends paid (4.5) (4,191)
(3.2) 1,259
NAV at 31 December 2016 59.7 56,109
Cumulative dividends paid 52.5
Total Return:     at 31 December 2016 112.2
                             at 31 December 2015 110.9
Financial Results
In the year to 31 December 2016 your
Company’s total return increased by 1.3
pence per ordinary share to 112.2 pence
per ordinary share, driven mainly by the
underlying value growth in the investment
portfolio. This equates to an increase of
2.1 per cent on the opening net asset value
at 31 December 2015. 
During the year your Company has paid
total dividends of 4.5 pence per ordinary
share, bringing the total cumulative
dividends paid since inception to 52.5
pence per ordinary share.  The net asset
value at 31 December 2016 is 59.7 pence
per share as summarised in the table
below: 
Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
7
The charts on page 12 of these financial
statements show in greater detail the
movement in total return, net asset value
and dividends paid over time.
The investments held at 31 December
2015, amounting to £36.65 million, have
over the year increased by £1.04 million to
£37.69 million at 31 December 2016.  This
return comprises a gain over the opening
value from the realisation of investments
and deferred proceeds of £0.34 million,
and a gain on the revaluation of the
portfolio of £0.70 million.  There were
strong performances from ACC Aviation,
Business Collaborator Limited, GTK
(Holdco) Limited and Mangar Health
Limited, which in part were offset by the
poorer performances of Ness (Holdings)
Limited, Cambrian Lodges Holdings
Limited, Seven Technologies Holdings
Limited and Intamac Systems Limited. 
Shareholder Relations
Dividends
The Board remains committed to
achieving the objective of a consistent
dividend stream over time.  Dividends paid
in the year comprise a final dividend of 2.5
pence per ordinary share in respect of the
year ended 31 December 2015, and an
interim dividend of 2.0 pence per ordinary
share in respect of the financial year just
ended, totalling 4.5 pence per ordinary
share.  This brings the cumulative
dividends paid to 52.5 pence per ordinary
share. 
Following the modifications to the VCT
rules there has been a change in the
nature of  new investments with a
requirement to invest in earlier stage
businesses which generally require a
higher proportion of equity investment
CHAIRMAN’S STATEMENT
Total shareholder return for the year was
1.3 pence per ordinary share, which was
2.1 per cent of the net asset value at 31
December 2015 and your Company’s
portfolio generated a return of 1.5 pence
per ordinary share, which was  2.8 per
cent over its opening value.
The impact of the new VCT rules on the
investment rate over the past two years
has been quite marked.  Investments in
new unquoted trading companies totalled
£4.3 million in 2016 and £3.0 million in
2015, compared to £12.3 million in 2014,
the last year under the previous rules.
In light of this it is pleasing that there was
an increase in the investment rate
following HMRC’s issuance of its revised
guidance on the new VCT rules in May
2016, with 75 per cent of the year’s
investments being completed in the final
quarter of the year.  There remains a good
pipeline of potential investments which
your Board is looking to convert to add to
the portfolio during 2017. BRITISH SMALLER COMPANIES VCT2 PLC
8
than in the past. As the existing portfolio
matures it is anticipated that the resultant
future dividend stream and net asset value
could as a consequence become more
volatile than in the past.
With this in mind and to maintain a
sustainable level of future dividends the
Board is proposing a final dividend of 1.5
pence per share for the year ended 31
December 2016.  This final dividend is
subject to approval by the shareholders at
the forthcoming Annual General Meeting
and if approved will then be paid on 12
May 2017 to shareholders on the register
at 31 March 2017.  The ex-dividend date is
30 March 2017.
Dividend Re-investment Scheme
(“DRIS”)
Your Company operates a DRIS, which
gives shareholders the opportunity to re-
invest any cash dividends and is open to all
shareholders, including those who
invested under the recent offers.  For the
financial year ending 31 December 2016
dividends totalling £0.8 million were
invested in your Company by way of the
DRIS.
Fundraising
During the first half of the financial year
your Company raised net proceeds of £3.5
million through a ”top-up” offer.  Your
Company launched a further top-up
fundraising on 3 January 2017 and it is
pleasing that the offer closed in less than
a week.  The Company allotted 6,787,231
ordinary shares on 10 February 2017
raising net proceeds of £4.1 million and
following this allotment there were
100,761,545 ordinary shares in issue.
Shareholder relations
As part of the Board’s continuing dialogue
with shareholders, the 21st shareholder
workshop was held in conjunction with
British Smaller Companies VCT plc at the
British Library on 17 May 2016, with over
200 attendees. There were presentations
from the managing directors of two of our
newest investments, Ness (Holdings)
Limited and KeTech Enterprises Limited,
David Hall and David Bell from the
Investment Adviser, as well as Wyndham
North of HM Treasury.
Your Company’s electronic communications
policy, whereby documents such as the
annual report are disseminated via the
website www.bscfunds.com rather than by
post, has saved on printing costs as well as
being more environmentally friendly. I am
pleased to report that this policy continues
to be well received, with 84 per cent of
shareholders receiving communications in
this way.
The website www.bscfunds.com is
refreshed on a regular basis, with the
emphasis on providing a comprehensive
level of information in a user friendly
format.
The next Investor Workshop will take place
on 3 May 2017 and is being held at The
Grand Connaught Rooms, 61-65 Great
Queen Street, Covent Garden, London.
10 May
2017
The Annual General Meeting of the Company will be held at 12:00 noon 
on 10 May 2017 at 33 St James Square, London, SW1Y 4JS. Full details of 
the agenda for this meeting are included in the Notice of the Annual General
Meeting on page 76.
Stockbrokers
I am pleased to inform you that your Board
has appointed Panmure Gordon (UK)
Limited as corporate broker with effect
from 1 January 2017.  The Panmure
Gordon team has a wealth of experience
as broker to numerous VCTs and we look
forward to working with them in the
future.  The Board would like to thank
Nplus1 Singer for the work they have done
as the Company’s broker over many years.
Auditors
The Board has carried out a competitive
tender process for the provision of audit
services and, as a result, Grant Thornton
LLP resigned as the Company’s auditor .
The Board has appointed BDO LLP to fill
the casual vacancy and a resolution to
appoint BDO LLP as auditor is included in
the notice of the Company’s Annual
General Meeting to be held on 10 May 2017. Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
9
Outlook
New investments will continue to be made
in earlier stage businesses which have
less ability to finance debt instruments as
they invest for growth. The majority of new
investments are therefore likely to
comprise a significantly higher proportion
of equity.  This is likely to have the impact
of reducing the portfolio’s income stream
with returns more reliant on equity
realisations.
Investment will continue to focus on high
quality businesses with good growth
potential and attractive realisation
prospects.
Richard Last
Chairman
21 March 2017 BRITISH SMALLER COMPANIES VCT2 PLC
10
Co-investment
British Smaller Companies VCT2 plc and
British Smaller Companies VCT plc (“the
VCTs”) have in aggregate first choice of all
investment opportunities meeting the VCT
qualifying criteria that require up to £4.5
million of equity. Amounts above £4.5
million will be allocated one third to YFM’s
institutional co-investment funds and two
thirds to the VCTs. Where there are
opportunities for the VCTs to co-invest
with each other the basis for allocation is
40 per cent to the Company and 60 per
cent to British Smaller Companies VCT
plc. The Board of the Company has
discretion as to whether or not to take up,
or in the circumstances where British
Smaller Companies VCT plc does not take
its allocation, increase its allocation in
such co-investment opportunities.
The replacement capital element of any
investment will be provided by other funds
managed/advised by YFM.
Asset mix
Pending investment in VCT-qualifying
securities, surplus cash is primarily held
in interest bearing instant access, and
short-notice bank accounts. Subsequent
to the Finance (No. 2) Act 2015
investments can no longer be made in
non-qualifying quoted investments traded
on an unregulated exchange. This change
therefore now excludes AIM investments
in this category. 
The Company’s objective is to provide investors with 
an attractive long-term tax free dividend yield whilst
maintaining the Company’s status as a venture
capital trust.
OBJECTIVES AND KEY POLICIES
Investment Policy
The investment strategy of the Company 
is to create a portfolio with a mix of
companies operating in traditional
industries and those that offer
opportunities in the development 
and application of innovation. 
The legislation governing VCTs requires
that at least 70 per cent by value of its
holdings must be in Qualifying Holdings.
The maximum value of any single
investment is 15 per cent at the time 
of investment. 
The Company invests in UK businesses
across a broad range of sectors including,
but not limited to, Software, IT &
Telecommunications, Business Services,
Manufacturing & Industrial Services,
Retail & Brands and Healthcare, in VCT
qualifying and non-qualifying securities. 
The majority of investments in the current
portfolio are in a combination of equities,
preference shares and loan stock. The
investments made under the new VCT
rules consist largely of equity with a
preferred return on realisation. 
Borrowing
The Company funds the investment
programmes out of its own resources 
and has no borrowing facilities for 
this purpose. 
Remuneration Policy
The Company’s policy on the remuneration
of its directors, all of whom being non-
executive directors, can be found on page
42.
Other Key Policies
Details of the Company’s policies on the
payment of dividends, the DRIS and the
buy-back of shares are given on page 2. 
In addition to these the Company’s anti-
bribery and environmental and social
responsibilities policies can be found 
on page 31. Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
11
The Board approves all investment and
divestment decisions save in that new
investments up to £250,000 in companies
whose securities are traded on a regulated
stock exchange and where the decision 
is required urgently, in which case the
Chairman of the Board of Directors, 
if appropriate, may act in consultation 
with the Investment Adviser.
The Board regularly monitors the
performance of the portfolio and the
investment requirements set by the
relevant VCT legislation. Reports are
received from the Investment Adviser
regarding the trading and financial
position of each investee company and
senior members of the Investment
Advisory Team regularly attend the
Company’s Board meetings. Monitoring
reports are also received at each Board
meeting on compliance with VCT
regulations so that the Board can monitor
that the Venture Capital Trust status of the
Company is maintained and take
corrective action if appropriate.
The Board reviews the terms of YFM
Private Equity Limited’s appointment as
Investment Adviser on a regular basis. 
YFM Private Equity Limited has performed
investment advisory, administrative and
secretarial services for the Company since
its inception on 28 November 2000. The
principal terms of the agreement under
which these services are performed are
set out in note 3 to the financial
statements.
Performance Incentive
The Investment Adviser will receive an
amount (satisfied by the issue of shares)
equivalent to 20 per cent of the amount by
which the cumulative dividends per
ordinary share paid as at the last business
day in December in any year, plus the
average of the middle market price per
ordinary share on the five dealing days
prior to that day, exceeds 120 pence per
ordinary share, multiplied by the number
of ordinary shares issued and the ordinary
shares under option (if any) (the “Hurdle”).
Under the terms of the Subscription
Rights Agreement, once the Hurdle has
been exceeded it is reset at that value
going forward, which becomes the new
Hurdle. Any subsequent exercise of these
rights will only occur once the new Hurdle
has been exceeded. The subscription
rights are exercisable in the ratio 95:5
between the Investment Adviser and
Chord Capital Limited. Further details are
given in note 3 to the financial statements.
In the opinion of the directors the
continuing appointment of YFM Private
Equity Limited as Investment Adviser is in
the interests of the shareholders as a
whole in view of its experience in advising
venture capital trusts and in making,
managing and exiting investments of the
kind falling within the Company’s
investment policies.
The Investment Adviser is responsible for the sourcing and
screening of initial enquiries, carrying out suitable due
diligence investigations and making submissions to the
Board regarding potential investments. Once approved,
further due diligence is carried out as necessary and HMRC
clearance is obtained for approval as a Qualifying Holding.
PROCESSES AND OPERATIONS 2016 2007 2008 2009 2010 2011 2012 2013 2014 2015
10.5
89.5
92.9
94.7
94.4
98.5
1 00.0
104.6
106.4
1 10.9
112.2
16.0 22.0 26.0 30.0 34.5 39.0 43.5 48.0 52.5
As at 31 December
79.0 76.9 72.7 68.4 68.5 65.5 65.6 62.9 62.9 59.7
Total Return (pps) Cumulative Dividends (pps) NAV (pps)
2.0 3.5 4.0 4.0 4.0 4.0 4.5 4.5 4.5 4.5
3.5
5.5
6.0
4.0 4.0
4.5 4.5 4.5 4.5 4.5
1.5
2.0
2.0
0.5
Dividends Paid (pps) Special Dividends (pps) Ordinary Dividends (pps)
2016 2007 2008 2009 2010 2011 2012 2013 2014 2015
Year ended 31 December
BRITISH SMALLER COMPANIES VCT2 PLC
12
The commonly used benchmarks of performance for VCTs
are total return, calculated as cumulative dividends paid
plus net asset value, and dividends paid.
KEY PERFORMANCE INDICATORS
Total Return
Dividends Paid 
The evaluation of comparative success of the Company’s total return is by way of reference to the share price total return for approximately
60 generalist VCTs as published by the Association of Investment Companies (“the AIC”). This is the Company’s stated benchmark index. 
A comparison and explanation of the calculation of this return is shown in the Directors’ Remuneration Report on page 44. 
The average dividend paid over the last 5 years was 4.5 pence per ordinary share, equivalent to a 7.5 per cent yield per annum. Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
13
reduction in net asset value as a result of
recurring operational expenses which,
whilst based on historical information,
provides an indication of the likely level of
costs that will be incurred in managing the
fund in the future. 
Expenses
Year to Year to
31 December 2016 31 December 2015
(%) (%)
Ongoing Charges figure 2.51 2.28
Expenses Cap
The total costs incurred by the Company in
the year (excluding any performance
related fees, trail commission payable to
financial intermediaries and VAT) is
capped at 2.9 per cent of the total net
asset value as at the relevant year end.
The treatment of costs in excess of the cap
is described in note 3 on page 60. There
was no breach of the expenses cap in the
current or prior year.
Shareholder Returns
The table below shows the cumulative dividends, the total return on each fundraising round per ordinary share and the total return if a
shareholder had opted to participate in the Company’s DRIS. The cumulative dividend and total return figures in this table exclude the
benefits of all tax reliefs, whilst the last column includes the benefit of tax reliefs as noted.
Tax year Net asset Cumulative Total return Offer price Offer price Overall return
value as at dividends since net of initial including tax
31 December paid since fundraising/ tax relief relief since
2016 fundraising
1
date of fundraising with
acquisition participation in
the DRIS
2
Pence Pence Pence Pence Pence Pence
2000/01 and 2001/02 59.7 52.5 112.2 80.0 100.0 173.2 
2001/02 and 2002/03 59.7 52.5 112.2 80.0 100.0 173.2 
December 2005 issue of shares 
on acquisition of British Smaller 
Technology Companies 
3
41.0 35.1 76.1 49.0 69.0 154.2 
2009/10 and 2010/11 59.7 30.5 90.2 54.1 77.3 132.5 
2010/11 and 2011/12 59.7 26.5 86.2 49.2 70.3 122.9 
2012 59.722.582.249.470.5115.6 
2012/13 and 2013/14 59.7 18.0 77.7 47.6 68.0 107.2 
2013/14 and 2014/15 59.7 13.5 73.2 47.6 68.0 99.8 
2014/15 and 2015/16 59.7 9.0 68.7 45.5 65.0 91.9 
2015/16 59.7 4.5 64.2 44.7 63.8 85.0
Notes
1. This assumes that at the time of investment the tax relief given on the investment was not also invested in shares of the Company
2. NAV plus tax relief on the initial subscription plus additional tax relief and NAV on DRIS shares purchased. Assuming that all dividends since inception were
invested under terms of current DRIS
3. Assuming initial offer price and initial tax relief from original subscription in British Smaller Technology Companies VCT plc
Expenses
Ongoing Charges figure
The Board monitors expenses using the
Ongoing Charges figure, as calculated in
line with the AIC recommended
methodology. This figure shows
shareholders the annual percentage BRITISH SMALLER COMPANIES VCT2 PLC
14
The Board can confirm that during the
period all of the VCT legislative tests have
been met.
Under Chapter 3 Part 6 of the Income Tax
Act 2007, in addition to the requirement
for a VCT’s ordinary share capital to be
listed in the Official List on a European
regulated market throughout the period,
there are a further five specific tests that
VCTs must meet following the initial three
year provisional period.
The Board can confirm that during the
period all of the VCT legislative tests set
out in the table have been met.
Further restrictions placed on VCT’s are:
Dividends from cancelled share
premium
The Finance Act 2014 introduced a
restriction with respect to the use of monies
in respect of VCT’s. In particular, no
dividends can be paid out of cancelled share
premium arising from shares allotted on or
after 6 April 2014 until at least three
financial years have elapsed. In the case of
the Company this is 1 January 2018.
From the share premium cancellation of
£13.55 million on 10 October 2014, £1.34
million remains undistributable until 1
January 2018.
Other
The Finance (No. 2) Act 2015 imposes
further conditions in respect of
investments, including those regarded as
non-qualifying investments, including:
i) An aggregate limit of £12 million (or
£20 million for Knowledge Intensive
Companies) on the amount of State
Aid Risk Finance investment a
business can receive during its
lifetime;
ii) No more than seven years can have
elapsed since the first commercial
sale achieved by the business (ten
years in the case of a Knowledge
Intensive Company), unless:
a. the business has previously
received an investment from a
fund that has received state aid, or
b. the investment comprises more
than 50% of the average of the
previous five years’ turnover and
the funds are to be used in the
business to fund growth into new
product markets and/or new
geographies.
Compliance with VCT
Legislative Tests
The main business risk facing the
Company is the retention of VCT qualifying
status. The Board receives regular reports
on compliance with the VCT legislative
tests from its Investment Adviser. In
addition the Board receives formal reports
from its VCT Status Adviser twice a year.
Income Test The Company’s income in the period must be derived
wholly or mainly (70 per cent) from shares or
securities. 
Retained Income Test The Company must not retain more than 15 per cent
of its income from shares and securities.
Qualifying Holdings Test At least 70 per cent by value of the Company’s
investments must be represented throughout the
period by shares or securities comprised in
Qualifying Holdings of investee companies. 
Eligible Shares Test At least 30 per cent of the Company’s Qualifying
Holdings must be represented throughout the period
by holdings of non-preferential ordinary shares. 
For monies raised from 6 April 2011 onwards the
eligible shares test above increases to at least 70 per
cent of Qualifying Holdings that must be represented
by eligible shares. 
In addition, monies are not permitted to be used to
finance buy-outs or otherwise to acquire existing
businesses or shares.
There is also an annual limit for each investee
company which provides that they may not raise more
than £5.0 million of state aid investment (including
from VCTs) in the 12 months ending on the date of
each investment.
Maximum Single The value of any one investment has, at any time in 
Investment Test the period, not represented more than 15 per cent of
the Company’s total investment value. This is
calculated at the time of investment and further
additions and therefore cannot be breached passively.  INVESTMENT
INSTRUMENT
Less than 1 year
Between 1 and 3 years
Between 3 and 5 years
Greater than 5 years
AGE OF
INVESTMENTS
Ordinary Shares
Quoted companies
Preference shares
Loan
Value below cost
Quoted Companies - portfolio
above cost
At cost
Value above cost
VALUE
COMPARED
TO COST
}
50%
L
P
11%
53%
17%
19%
52%
L
P
45%
5%
28%
15%
5%
INDUSTRY
SECTOR
Business Services
Manufacturing and Industrial
Healthcare
Software, IT and Telecommunications
Retail and Brands
18%
30%
12%
32%
8%
Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
15
INVESTMENT PERFORMANCE
Portfolio structure
50 per cent of the portfolio’s value is held in income generating financial instruments.
Also included below is a profile of the investment portfolio by industry sector.
This illustrates the broad range of the investment portfolio with over one third of the portfolio valuation being held for more than 
3 years, whilst 85 per cent is held at cost or above.
Portfolio diversity BRITISH SMALLER COMPANIES VCT2 PLC
16
Significant Investment
Movements
Unquoted
The £0.28 million unrealised valuation
gain from the unquoted portfolio is as a
result of improved profitability by a
number of businesses. There were
particularly strong performances from
ACC Aviation, Business Collaborator
Limited, GTK (Holdco) Limited and Mangar
Health Limited which reflected in
valuation gains. Although these were in
part offset by four investments (Cambrian
Park & Leisure Homes Limited, Ness
(Holdings) Limited, Seven Technologies
Holdings Limited and Intamac Systems
Limited) where trading conditions were
more difficult.
Quoted
Overall the quoted portfolio produced 
a value gain of £0.42 million. The main
contributor was AB Dynamics plc, with 
a value gain of £0.24 million.
TABLE A
Investment portfolio
£million %
Quoted value gain 0.42 40
Unquoted value gain 0.28 27
Gain on disposal over opening value 0.25 24
0.95 91
Gain from deferred proceeds 0.09 9
Total Value Movement 1.04 100
At 31 December 2016 the investment portfolio was valued at £39.32 million, representing
70.0 per cent of net assets (66.8 per cent at 31 December 2015). Cash at 31 December
2016 was £15.86 million representing 28.3 per cent of net assets (31.8 per cent at 31
December 2015). 
Your Portfolio
£39.32
million
Fair value of portfolio 
Increase of
7.3%
(2015: £36.65 million)
26
Number of portfolio companies
with value of £0.5 million or
more
(2015: 24)
£1.94
million
Income from the portfolio
(2015: £1.95 million)
£4.50
million
Level of new investment 
(2015: £7.24 million)
The portfolio delivered a strong performance in the year,
with a return of £1.04 million on the opening value and
income of £1.94 million.
Investment Review
The portfolio as a whole delivered an
increased value of £1.04 million in the
year, as shown in Table A below. A value
gain of £0.28 million has come from the
unquoted portfolio with a very strong
performance from ACC Aviation, offset by
the impact of difficult trading conditions at
Ness (Holdings) Limited and Cambrian
Park & Leisure Homes Limited. Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
17
Investments
During the year ended 31 December 2016
the Company completed 6 investments
totalling £4.51 million. This comprised 4
new investments of £4.28 million and 2
follow-on investments of £0.23 million.
The analysis of these investments is
shown in Table B:
TABLE B
Date Company
Investments made £million
New Follow-on Total
Mar-16 Immunobiology Limited - 0.15 0.15
Jun-16 Sipsynergy (via Hosted Network Services Limited) 0.90 - 0.90
Aug-16 Intamac Systems Limited - 0.08 0.08
Oct-16 Biz2Mobile Limited 1.00 - 1.00
Oct-16 Traveltek Group Holdings Limited 0.98 - 0.98
Nov-16 Matillion Limited 1.40 - 1.40
Invested in the year 4.28 0.23 4.51
Capitalised interest and dividends 0.08
Total additions in the year 4.59 BRITISH SMALLER COMPANIES VCT2 PLC
18
Portfolio Composition
As at 31 December 2016 the portfolio had
a value of £39.32 million which comprised
£37.25 million in unquoted investments
(95 per cent) and £2.07 million in quoted
investments (5 per cent). An analysis of
the movements in the year is shown on
page 63.
The portfolio remains well diversified, with
26 investments having a value greater
than £0.5 million, compared to 24 a year
earlier.
The charts on page 15 of these financial
statements show the composition of the
portfolio as at 31 December 2016 by
industry sector, age of investment,
investment instrument and the valuation
compared to cost. This demonstrates
representation across a wide range of
industry sectors.
Disposal of Investments
During the year to 31 December 2016 the
Company received proceeds from
disposals, repayments of loans and
deferred consideration of £3.06 million.
Overall this resulted in a value gain on
disposal of investments of £0.34 million
above the 31 December 2015 valuations as
set out in Table C.
The most significant proceeds relate to the
sale of Callstream Group Limited, for
proceeds of £0.75 million.
A further analysis of all investments sold
in the year can be found in note 7 to the
financial statements on page 65.
Valuation Policy
Unquoted investments are valued in
accordance with the valuation policy set
out in note 1 on pages 55 and 56, 
which takes account of current industry
guidelines for the valuation of venture
capital portfolios. Adjustments to fair
value are made where an investment is
significantly under-performing. As at 31
December 2016 the value of investments
falling into each valuation category is
shown in Table D below:
Summary and Outlook
There is a good pipeline of potential
investments coming through which should
see a higher investment rate in 2017. The
combination of an improving portfolio
performance and a number of attractive
exit opportunities should continue to
deliver improving total returns.
David Hall
YFM Private Equity Limited
21 March 2017
TABLE C
Disposal of Investments Net proceeds Opening value Gain on
from sale of 31 December opening 
investments 2015 value
£million £million £million
Sale of portfolio investments 2.88 2.63 0.25
Deferred proceeds received 0.18 0.09 0.09
Total investment disposals 3.06 2.72 0.34
TABLE D
Valuation Policy Valuation % of 
£million portfolio 
by value
Earnings multiple 22.04 56%
Cost, reviewed for change in fair value 13.11 34%
Price of recent investment, reviewed for change in fair value 2.10 5%
Quoted investments at bid price 2.07 5%
Total 39.32 100% Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
19
Page Name of Company Date of Location Industry Sector Current Valuation Proceeds Realised
No initial cost at 31 to date &
investment December unrealised
2016 value 
         to date*
£000 £000 £000 £000
Unquoted Portfolio
22 ACC Aviation (via Newacc Nov-14 Reigate Business services 1,379 3,480 - 3,480
(2014) Limited)
23 Intelligent Office (via IO May-14 Alloa Business services 1,956 2,951 - 2,951
Outsourcing Limited)
23 Mangar Health Limited Jan-14 Powys Healthcare 1,640 2,486 - 2,486 
24 DisplayPlan Holdings Limited Jan-12 Baldock Business services 70 2,015 820 2,835 
24 KeTech Enterprises Limited Nov-15 Nottingham Software IT & Telecomms 2,000 2,000 - 2,000 
25 Business Collaborator Limited Nov-14 Reading Software IT & Telecomms 1,340 1,743 - 1,743 
25 Springboard Research Holdings Ltd Oct-14 Bedfordshire Business services 1,706 1,706 - 1,706 
26 Gill Marine Holdings Limited Sep-13 Nottingham Retail & brands 1,870 1,690 - 1,690 
26 GTK (Holdco) Limited Oct-13 Basingstoke Manufacturing & Ind Services 741 1,675 609 2,284 
27 Immunobiology Limited Jun-03 Cambridge Healthcare 2,382 1,486 - 1,486 
27 Leengate Holdings Limited Dec-13 Derbyshire Manufacturing & Ind Services 934 1,408 - 1,408 
28 Matillion Limited Nov-16 Knutsford Software IT & Telecomms 1,400 1,400 - 1,400 
Biz2Mobile Limited Oct-16 Abingdon Software IT & Telecomms 1,000 1,000 - 1,000 
Traveltek Group Holdings Limited Oct-16 East Kilbride Software IT & Telecomms 980 980 - 980 
Macro Art Holdings Limited Jun-14 Cambridgeshire Business services 627 959 212 1,171 
The Heritage Window Sep-14 Sevenoaks Manufacturing & Ind Services 1,468 954 - 954
Company Holdco Limited
Sipsynergy (via Hosted Jun-16 Ware Software IT & Telecomms 900 900 - 900
Network Services Limited)
Wakefield Acoustics Dec-14 Heckmondwike Manufacturing & Ind Services 720 883 41 924
(via Malvar Engineering Limited)
Deep-Secure Limited Dec-09 Malvern Software IT & Telecomms 500 625 - 625 
Harvey Jones Holdings Limited May-07 London Retail & brands 442 622 751 1,373 
Seven Technologies Apr-12 Belfast Software IT & Telecomms 1,238 619 762 1,381
Holdings Limited
PowerOasis Limited Nov-11 Swindon Software IT & Telecomms 594 594 - 594 
Selima Holding Company Ltd Mar-12 Sheffield Software IT & Telecomms 300 586 - 586 
TeraView Limited Dec-11 Cambridge Software IT & Telecomms 375 555 - 555 
Bagel Nash Group Limited Jul-11 Leeds Retail & brands / Manufacturing 630 548 200 748
& Ind Services
Other investments £0.5 million and below 3,661 3,382 477 3,859 
Total unquoted investments  30,853 37,247 3,872 41,119
Quoted Portfolio
AB Dynamics plc May-13 Bradford-on-Avon Manufacturing & Ind Services 123 636 503 1,139 
Other investments £0.5 million and below 1,296 1,436 534 1,970 
Total quoted investments  1,419 2,072 1,037 3,109 
32,272 39,319 4,909 44,228
Full disposals to date 18,810 - 25,670 25,670 
Total Investment portfolio  51,082 39,319 30,579 69,898 
* represents proceeds received to date plus the unrealised valuation at 31 December 2016.
Investment Portfolio Summary at 31 December 2016 BRITISH SMALLER COMPANIES VCT2 PLC
20
Disposal History to 31 December 2016
Name of Company Date of Date of Industry sector Cost Proceeds Capital Gains
initial disposal to date return (losses) on
investment multiple disposal
£000 £000 x £000
Cozart plc Jul-04 Oct-07 Healthcare 1,566 2,978 1.90 1,412 
Sarian Systems Limited Dec-05 Apr-08 Telecoms 928 2,605 2.81 1,677 
DxS Limited Apr-04 Sep-09 Healthcare 163 2,515 15.43 2,352 
Vibration Technology Limited Mar-02 Sep-06 Industrial 1,061 2,328 2.19 1,267 
Primal Pictures Limited Dec-05 Sep-12 Medical instruments 961 2,258 2.35 1,297
Sirigen Group Limited Jun-10 Sep-12 Medical technology 517 1,962 3.79 1,445
Amino Technologies plc Sep-01 Nov-04 Electronics 415 1,872 4.51 1,457 
Waterfall Services Limited Feb-07 Dec-14 Business services 483 1,422 2.94 939 
Digital Healthcare Limited Jun-05 Aug-13 Medical instruments 3,072 1,285 0.42 (1,787)
Callstream Group Limited Sep-10 Mar-16 Software 500 1,017 2.03 517 
Insider Technologies (Holdings) Limited Aug-12 Oct-15 Software 780 773 0.99 (7)
Pressure Technologies plc Jun-07 Jul-15 Industrial 302 657 2.18 355 
The ART Technology Group Inc. Apr-03 Oct-09 Software 275 638 2.32 363 
Brady plc Dec-10 Apr-16 Software 603 484 0.80 (119)
Tamesis Limited Jul-01 Sep-07 Software 150 317 2.11 167 
Optos plc Dec-05 Jan-14 Healthcare 152 316 2.08 164 
Tekton Group Limited Dec-05 Dec-06 Software 103 296 2.87 193 
Tikit Group plc May-11 Jan-13 Software 198 283 1.43 85 
Oxonica plc May-02 Sep-09 Chemical 241 258 1.07 17 
Group NBT plc May-11 Nov-11 IT support 197 256 1.30 59 
Vianet Group plc Oct-06 Sep-14 Business services 243 176 0.72 (67)
Patsystems plc Sep-07 Jan-12 Software 317 164 0.52 (153)
Hargreaves Services plc Aug-12 Jun-15 Transport 325 160 0.49 (165)
Cambridge Cognition Holdings plc May-02 Jun-15 Healthcare 240 157 0.65 (83)
May Gurney Integrated Services plc May-11 Mar-13 Construction 211 141 0.67 (70)
Arakis Limited Mar-04 Aug-05 Healthcare 14 108 7.71 94 
14,017 25,426 11,409
Proceeds £0.1m and below 4,793 244 (4,549)
Total  18,810 25,670 6,860
n Investment acquired solely from the merger with British Smaller Technology Companies VCT plc in December 2005
n Investment made prior to 31 December 2003 Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
21
Name of Company Investment Disposal Additions Valuation Investment
Valuation Proceeds including gains Valuation
at 31 capitalised including at 31
December interest and profits / December
2015 dividends (losses) 2016
on disposal
£000 £000 £000 £000 £000
Unquoted portfolio
ACC Aviation (via Newacc (2014) Limited) 1,801 -  -  1,679 3,480 
Intelligent Office (via IO Outsourcing Limited) 3,350 -  -  (399) 2,951 
Mangar Health Limited 2,201 -  -  285 2,486 
DisplayPlan Holdings Limited 1,753 -  -  262 2,015 
KeTech Enterprises Limited 2,000 -  -  - 2,000 
Business Collaborator Limited 1,384 -  -  359 1,743 
Springboard Research Holdings Ltd 1,646 -  60 - 1,706 
Gill Marine Holdings Limited 1,778 -  -  (88) 1,690 
GTK (Holdco) Limited 1,560 (272) -  387 1,675 
Immunobiology Limited 1,311 -  150 25 1,486 
Leengate Holdings Limited 1,143 -  -  265 1,408 
Matillion Limited -  -  1,400 - 1,400 
Biz2Mobile Limited -  -  1,000 - 1,000 
Traveltek Group Holdings Limited -  -  980 - 980 
Macro Art Holdings Limited 984 (104) -  79 959 
The Heritage Window Company Holdco Limited 1,101 -  -  (147) 954 
Sipsynergy (via Hosted Network Services Limited) -  -  900 - 900 
Wakefield Acoustics (via Malvar Engineering Limited) 761 (41) -  163 883 
Deep-Secure Limited 357 -  -  268 625 
Harvey Jones Holdings Limited 1,099 (469) -  (8) 622 
Seven Technologies Holdings Limited 1,208 -  -  (589) 619 
PowerOasis Limited 594 -  -  - 594 
Selima Holding Company Ltd 463 -  -  123 586 
TeraView Limited 488 -  -  67 555 
Bagel Nash Group Limited 583 (27) 2  (10) 548 
Callstream Group Limited 679 (752) -  73 - 
Other investments £0.5 million and below 5,724 (61) 96 (2,377) 3,382 
Total unquoted investments 33,968 (1,726) 4,588 417 37,247
Quoted portfolio
AB Dynamics plc 809 (503) - 330 636
Other investments £0.5 million and below 1,875 (645) - 206 1,436
Total quoted investments 2,684 (1,148) - 536 2,072
Total Movement 36,652 (2,874) 4,588 953 39,319
Summary of Investment Portfolio Movement since 31 December 2015 BRITISH SMALLER COMPANIES VCT2 PLC
22
INVESTEE COMPANY INFORMATION 
Fair Value
£3.1m
2015: £4.4m
Number of companies
4.5
* 
2015: 4.5
Fair Value
£12.6m
2014: £9.6m
Number of companies
15
2015: 13
Fair Value
£4.9m
2015: £4.4m
Number of companies
6
20145: 6
Fair Value
£11.6m
2015: £10.0m
Number of companies
6
2015: 6
Retail and Brands Manufacturing and
Industrial Services
Software, IT and
Telecommunications
Healthcare Business Services
Fair Value
£7.1m
2015: £8.3m
Number of companies
9.5
* 
2015: 9.5
Investment Portfolio
This section describes the business of the active companies in the portfolio with a value greater than £1.0 million in order of valuation at
31 December 2016. The Company’s voting rights in an investee company are the same as the percentage of equity held for each
investment detailed below.
ACC Aviation (via Newacc (2014) Limited)
Reigate
www.flyacc.com
Cost: £1,379,000
Valuation: £3,480,000
Date of initial Investment: November 2014
Equity held: 13.22%
Valuation basis: Earnings multiple
Interest: £37,011
(2015 £36,910)
Dividends: £76,268
(2015 £76,060)
Year ended 31 December 2015 2014
£million £million
Sales 40.56 52.11
EBITA 1.38 1.12
Adjusted to reflect underlying performance as a full year’s
trading results have not be filed.
With annual sales of over £40m, ACC Aviation
has built an excellent reputation for providing
services to clients across the world in all
aspects of aircraft leasing, charter and flight
management. The airline industry continues to change at a
fast pace as passenger demand grows and air travel expands
across the globe. The business has successfully transitioned
from a simple broker to providing a range of solutions.
* one company is represented in two industry sectors.  Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
23
Intelligent Office is a leading provider of process
outsourcing solutions to UK legal practices.
This typically includes improvements to
services offered in addition to operational
efficiency. The Managed Services division works
within firms’ own premises to help them transform and
manage key administrative functions and secretarial services
Mangar is a world leader in inflatable lifting and handling and
bathing equipment for the elderly, disabled and
emergency services markets. It distributes its
products to care providers, local authorities,
ambulance services and care homes. Products
help facilitate extended independence for 
elderly users, as well as providing significant cost savings for
care providers.
Intelligent Office [via IO Outsourcing Limited]
Alloa
www.intelligentofficeuk.com
Cost: £1,956,000
Valuation: £2,951,000
Date of initial Investment: May 2014
Equity held: 17.77%
Valuation basis: Earnings multiple
Interest: £39,423
(2015 £39,316)
Dividends: £84,594
(2015 £84,594)
Year ended 30 September 2016 2015
£million £million
Sales 29.12 22.70
EBITA 1.67 1.52
Profit (loss) before tax 0.06 (0.15)
Retained losses (0.87) (0.62)
Net assets 7.16 7.29
Mangar Health Limited Powys
www.mangar.co.uk
Cost: £1,640,000
Valuation: £2,486,000
Date of initial Investment: January 2014
Equity held: 17.10%
Valuation basis: Earnings multiple
Interest: £131,559
(2015 £131,200)
Dividends: £14,194
(2015 £6,773)
Year ended 31 July 2016 2015
£million £million
Sales 7.74 7.39
EBITA 1.54 1.41
Profit before tax 0.06 0.08
Retained losses (0.33) (0.25)
Net assets 0.66 0.74 BRITISH SMALLER COMPANIES VCT2 PLC
24
DisplayPlan provides retail display solutions
from design to finished product delivery to
branded product manufacturers and UK
retailers. The business is typically engaged
very early to help define brand values and concepts. Strong
profits have been achieved since investment with an
emphasis on continuing to broaden its customer base.
KeTech is a specialist manufacturer and
distributor to the rail communications and
defence sectors. Its core rail products include
on train and on platform solutions and are
increasingly being specified on some high profile new
projects and upgrades.
DisplayPlan Holdings Limited Baldock
www.displayplan.com
Cost: £70,000
Valuation: £2,015,000
Date of initial Investment: January 2012
Equity held: 12.25%
Valuation basis: Earnings multiple
Interest: £nil
(2015 £19,132)
Dividends: £73,500
(2015 £16,306)
Year ended 31 December 2015 2014
£million £million
Sales 16.40 14.64
EBITA 1.53 1.01
Profit before tax 1.10 0.64
Retained profits 5.02 4.20
Net assets 5.42 4.60
KeTech Enterprises Limited Nottingham
www.ketech.com
Cost: £2,000,000
Valuation: £2,000,000
Date of initial Investment: November 2015
Equity held: 12.83%
Valuation basis: Cost, reviewed for 
change in fair value
Interest: £86,131
(2015 £12,319)
Dividends: £48,432
(2015 £7,543)
Year ended 31 August 2016 2015
£million £million
Sales 7.13 6.87
EBITA 0.44 1.41
Adjusted to reflect a full year’s trading as the 
investment was made during the year. Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
25
Business Collaborator is an established
provider of collaboration software hosted on the
cloud to the construction sector and a leader in
the nascent Building Information Modelling
(“BIM”) software market. Revenues are derived from a SaaS
software model. Sales growth is driven by the products ability
to deliver cost savings to its customer base of construction
firms and asset owners, supported by government
regulations.
Springboard Research is a leading provider of
retail performance monitoring; providing
footfall, dwell time and analysis of consumer
behaviour. It is the official provider of footfall
data and benchmarks to the British Retail Consortium,
Shopping Centre Magazine and Drapers magazine this year.
A continually shifting retail environment means that retailers
and landlords are seeking new ways of improving their
competitive advantage. The company has seen a significant
increase in sales to North America.
Business Collaborator Limited Reading
www.groupbc.com
Cost: £1,340,000
Valuation: £1,743,000
Date of initial Investment: November 2014
Equity held: 19.38%
Valuation basis: Earnings multiple
Interest: £119,311
(2015 £121,400)
Year ended 30 November 2015
£million
Sales 2.86
EBITA 0.21
Loss before tax (0.26)
Retained losses (0.26)
Net assets 0.21
Springboard Research Holdings Limited Bedfordshire
www.spring-board.info
Cost: £1,706,000
Valuation: £1,706,000
Date of initial Investment: October 2014
Equity held: 12.95%
Valuation basis: Cost, reviewed for 
change in fair value
Interest: £107,353
(2015 £65,617)
Dividends: £59,298
(2015 £59,136)
Year ended 31 December 2015
£million
Sales 4.10
EBITA 0.01
Loss before tax (0.93)
Retained losses (0.95)
Net assets 2.08 BRITISH SMALLER COMPANIES VCT2 PLC
26
Gill Marine is a manufacturer of technical
sailing equipment and clothing. Exports
account for over 70 per cent of turnover. The
strategy is to develop the brand further into
adjacent markets and increase its share in existing
and new markets, including direct to the customer through
its relaunched website.
GTK is a manufacturer of cable assemblies,
connectors, optoelectronics and
manufacturing solutions for high technology
customers. With a small sourcing team in
Taiwan it provides design, procurement and
manufacturing services of essential but non-core electronic
components for customers in sectors such as precision
instrumentation, defence/security and contract equipment
manufacturing.
Gill Marine Holdings Limited Nottingham
www.gillmarine.com
Cost: £1,870,000
Valuation: £1,690,000
Date of initial Investment: September 2013
Equity held: 13.81%
Valuation basis: Earnings multiple
Interest: £168,761
(2015 £168,300)
Year ended 30 September 2016 2015
£million £million
Sales 12.23 12.34
EBITA 1.45 1.52
(Loss) profit before tax (0.87) 0.43
Retained (losses) profits (0.51) 0.39
Net assets 1.06 1.95
GTK (Holdco) Limited Basingstoke
www.gtk.co.uk
Cost: £741,000
Valuation: £1,675,000
Date of initial Investment: October 2013
Equity held: 17.70%
Valuation basis: Earnings multiple
Interest: £48,194
(2015 £54,669)
Year ended 31 July 2016 2015
£million £million
Sales 12.19 10.61
EBITA 1.08 0.78
Profit before tax 0.62 0.29
Retained profits 0.97 0.29
Net assets 1.61 0.93 Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
27
Immunobiology has developed a new platform
technology to produce high efficacy vaccines
for infectious diseases including influenza,
tuberculosis, meningitis and bacterial
pneumonia. It has concluded a successful phase 1
human trial for its pneumonia vaccine and is currently
exploring commercial collaborations to fund further work or
realise value.
Leengate Valves is a wholesaler, stockist and
distributor, supplying one of the largest
ranges of industrial valves in the UK to leading
re-sellers in the gas, water and industrial
sectors. In addition it supplies engineering
actuation and automation packages, offering a next day
service and high quality technical advice. Leengate is
developing some own-branded products for the agriculture
and drinking water markets.
Immunobiology Limited Cambridge
www.immbio.com
Cost: £2,382,000
Valuation: £1,486,000
Date of initial Investment: June 2003
Equity held: 26.70%
Valuation basis: Price of recent investment, 
reviewed for change in 
fair value and supporting 
third party investment
Year ended 31 May 2016 2015
£million £million
Sales - -
LBITA (1.95) (1.70)
Loss before tax (1.94) (1.69)
Retained losses (12.04) (10.65)
Net assets 1.17 0.97
Leengate Holdings Limited Derbyshire
www.leengatevalves.co.uk
Cost: £934,000
Valuation: £1,408,000
Date of initial Investment: December 2013
Equity held: 7.00%
Valuation basis: Earnings multiple
Interest: £75,737
(2015 £78,456)
Dividends: £22,477
(2015 £22,416)
Year ended 31 December 2015 2014
£million £million
Sales 7.83 7.50
EBITA 1.53 1.19
Profit before tax 0.63 0.27
Retained profits 0.48 0.11
Net assets 1.06 0.69 BRITISH SMALLER COMPANIES VCT2 PLC
28
Matillion is a leading provider of cloud-based
integration technologies and an Advanced
Technology Partner to Amazon Web Services.
Products enable its customers to store securely
and easily access large quantities of their data in the cloud.
Matillion Limited Knutsford
www.matillion.com
Cost: £1,400,000
Valuation: £1,400,000
Date of initial Investment: November 2016
Equity held: 10.50%
Valuation basis: Cost, reviewed for change
in fair value
Year ended 31 December 2016
£million
Sales 1.29
LBITA (0.78)
Adjusted to reflect underlying performance as a full
year’s trading results have not been filed. Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
29
RISK FACTORS
The Board carries out a regular and robust review of the risk
environment in which the Company operates. The 
principal risks and uncertainties identified by the Board 
and techniques used to mitigate these risks are set out 
in this section.
The Board seeks to mitigate its principal
risks by setting policy, regularly reviewing
performance and monitoring progress and
compliance. In the mitigation and
management of these risks, the Board
applies rigorously the principles detailed
in section C.2: ”Risk Management &
Internal Control” of The UK Corporate
Governance Code issued by the Financial
Reporting Council in September 2014.
Details of the Company’s internal controls
are contained in the Corporate
Governance Internal Control section on
pages 40 and 41 and further information
on exposure to risks including those
associated with financial instruments is
given in note 17a of the financial
statements.
Loss of Approval as a VCT 
Risk - The Company must comply with Chapter 3 Part 6 of
the Income Tax Act 2007 which allows it to be exempted from
corporation tax on capital gains. Any breach of these rules
may lead to the Company losing its approval as a VCT,
qualifying shareholders who have not held their shares for
the designated holding period having to repay the income tax
relief they obtained and future dividends paid by the Company
becoming subject to tax. The Company would also lose its
exemption from corporation tax on capital gains.
Mitigation - One of the Key Performance Indicators
monitored by the Company is the compliance with legislative
tests. Details of how the Company manages these
requirements can be found under the heading “Compliance
with VCT Legislative Tests” on page 14.
Economic
Risk - Events such as recession and interest rate fluctuations
could affect investee companies’ performance and
valuations. 
Mitigation - As well as the response to ‘Investment and
Strategic’ risk below the Company has a clear investment
policy (summarised on page 10) and a diversified portfolio
operating in a range of sectors. The Investment Adviser
actively monitors investee performance which provides
quality information for monthly reviews of the portfolio.
Investment and Strategic
Risk - Inappropriate strategy, poor asset allocation or
consistently weak stock allocation may lead to under
performance and poor returns to shareholders. The quality of
enquiries, investments, investee company management
teams and monitoring, and the risk of not identifying investee
under performance might also lead to under performance
and poor returns to shareholders.
Mitigation - The Board reviews strategy annually. At each of
the Board meetings the directors review the appropriateness
of the Company’s objectives and stated strategy in response
to changes in the operating environment and peer group
activity. The Investment Adviser carries out due diligence on
potential investee companies and their management teams
and utilises external reports where appropriate to assess the
viability of investee businesses before investing. Wherever
possible a non-executive director will be appointed to the
board of the investee on behalf of the Company. BRITISH SMALLER COMPANIES VCT2 PLC
30
Regulatory
Risk - The Company is required to comply with the Companies
Act 2006, the rules of the UK Listing Authority, the Prospectus
Rules made by the Financial Conduct Authority and
International Financial Reporting Standards as adopted by the
European Union and is subject to the EU’s Alternative
Investment Fund Manager’s Directive. Breach of any of these
might lead to suspension of the Company’s Stock Exchange
listing, financial penalties or a qualified audit report.
Mitigation - The Investment Adviser and the Company
Secretary have procedures in place to ensure recurring
Listing Rules requirements are met and actively consult with
brokers, solicitors and external compliance advisers as
appropriate. The key controls around regulatory compliance
are explained on pages 40 and 41.
Reputational
Risk - Inadequate or failed controls might result in breaches
of regulations or loss of shareholder trust.
Mitigation - The Board is comprised of directors with suitable
experience and qualifications who report annually to the
shareholders on their independence. The Investment Adviser is
well-respected with a proven track record and has a formal
recruitment process to employ experienced investment staff.
Allocation rules relating to co-investments with other funds
managed/advised by the Investment Adviser, have been agreed
between the Investment Adviser and the Company. Advice is
sought from external advisors where required. Both the Company
and the Investment Adviser maintain appropriate insurances.
Operational
Risk - Failure of the Investment Adviser’s and administrator’s
accounting systems or disruption to its business might lead
to an inability to provide accurate reporting and monitoring.
Mitigation - The Investment Adviser has a documented
business continuity plan, which provides for back-up services
in the event of a system breakdown.
Market/Liquidity
Risk - Lack of liquidity in both the venture capital and public
markets. Investment in unquoted and AIM quoted companies,
by their nature, involve a higher degree of risk than investment
in companies trading on the main market. In particular,
smaller companies often have limited product lines, markets
or financial resources and may be dependent for their
management on a smaller number of key individuals. The fact
that a share is traded on AIM or on the main market does not
guarantee its liquidity. The spread between the buying and
selling price of such shares may be wide and thus the price
used for valuation may not be achievable. In addition, the
market for stock in smaller companies is often less liquid than
that for stock in larger companies, bringing with it potential
difficulties in acquiring, valuing and disposing of such stock.
Mitigation - Overall liquidity risks are monitored on an ongoing
basis by the Investment Adviser and on a quarterly basis by the
Board. Sufficient liquid resources are maintained to pay
expenses as they fall due, in the event that investments prove
difficult to realise.
Financial
Risk - Inadequate controls might lead to misappropriation of
assets. Inappropriate accounting policies might lead to
misreporting or breaches of regulations.
Mitigation - The key controls around financial reporting are
described on pages 40 and 41. Strategic Report
Annual Report and Accounts for the year ended 31 December 2016
31
Environment
The Board recognises the requirement
under Section 414C of the Companies 
Act 2006 to detail information about
environmental matters (including the
impact of the Company’s business on the
environment), employee, human rights,
social and community issues, including
information about any policies it has in
relation to these matters and effectiveness
of these policies. 
The Company seeks to ensure that its
business is conducted in a manner that 
is responsible to the environment and has
introduced an electronic communications
policy. This policy has led to a significant
increase in the number of such
communications, with a commensurate
reduction in the distribution of hard copy
documents. The management and
administration of the Company is
undertaken by the Investment Adviser.
YFM Private Equity Limited recognises the
importance of its environmental
responsibilities, monitors its impact on the
environment and implements policies to
reduce any damage that might be caused
by its activities. Initiatives of the
Investment Adviser designed to minimise
its and the Company’s impact on the
environment include recycling and
reducing energy consumption. Given the
size and nature of the Company’s activities
and the fact that it has no employees, the
Board considers there is limited scope to
develop and implement social and
community policies.
Anti-Bribery and
Corruption Policy
The Company has a zero tolerance
approach to bribery. The following is 
a summary of its policy:
• it is the Company’s policy to conduct
all of its business in an honest and
ethical manner. The Company is
committed to acting professionally,
fairly and with integrity in all its
business dealings and relationships;
• the directors of the Company, the
Investment Adviser and any other
service providers must not promise,
offer, give, request, agree to receive or
accept financial or other advantage in
return for favourable treatment, to
influence a business outcome or gain
any business advantage on behalf of
the Company or encourage others to
do so; and
• the Company has communicated its
anti-bribery policy to the Investment
Adviser and its other service
providers.
The Company had no employees during
the year. The Board is composed of three
male non-executive directors. For a review
of the policies used when appointing
directors to the Board of the Company
please refer to the Directors’
Remuneration Report.
The Strategic Report on pages 6 to 31 is
approved
By Order of the Board
Richard Last
Chairman
21 March 2017
OTHER MATTERS BRITISH SMALLER COMPANIES VCT2 PLC
32
Richard Last Chairman
Richard Last (appointed 16 November 2000) is a Fellow of the Institute of Chartered Accountants 
in England and Wales with substantial experience in the IT software and services sectors, and is
chairman and non-executive director of Servelec Group plc which is listed on the main market of the
London Stock Exchange. He is also a chairman and non-executive director of Gamma Communications
plc, Lighthouse Group plc, Tribal Group plc and Arcontech Group plc and non–executive director of
Corero Network Security plc, all AIM listed. In addition he is a director of a number of private
companies including APD Communications Limited, Learn Solutions Limited, both of which 
he is chairman, and Waste Management Solutions Limited.
Robert Martin Pettigrew 
Robert Pettigrew (appointed 16 November 2000) has more than 20 years’ experience in the
development of emerging businesses and, in particular, the commercial exploitation of new
technologies. He co-founded The Generics Group of companies (renamed Science Group plc) in 1986,
which is one of the country’s leading technology consulting and investment groups and was a key
member of the team that took the company public in December 2000. He retired from The Generics
Group at the end of 2002 to pursue independent investment activities. He is currently an investor-
director and non-executive chairman of Sunamp Limited, Odos Imaging Limited and Pervasid Limited
as well as being a non-executive director of Acal Energy Limited.
Peter Charles Waller 
Peter Waller (appointed 1 November 2010) is an experienced chairman and director with extensive
UK and international executive experience in the IT technology, software and services sector. 
He initially worked with IBM and Hitachi then with Spring plc, at that time one of the UK’s largest
recruitment and training businesses. He is currently chairman of KeyPoint Technologies (UK) Limited,
director and founder of Turnberry Management Company Limited and non-executive director of BCS
Learning & Development Limited. For the past decade Peter has worked as a board member with a
succession of early stage and early growth private and public companies. His particular skills are in
sales and marketing and working with companies to develop successful sales growth strategies.
Secretary Registered Office of the Company
The City Partnership (UK) Limited 5th Floor
110 George Street Valiant Building
Edinburgh 14 South Parade
EH2 4LH Leeds
LS1 5QS
Registered No: SC269164 Registered No: 04084003
DIRECTORS
Name Background and Experience Corporate Governance
Annual Report and Accounts for the year ended 31 December 2016
33
Principal Activity
The Company is a public limited company
incorporated and domiciled in the United
Kingdom. The address of the registered
office and principal place of business is
5th Floor, Valiant Building, 14 South
Parade, Leeds, LS1 5QS.
The Company has its primary, and sole,
listing on the London Stock Exchange. 
The principal activity of the Company is
the making of long term equity and loan
investments, mainly in unquoted
businesses.
The Company operates as a venture
capital trust (“VCT”) and has been
approved by HM Revenue & Customs as 
an authorised venture capital trust under
Chapter 3 Part 6 of the Income Tax Act
2007. It is the directors’ intention to
continue to manage the Company’s 
affairs in such a manner as to comply 
with Chapter 3 Part 6 of the Income Tax
Act 2007.
Business Performance 
and Future Prospects
A detailed and fair review of the
Company’s business, its development, its
financial performance during and at the
end of the financial year, and its future
prospects is set out in the Strategic Report
on pages 7 to 31. The principal risks and
uncertainties the Company faces are
detailed on pages 29 to 30.
Results and Dividends
The Statement of Comprehensive Income
is set out on page 50. The profit before and
after taxation for the year amounted to
£1,412,000 (2015: £4,132,000). 
During the year the Company paid a total
of £4,191,000 (2015:£ 3,887,000) in
dividends totalling 4.5 pence per ordinary
share. A detailed review can be found in
note 5 on page 61.
The directors recommend the payment of
a final dividend of 1.5 pence per ordinary
share (2015: 2.5 pence). A resolution to
this effect will be proposed at the Annual
General Meeting to be held on 10 May
2017.
The net asset value per ordinary share at
31 December 2016 was 59.7 pence (2015:
62.9 pence). The transfer to and from
reserves is given in the Statement of
Changes in Equity on page 52.
Going Concern
The directors have carefully considered
the issue of going concern and are
satisfied that the Company has sufficient
resources to meet its obligations for the
foreseeable future. The directors therefore
believe that it is appropriate to continue 
to apply the going concern basis of
accounting in preparing the financial
statements.
Statement on Long-term
Viability
The AIC’s Code of Corporate Governance
requires the Board to assess the
Company’s viability over an appropriate
period and the directors consider that for
the purpose of this exercise it is not
practical or meaningful to look forward
over a period of more than three years.
Taking into account the Company’s current
position and principal risks, the directors
have concluded that there is a reasonable
expectation that the Company will be able
to continue in operation and meet its
liabilities as they fall due over that period.
In making their assessment the directors
have taken into account the principal 
risks and their mitigation identified in the
strategic report on pages 29 to 30, 
the nature of the Company’s business,
including its substantial reserves of cash,
the potential of its venture capital portfolio
to generate future income and capital
proceeds, and the ability of the directors to
minimise the level of cash outflows should
this be necessary.
Corporate Governance
The statement on corporate governance
set out on pages 36 to 41 is included in the
Directors’ Report by reference.
Directors’ and Officers’
Liability Insurance
The Company has, as permitted by the
Companies Act 2006, maintained
insurance cover on behalf of the directors
indemnifying them against certain
liabilities which may be incurred by any of
them in relation to the Company.
DIRECTORS’ REPORT
For the year ended 31 December 2016
The directors present their report and audited financial
statements of British Smaller Companies VCT2 plc 
(“the Company”) for the year ended 31 December 2016. BRITISH SMALLER COMPANIES VCT2 PLC
34
Provision of Information 
to the External Auditor
The directors confirm that so far as each
director is aware, there is no relevant audit
information of which the Company’s
auditor is unaware; and that each of the
directors has taken all the steps that he
ought to have taken as a director in order
to make himself aware of any relevant
audit information and to establish that the
Company’s auditor is aware of that
information.
Share Capital
As shown in note 11 of the financial
statements, the Company has only one
class of share, being ordinary shares of 10
pence each.
Buy-Back and Issue of
Ordinary Shares
In accordance with the Company’s stated
buy-back policy the Company purchased
during the year (under the authority
granted by the shareholders at a general
meeting held on 6 May 2016) 417,743
ordinary shares of 10 pence each in the
market (as disclosed in the table below)
for aggregate consideration of £240,000
These shares are held in treasury.
Under the existing authority, which expires
on 6 May 2019, the Company has the
power to purchase shares up to 14.99 
per cent of the Company’s ordinary share
capital as at 24 March 2016, being
13,932,647 ordinary shares. 
During the year to 31 December 2016 a
total of 7,129,482 ordinary shares were
issued. As a result of the offer for
subscription 5,683,709 shares were
issued, while 1,445,773 were issued under
the Company’s DRIS. Further details are
given in note 11 on page 70.
The directors have unconditional authority
to allot shares in the Company or to grant
rights to subscribe for or to convert any
security into ordinary shares in the
Company until 10 May 2017 up to an
aggregate nominal amount of £3,000,000.
This authority will be replaced by a new
authority to issue shares up to an
aggregate nominal amount of £4,000,000
at the next Annual General Meeting.
In addition, the directors have a separate
unconditional authority to allot shares in
the Company in connection with the
Company’s DRIS until 3 December 2019.
Buy-Back of Shares
Date Number of % Consideration
ordinary shares of issued paid per
of 10p share capital ordinary
bought-back at that date share (pence)
24 March 2016 74,364 0.08% 56.86
27 April 2016 62,946 0.07% 57.63
15 June 2016 102,220 0.11% 58.30
29 November 2016 178,213 0.19% 57.54
Capital Disclosures
The following information has been
disclosed in accordance with Schedule 7 of
the Large and Medium Sized Companies
and Groups (Accounts and Reports)
Regulations 2008 (as amended):
• the Company’s capital structure is
summarised in note 11 to the financial
statements. Each ordinary share
carries one vote. There are no
restrictions on voting rights or any
agreement between holders of
securities that result in restrictions on
the transfer of securities or on voting
rights;
• there are no securities carrying
special rights with regard to the
control of the Company;
• the Company does not have an
employee share scheme; 
• the rules concerning the appointment
and replacement of directors,
amendments to the Articles of
Association and powers to issue or
buy-back the Company’s shares are
contained in the Articles of Association
of the Company and the Companies
Act 2006;
• with the exception of the Investment
Adviser’s Incentive Agreement, there
are no agreements to which the
Company is party that take effect, alter
or terminate upon a change in control
following a takeover bid; and
• there are no agreements between the
Company and its directors providing
for compensation for loss of office that
may occur because of a takeover bid. Corporate Governance
Annual Report and Accounts for the year ended 31 December 2016
35
Environment
The Company has no greenhouse gas
emissions to report from the operations of
the Company, nor does it have
responsibility for any emissions producing
sources including those within its
underlying investment portfolio under part
7 of schedule 7 to the Large and Medium-
sized Companies and Groups (Accounts
and Reports) Regulations 2008, as
amended.
Directors and their
Interests
The directors of the Company at 31
December 2016, their interests and
contracts of significance are set out in the
Directors’ Remuneration Report on pages
42 to 44.
Substantial Shareholdings
The directors are not aware of any
substantial shareholdings representing 3
per cent or more of the Company’s issued
share capital as at 31 December 2016 and
the date of this report. 
Independent Auditor
The Board has carried out a competitive
tender process for the provision of audit
services and, as a result, Grant Thornton
LLP resigned as the Company’s auditor.
The Board appointed BDO LLP to fill the
casual vacancy until the Company’s next
Annual General Meeting.
BDO LLP has indicated its willingness to
continue in office and a resolution
concerning its reappointment will be
proposed at the Annual General Meeting. 
No fees are payable to the auditor in
respect of non-audit services.
Employment Policies
The employment policies of the Company
are set out on page 43.
Events after the Balance
Sheet Date
Subsequent to the year end the Company
allotted a total of 6,787,231 ordinary
shares on 10 February 2017 pursuant to
the offer detailed under “Fundraising” on
page 8, raising net proceeds of
approximately £4.1 million.
Annual General Meeting
Shareholders will find the Notice of the
Annual General Meeting on pages 76 to 79
of these financial statements. 
The ordinary business of the meeting
includes a resolution (resolution 9) to be
proposed to ensure the directors retain
the authority to allot shares in the
Company until the date of the 2018 Annual
General Meeting up to an aggregate
nominal amount of £4,000,000
(representing approximately 41 per cent of
the issued ordinary share capital of the
Company as at 10 May 2017, excluding
treasury shares).
Also included are three Special
resolutions:
Resolution 10 is proposed to empower the
directors to allot shares under the
authority granted by resolution 9 and to
sell treasury shares without regard to any
rights of pre-emption on the part of the
existing shareholders.
Resolution 11 is proposed to amend the
Articles of Association to increase the cap
on aggregate directors’ fees to £100,000
per annum.
The directors have agreed to forego the
ability to reclaim certain expenses and
their fees were increased to compensate
for this. As a result the cap on aggregate
director's fees of £75,000 has been
reached and your Board propose to
increase the cap on aggregate fees to
£100,000 in order to provide the flexibility
to recruit new Directors in the future.
Resolution 12 will, if passed, approve,
subject to the sanction of the High Court,
the cancellation of the amount standing to
the credit of the share premium account of
the Company at the date that the court
order granting the cancellation is made.
The directors consider it appropriate to
obtain the approval of shareholders to
cancel the share premium account
(subject to the sanction of the High Court)
to create further distributable reserves to
fund distributions to shareholders and
share buy-backs, to set off or write off
losses and for other corporate purposes of
the Company. Application to court will be
made if and when the Board feels this is
appropriate. This authority is being taken
now to provide flexibility to the Board in
the future without a further general
meeting of the Company having to be
convened.
This report was approved by the Board on
21 March 2017 and signed on its behalf by
Richard Last
Chairman
British Smaller Companies VCT2 plc. 
Registered number 04084003 BRITISH SMALLER COMPANIES VCT2 PLC
36
The AIC Code as explained by the AIC
Guide, addresses all the principles set out
in the UK Corporate Governance Code
issued by the Financial Reporting Council
(“FRC”), as well as setting out additional
principles and recommendations on
issues which are of specific relevance 
to the Company.
The UK Corporate Governance Code can
be found on the website of the FRC at
www.frc.org.uk.
The Board considers that reporting
against the principles and
recommendations of the AIC Code and 
by reference the AIC Guide (which
incorporates the UK Corporate
Governance Code), will provide better
information to shareholders.
The Company is committed to maintaining
the highest standards of corporate
governance and during the year to 31
December 2016 complied with the
recommendations of the AIC Code and
relevant provisions of the UK Corporate
Governance Code, except as set out below.
The UK Corporate Governance Code
includes provisions relating to the
appointment of a chief executive and a
recognised senior independent non-
executive director, those relating to the
establishment of an independent
Remuneration Committee, the
presumption concerning the Chairman’s
independence and the need for an internal
audit function. For reasons set out in the
AIC Guide, and in the preamble to the UK
Corporate Governance Code, the Board
considers these provisions are not
relevant to the position of British Smaller
Companies VCT2 plc, which is an
externally advised venture capital trust.
The Company has therefore not reported
further in respect of these provisions.
In accordance with The UK Corporate
Governance Code issued in April 2016
section C.3.1 the Board should establish
an Audit Committee of at least three
independent non-executive directors and
the Chairman of the Company should not
be chair of this Committee. The Company
has not complied with this criteria as the
chair of the Audit Committee is Mr R Last.
Given the size and nature of the Company
and the significant experience of Mr R Last
at performing this duty it was felt that
adequate controls were in place to ensure
the Audit Committee remained
independent.
Role of the Board
An investment advisory agreement
between the Company and YFM Private
Equity Limited sets out the matters over
which the Investment Adviser has
authority. This includes monitoring of the
Company’s assets and the provision of
accounting, company secretarial,
administration and some marketing
services. All other matters are reserved
for the approval of the Board. A formal
schedule of matters reserved to the Board
for decision has been approved. This
includes determination and monitoring of
the Company’s investment objectives and
policy and its future strategic direction,
gearing policy, management of the capital
structure, appointment and removal of
third party service providers, review of key
investment and financial data and the
Company’s corporate governance, risk
control and custody arrangements.
The Board meets at least quarterly and
additional meetings are arranged as
necessary. Full and timely information is
provided to the Board to enable it to
function effectively and to allow directors
to discharge their responsibilities. 
There is an agreed procedure for directors
to take independent professional advice if
necessary and at the Company’s expense.
This is in addition to the access that every
director has to the advice and services of
the Company Secretary, who is
responsible to the Board for ensuring that
applicable rules and regulations are
complied with and that Board procedures
are followed. The Company indemnifies its
directors and officers and has purchased
insurance to cover its directors. Neither
the insurance nor the indemnity provide
cover if the director has acted fraudulently
or dishonestly.
Board Composition
The Board consists of three non-executive
directors, all of whom are regarded by the
Board as independent and also as
independent of the Company’s Investment
Adviser, including the Chairman. The
CORPORATE GOVERNANCE
The Board is committed to the principle and application of
sound corporate governance and confirms that the
Company has taken steps, appropriate to a venture capital
trust and relevant to its size and operational complexity, 
to comply with the principles and recommendations of the
Association of Investment Companies’ Code of Corporate
Governance issued in July 2016 (“AIC Code”) by reference
to the AIC Corporate Governance Guide for Investment
Companies (“AIC Guide”) available on the AIC website
www.theaic.co.uk. Corporate Governance
Annual Report and Accounts for the year ended 31 December 2016
37
independence of the Chairman was
assessed upon his appointment. Although
The UK Corporate Governance Code
presumes that the chairman of a company
is deemed not to be an independent
director, the remaining directors, having
considered the nature of the role in the
Company, are satisfied that Mr R Last
fulfils the criteria for independence as a
non-executive director. The directors have
a breadth of investment, business and
financial skills and experience relevant to
the Company’s business and provide a
balance of power and authority including
recent and relevant financial experience.
Brief biographical details of each director
are set out on page 32.
A review of Board composition and
balance is included as part of the annual
performance evaluation of the Board,
details of which are given below.
There are no executive officers of the
Company. Given the structure of the Board
and the fact that the Company’s
administration is conducted by YFM
Private Equity Limited, the Company has
not appointed a chief executive officer or a
senior independent non-executive director.
In addition, the directors consider that the
role of a senior independent non-executive
director is taken on by all of the directors.
Shareholders are therefore able to
approach any director with any queries
they may have.
Boardroom Diversity
The Board is committed to ensuring that
the Company is run in the most effective
manner. Consequently the Board monitors
the diversity of all directors to ensure an
appropriate level of experience and
qualification.
The Board believes in the value and
importance of diversity in the boardroom
but does not consider that it is appropriate
or in the best interests of the Company
and its shareholders to set prescriptive
targets for gender or nationality on the
Board.
Diversity of thought, experience and
approach are all important and the
directors will always seek to appoint on
merit against objective criteria.
Tenure
Directors are initially appointed until the
following Annual General Meeting when,
under the Company’s Articles of
Association, it is required that they be
elected by shareholders. Thereafter, it is
the Board’s policy that a director’s
appointment will run for a term of one
year until the next Annual General
Meeting. Subject to the performance
evaluation carried out each year, the
Board will agree whether it is appropriate
for the director to seek a further term. The
Board does not believe that length of
service in itself necessarily disqualifies a
director from seeking re-election but,
when making a recommendation, the
Board will take into account the ongoing
requirements of The UK Corporate
Governance Code, including the need to
refresh the Board and its Committees. 
The Board seeks to maintain a balance of
skills and the directors are satisfied that
as currently composed the balance of
experience and skills of the individual
directors is appropriate for the Company,
in particular with regards to investment
appraisal and investment risk
management. 
The terms and conditions of directors’
appointments are set out in formal letters
of appointment, copies of which are
available for inspection on request at the
Company’s registered office and at the
Annual General Meeting. There are no set
minimum notice periods for Mr R Last or
Mr R M Pettigrew, though Mr P C Waller’s
appointment is terminable by him or the
Company on three months’ notice.
The directors recommend the re-election
of Mr P C Waller, Mr R M Pettigrew, and
Mr R Last at this year’s Annual General
Meeting, because of their commitment,
experience and continued contribution to
the Company.
Meetings and Committees
The Board delegates certain
responsibilities and functions to
Committees. Directors who are not
members of Committees may attend at
the invitation of the Chairman. 
The table below details the number and
function of the meetings attended by each
director. There were no Nominations
Committee meetings held in the year.
During the year there were seven formal
Board meetings, three Audit Committee
meetings, one Allotment Committee
meeting, and one General Meeting. The
directors met via telephone and electronic
conferences on 16 other occasions.
Meetings attended
Mr R Mr P C Mr R M 
Last Waller Pettigrew Total
Board meetings 7 7 7 7
Audit Committee 3 3 3 3
Allotment Committee 1 1 1 1
Telephone and electronic 
conferences 15 16 16 16
General meetings 1 1 1 1
Total 27 28 28 28 BRITISH SMALLER COMPANIES VCT2 PLC
38
As set out on page 39 the quorum for the
Allotment Committee is one director.
In addition there were two DRIS allotment
meetings which the directors were not
required to attend, but which were
attended by the Company Secretary.
Training and Appraisal
On appointment, the Investment Adviser
and Company Secretary provide all
directors with induction training.
Thereafter, regular briefings are provided
on changes in regulatory requirements
that affect the Company and its directors.
Directors are encouraged to attend
industry and other seminars covering
issues and developments relevant to VCTs.
The performance of the Board has been
evaluated in respect of the financial year
ended 31 December 2016. The Board, led
by the Chairman, has conducted a
performance evaluation to determine
whether it and individual directors are
functioning effectively. 
The factors taken into account were based
on the relevant provisions of The UK
Corporate Governance Code and included
attendance and participation at Board and
Committee meetings, commitment to
Board activities and the effectiveness of
their contribution. The results of the
overall evaluation process are
communicated to the Board. Performance
evaluation continues to be conducted on
an annual basis.
The Chairman has confirmed that the
performance of the other directors being
proposed for re-election continues to be
effective and that they continue to show
commitment to the role. The independent
directors have similarly appraised the
performance of the Chairman. They
considered that the performance of Mr R
Last continues to be effective and that he
continues to demonstrate a strong
commitment to the role. 
Remuneration Committee
Due to the size of the Board and the
remuneration procedures currently in
place, in the directors’ opinion, there is no
role for an independent Remuneration
Committee. The Directors’ Remuneration
Report may be found on pages 42 to 44.
Audit Committee
The Audit Committee consists of Mr R
Last, Mr R M Pettigrew and Mr P C Waller
and meets at least three times each year.
The directors consider that it is
appropriate that the Chairman of the
Committee should be Mr R Last. The
members of the Committee consider that
they have the requisite skills and
experience to fulfil the responsibilities of
the Committee, and that the Chair of the
Committee meets the requirements of The
UK Corporate Governance Code as to
recent and relevant financial experience.
The Audit Committee’s terms of reference
include the following roles and
responsibilities:
• monitoring and making
recommendations to the Board in
relation to the Company’s published
financial statements (including in
relation to the valuation of the
Company’s unquoted investments) and
other formal announcements relating
to the Company’s financial
performance;
• monitoring and making
recommendations to the Board in
relation to the Company’s internal
control (including internal financial
control) and risk management
systems;
• annually considering the need for an
internal audit function;
• making recommendations to the
Board in relation to the appointment,
re-appointment and removal of the
external auditor and approving the
remuneration and terms of
engagement of the external auditor;
• reviewing and monitoring the external
auditor’s independence and objectivity
and effectiveness of the audit process,
taking into consideration relevant UK
professional and regulatory
requirements;
• monitoring the extent to which the
external auditor is engaged to supply
non-audit services; and
• ensuring that the Investment Adviser
has arrangements in place for the
investigation and follow-up of any
concerns raised confidentially by staff
in relation to the propriety of financial
reporting or other matters. 
It reviews the terms of the investment
advisory agreement and examines the
effectiveness of the Company’s internal
control and risk management systems,
receives information from the Investment
Adviser’s compliance department and
reviews the scope and results of the
external audit, its cost effectiveness and
the independence and objectivity of the
external auditor. 
The directors’ statement on the
Company’s system of internal control is
set out on pages 40 and 41.
The Audit Committee has written terms of
reference which define clearly its
responsibilities, copies of which are
available for inspection on request at the
Company’s registered office and at the
Annual General Meeting, and also on the
Company’s website at www.bscfunds.com.
The Company does not have an
independent internal audit function as it is
not deemed appropriate given the size of
the Company and the nature of the
Company’s business. However the
Committee considers annually whether
there is a need for such a function and, if
so, would recommend this to the Board.  Corporate Governance
Annual Report and Accounts for the year ended 31 December 2016
39
These issues were discussed with the
Investment Adviser and the auditor at the
pre-year-end audit planning meeting and
at the conclusion of the audit of the
financial statements.
Valuation of unquoted
investments: 
The Audit Committee reviewed the
estimates and judgements made in the
investment valuations and was satisfied
that they were appropriate. The
Investment Adviser and the auditor
confirmed to the Audit Committee that the
investment valuations had been carried
out consistently with prior periods and in
accordance with the published industry
guidelines, taking account of the latest
available information about investee
companies and current market data.
Venture capital trust status: 
The Investment Adviser confirmed to the
Audit Committee that the conditions for
maintaining the Company’s status as an
approved venture capital trust had been
complied with throughout the year. The
position was also reviewed by the
Company’s advisers.
The Investment Adviser confirmed to the
Audit Committee that it was not aware of
any material unadjusted misstatements.
Having reviewed the reports received from
the Investment Adviser and the auditor,
the Audit Committee is satisfied that the
key areas of risk and judgement have been
appropriately addressed in the financial
statements and that the significant
assumptions used in determining the
value of assets and liabilities and revenue
recognition have been properly appraised
and are sufficiently robust. The Committee
considers that BDO LLP has carried out its
duties as auditor in a diligent and
professional manner. 
As part of the review of audit effectiveness
and independence, BDO LLP has
confirmed that it is independent of the
Company and has complied with
applicable auditing standards. BDO LLP
was appointed as the result of a
competitive tendering process in 2016. 
As a consequence, this is their first year of
office as auditor.
During the year ended 31 December 2016
the Audit Committee discharged its
responsibilities by:
• reviewing and approving the external
auditor’s terms of engagement,
remuneration and independence;
• reviewing the external auditor’s plan
for the audit of the Company’s
financial statements, including
identification of key risks;
• reviewing YFM Private Equity Limited’s
statement of internal controls
operated in relation to the Company’s
business and assessing the
effectiveness of those controls in
minimising the impact of key risks;
• reviewing reports on the effectiveness
of YFM Private Equity Limited’s
compliance procedures;
• reviewing the appropriateness of the
Company’s accounting policies;
• reviewing the Company’s draft annual
financial statements, half yearly
results statement and interim
management statements prior to
Board approval, including the
proposed fair value of investments as
determined by the directors; 
• reviewing the external auditor’s
detailed reports to the Committee on
the annual financial statements; 
• recommending to the Board and
shareholders the re-appointment of
Grant Thornton UK LLP as the
Company’s external auditor; and
• undertaking a competitive tendering
process for external auditing services,
resulting in the appointment of BDO
LLP to fill the casual vacancy.
The key areas of risk that have been
identified and considered by the Audit
Committee in relation to the business
activities and financial statements of the
Company are as follows:
• valuation of unquoted investments;
and
• compliance with HM Revenue &
Customs’ conditions for maintenance
of approved venture capital trust
status.
Having completed its review the Audit
Committee is satisfied that BDO LLP
remained effective and independent in
carrying out its responsibilities up to the
date of signing this report. No non-audit
services were provided by BDO LLP during
the year . 
Nominations Committee
The Company has a Nominations
Committee which consists of Mr R Last, Mr
R M Pettigrew and Mr P C Waller, all of
whom who are considered by the Board to
be independent of the Investment Adviser .
The Chairman of the Board acts as
Chairman of the Committee. 
In considering appointments to the Board,
the Nominations Committee takes into
account the ongoing requirements of the
Company and the need to have a balance of
skills and experience within the Board.
Meetings are held as and when required.
There were no Nominations Committee
meetings during the year .
Investment Committee
The Board has determined that, due to the
investment procedures currently in place,
in its opinion there is no role for an
independent Investment Committee.
Allotment Committee
The Company has an Allotment Committee
which consists of the directors who are
considered by the Board to be independent
of the Investment Adviser . The quorum for
Committee meetings is one director,
unless otherwise determined by the Board.
In addition the Company Secretary has an
authority to allot shares under the DRIS.
The Committee considers and, if
appropriate, authorises the allotment of
shares. The Committee ensures that the
total number of shares to be issued does
not exceed the authority given by the
shareholders. There are no written terms
of reference. BRITISH SMALLER COMPANIES VCT2 PLC
40
Relations with
Shareholders
The Board regularly monitors the
shareholder profile of the Company. It aims
to provide shareholders with a full
understanding of the Company’s activities
and performance, and reports formally to
shareholders twice a year by way of the
Annual Report and the Interim Report. This
is supplemented by the daily publication of
the Company’s share price and the
publication for the two quarters of the year
where an Annual or Interim Report is not
issued (31 March and 30 September),
through the London Stock Exchange, of the
net asset value of the Company together
with a factsheet detailing developments for
the Company in that quarter . 
All shareholders have the opportunity, and
are encouraged, to attend the Company’s
Annual General Meeting at which the
directors and representatives of the
Investment Adviser are available in person
to meet with and answer shareholders’
questions. In addition representatives of the
Investment Adviser periodically hold
shareholder workshops which review the
Company’s performance and industry
developments, and which give shareholders
a further opportunity to meet members of
the Board and chief executives or chairmen
of some of the investee companies. During
the year the Company’s Investment Adviser
has held regular discussions with
shareholders. The directors are made fully
aware of shareholders’ views. The
Chairman and directors make themselves
available, as and when required, to address
shareholder queries. The directors may be
contacted through the Company Secretary
whose details are shown on page 83. 
The Company’s Annual Report is published
in time to give shareholders at least 21
clear days’ notice of the Annual General
Meeting. Shareholders wishing to raise
questions in advance of the meeting are
encouraged to write to the Company
Secretary at the address shown on page 83.
Separate resolutions are proposed for each
separate issue. Proxy votes will be counted
and the results announced at the Annual
General Meeting for and against each
resolution.
Internal Control and Risk
Management
Under an agreement dated 28 November
2000, superseded by an agreement dated
31 October 2005 and as varied by
agreements dated 8 December 2010, 26
October 2011, 16 November 2012, 17
October 2014 and 7 August 2015, certain
functions of the Company have been sub-
contracted to YFM Private Equity Limited.
The Board receives operational and
financial reports on the current state of the
business and on appropriate strategic,
financial, operational and compliance
issues. These matters include, but are not
limited to:
• a clearly defined investment strategy
for the Investment Adviser to the
Company;
• all decisions concerning the acquisition
or disposal of investments are taken by
the Board after due consideration of
the recommendations made by the
Investment Adviser;
• regular reviews of the Company’s
investments, liquid assets and
liabilities, revenue and expenditure;
• regular reviews of compliance with the
VCT regulations to retain status; and
• the Board receives copies of the
Company’s management accounts on a
regular basis showing comparisons
with budget. These include a report by
the Investment Adviser with a review of
performance. Additional information is
supplied on request.
The Board confirms the procedures to
implement the guidance detailed in section
C.2: “Risk Management & Internal Control”
of The UK Corporate Governance Code and
those identified in the Principles 13 and 15 of
the AIC Code were in place throughout the
year ended 31 December 2016 and up to the
date of this report. A detailed review of the
risks faced by the Company and the
techniques used to mitigate these risks can
be found in the Strategic Report on page 29.
The Board acknowledges that it is
responsible for overseeing the Company’s
system of internal control and for reviewing
its effectiveness. Such a system is designed
to manage rather than eliminate the risk of
failure to achieve business objectives and
can only provide reasonable and not
absolute assurance against material
misstatement or loss.
The Board arranges its meeting agenda so
that risk management and internal control
is considered on a regular basis and a full
robust risk and control assessment takes
place no less frequently than twice a year .
There is an ongoing process for identifying,
evaluating and managing the significant
risks faced by the Company. This process
has been in place for longer than the year
under review and up to the date of approval
of the Annual Report. The process is
formally reviewed bi-annually by the Board.
However, due to the size and nature of the
Company, the Board has concluded that it
is not necessary at this stage to set up an
internal audit function. This decision will be
kept under review. The directors are
satisfied that the systems of risk
management that they have introduced are
sufficient to comply with the FRC Guidance
on Risk Management, Internal Control and
Related Financial and Business Reporting.
In particular the Board, together with the
Audit Committee, is responsible for
overseeing and reviewing internal controls
concerning financial reporting. In addition
to those controls sub-contracted as listed
above the following controls have been in
place throughout the year:
• a robust system of internal control is
maintained by the Investment Adviser
over the preparation and reconciliation
of investment portfolio valuations;
• monthly reconciliation of assets held
as fixed income securities and cash;
• independent review of the valuations
of portfolio investments by the Board
(quarterly);
• the Audit Committee review of
financial reporting and compliance (as
set out on page 38);
• the Board reviews financial
information including the Annual
Report, Interim Report and interim
management statements prior to their
external communication; and Corporate Governance
Annual Report and Accounts for the year ended 31 December 2016
41
Conflicts of Interest
The directors have declared any conflicts
or potential conflicts of interest to the
Board which has the authority to authorise
such situations if appropriate. The
Company Secretary maintains the
Register of Directors’ Interests which is
reviewed quarterly by the Board, when
changes are notified, and the directors
advise the Company Secretary and the
Board as soon as they become aware of
any conflicts of interest. Directors who
have conflicts of interest which have been
approved by the Board do not take part in
discussions or decisions which relate to
any of their conflicts. Details of all Related
Party Transactions are shown in note 15
on page 71.
Corporate Governance in
relation to Investee
Companies
The Company delegates responsibility for
monitoring its investments to its
Investment Adviser whose policy, which
has been noted by the Board, is as follows:
YFM Private Equity Limited is committed
to introducing corporate governance
standards into the companies in which its
clients invest. With this in mind, the
Company’s investment agreements
contain contractual terms specifying the
required frequency of management board
meetings and of annual shareholders’
meetings, and for representation at such
meetings through YFM Private Equity
Limited. In addition, provision is made for
the preparation of regular and timely
management information to facilitate the
monitoring of an investee company
performance in accordance with best
practice in the private equity sector.
Co-Investment
Typically the Company invests alongside
other venture capital funds and other
private equity funds advised or managed
by the Investment Adviser, such
syndication spreading investment risk.
Details of the amounts invested in
individual companies are set out in the
Strategic Report. Co-Investments are
detailed in note 7 to the financial
statements on page 68.
Management
The Board has delegated the monitoring of
the investment portfolio to the Investment
Adviser.
This report was approved by the Board on
21 March 2017 and signed on its behalf by
Richard Last
Chairman
British Smaller Companies VCT2 plc 
Registered number 04084003
• the Board reviews the financial
information in any prospectus or offer
for subscription issued by the
Company in connection with the issue
of new share capital.
Following the FCA’s registration of the
Company as a Small Registered
Alternative Investment Fund Manager the
Company holds its own investments. All
investments made for the accounts of and
monies received for the Company will be
deposited in the name of the Company or
will be held by a custodian or the
Company’s solicitors. All certificates and
other documents evidencing title (whether
or not in registered form) will be received
by the Company and will be held in the
Company’s name or forwarded directly to
the custodian or the Company’s solicitors.
No third party custodian has been
appointed. The Company will take legal
ownership of its assets.
The Board has reviewed the effectiveness
of the Company’s systems of internal
control and risk management for the year
and up to the date of this Report. The
Board is of the opinion that the Company’s
systems of internal, financial, and other
controls are appropriate to the nature of
its business activities and methods of
operation given the size of the Company,
and the Board has a reasonable
expectation that the Company will
continue in operational existence for the
foreseeable future. BRITISH SMALLER COMPANIES VCT2 PLC
42
DIRECTORS’ REMUNERATION REPORT
The Board has prepared this report in accordance with the
requirements of the Large and Medium Sized Companies 
and Groups (Accounts and Reports) (Amendment)
Regulations 2013. Ordinary resolutions for the approval of
this report and the Directors’ Remuneration Policy will be put
to the members at the forthcoming Annual General Meeting.
The law requires the Company’s auditor,
BDO LLP, to audit certain information
included in this report. Where disclosures
have been audited, they are indicated as
such. The auditor’s opinion is included in
the Independent Auditor’s Report on pages
46 to 49.
Directors’ Remuneration
Policy
This statement of the Directors’
Remuneration Policy took effect following
approval by shareholders at the Annual
General Meeting held on 19 May 2014. A
resolution to approve the Directors’
Remuneration Policy will be put to
shareholders every three years.
The Board currently comprises three
directors, all of whom are non-executive.
The Board does not have a separate
Remuneration Committee due to the size
of the Board and the remuneration
procedures currently in place. In the
directors’ opinion and under the Listing
Rules, there is no requirement for an
independent Remuneration Committee. 
The Board has not retained external
advisors in relation to remuneration
matters but has access to information
about directors’ fees paid by other
companies of a similar size and nature.
Shareholders’ views in respect of the
directors’ remuneration are
communicated at the Company’s AGM and
are taken into consideration in formulating
the Directors Remuneration Policy.
At the last Annual General Meeting over 99
per cent of shareholders who exercised
their voting rights voted for the resolution
approving the Directors’ Remuneration
Report, showing significant shareholder
approval.
The Board’s policy is that the
remuneration of non-executive directors
should reflect the experience of the Board
as a whole, to be fair and comparable to
that of other relevant venture capital
trusts that are similar in size and have
similar investment objectives and
structures. Furthermore, the level of
remuneration should be sufficient to
attract and retain the directors needed to
oversee properly the Company and to
reflect the duties and responsibilities of
the Directors and the value and amount of
time committed to the Company’s affairs.
It is not considered appropriate that
directors’ remuneration should be
performance-related, and as such the
directors are not eligible for bonuses,
share options, pension benefits, long-term
incentive schemes or other benefits in
respect of their services as non-executive
directors of the Company. 
It is the Board’s policy that directors do
not have service contracts, but new
directors are provided with a letter of
appointment. The terms of directors’
appointments provide that directors
should retire and be subject to election at
the first Annual General Meeting after
their appointment. Thereafter, it has been
agreed that all directors will offer
themselves for re-election on an annual
basis. There is no notice period other than
for Mr P C Waller, whose appointment is
terminable by him or the Company on
three months’ notice. Any director who
ceases to hold office is not entitled to
receive any payment other than accrued
fees (if any) for past services. There were
no payments for loss of office made during
the period.
The policy will continue to be applied in
the forthcoming year.
Brief biographical notes on the directors
are given on page 32.
Statement by the Chairman
of the Nominations
Committee
In accordance with the Directors’
Remuneration Policy the directors’ fees
were reviewed by the Board during the
year. The Board agreed that the directors’
fees payable by the Company should be
increased from 1 April 2016 to £34,000 per
annum for the Chairman and £20,500 per
annum for the other directors.
As noted on page 35 the directors have
agreed to forego the ability to reclaim
certain expenses and their fees were
increased to compensate for this.  As a
result the cap on aggregate director's fees
of £75,000 has been reached and your
Board propose to increase the cap on
aggregate fees to £100,000 in order to
provide the flexibility to recruit new
directors in the future. Corporate Governance
Annual Report and Accounts for the year ended 31 December 2016
43
Directors’ Remuneration 
for the year ended 31
December 2016 (audited)
The directors who served in the year
received the following emoluments in the
form of fees, which represent the entire
remuneration payable to directors (see
Table A):
There are no executive directors (2015:
none). 
Total fees paid (audited) TABLE A
2016 2015
££
R Last 33,375 31,500
R M Pettigrew 19,875 18,000
P C Waller 19,875 18,000
73,125 67,500
Directors and their interests (audited) TABLE B
Number of ordinary shares at: Percentage of voting rights:
31 December 31 December 31 December 31 December
2016 2015 2016 2015
R Last 134,632 134,632 0.14% 0.15%
R M Pettigrew 80,333 80,333 0.09% 0.09%
P C Waller 35,560 35,560 0.04% 0.04%
Relative Importance of
Spend on Pay
Directors’ remuneration, dividend
distribution and share buy-backs are
shown in Table C.
Consideration of
Employment Conditions of
Non-director Employees
The Company does not have any
employees. Accordingly, the disclosures
required under paragraph 38 and 39 of
Schedule 8 to the Large and Medium-sized
Companies and Groups (Accounts and
Reports) Regulations 2008 are not
required.
Relative importance of pay TABLE C
2016 2015
££
Dividends 4,191,000 3,887,000 
Share buy-backs 240,000 123,000
Total directors fees 73,125 67,500 
Directors and their
Interests (audited)
The directors of the Company at 31
December 2016 and their beneficial
interests in the share capital of the
Company (including those of immediate
family members) were as shown in Table B
None of the directors held any options to
acquire additional shares at the year end.
The Company has not set out any formal
requirement or guidelines concerning
their ownership of shares in the Company. Dec 2008
Dec 2009
Dec 2010
Dec 2011
Dec 2012
Dec 2013
Dec 2014
Dec 2016
Dec 2015
BSC2 Share price return
(Dividends reinvested since
inception)
VCT Generalist Share Price Total Return
(Source: Index compiled by the AIC)
BSC2 Net Asset Value
Total Return (NAV plus
dividends paid)
Pence per ordinary share
100
150
200
250
300
BRITISH SMALLER COMPANIES VCT2 PLC
44
Company Performance
The Board is responsible for the
Company’s investment strategy and
performance, although the management
of the Company’s investment portfolio is
delegated to the Investment Adviser
through the advisory agreement, as
referred to in the Directors’ Report.
Net asset value total return (calculated by
reference to the net asset value and
cumulative dividends paid, as set out in
note 13 of these financial statements and
excluding tax reliefs received by
shareholders) is the primary recognised
measure of performance in the VCT
industry. This measure is discussed on
page 12. 
The graph above shows a comparison over
the last eight years of the movements in
both the Company’s share price total
return and the share price total return for
approximately 60 Generalist VCTs as
published by the Association of Investment
Companies (AIC). In line with the AIC index
all the relative performance measures
have been rebased to 100 as at December
2008. The directors consider this to be the
most appropriate published index on
which to report on comparative
performance. 
Changes in the Company’s net asset value
total return are included on the graph as
the Board believes this reflects the return
to shareholders not participating in the
DRIS.
This report was approved by the Board and
signed on its behalf on 21 March 2017
Richard Last
Chairman Corporate Governance
Annual Report and Accounts for the year ended 31 December 2016
45
The directors are responsible for preparing the annual 
report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to
prepare the financial statements for each
financial year. Under that law the directors
are required to prepare the financial
statements and have elected to prepare
the Company’s financial statements in
accordance with International Financial
Reporting Standards (IFRSs) as adopted by
the European Union. Under company law
the directors must not approve the
financial statements unless they are
satisfied that they give a true and fair view
of the state of affairs of the Company and
of the profit or loss for the Company for
that period.
In preparing these financial statements,
the directors are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and accounting
estimates that are reasonable and
prudent;
• state whether they have been
prepared in accordance with IFRSs
as adopted by the European Union,
subject to any material departures
disclosed and explained in the
financial statements; and
• prepare a strategic report, directors’
report and directors’ remuneration
report which comply with the
requirements of the Companies Act
2006.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the
Company’s transactions and disclose with
reasonable accuracy at any time the
financial position of the Company and
enable them to ensure that its financial
statements comply with the Companies
Act 2006. They are also responsible for
safeguarding the assets of the Company
Having taken advice from the Audit
Committee, the Board considers the
annual report and accounts, taken as a
whole, are fair, balanced and
understandable and that it provides the
information necessary for shareholders to
assess the Company’s performance,
business model and strategy.
The names and functions of all the
directors are stated on page 32.
For and on behalf of the Board
This statement was approved by the 
Board and signed on its behalf on 21
March 2017.
Richard Last
Chairman
DIRECTORS’ RESPONSIBILITIES STATEMENT
and hence for taking reasonable steps for
the prevention and detection of fraud and
other irregularities.
Website Publication
The directors are responsible for ensuring
the annual report and the financial
statements are made available on a
website. Financial statements are
published on the Company’s website at
www.bscfunds.com in accordance with
legislation in the United Kingdom
governing the preparation and
dissemination of financial statements,
which may vary from legislation in other
jurisdictions. The maintenance and
integrity of the Company’s website is the
responsibility of the directors. The
directors’ responsibility also extends to
the ongoing integrity of the financial
statements contained therein.
Directors’ Responsibilities
pursuant to DTR4
The directors confirm to the best of their
knowledge:
• the financial statements have been
prepared in accordance with IFRSs
as adopted by the European Union
and give a true and fair view of the
assets, liabilities, financial position
and profit and loss of the Company;
and
• the annual report includes a fair
review of the development and
performance of the business and the
financial position of the Company,
together with a description of the
principal risks and uncertainties that
it faces. Respective responsibilities
of directors and auditor
As explained more fully in the Directors’
Responsibility Statement, the directors are
responsible for the preparation of the
financial statements and for being
satisfied that they give a true and fair view.
Our responsibility is to audit and express
an opinion on the financial statements in
accordance with applicable law and
International Standards on Auditing (UK
and Ireland). Those standards require us
to comply with the Financial Reporting
Council’s  (FRC’s) Ethical Standards for
Auditors. 
A description of the scope of an audit of
financial statements is provided on the
FRC’s website at
www.frc.org.uk/auditscopeukprivate
An overview of the scope 
of the audit including our
assessment of the risk of
material misstatement
Our audit approach was developed by
obtaining an understanding of the
Company’s activities, the key functions
undertaken on behalf of the Board by the
Investment Adviser and the overall control
environment. Based on this understanding
we assessed those aspects of the
Company’s transactions and balances
which were most likely to give rise to a
material misstatement.  Below are those
risks which we considered to have the
greatest effect on the overall audit
strategy including the allocation of
resources in the audit, and our audit
response:
BRITISH SMALLER COMPANIES VCT2 PLC
46
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF BRITISH SMALLER COMPANIES VCT2 PLC 
Valuation of investments 
The valuation of investments is a key
accounting estimate where there is an
inherent risk of management override
arising from the investment valuations
being prepared by the Investment Adviser,
who is remunerated based on the net
asset value of the company. In addition,
there is a high level of estimation
uncertainty involved in determining the
unquoted investment valuations.
We performed initial analytical procedures
to determine the extent of our work
considering, inter alia, the value of
individual investments, the nature of the
investment and the extent of the fair value
movement. A breakdown of the investment
portfolio by nature of instrument and
valuation method is shown below.
In respect of unquoted equity our sample
for testing was stratified according to risk,
having regard to the subjectivity of the
inputs to the valuations. 40% of the
portfolio is based on price of recent
investment or cost, reviewed for
impairment. For such investments, on a
sample basis, we verified the cost or price
of recent investment to supporting
documentation and reviewed the
Investment Adviser’s determination of
whether there were any reasons why the
valuation did not remain appropriate,
including obtaining evidence of the cash
balance where appropriate. 
Our opinion on the 
financial statements
In our opinion British Smaller Companies
VCT2 plc’s financial statements for the year
ended 31 December 2016, which have been
prepared by the directors in accordance
with applicable law and International
Financial Reporting Standards as adopted
by the European Union (“IFRSs”): 
• give a true and fair view of the state of
the Company’s affairs as at 31
December 2016 and its profit for the
year then ended;
• have been properly prepared in
accordance with IFRSs as adopted by
the European Union; and
• have been prepared in accordance with
the requirements of the Companies Act
2006.
This report is made solely to the
Company’s members, as a body, in
accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has
been undertaken so that we might state to
the Company’s members those matters we
are required to state to them in an
auditor’s report and for no other purpose.
To the fullest extent permitted by law, we
do not accept or assume responsibility to
anyone other than the Company and the
Company’s members as a body, for our
audit work, for this report, or for the
opinions we have formed.
What our opinion covers
Our audit opinion on the financial
statements covers the Statement of
Comprehensive Income, the Balance
Sheet, the Statement of Changes in Equity,
the Statement of Cash Flows and the
related notes.
Unquoted equity
Unquoted loan stock
Quoted equity
INVESTMENT
BY TYPE
45%
50%
5% Auditor’s Report
Annual Report and Accounts for the year ended 31 December 2016
47
59% of the unquoted investment portfolio
is valued in accordance with more
subjective techniques, mainly on an
earnings multiple basis, as described in
note 7. In respect of the sample selected
for detailed testing (representing 99% by
value of the investments valued using
more subjective techniques) we:
• recalculated the value attributable to
the company;
• reviewed and challenged the inputs to
the valuation and assessed the impact
of the estimation uncertainty
concerning these assumptions and the
disclosure of these uncertainties in the
financial statements;
• reviewed the historical financial
statements and recent management
information available for unquoted
investments used to support
assumptions about maintainable
earnings used in the valuations;
• considered the earnings multiples
applied by reference to observable
listed company market data; and 
• challenged adjustments made to such
market data in establishing the
earnings multiple applied in arriving at
the valuations adopted.
Where appropriate, we performed a
sensitivity analysis by developing our own
point estimate where we considered that
alternative input assumptions could
reasonably have been applied and we
considered the overall impact of such
sensitivities on the portfolio of
investments in determining whether the
valuations as a whole are reasonable and
free from bias.
In respect of quoted equity investments
(5% of the total portfolio value), we
obtained the year end price and confirmed
that bid price had been used as the most
appropriate indication of fair value.
The remainder of the portfolio was subject
to analytical procedures to confirm there
were no unexpected movements in value
warranting further investigation.
The extent of our testing is detailed below:
Revenue recognition 
Revenue consists primarily of interest
earned on loans to investee companies
and cash balances, as well as  dividends
receivable from investee companies.
Revenue recognition is considered to be a
significant audit risk as it is a key factor in
demonstrating the performance of the
portfolio.
We developed expectations for interest
income receivable based on loan
instruments and investigated any
variations in amounts recognised to ensure
they were valid. We traced a sample of
interest income receipts to bank.
We considered whether the accounting
policy had been applied correctly by
management in determining provisions
against income where recovery is
considered doubtful, considering
management information relevant to the
ability of the investee company to service
the loan and the reasons for any arrears of
loan interest. We considered the
appropriateness of the accounting
treatment of other fixed returns, including
redemption premia. 
We considered the completeness of
dividend income receivable by reviewing
independent data including published
dividend histories for quoted investments
and statutory and management
information for a sample of unquoted
investments. We traced dividend income
received to bank statements and
considered the appropriate classification
of dividends between revenue and capital.  
The audit committee’s consideration of
their key issues is set out on page 39.
Materiality in context
We apply the concept of materiality both in
planning and performing our audit, and in
evaluating the effect of misstatements.
For planning, we consider materiality to be
the magnitude by which misstatements,
including omissions, could influence the
economic decisions of reasonable users
that are taken on the basis of the financial
statements. Importantly, misstatements
below this level will not necessarily be
evaluated as immaterial as we also take
account of the nature of identified
misstatements, and the particular
circumstances of their occurrence, when
evaluating their effect on the financial
statements.  The application of these key
considerations gives rise to two levels of
materiality, the quantum and purpose of
which are tabulated on page 48.
Detailed testing
Analytical procedures
INVESTMENTS
BY VALUE
7%
93%
Analytical procedures
Detailed testing
INVESTMENTS
BY NUMBER
83%
17% BRITISH SMALLER COMPANIES VCT2 PLC
48
We agreed with the Audit Committee that
we would report to the Committee all
audit differences in excess of £10,000, as
well as differences below that threshold
that, in our view, warranted reporting on
qualitative grounds.
Opinion on other matters
prescribed by the
Companies Act 2006
In our opinion the part of the Directors’
Remuneration Report to be audited has
been properly prepared in accordance with
the Companies Act 2006.
In our opinion:  based on the work
undertaken in the course of the audit:
• the information given in the Strategic
Report and Directors’ Report for the
financial year for which the financial
statements are prepared is consistent
with the financial statements; and
• the Strategic Report and Directors’
Report have been prepared in
accordance with applicable legal
requirements.
Materiality measure Purpose Key considerations and benchmarks Quantum (£)
Financial statement materiality
(2% value of investments)
Assessing whether the
financial statements as a whole
present a true and fair view
• The value of investments
• The level of judgement
inherent in the valuation
• The range of reasonable
alternative valuation
800,000
Specific materiality – classes of
transactions and balances
which impact on revenue
profits (10% revenue return
before tax) 
Assessing those classes of
transactions, balances or
disclosures for which
misstatements of lesser
amounts than materiality for
the financial statements as a
whole could reasonably be
expected to influence the
economic decisions of users
taken on the basis of the
financial statements.
• The level of net income
return
120,000
Statement regarding the
directors’ assessment of
principal risks, going
concern and longer term
viability of the company
We have nothing material to add or to
draw attention to in relation to:
• the directors’ confirmation in the
annual report that they have carried
out a robust assessment of the
principal risks facing the entity,
including those that would threaten its
business model, future performance,
solvency or liquidity;
• the disclosures in the annual report
that describe those risks and explain
how they are being managed or
mitigated;
• the directors’ statement in the
financial statements about whether
they considered it appropriate to adopt
the going concern basis of accounting
in preparing them and their
identification of any material
uncertainties to the Company’s ability
to continue to do so over a period of at
least twelve months from the date of
approval of the financial statements;
and
• the directors’ explanation in the
annual report as to how they have
assessed the prospects of the entity,
over what period they have done so
and why they consider that period to
be appropriate, and their statement as
to whether they have a reasonable
expectation that the entity will be able
to continue in operation and meet its
liabilities as they fall due over the
period of their assessment, including
any related disclosures drawing
attention to any necessary
qualifications or assumptions. Auditor’s Report
Annual Report and Accounts for the year ended 31 December 2016
49
Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion,
information in the annual report is:
• materially inconsistent with the information in the audited financial statements; or 
• apparently materially incorrect based on, or materially inconsistent with, our knowledge
of the Company acquired in the course of performing our audit; or 
• is otherwise misleading.
In particular, we are required to consider whether we have identified any inconsistencies
between our knowledge acquired during the audit and the directors’ statement that they
consider the annual report is fair, balanced and understandable and whether the annual
report appropriately discloses those matters that we communicated to the Audit Committee
which we consider should have been disclosed.
We have nothing to report in respect 
of these matters.
In the light of the knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have not identified material misstatements in the
Strategic Report or the Directors’ Report.
We have nothing to report in respect 
of these matters.
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• adequate accounting records have not been kept or returns adequate for our audit have
not been received from branches not visited by us; or
• the financial statements and the part of the directors’ remuneration report to be audited
are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
We have nothing to report in respect 
of these matters.
Under the Listing Rules we are required to review the part of the corporate governance
statement relating to the Company’s compliance with the provisions of the UK Corporate
Governance Code specified for review by the auditor in accordance with Listing Rule 9.8.10
R(2). The Listing Rules also require that we review the directors’ statements set out on page
33 regarding going concern and longer term viability.
We have nothing to report in respect 
of these matters.
Matters on which we are
required to report by
exception
Peter Smith (senior statutory auditor)
For and on behalf of BDO LLP, 
statutory auditor
London
United Kingdom
21 March 2017
BDO LLP is a limited liability partnership  BRITISH SMALLER COMPANIES VCT2 PLC
50
2016 2015
Notes Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Income 2 1,937 - 1,937 1,953 - 1,953
Gains on investments held at fair value 7 - 704 704 - 3,316 3,316
Gain on disposal of investments 7 - 339 339 - 232 232
Total income 1,937 1,043 2,980 1,953 3,548 5,501
Administrative expenses:
Investment Adviser’s fee (280) (839) (1,119) (234) (701) (935)
Other expenses (449) - (449) (434) - (434)
3 (729) (839) (1,568) (668) (701) (1,369)
Profit before taxation 1,208 204 1,412 1,285 2,847 4,132
Taxation 4 (116) 116 - (152) 152 -
Profit for the year 1,092 320 1,412 1,133 2,999 4,132
Total comprehensive income for the year 1,092 320 1,412 1,133 2,999 4,132
Basic and diluted earnings 
per ordinary share 6 1.17p 0.34p 1.51p 1.36p 3.60p 4.96p
The accompanying notes on pages 55 to 75 are an integral part of these financial statements.
The Total column of this statement represents the Company’s Statement of Comprehensive Income, prepared in accordance with
International Financial Reporting Standards (‘IFRSs’) as adopted by the European Union. The supplementary Revenue and Capital
columns are prepared under the Statement of Recommended Practice ‘Financial Statements of Investment Trust Companies and
Venture Capital Trusts’ (‘SORP’) 2014 published by the AIC.
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2016 Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
51
2016 2015
Notes £000 £000
Assets
Non-current assets
Financial assets at fair value through profit or loss 7 39,319 36,652
Trade and other receivables 8 837 678
40,156 37,330
Current assets
Trade and other receivables 8 391 368
Cash on fixed term deposit 9 3,037 1,992
Cash and cash equivalents 9 12,826 15,444
16,254 17,804
Liabilities
Current liabilities
Trade and other payables 10 (301) (284)
Net current assets 15,953 17,520
Net assets 56,109 54,850
Shareholders’ equity
Share capital 11 9,652 8,939
Share premium account 16,902 13,337
Capital redemption reserve 88 88
Other reserve 2 2
Merger reserve 5,525 5,525
Capital reserve 15,621 20,781
Investment holding gains and losses 7,077 5,127
Revenue reserve 1,242 1,051
Total shareholders’ equity 56,109 54,850
Net asset value per ordinary share 12 59.7p 62.9p
The accompanying notes on pages 55 to 75 are an integral part of these financial statements.
The financial statements were approved and authorised for issue by the Board of Directors and were signed on its behalf on 21 March
2017.
Richard Last
Chairman
BALANCE SHEET
At 31 December 2016 BRITISH SMALLER COMPANIES VCT2 PLC
52
STATEMENT OF CHANGES IN EQUITY 
For the year ended 31 December 2016
Share Share Other Capital Investment Revenue Total 
capital premium reserves* reserve holding reserve equity
account gains
(losses)
£000 £000 £000 £000 £000 £000 £000
Balance at 31 December 2014 6,447 342 5,615 24,822 1,507 600 39,333
Revenue return for the year ----- 1,285 1,285
Capital expenses - - - (701) - - (701)
Investment holding gain 
on investments held at fair value ---- 3,316 - 3,316
Realisation of investments in the year - - - 232 - - 232
Taxation - - - 152 - (152) -
Total comprehensive (expense) 
income for the year - - - (317) 3,316 1,133 4,132
Issue of share capital 2,366 13,056---- 15,422
Issue costs ** - (667) - (92) - - (759)
Purchase of own shares - - - (123) - - (123)
Issue of shares – DRIS 126 606---- 732
Dividends - - - (3,205) - (682) (3,887)
Total transactions with owners 2,492 12,995 - (3,420) - (682) 11,385
Realisation of prior year 
investment holding losses - - - (304) 304 - -
Balance at 31 December 2015 8,939 13,337 5,615 20,781 5,127 1,051 54,850
Revenue return for the year ----- 1,208 1,208
Capital expenses - - - (839) - - (839)
Investment holding gain on 
investments held at fair value ---- 704 - 704
Realisation of investments in the year - - - 339 - - 339
Taxation - - - 116 - (116) -
Total comprehensive (expense)  
income for the year - - - (384) 704 1,092 1,412
Issue of share capital 568 3,030---- 3,598
Issue costs ** - (146) ---- (146)
Purchase of own shares - - - (240) - - (240)
Issue of shares – DRIS 145 681---- 826
Dividends - - - (3,321) - (870) (4,191)
Total transactions with owners 713 3,565 - (3,561) - (870) (153)
Transfer between reserves - - - (1,933) 1,964 (31) -
Realisation of prior year 
investment holding gains - - - 718 (718) - -
Balance at 31 December 2016 9,652 16,902 5,615 15,621 7,077 1,242 56,109
The accompanying notes on pages 55 to 75 are an integral part of these financial statements. Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
53
Statement of Changes in Equity (continued)
for the year ended 31 December 2016
Reserves available for distribution
Under the Companies Act 2006 the capital reserve and the revenue reserve are distributable reserves. The table below shows amounts
that are available for distribution.
Capital Revenue Total 
reserve reserve
£000 £000 £000
Distributable reserves as above 15,621 1,242 16,863
Less : Interest and dividends not yet distributable - (1,065) (1,065)
: Cancelled share premium not yet distributable (1,343) - (1,343)
Reserves available for distribution*** 14,278 177 14,455
* Other reserves include the capital redemption reserve, the merger reserve and the other reserve, which are non-distributable. The other reserve was
created upon the exercise of warrants, the capital redemption reserve was created for the purchase and cancellation of own shares, and the merger reserve
was created on the merger with British Smaller Technologies Company VCT plc.
** Issue costs include both fundraising costs and costs incurred from the Company’s DRIS.
*** Subject to filing these financial statements at Companies House.
The merger reserve was created to account for the difference between the nominal and fair value of shares issued as consideration for
the acquisition of the assets and liabilities of British Smaller Technology Companies VCT plc. The reserve was created after meeting the
criteria under section 131 of the Companies Act 1985 and the provisions of the Companies Act 2006 for merger relief. The merger
reserve is a non-distributable reserve.
The capital reserve and revenue reserve are both distributable reserves. The reserves total £16,863,000 representing a decrease of
£4,969,000 during the year. The directors also take into account the level of the investment holding gains (losses) reserve and the future
requirements of the Company when determining the level of dividend payments. 
Of the potentially distributable reserves of £16,863,000 shown above, £1,065,000 relates to interest and dividends not yet distributable
and £1,343,000 of share premium which becomes distributable from 1 January 2018.
On filing these financial statements at Companies House the reserves available for distribution will be £14,455,000. BRITISH SMALLER COMPANIES VCT2 PLC
54
STATEMENT OF CASH FLOWS
For the year ended 31 December 2016
Notes 2016 2015
£000 £000
Net cash inflow from operating activities 20 147
Cash flows from (used in) investing activities
Purchase of financial assets at fair value through profit or loss 7 (4,508) (7,239)
Proceeds from sale of financial assets at fair value through profit or loss 7 2,874 2,458
Deferred consideration 7 183 13
Cash placed on fixed term deposit (1,045) (1,992)
Net cash outflow from investing activities (2,496) (6,760)
Cash flows from (used in) financing activities
Issue of ordinary shares 3,598 15,422
Costs of ordinary share issues* (146) (733)
Purchase of own ordinary shares (240) (123)
Dividends paid 5 (3,354) (3,142)
Net cash (outflow) inflow from financing activities (142) 11,424
Net (decrease) increase in cash and cash equivalents (2,618) 4,811
Cash and cash equivalents at the beginning of the year 15,444 10,633
Cash and cash equivalents at the end of the year 9 12,826 15,444
* Issue costs include both fundraising costs and expenses incurred from the Company’s DRIS.
Reconciliation of Profit before T axation to Net Cash Inflow
from Operating Activities 
2016 2015
£000 £000
Profit before taxation 1,412 4,132
Increase in trade and other payables 6 24
Increase in trade and other receivables (275) (345)
Gains on disposal of investments in the year (339) (232)
Profit on investments held at fair value (704) (3,316)
Capitalised interest and dividends (80) (116)
Net cash inflow from operating activities 20 147
The accompanying notes on pages 55 to 75 are an integral part of these financial statements. Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
55
1. Principal Accounting Policies
Basis of Preparation
The accounts have been prepared on a going concern basis and in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union and those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historical cost basis as modified by the measurement of investments at fair
value through profit or loss.
The accounts have been prepared in compliance with the recommendations set out in the Statement of Recommended Practice
‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ issued by the Association of Investment Companies in
November 2014 (SORP) to the extent that they do not conflict with IFRSs as adopted by the European Union. 
The financial statements are prepared in accordance with IFRSs and interpretations in force at the reporting date. New standards
coming into force during the year have not had a material impact on these financial statements.
Standards, amendments to standards and interpretations have been issued which will be effective for future reporting periods but have
not been adopted early in these financial statements. These include IFRS 9, IFRS 15, IFRS 16, IFRIC 22 and amendments to IFRS 1, IFRS
2, IFRS 4, IFRS 12,  IFRS 15, IFRS 16, IAS 7, IAS 12, IAS 28 and IAS 40. Following an initial assessment, the Company does not expect that
these standards, amendments and interpretations, issued but not yet effective, will have a material impact on its results or net assets.
The financial statements are presented in sterling and all values are rounded to the nearest thousand (£000), except where stated.
Financial Assets held at Fair Value through Profit or Loss
Financial assets designated as at fair value through profit or loss at inception are those that are managed and whose performance is
evaluated on a fair value basis, in accordance with the documented investment strategy of the Company. Information about these
financial assets is provided internally on a fair value basis to the Company’s key management. The Company’s investment strategy is to
invest cash resources in venture capital investments as part of the Company’s long-term capital growth strategy. Consequently, all
investments are classified as held at fair value through profit or loss.
All investments are measured at fair value on the whole unit of account basis with gains and losses arising from changes in fair value
being included in the Statement of Comprehensive Income as gains or losses on investments held at fair value. 
Transaction costs on purchases are expensed immediately through profit or loss.
Redemption premiums are designed to protect the value of the Company’s investment. These are accrued daily on an effective rate basis
and included within the capital valuation of the investment (and thus classified under “Gain or loss on investments held at fair value” in
the Statement of Comprehensive Income).
Although the Company holds more than 20 per cent of the equity of certain companies, it is considered that the investments are held as
part of the investment portfolio, and their value to the Company lies in their marketable value as part of that portfolio, so none represent
investments in associated undertakings. These investments are therefore not accounted for using equity accounting, as permitted by IAS
28 ‘Investments in associates’ and FRS 11 ‘Joint arrangements’ which give exemptions from equity accounting for venture capital
organisations.
Under IFRS10 “Consolidated Financial Statements”, control is presumed to exist when the Company has power over an investee
(whether or not used in practice); exposure or rights; to variable returns from that investee, and ability to use that power to affect the
reporting entities returns from the investees. The Company does not hold more than 50 per cent of the equity of any of the companies
within the portfolio. The Company does not control any of the companies held as part of the investment portfolio. It is not considered
that any of the holdings represent investments in subsidiary undertakings.
Valuation of Investments
Unquoted investments are valued in accordance with IFRS 13 “Fair Value Measurement” and, where appropriate, the International
Private Equity and Venture Capital (IPEVC) Valuation Guidelines (“the Guidelines”) issued in December 2015. Quoted investments are
valued at market bid prices. A detailed explanation of the valuation policies of the Company is included below. 
NOTES TO THE FINANCIAL ST A TEMENTS
For the year ended 31 December 2016 BRITISH SMALLER COMPANIES VCT2 PLC
56
1. Principal Accounting Policies (continued)
Initial measurement
Financial assets are initially measured at fair value. The best estimate of the initial fair value of a financial asset that is either quoted or
not quoted in an active market is the transaction price (i.e. cost).
Subsequent measurement
The Guidelines identify six of the most widely used valuation methodologies for unquoted investments. The Guidelines advocate that the
best valuation methodologies are those that draw on external, objective market based data in order to derive a fair value.
Unquoted Investments
• Price of recent investment, reviewed for change in fair value. This represents the cost of the investment or the price at which a
significant amount of new investment has been made by an independent third party adjusted, if necessary, for factors relevant to the
background of the specific investment. The value of the investment is assessed for changes or events that would imply either a
reduction or increase to its fair value through comparison of financial, technical and marketing milestones set at the time of
investment. Where it is considered that the fair value no longer approximates to the cost of the recent investment an estimated
adjustment to the cost, based on objective data, will be made to the investment’s carrying value.
• Earnings multiple. A multiple that is appropriate and reasonable, given the risk profile and earnings growth prospects of the
underlying company, is applied to the maintainable earnings of that company. The multiple is adjusted to reflect any risk associated
with lack of marketability and to take account of the differences between the investee company and the benchmark company or
companies.
• Net assets. The value of the business is derived by using appropriate measures to value the assets and liabilities of the investee
company. 
• Discounted cash flows of the underlying business. The present value of the underlying business is derived by using reasonable
assumptions and estimations of expected future cash flows and the terminal value, and discounted by applying the appropriate risk-
adjusted rate that quantifies the risk inherent in the company.
• Discounted cash flows from the investment. Under this method, the discounted cash flow concept is applied to the expected cash
flows from the investment itself rather than the underlying business as a whole.
• Sales multiples and industry valuation benchmarks. Where appropriate comparator companies can be identified, multiples of
revenues may be used as a valuation benchmark.
Discounted cash flows and industry valuation benchmarks are only likely to be reliable as the main basis of estimating fair value in
limited situations. Their main use is to support valuations derived using other methodologies and for assessing reductions in fair value.
Where an independent third party valuation exists, this will be used as the basis to derive the gross attributable enterprise value of the
company. In other cases, the most suitable valuation technique, as set out above, is used to determine this value. This value is then
apportioned appropriately to reflect the respective amounts accruing to each financial instrument holder in the event of a sale at that
level at the reporting date.
Unquoted investments held in the form of loan investments are valued at fair value using the appropriate methodologies as used for
valuing equity investments, primarily being price of recent investment and earnings multiple.
Quoted Investments
Quoted investments are valued at active market bid price. An active market is defined as one where transactions take place regularly
with sufficient volume and frequency to determine price on an ongoing basis. Where the Company judges that the level of trading does
not meet these requirements one of the methodologies above will be used to value the investment. No methodology other than active
market bid price has been applied as at 31 December 2016
Income
Dividend income on unquoted equity shares is recognised at the time when the right to the income is established. Interest on loan stock and
dividends on preference shares are accrued daily on an effective rate basis. Provision is made against this income where recovery is doubtful.
Where interest and preference dividends are rolled up and/or payable at redemption then they are recognised as income unless there is
reasonable doubt as to their receipt.  Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
57
Expenses 
Expenses are accounted for on an accruals basis. Expenses are charged through the Revenue column of the Statement of
Comprehensive Income, except for Investment Adviser’s fee and incentive fees. Of the Investment Adviser’s fees 75 per cent are
allocated to the capital column of the Statement of Comprehensive Income, to the extent that these relate to an enhancement in the
value of the investments and in line with the Board’s expectation that over the long term 75 per cent of the Company’s investment
returns will be in the form of capital gains. The incentive fee payable to the Investment Adviser (as set out in note 3) is charged wholly
through the Capital column.
Tax relief is allocated to the Capital Reserve using a marginal basis.
Cash and Cash Equivalents
Cash and cash equivalents include cash at hand as this meets the definition in IAS 7 ‘Statement of cash flows’ of a short term highly
liquid investment that is readily convertible into known amounts of cash and subject to insignificant risk of change in value.
Balances held in fixed term deposits are not classified as cash and cash equivalents, unless they are due for maturity within three
months, as they do not meet the definition in IAS 7 ‘Statement of cash flows’ of short-term highly liquid investments.
Cash flows classified as “operating activities” for the purposes of the Statement of Cash Flows are those arising from the Revenue
column of the Income Statement, together with the items in the Capital column that do not fall to be easily classified under the headings
for “Investing Activities” given by IAS 7 ‘Statement of cash flows’, being advisory and incentive fees payable to the Investment Adviser.
The Capital cash flows relating to acquisition and disposal of investments are presented under “investing activities” in the Statement of
Cash Flows in line with both the requirements of IAS 7 and the positioning given to these headings by general practice in the industry.
Share capital and Reserves
Share Capital 
This reserve contains the nominal value of all shares allotted under offers for subscription.
Share Premium Account
This reserve contains the excess of gross proceeds less issue costs over the nominal value of shares allotted under offers for
subscription, to the extent that it has not been cancelled.
Capital Redemption Reserve
The nominal value of shares bought back and cancelled is held in this reserve, so that the Company’s capital is maintained.
Capital Reserve
The following are included within this reserve:
• Gains and losses on realisation of investments;
• Realised losses upon permanent diminution in value of investments;
• 75 per cent of the Investment Adviser’s fee expense, together with the related taxation effect to this reserve in accordance with the
policy on expenses in note 1 of the financial statements;
• Incentive fee payable to the Investment Adviser;
• Capital dividends paid to shareholders;
• Purchase and holding of the Company’s own shares; and
• Credits arising from cancellation of any share premium account.
Investment Holding Gains (Losses) Reserve
Increases and decreases in the valuation of investments held at the year end are accounted for in this reserve, except to the extent that
the diminution is deemed permanent. BRITISH SMALLER COMPANIES VCT2 PLC
58
1. Principal Accounting Policies (continued)
In accordance with stating all investments at fair value through the profit and loss, all such movements through both revaluation and
realised capital reserves are now shown within the Statement of Comprehensive Income for the year.
Revenue Reserve
This reserve includes all income from investments along with any costs associated with the running of the Company – less 75 per cent of
the advisory fee expense as detailed in the Capital Reserve above.
Taxation
Due to the Company’s status as a venture capital trust and the continued intention to meet the conditions required to comply with
Chapter 3 Part 6 of the Income Tax Act 2007, no provision for taxation is required in respect of any realised or unrealised appreciation of
the Company’s investments which arises. Deferred tax is recognised on all temporary differences that have originated, but not reversed,
by the balance sheet date.
Deferred tax assets are only recognised to the extent that they are regarded as recoverable. Deferred tax is calculated at the tax rates
that are expected to apply when the asset is realised. Deferred tax assets and liabilities are not discounted.
Dividends Payable
Dividends payable are recognised only when an obligation exists. Interim and special dividends are recognised when paid and final
dividends are recognised when approved by shareholders in general meetings.
Segmental Reporting
In accordance with IFRS 8 ‘Operating segments’ and the criteria for aggregating reportable segments, segmental reporting has been
determined by the directors based upon the reports reviewed by the Board. The directors are of the opinion that the Company has
engaged in a single operating segment - investing in equity and debt securities within the United Kingdom - and therefore no reportable
segmental analysis is provided.
Critical Accounting Estimates and Judgements
The preparation of financial statements in conformity with generally accepted accounting practice requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the
amount, event or actions, actual results may ultimately differ from those estimates. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are those
used to determine the fair value of investments at fair value through profit or loss, as disclosed in note 7 to the financial statements.
The fair value of investments at fair value through profit or loss is determined by using valuation techniques. As explained above, the
Board uses its judgement to select from a variety of methods and makes assumptions that are mainly based on market conditions at
each balance sheet date.  Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
59
2. Income
2016 2015
£000 £000
Dividends from unquoted companies 611 490
Dividends from AIM quoted companies 17 35
Interest on loans to unquoted companies 1,140 1,264
Income from investments held at fair value through profit or loss 1,768 1,789
Interest on bank deposits 169 164
1,937 1,953
The above is stated net of £133,000 (2015: £nil) of income in relation to loan interest and preference dividends, which has been fully
provided for.
3. Administrative Expenses
2016 2015
£000 £000
Investment Adviser’s fee 1,119 935
Administration fee 62 61
Total payable to YFM Private Equity Limited 1,181 996
Other expenses:
Trail commission 133 134
Directors’ remuneration 81 76
General expenses 52 43
Listing and registrar fees 46 57
Printing 34 24
Auditor’s remuneration - audit fees (excluding irrecoverable VAT) 23 19
Irrecoverable VAT 18 20
1,568 1,369
Ongoing charges figure 2.51% 2.28%
Directors’ remuneration comprises only short term benefits including social security contributions of £7,000 (2015: £6,000).
The directors are the Company’s only key management personnel.
No fees are payable to the auditor in respect of non-audit services supplied pursuant to legislation (2015: £nil). 
YFM Private Equity Limited has acted as Investment Adviser and performed administrative and secretarial duties for the Company under an
agreement dated 28 November 2000, superseded by an agreement dated 31 October 2005 and as varied by agreements dated 8 December
2010, 26 October 2011, 16 November 2012, 17 October 2014 and 7 August 2015 (the “IAA”). The agreement may be terminated by not less
than twelve months’ notice given by either party at any time. Following the Financial Conduct Authority’s registration of the Company as a
Small Registered Alternative Investment Fund Manager, the Company has retained responsibility for the custody of its investments.
The key features of the agreement are:
• YFM Private Equity Limited receives an Investment Adviser fee, payable quarterly in advance, calculated at half-yearly intervals as at 30
June and 31 December . The fee is allocated between capital and revenue as described in note 1; 
• The annual advisory fee payable to the Investment Adviser is 2.50 per cent of net assets up to £16.0 million, 1.25 per cent of net assets in
excess of £16.0 million and up to £26.667 million, and 2.00 per cent of net assets in excess of £26.667 million. Based on the Company’s
net assets at 31 December 2016 of £56.109 million, this equates to 2.0 per cent per cent of net assets, or £1,122,000 per annum; BRITISH SMALLER COMPANIES VCT2 PLC
60
3. Administrative Expenses (continued)
• YFM Private Equity Limited shall bear the annual operating costs of the Company (including the advisory fee set out above but
excluding any payment of the performance incentive fee, details of which are set out below and excluding VAT and trail commissions)
to the extent that those costs exceed 2.9 per cent of the net asset value of the Company; and
• Under the IAA YFM Private Equity Limited also provides administrative and secretarial services to the Company for a fee of £46,000
per annum plus annual adjustments to reflect movements in the Retail Prices Index. This fee is charged fully to revenue, and
totalled £62,000 for the year ended 31 December 2016 (2015: £61,000). 
When the Company makes investments into its unquoted portfolio the Investment Adviser charges that investee an advisory fee. With
effect from 1 October 2013 if the average of relevant fees exceeds 3.0 per cent of the total invested into new portfolio companies and 2.0
per cent into follow-on investments over the Company’s financial year, this excess will be rebated to the Company. As at 31 December
2016, the Company was due a rebate from the Investment Adviser of £Nil (2015: £Nil).
Monitoring and directors’ fees the Investment Adviser receives from the investee companies are limited to a maximum of £40,000
(excluding VAT) per annum per company.
The total remuneration payable to YFM Private Equity Limited under the IAA in the period was £1,181,000 (2015: £996,000). 
Under the IAA, YFM Private Equity Limited is entitled to receive fees from investee companies in respect of the provision of non-
executive directors and other advisory services. YFM Private Equity Limited is responsible for paying the due diligence and other costs
incurred in connection with proposed investments which for whatever reason do not proceed to completion. In the year ended 31
December 2016 the fees receivable by YFM Private Equity Limited from investee companies which were attributable to advisory and
directors’ and monitoring fees amounted to £412,000 (2015: £340,000).
Under the Subscription Rights Agreement dated 23 November 2001 between the Company, YFM Private Equity Limited and Chord
Capital Limited (“Chord” formerly Generics Asset Management Limited), as amended by an agreement between those parties dated 31
October 2005, YFM Private Equity Limited and Chord have a performance-related incentive, structured so as to entitle them to an
amount (satisfied by the issue by the Company of ordinary shares) equivalent to 20 per cent of the amount by which the cumulative
dividends per ordinary share paid as at the last business day in December in any year, plus the average of the middle market price per
ordinary share on the five dealing days prior to that day, exceeds 120 pence per ordinary share, multiplied by the number of ordinary
shares issued and the ordinary shares under option (if any) (the “Hurdle”). Under the terms of the Subscription Rights Agreement, once
the Hurdle has been exceeded it is reset at that value going forward, which becomes the new Hurdle. Any subsequent exercise of these
rights will only occur once the new Hurdle has been exceeded. The subscription rights are exercisable in the ratio 95:5 between the
Investment Adviser and Chord Capital Limited. 
By a Deed of Assignment dated 19 December 2003 (together with a supplemental agreement dated 5 October 2005), the benefit of the
YFM Private Equity Limited subscription right was assigned to YFM Private Equity Limited Carried Interest Trust (the “Trust”), an
employee benefit trust formed for the benefit of certain employees of YFM Private Equity Limited and associated companies. Pursuant to
a deed of variation dated 16 November 2012 between the Company, the trustees of the Trust and Chord, the Subscription Rights
Agreement was varied so that the subscription rights will be exercisable in the ratio of 95:5 between the trustees of the Trust and Chord.
Pursuant to a deed of variation dated 5 August 2014 the Subscription Rights Agreement was varied so that the recipient was changed
from the Trust to YFM Private Equity Limited. 
As at 31 December 2016 the total of cumulative cash dividends paid and mid-market price was 112.50 pence per ordinary share. No
shares have been issued under this agreement. 
Under the terms of the offer launched on 8 December 2015, YFM Private Equity Limited was entitled to 5.0 per cent of gross
subscriptions from execution brokers and 3.0 per cent of gross subscriptions for applications through intermediaries offering financial
advice or directly from applicants, less the cost of incentive shares and re-investment of intermediary commission. The net amount paid
to YFM Private Equity Limited under this offer amounted to £108,200.
The Investment Adviser met all costs and expenses arising from this offer out of this fee, including any payment or re-investment of
initial intermediary commissions.
The details of directors’ remuneration are set out in the Directors’ Remuneration Report on page 43 under the heading “Directors’
Remuneration for the year ended 31 December 2016 (audited)”.  Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
61
4. Taxation 
2016 2015
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Profit before taxation 1,208 204 1,412 1,285 2,847 4,132
Profit before taxation multiplied by standard 
rate of corporation tax in UK of 20% 
(2015: 20%) 242 40 282 257 569 826
Effect of:
UK dividends received (126) - (126) (105) - (105)
Non-taxable profits on investments - (209) (209) - (709) (709)
Excess advisory expenses -5353 - (12) (12)
Tax charge (credit) 116 (116) - 152 (152) -
The Company has no provided or unprovided deferred tax liability in either year.
Deferred tax assets of £514,000 calculated at 17% (2015: £497,000 at 18%) in respect of unrelieved management expenses (£3.021
million as at 31 December 2016 and £2.761 million as at 31 December 2015) have not been recognised as the directors do not currently
believe that it is probable that sufficient taxable profits will be available against which assets can be recovered.
Due to the Company’s status as a venture capital trust and the continued intention to meet with the conditions required to comply with
Section 274 of the Income Tax Act 2007, the Company has not provided for deferred tax on any capital gains or losses arising on the
revaluation or realisation of investments.
5. Dividends
Amounts recognised as distributions to equity holders in the period to 31 December:
2016 2015
Revenue Capital Total Revenue Capital Total
£000 £000 £000 £000 £000 £000
Final dividend for the year ended 31 December 
2015 of 2.5p (2014: 2.5p) per ordinary share 277 2,045 2,322 268 1,885 2,153
Interim dividend for the year ended 31 December 
2016 of 2.0p (2015: 2.0p) per ordinary share 593 1,276 1,869 414 1,320 1,734
870 3,321 4,191 682 3,205 3,887
Shares allotted under DRIS (826) (732)
Unclaimed dividends (11) (13)
Dividends paid in Statement of Cash Flows 3,354 3,142
The final year-end dividend of 2.5 pence per ordinary share in respect of the year to 31 December 2015 was paid on 9 May 2016 to
shareholders on the register at 8 April 2016.
The interim dividend of 2.0 pence per ordinary share was paid on 26 September 2016 to shareholders on the register as at 26 August 2016.
A final dividend of 1.5 pence per ordinary share in respect of the year to 31 December 2016 is proposed. This dividend has not been
recognised in the year ended 31 December 2016 as the obligation did not exist at the balance sheet date.
During the year the Company has received £14,000 (2015: £16,000) from the Registrars in respect of unclaimed dividends. The Company
has made efforts to contact the relevant shareholders, with the result that £3,000 (2015: £3,000) has been paid to shareholders in the year .
The unclaimed balance is held in a separate bank account until contact can be made with the shareholders affected. BRITISH SMALLER COMPANIES VCT2 PLC
62
6. Basic and Diluted Earnings per Ordinary Share
The basic and diluted earnings per ordinary share is based on the profit after tax attributable to shareholders of £1,412,000 (2015:
£4,132,000) and 93,363,744 (2015: 83,224,240) ordinary shares being the weighted average number of ordinary shares in issue during the
year.
The basic and diluted revenue earnings per ordinary share is based on the profit for the year attributable to shareholders of £1,092,000
(2015: £1,133,000) and 93,363,744 (2015: 83,224,240) ordinary shares being the weighted average number of ordinary shares in issue
during the year.
The basic and diluted capital earnings per ordinary share is based on the capital profit for the year attributable to shareholders of
£320,000 (2015: £2,999,000) and 93,363,744 (2015: 83,224,240) ordinary shares being the weighted average number of ordinary shares in
issue during the year.
During the year the Company allotted 5,683,709 new ordinary shares from a top up offer, and 1,445,773 new ordinary shares in respect
of its DRIS.
The Company has also repurchased 417,743 of its own shares in the year, and these shares are held in the capital reserve. The total of
2,545,746 treasury shares has been excluded in calculating the weighted average number of ordinary shares for the period. The
Company has no securities that would have a dilutive effect and hence basic and diluted earnings per share are the same.
The only potentially dilutive shares are those shares which, subject to certain criteria being achieved in the future, may be issued by the
Company to meet its obligations under the Subscription Rights Agreement as set out in Note 3. No such shares have been issued or are
currently expected to be issued. There are, therefore, considered to be no potentially dilutive shares in issue at 31 December 2016 or 31
December 2015 
7. Financial Assets at Fair Value through Profit or Loss 
IFRS13, in respect of financial instruments that are measured in the balance sheet at fair value, requires disclosure of fair value
measurements by level of the following fair value measurement hierarchy: 
• Level 1: quoted prices in active markets for identical assets or liabilities. The fair value of financial instruments traded in active
markets is based on quoted market prices at the balance sheet date. A market is defined as a market in which transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The quoted
market price used for financial assets held by the Company is the current bid price. These instruments are included in level 1 and
comprise AIM quoted investments and other fixed income securities classified as held at fair value through profit or loss.
• Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.
These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
The Company held no such instruments in the current or prior year.
• Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in unquoted
companies) is determined by using valuation techniques such as earnings multiples. If one or more of the significant inputs is not
based on observable market data, the instrument is included in level 3. The majority of the Company’s investments fall into this
category.
Each investment is reviewed at least quarterly to ensure that it has not ceased to meet the criteria of the level in which it is included at
the beginning of each accounting period. The change in fair value for the current and previous year is recognised through profit or loss. 
There have been no transfers between these classifications in either period.
All items held at fair value through profit or loss were designated as such upon initial recognition.
Valuation of Investments
Full details of the methods used by the Company are set out in note 1 of these financial statements. Where investments are held in
quoted stocks, fair value is set at the market bid price.  Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
63
Movements in investments at fair value through profit or loss during the year to 31 December 2016 are summarised as follows:
IFRS13 measurement classification Level 3 Level 1
Unquoted Quoted Equity Total
Investments Investments Investments
£000 £000 £000
Opening cost 29,332 2,223 31,555
Opening investment holding gain 4,636 461 5,097
Opening fair value at 1 January 2016 33,968 2,684 36,652
Additions at cost 4,508 - 4,508
Capitalised interest and dividends 80 - 80
Disposal proceeds (1,727) (1,147) (2,874)
Net profit on disposal* 133 116 249
Change in fair value 285 419 704
Closing fair value at 31 December 2016 37,247 2,072 39,319
Closing cost 30,853 1,419 32,272
Closing investment holding gain** 6,394 653 7,047
Closing fair value at 31 December 2016 37,247 2,072 39,319
* The net profit on disposal in the table above is £249,000 whereas that shown in the Statement of Comprehensive Income is £339,000.
The difference comprises deferred proceeds of £90,000 in respect of assets which have been disposed of and are not included within
the investment portfolio at the year-end (see page 65).
** Following the merger between the Company and British Smaller Technologies Company VCT plc a total of £975,000 of negative
goodwill was recognised in the investment holding gains and losses reserve in respect of the investments acquired. The relevant
amount per investment is realised, at the point of disposal to the capital reserve. At 31 December 2016 a total of £30,000 (2015:
£30,000) was held on investments yet to be realised in the investment holdings gains and losses reserve.
There were no individual reductions in fair value during the year that exceeded 5 per cent of the total assets of the Company (2015: £nil).
Level 3 valuations include assumptions based on non-observable market data, such as discounts applied either to reflect change in fair
value of financial assets held at the price of recent investment, or to adjust earnings multiples. IFRS 13 requires an entity to disclose
quantitative information about the significant unobservable inputs used. Of the Company’s Level 3 investments, 59 per cent are held on
an earnings multiple basis, which have significant judgement applied to the valuation inputs. The table on page 64 sets out the range of
Price Earnings ratios and discounts applied in arriving at investments valued on an earnings multiple basis. 35 per cent are recent deals
held at cost. The remaining 6 per cent are valued based on previous investment round reviewed for impairment.  BRITISH SMALLER COMPANIES VCT2 PLC
64
7. Financial Assets at Fair Value through Profit or Loss (continued)
Manufacturing & Retail & Software, 
Industrial Brands IT and Business
Services Telecommunications Healthcare Services
Earnings multiple inputs
PE Multiple Range 24.18 – 32.34 15.99 – 27.26 36.29 35.25 24.18 – 24.63
PE Multiple Weighted Average 29.45 19.31 36.29 35.25 24.46
Combined PE and/or Marketability 
Discount Range 56% - 72% 48% - 60% 40% - 68% 72% 60% - 68%
Combined PE and/or Marketability 
Discount Weighted Average 68% 52% 60% 72% 64%
The standard also requires disclosure, by class of financial instruments, if the effect of changing one or more inputs to reasonably
possible alternative assumptions would result in a significant change to the fair value measurement. Each unquoted portfolio company
has been reviewed in order to identify the sensitivity of the valuation methodology to using alternative assumptions. Where discounts
have been applied (for example to Earnings Levels or PE ratios) alternatives have been considered which still fall within the IPEVC
Guidelines (see page 56). For each unquoted investment, two scenarios have been modelled: more prudent assumptions (downside
case) and more optimistic assumptions (upside case). Applying the downside alternative the value of the unquoted investments would be
£2.7 million or 7.1 per cent lower. Using the upside alternative the value would be increased by £2.6 million or 7.1 per cent.
Movements in investments at fair value through profit or loss during the year to 31 December 2015 are summarised as follows:
IFRS 13 measurement classification Level 3* Level 1
Unquoted Quoted Total
Investments Equity Investments
Investments
£000 £000 £000
Opening cost 24,593 2,146 26,739
Opening investment holding gain (loss) 1,495 (18) 1,477
Opening fair value at 1 January 2015 26,088 2,128 28,216
Additions at cost 6,478 761 7,239
Capitalised interest and dividends 116 - 116
Disposal proceeds (1,984) (474) (2,458)
Net profit (loss) on disposal* 312 (89) 223
Change in fair value 2,958 358 3,316
Closing fair value at 31 December 2015 33,968 2,684 36,652
Closing cost 29,332 2,223 31,555
Closing investment holding gain 4,636 461 5,097
Closing fair value at 31 December 2015 33,968 2,684 36,652
*All of the changes in fair value during the year to level 3 investments relate to assets held at the year end. Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
65
The following disposals took place in the year (all companies are unquoted except where otherwise indicated):
Net proceeds Cost Opening Profit (loss)
from sale carrying on disposal
value as at 
1 January
2016
£000 £000 £000 £000
Unquoted investments:
Bagel Nash Group Limited 27 27 27 -
Callstream Group Limited 752 329 679 73
Cambrian Park and Leisure Homes Limited
(via Cambrian Lodges Holdings Limited) 61 61 61 -
GTK (Holdco) Limited 272 72 212 60
Harvey Jones Holdings Limited 469 469 469 -
Macro Art Holdings Limited 104 104 104 -
Wakefield Acoustics (via Malvar Engineering Limited) 41 41 41 -
Quoted investments:
AB Dynamics plc 503 131 416 87
Brady plc 320 498 315 5
Gamma Communications plc 170 73 171 (1)
Gooch & Housego plc 155 102 130 25
Total proceeds on disposals in the year 2,874 1,907 2,625 249
Deferred proceeds:
Ellfin Homecare Limited 1 - - 1
Primal Pictures Limited 2 - - 2
Silistix Limited 9-- 9
Sirigen Group Limited 171 - 93 78
Deferred proceeds received 183 - 93 90
Total proceeds from quoted and unquoted investments 3,057 1,907 2,718 339 BRITISH SMALLER COMPANIES VCT2 PLC
66
7. Financial Assets at Fair Value through Profit or Loss (continued)
The following disposals took place in 2015:
Net proceeds Cost Opening Profit
from sale carrying (loss) on
value as at disposal
1 January
2015
£000 £000 £000 £000
Unquoted investments:
Insider Technologies (Holdings) Limited 773 780 522 251
DisplayPlan Holdings Limited 592 455 531 61
GTK (Holdco) Limited 103 103 103 -
Macro Art Holdings Limited 87 87 87 -
Cambrian Park & Leisure Homes Limited 
(via Cambrian Lodges Holdings Limited) 67 67 67 -
Bagel Nash Group Limited 80 80 80 -
Harvey Jones Holdings Limited 282 282 282 -
Quoted investments:
Hargreaves Services plc 159 325 262 (103)
Cambridge Cognition Holdings plc 156 240 140 16
Pressure Technologies plc 159 120 161 (2)
Total proceeds on disposals in the year 2,458 2,539 2,235 223
Deferred proceeds:
Primal Pictures Limited 12 - 12 -
DxS Limited 1-- 1
Deferred proceeds received 13 - 12 1
Revaluation of deferred proceeds:
Sirigen Group Limited - - - 8
Total proceeds from quoted and unquoted investments 2,471 2,539 2,247 232 Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
67
Significant Interests
YFM Private Equity Limited, the Company’s Investment Adviser, also acts as investment adviser or manager to certain other funds that
have invested in some of the companies within the current portfolio of the Company. Details of these investments are summarised in the
tables below.
At 31 December 2016 the Company held a significant holding of at least 20 per cent of the issued ordinary share capital, either
individually or alongside commonly managed funds, in the following companies:
Company Principal activity No of shares Percentage Percentage
held by the of class held of class
Company by the held by
Company* commonly
advised/
managed funds*
ACC Aviation (via Newacc (2014) Limited) Business Services 14,365,817 13% 50%
Bagel Nash Group Limited Food Retail and Manufacturing 33,091 5% 40%
Biz2Mobile Limited Software IT & Telecomms 1,694,916 11% 27%
Business Collaborator Limited Software IT & Telecomms 126,000 19% 48%
Cambrian Park & Leisure Homes Limited Manufacturing & Industrial 100,000 16% 41%
(via Cambrian Lodges Holdings Limited)
Deep-Secure Limited Software IT & Telecomms 49,678 8% 57%
DisplayPlan Holdings Limited Business Services 1,260 12% 35%
EL Support Services Limited Business Services 3,500 50% 100%
Gill Marine Holdings Limited Retail & Brands 138,137 14% 66%
GTK (Holdco) Limited Manufacturing & Industrial 14,603,200 18% 48%
Harvey Jones Holdings Limited Retail & Brands 38,858 3% 30%
The Heritage Windows Company Holdco Limited Manufacturing & Industrial 1,142,400 28% 70%
Immunobiology Limited Healthcare 20,109,968 27% 27%
Intamac Systems Limited Software IT & Telecomms 1,500,000 12% 34%
Intelligent Office (via IO Outsourcing Limited) Business Services 106,609 18% 44%
KeTech Enterprises Limited Software IT & Telecomms 128,333 13% 38%
Macro Art Holdings Limited Business Services 100,000 13% 32%
Mangar Health Limited Healthcare 78,555 17% 48%
Matillion Limited Software IT & Telecomms 22,987 11% 30%
NB Technology Services Limited Software IT & Telecomms 3,500 50% 100%
Ness (Holdings) Limited Retail & Brands 10,000,000 17% 43%
OC Engineering Services Limited Retail & Brands 3,500 50% 100%
RMS Group Holdings Limited Manufacturing & Industrial 59,619 3% 23%
Seven Technologies Holdings Limited Software IT & Telecomms 619,130 6% 38%
SH Healthcare Services Limited Healthcare 3,500 50% 100%
Sipsynergy (via Hosted Network Services Limited) Software IT & Telecomms 135,832 10% 30%
SP Manufacturing Services Limited Manufacturing & Industrial 3,500 50% 100%
Springboard Research Holdings Limited Business Services 171,892 13% 32%
Wakefield Acoustics (via Malvar Engineering Limited) Manufacturing & Industrial 49,600 15% 37%
*Fully diluted holding.
In a number of cases the issued ordinary share capital of an investee company is split into different classes of shares and thus the
percentages given above do not necessarily represent the Company’s (or other commonly managed funds’) percentage holding of an
investee company’s total equity.  BRITISH SMALLER COMPANIES VCT2 PLC
68
7. Financial Assets at Fair Value through Profit or Loss (continued)
The amounts shown below are the net cost of investments as at 31 December 2016 and exclude those companies which are in
receivership or liquidation.
British British British The YFM Equity Total
Smaller Smaller Smaller Chandos Partners 2015 
Companies Companies Companies Fund Co-Investment
VCT2 plc VCT plc EIS Fund LP LP 
£000 £000 £000 £000 £000 £000
AB Dynamics plc 123 137--- 260
ACC Aviation (via Newacc (2014) Limited) 1,379 2,068 - - 1,723 5,170 
Bagel Nash Group Limited 630 944 - 2,185 - 3,759 
Biz2Mobile Limited 1,000 1,500--- 2,500
Business Collaborator Limited 1,340 2,010 - - - 3,350 
Cambrian Park & Leisure Homes Limited 1,072 1,608 - - - 2,680
(via Cambrian Lodges Holdings Limited)
Deep-Secure Limited 500 1,000 - 2,000 - 3,500 
DisplayPlan Holdings Limited 70 130 - - - 200 
EKF Diagnostics plc 437 448--- 885
EL Support Services Limited 500 500 - - - 1,000 
Gamma Communication plc 95 139--- 234
Gill Marine Holdings Limited 1,870 2,500 600 4,000 - 8,970 
GTK (Holdco) Limited 741 1,127 250 - - 2,118 
Harvey Jones Holdings Limited 442 735 - 223 - 1,400 
The Heritage Window Company Holdco Limited 1,468 2,203 - - - 3,671 
Intamac Systems Limited 905 302 - 2,422 - 3,629 
Intelligent Office (via IO Outsourcing Limited) 1,956 2,934 - - - 4,890 
KeTech Enterprises Limited 2,000 2,000 - - 1,000 5,000 
Leengate Holdings Limited 934 1,401 - - - 2,335 
Macro Art Holdings Limited 627 941 - - - 1,568 
Mangar Health Limited 1,640 2,460 500 - - 4,600 
Matillion Limited 1,400 2,100 - - 500 4,000
NB Technology Services Limited 500 500 - - - 1,000 
OC Engineering Services Limited 500 500 - - - 1,000 
PowerOasis Limited 594 445 - 1,186 - 2,225 
RMS Group Holdings Limited 70 180 - 250 - 500 
Selima Holding Company Ltd 300 600 - - - 900 
Seven Technologies Holdings Limited 1,238 1,984 370 3,941 - 7,533 
SH Healthcare Services Limited 500 500 - - - 1,000 
SP Manufacturing Services Limited 500 500 - - - 1,000 
Springboard Research Holdings Limited 1,706 2,558 - - - 4,264 
Sipsynergy (via Hosted Network Services Ltd) 900 1,350 - - 500 2,750
TeraView Limited 375 375 - - - 750 
Traveltek Group Holdings Limited 980 1,470 - - 1,250 3,700
Wakefield Acoustics (via Malvar Engineering Limited) 720 1,095 - - - 1,815  Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
69
8. Trade and Other Receivables 
2016 2015
£000 £000
Non-current assets:
Accrued income 837 678
Current assets:
Trade receivables 449 186
Less: Allowances for credit losses on trade receivables (133) -
Prepayments and accrued income 75 182
391 368
Allowance for credit losses on trade receivables:
Allowances as at 1 January - 197
Trade receivable written off - (197)
Additions – charged to Statement of Comprehensive Income 133 -
Allowances as at 31 December 133 -
Trade receivables are assessed for reduction in fair value when older than 90 days or where there is reasonable doubt that payment will
be received in due course. As of 31 December 2016, there were no trade receivables that were past due but not impaired (2015: £nil). 
The carrying amounts of the Company’s trade and other receivables are denominated in sterling.
The maximum exposure to credit risk at the reporting date in respect of trade and other receivables is £449,000 (2015: £186,000). The
Company does not hold any collateral as security.
9. Cash and Cash Equivalents 
2016 2015
£000 £000
Cash at bank 12,826 15,444
Cash and Cash Equivalents 12,826 15,444
At 31 December 2016 a further £3.04 million (2015: £1.99 million) was also held in fixed term deposit accounts which were due to
mature in April 2017. In accordance with the definition of cash and cash equivalents the amounts in both the current and prior year are
shown separately as a current asset on the face of the balance sheet.
10. Trade and Other Payables
2016 2015
£000 £000
Amounts payable within one year:
Accrued expenses 301 284
301 284 BRITISH SMALLER COMPANIES VCT2 PLC
70
11. Called-up Share Capital
2016 2015
Allotted, Allotted, 
Called-up and Called-up and 
Fully paid Fully paid
£000 £000
Ordinary shares of 10 pence
Issued: 96,520,060 (2015: 89,390,578) including 2,545,746 shares held in treasury (2015: 2,128,003). 9,652 8,939
The movement in the year was as follows:
Price Date Number Share 
pence of shares Capital
£000
Total as at 1 January 2016 89,390,578 8,939
Issue of shares Fundraising 63.00-64.50 14 January 2016 5,683,709 569
Issue of shares DRIS 58.05 9 May 2016 763,247 76
Issue of shares DRIS 56.05 26 September 2016 682,526 68
As at 31 December 2016 (including treasury shares) 96,520,060 9,652
The movement in the year to 31 December 2015 was as follows:
Price Date Number Share 
pence of shares Capital
£000
Total as at 1 January 2015 64,466,898 6,447
Issue of shares Fundraising 64.75 6 January 2015 4,480,709 448
Issue of shares Fundraising 65.50-69.13 6 January 2015 3,181,424 318
Issue of shares Fundraising 64.75 2 February 2015 1,672,709 167
Issue of shares Fundraising 63.25-66.23 2 February 2015 976,469 98
Issue of shares Fundraising 64.75 2 March 2015 2,486,374 249
Issue of shares Fundraising 63.25-66.23 2 March 2015 1,313,296 131
Issue of shares Fundraising 66.25 30 March 2015 4,267,036 427
Issue of shares Fundraising 65.00-68.06 30 March 2015 4,145,378 415
Issue of shares Fundraising 66.25 22 April 2015 911,888 91
Issue of shares Fundraising 65.00-68.06 22 April 2015 229,866 23
Issue of shares DRIS 58.71 8 June 2015 677,522 67
Issue of shares DRIS 57.48 28 September 2015 581,009 58
As at 31 December 2015 (including treasury shares) 89,390,578 8,939
During the year the Company purchased 417,743 (2015: 217,981) of its own shares and these shares are held in treasury on the balance
sheet. Full details of the share purchases are set out in the Directors’ Report under the heading ‘Issue and Buy-Back of Shares’. The
treasury shares have been included in calculating the number of ordinary shares in issue at 31 December 2016. 
The Company is party to a share based payment arrangement as defined by IFRS 2 ‘Share based payments’. The details of the
arrangement are explained in Note 3: Administration Expenses. As the arrangement was entered into prior to 7 November 2002, the
Company is not required to account for the arrangement under IFRS 2. No shares have been issued to date under this arrangement. Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
71
12. Basic and Diluted Net Asset Value per Ordinary Share
The basic and diluted net asset value per ordinary share is calculated on attributable assets of £56,109,000 (2015: £54,850,000) and
93,974,314 (2015: 87,262,575) ordinary shares in issue at the year end.
The treasury shares have been excluded in calculating the number of ordinary shares in issue at 31 December 2016.
The only potentially dilutive shares are those shares which, subject to certain criteria being achieved in the future, may be issued by the
Company to meet its obligations under the Subscription Rights Agreement as set out in note 3. No such shares have been issued or are
currently expected to be issued. There are therefore considered to be no potentially dilutive shares in issue at 31 December 2016 or 31
December 2015. Consequently, basic and diluted net asset values per ordinary share are equivalent in both the year ended 31 December
2016 and 31 December 2015. 
13. Total Return per Ordinary Share
The total return per ordinary share is calculated on cumulative dividends paid of 52.5 pence per ordinary share (2015: 48.0 pence per
ordinary share) plus the net asset value as calculated per note 12.
14. Financial Commitments
There are no financial commitments at 31 December 2016.
15. Related Party Transactions
Mr R Last is chairman and non-executive director of Gamma Communications plc, in which he has a 0.06 per cent equity stake. During
the year to 31 December 2016 he received remuneration of £75,000 from Gamma in respect of his services.
16. Events after the Balance Sheet Date
Subsequent to the year end the Company allotted a total of 6,787,231 ordinary shares on 10 February 2017 pursuant to the offer detailed
under “Fundraising” on page 8, raising net proceeds of approximately £4.1 million.
17. Financial Instruments 
The Company has no derivative financial instruments and has no financial asset or liability for which hedge accounting has been used in
either year. The Company classifies its financial assets as either fair value through profit or loss or loans and receivables, and its
financial liabilities, primarily accrued expenses, as fair value through profit or loss. 
It is the directors’ opinion that the carrying value of trade receivables and trade payables approximates their fair value. Therefore, the
directors consider all assets and liabilities to be carried at a valuation which equates to fair value.
Investments are made in a combination of equity, fixed rate and variable rate financial instruments so as to comply with VCT legislation
and provide potential future capital growth. Surplus funds are held in bank deposits until suitable qualifying investment opportunities
arise.
In accordance with IAS 39, the Company has reviewed all contracts for embedded derivatives that are required to be separately
accounted for if they do not meet certain criteria set out in the standard. No embedded derivatives have been identified by the Company. BRITISH SMALLER COMPANIES VCT2 PLC
72
17. Financial Instruments (continued)
The accounting policies for financial instruments have been applied to the items below:
Assets as per balance sheet
2016 2015
Loans and Assets at Assets at 
receivables fair value Loans fair value 
through and through 
profit or loss receivables profit or loss
£000 £000 £000 £000
Non-current assets
Financial assets at fair value through profit and loss - 39,319 - 36,652
Accrued income 837 - 678 -
Current assets
Cash and cash equivalents 12,826 - 15,444 -
Cash on fixed term deposit 3,037 - 1,992 -
Trade and other receivables 316 - 186 -
17,016 39,319 18,300 36,652
Other assets – not financial instruments 75 - 182 -
17,091 39,319 18,482 36,652
Liabilities as per balance sheet
2016 2015
Other financial Other financial 
liabilities liabilities
£000 £000
Trade and other payables (301) (284)
(301) (284)
Assets classified as fair value through profit or loss were designated as such upon initial recognition. The Company has not reclassified
financial assets between any of the categories detailed in IAS 39, either in current or prior periods.
The Company’s investing activities expose it to various types of risk that are associated with the financial instruments and markets in
which it invests. The most important types of financial risk to which the Company is exposed are market risk, credit risk and liquidity
risk. The nature and extent of the financial instruments outstanding at the balance sheet date and the risk management policies
employed by the Company are discussed below. There have been no changes since last year in the objectives, policies, and processes for
managing and measuring risks facing the Company. 
17a Market Risk
Market Price Risk
The Company invests in new and expanding businesses, the shares of which may not be traded on the stock market. Consequently,
exposure to market factors, in relation to many investments, stems from market based measures that may be used to value unlisted
investments.
The market also defines the value at which investments may be sold. Returns are therefore maximised when investments are bought or
sold at appropriate times in the economic cycle.  Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
73
17. Financial Instruments (continued)
Market price risk arises from uncertainty about the future prices of financial instruments held in accordance with the Company’s
investment objectives. It represents the potential loss that the Company might suffer through holding market positions in the face of
market movements. In addition, the ability of the Company to purchase or sell investments is also constrained by requirements set
down for VCTs.
Of the Company’s investments, 5 per cent are quoted on AIM (2015: 7 per cent). A 5 per cent increase in stock prices as at 31 December
2016 would have increased the net assets attributable to the Company’s shareholders and the total profit for the year by £104,000 (2015:
£134,000). An equal change in the opposite direction would have decreased the net assets attributable to the Company’s shareholders
and the total profit for the year by an equal amount.
Of the Company’s investments, 95 per cent are in unquoted companies held at fair value (2015: 93 per cent). The valuation methodology
for these investments includes the application of externally produced FTSE
®
PE multiples. Therefore the value of the unquoted element
of the portfolio is also indirectly affected by price movements on the listed market. Investments have been valued in line with the
valuation guidelines described within Note 1. Those using an earnings multiple methodology include judgements regarding the level of
discount applied to that multiple. A 10 per cent decrease in the discount applied would have increased the net assets attributable to the
Company’s shareholders and the total profit for the year by £2,990,000 (5.3 per cent of net assets). An equal change in the opposite
direction would have decreased net assets attributable to the Company’s shareholders and the total profit for the year by £2,849,000 (5.1
per cent of net assets). 
Other valuations are valued at the price of recent investment, reviewed and discounted where the fair value of the investment no longer
equates to the cost of the recent investment. A 10 per cent decrease in the discount applied would have increased the net assets
attributable to the Company’s shareholders and the total profit for the year by less than 0.5 per cent of net assets.
The largest single concentration of risk relates to the Company’s investment in ACC Aviation (via Newacc (2014) Limited) which
constitutes 6.2 per cent of the net assets attributable to the Company’s shareholders. The Board seeks to mitigate this risk by
diversifying the portfolio and monitors the status of all investments on an ongoing basis. The average investment, excluding those that
have had their fair value reduced to nil, is 1.8 per cent (2015: 1.7 per cent) of the value of net assets.
Comparison of realised proceeds to unrealised valuations
The table below shows a comparison of the realised proceeds to the unrealised valuations one year prior to sale, for all disposals of
unquoted investments over the last five years.
Date of Disposal Sale Valuation Increase
proceeds one year (decrease)
to date earlier
£000 £000 £000
Primal Pictures Limited* Aug-12 1,916 1,008 908 
Sirigen Group Limited * Aug-12 1,962 517 1,445 
Digital Healthcare Limited Aug-13 1,285 1,156 129 
Ellfin Home Care Limited Dec-14 1 - 1
Waterfall Services Limited Dec-14 964 489 475 
Insider Technologies (Holdings) Limited Oct-15 773 587 186 
Callstream Group Limited Mar-16 752 773 (21)
7,653 4,530 3,123
* Includes estimated value of deferred consideration on exit BRITISH SMALLER COMPANIES VCT2 PLC
74
17. Financial Instruments (continued)
Interest Rate Risk
The Company’s venture capital investments include £14,527,000 (2015: £14,726,000) of loan stock in unquoted companies. The majority
of this loan stock at 31 December 2016 is at fixed rates to guard against fluctuations in interest rates. As a result the Company is
exposed to cash flow interest rate risk on £750,000 (2015: £883,000) of its loan stock portfolio. 
Other financial assets (being accrued income) and other financial liabilities (being accrued expenses) attract no interest and have an
expected maturity date of less than one year.
The Company has some exposure to interest rates as a result of interest earned on bank deposits. Other financial assets (being accrued
income) and other financial liabilities (being accrued expenses) attract no interest and have an expected maturity date of less than one
year. A sensitivity analysis has not been performed as the amounts involved are not considered to be significant.
2016 2015
Weighted Weighted Weighted Weighted
average average time average average time
interest rate for which interest rate for which
rate is fixed rate is fixed
£000 % Months £000 % Months
Fixed rate loan stock and preference shares 18,727 9.3 27 19,907 8.8 35
Cash on fixed term deposit 3,037 0.9 3 1,992 1.0 3
Combined 21,764 8.2 24 21,899 8.1 32
Exchange Rate Risk
The Company has no significant exposure to exchange rate risk.
17b Credit Risk
Credit risk is the risk that the counterparty to a financial instrument will fail to discharge an obligation or commitment that it has
entered into with the Company. The Investment Adviser has in place a monitoring procedure in respect of counterparty risk which is
reviewed on an ongoing basis. The carrying amounts of financial assets excluding equity investments total £36,492,000 (2015:
£39,224,000) which best represents the maximum credit risk exposure at the balance sheet date. 
The Company does not invest in floating rate instruments other than, on occasion, unquoted loan stock. Credit risk on unquoted loan
stock held within unlisted investments is considered to be part of market risk as disclosed above.
The fair value of the loans and receivables is not regarded as having changed due to the changes in credit risk in either year.
Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is
considered to be small due to the short settlement period involved and the high credit quality of the brokers used. The Board monitors
the quality of service provided by the brokers used to further mitigate this risk. Bankruptcy or insolvency of the broker may cause the
Company’s rights with respect to securities held by the broker to be delayed or limited. The Investment Adviser monitors the Company’s
risk by reviewing the broker’s internal control reports on a regular basis.
The cash held by the Company is held across a number of banks to spread the risk. Bankruptcy or insolvency of these banks may cause
the Company’s rights with respect to the cash held by the bank to be delayed or limited. The banks used by the Company are large and
reputable. Should the credit quality or the financial position of the banks or broker deteriorate significantly the Investment Adviser will
move the cash holdings to another bank. Financial Statements
Annual Report and Accounts for the year ended 31 December 2016
75
17. Financial Instruments (continued)
The maturities of the loan stock portfolio are as follows:
2016 £000 2015 £000
<1 year 1-2 years 2-5 years >5 years <1 year 1-2 years 2-5 years >5 years
Unquoted loan 
investments 2,603 2,835 9,089 - 1,822 1,403 11,245 256
The past due maturity dates of the loan stock portfolio are as follows:
Included within unquoted loan investments are £548,000 of loans which are past their due date but have been re-negotiated.
An aged analysis of the unquoted loan investments included above, which are past due but not individually impaired, is set out below. 
For this purpose these loans are considered to be past due when any payment due date under the loan’s contractual terms (such as
payment of interest) is received late or missed. The full value of the loan is given even though, in some cases, the only default is in
respect of interest.
2016 £000 2015 £000
0-6 months 0-6 months
Loans to investee companies past due 1,225 876
17c Liquidity Risk
The risk to the Company relates to liabilities which fall due within one year. These liabilities are deemed immaterial and as such the risk
associated with them is minimal.
The Company needs to retain enough liquid resources to support the financing needs of its investment businesses. To meet this aim the
Company places its surplus funds in bank interest deposit accounts. Investments in liquid funds are held for the purpose of liquidity
whilst waiting for suitable qualifying investment opportunities to arise. 
The Company’s liquidity risk is managed on an ongoing basis by the Investment Adviser in accordance with policies and procedures in
place. The cash requirements of the Company in respect of each investment are assessed at monthly portfolio meetings.
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. Of the Company’s assets 22.9 per cent (2015: 28.2
per cent) are in the forms of liquid cash. There are no undrawn committed borrowing facilities at either year end. The Company does not
have a material amount of liabilities at the year end.
18. Capital Management
The Company’s objectives when managing capital are:
• to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for
other stakeholders; and
• to ensure sufficient liquid resources are available to meet the funding requirements of its investments and to fund new investments
where identified.
The Company has no external debt; consequently all capital is represented by the value of share capital, distributable and other
reserves. Total shareholder equity at 31 December 2016 was £56.11 million (2015: £54.85 million).
In order to maintain or adjust its capital structure the Company may adjust the amount of dividends paid to shareholders, return capital
to shareholders, issue new shares or sell assets.
There have been no changes in capital management objectives or the capital structure of the business from the previous year. The
Company is not subject to any externally imposed capital requirements. BRITISH SMALLER COMPANIES VCT2 PLC
76
NOTICE OF THE ANNUAL GENERAL MEETING
No: 04084003
BRITISH SMALLER COMPANIES VCT2 PLC
NOTICE IS HEREBY GIVEN that the ANNUAL GENERAL MEETING of the Company will be held at 33 St James Square, London, SW1Y 4JS
on 10 May 2017 at 12:00 noon for the following purposes:
To consider and, if thought fit, pass the following resolutions:
Ordinary Resolutions
(1) That the annual report and accounts for the year ended 31 December 2016 be received.
(2) That the final dividend of 1.5 pence per ordinary share for the year ended 31 December 2016 be approved.
(3) That the Directors’ Remuneration Report for the year ended 31 December 2016 be approved other than the part of such report
containing the Directors’ Remuneration Policy.
(4) That the Directors’ Remuneration Policy contained in the Directors’ Remuneration Report for the year ended 31 December 2016
be approved.
(5) That Mr P C Waller be re-elected as a director.
(6) That Mr R M Pettigrew be re-elected as a director.
(7) That Mr R Last be re-elected as a director.
(8) That BDO LLP be appointed as auditor to the Company to hold office until the conclusion of the next general meeting at which
accounts are laid before the Company and that the directors be authorised to fix their remuneration.
(9) That the directors be and are hereby generally and unconditionally authorised in accordance with Section 551 of the Companies
Act 2006 (the “Act”) to exercise all the powers of the Company to allot shares in the Company or to grant rights to subscribe for
or to convert any security into shares in the Company up to an aggregate nominal amount of £4,000,000, during the period
commencing on the passing of this Resolution and expiring on the later of 15 months from the passing of this Resolution or the
next Annual General Meeting of the Company (unless previously revoked, varied or extended by the Company in general
meeting), but so that this authority shall allow the Company to make before the expiry of this authority offers or agreements
which would or might require shares in the Company to be allotted, or rights to subscribe for or to convert any security into
shares to be granted, after such expiry and that all previous authorities given to the directors be and they are hereby revoked,
provided that such revocation shall not have retrospective effect.
Special Resolutions
(10) That the directors be and are hereby empowered in accordance with Section 570(1) of the Act during the period commencing on
the passing of this Resolution and expiring at the conclusion of the Company’s next Annual General Meeting, or on the expiry of
15 months following the passing of this Resolution, whichever is the later, (unless previously revoked, varied or extended by the
Company in general meeting), to allot equity securities (as defined in Section 560 of the Act) for cash pursuant to the general
authority conferred upon the directors in Resolution 9 above as if Section 561 of the Act did not apply to any such allotment
provided that this power is limited to the allotment of equity securities in connection with the allotment for cash of equity
securities up to an aggregate nominal amount of £4,000,000, but so that this authority shall allow the Company to make offers or
agreements before the expiry and the directors may allot securities in pursuance of such offers or agreements as if the powers
conferred hereby had not so expired. This power applies in relation to a sale of shares which is an allotment of equity securities
by virtue of Section 560(3) of the Act as if in the first paragraph of this Resolution the words “pursuant to the general authority
conferred upon the directors in Resolution 9 above” were omitted.
(11) That, the Articles of Association of the Company be amended to increase the limit on the aggregate remuneration of the non-
executive directors from £75,000 to £100,000 per annum by replacing the figure of “£75,000” appearing in Article 128 with
“£100,000”. Annual General Meeting
Annual Report and Accounts for the year ended 31 December 2016
77
(12) That, subject to the sanction of the High Court, the amount standing to the credit of the share premium account of the Company
as at the date of the final hearing before the Court at which confirmation of said cancellation is sought, be cancelled.
BY ORDER OF THE BOARD
The City Partnership (UK) Limited
Company Secretary
21 March 2017
Registered office: 5th Floor, Valiant Building, 14 South Parade, Leeds LS1 5QS
Information regarding the Annual General Meeting, including the information required by section 311A of the Companies Act 2006, is
available from www.bscfunds.com.
Notes:
(a) Any member of the Company entitled to attend and vote at the Annual General Meeting is also entitled to appoint one or more
proxies to attend, speak and vote instead of that member. Any such appointment can only be made using the procedures set out in
these notes and the notes of the Form of Proxy. A member may appoint more than one proxy in relation to the Annual General
Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that member. A
proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company but must attend the Annual
General Meeting in order to represent his appointer. A member entitled to attend and vote at the Annual General Meeting may
appoint the Chairman or another person as his proxy although the Chairman will not speak for the member. A member who wishes
his proxy to speak for him should appoint his own choice of proxy (not the Chairman) and give instructions directly to that person. If
you are not a member of the Company but you have been nominated by a member of the Company to enjoy information rights, you
do not have a right to appoint any proxies under the procedures set out in these notes. Please read note (h) below. Under section
319A of the Companies Act 2006, the Company must answer any question a member asks relating to the business being dealt with
at the Annual General Meeting unless:
• answering the question would interfere unduly with the preparation for the Annual General Meeting or involve the disclosure
of confidential information;
• the answer has already been given on a website in the form of an answer to a question; or
• it is undesirable in the interests of the Company or the good order of the Annual General Meeting that the question be
answered.
(b) To be valid, a Form of Proxy must be completed and signed and with the power of attorney or other written authority, if any, under
which it is signed or an office or notarially certified copy or a copy certified in accordance with the Powers of Attorney Act 1971 of
such power and written authority, must be delivered to Capita Asset Services, PXS1, 34 Beckenham Road, Beckenham BR3 4ZF not
less than 48 hours (excluding weekends and public holidays) before the time appointed for holding the Annual General Meeting or
adjourned meeting at which the person named in the Form of Proxy proposes to vote. In the case of a poll taken more than 48
hours (excluding weekends and public holidays) after it is demanded, the document(s) must be delivered as aforesaid not less than
24 hours (excluding weekends and public holidays) before the time appointed for taking the poll, or where the poll is taken not
more than 48 hours (excluding weekends and public holidays) after it was demanded, be delivered at (and prior to the
commencement of) the meeting at which the demand is made. If no voting indication is given in the Form of Proxy, your proxy will
vote (or abstain from voting) as they think fit in relation to any matter put to the Annual General Meeting.
(c) To be valid, any Form of Proxy or other instrument appointing a proxy, must be returned by no later than 12.00 noon on 8 May 2017
through any one of the following methods:
i) by post, courier or (during normal business hours only) hand to the Company’s UK registrar at:
Capita Asset Services
PXS1
34 Beckenham Road
Beckenham
BR3 4ZF; BRITISH SMALLER COMPANIES VCT2 PLC
78
ii) electronically through the website of the Company’s UK registrar at www.capitashareportal.com; or
iii) in the case of shares held through CREST, via the CREST system (see note (p) below);
(d) If you return more than one proxy appointment, either by paper or electronic communication, the appointment received last by the
Registrar before the latest time for the receipt of proxies will take precedence. You are advised to read the terms and conditions of
use carefully. Electronic communication facilities are open to all shareholders and those who use them will not be disadvantaged.
(e) The return of a completed Form of Proxy, electronic filing or any CREST Proxy Instruction (as described in note (p) below) will not
prevent a shareholder from attending the Meeting and voting in person if he/she wishes to do so.
(f) In order to revoke a proxy instruction a member will need to inform the Company by sending a signed hard copy notice clearly
stating the intention to revoke the proxy appointment to Capita Asset Services, PXS1, 34 Beckenham Road, Beckenham BR3 4ZF. In
the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf
by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the
revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. The
revocation notice must be received by Capita Asset Services before the Annual General Meeting or the holding of a poll
subsequently thereto. If a member attempts to revoke his or her proxy appointment but the revocation is received after the time
specified then, subject to note (g) directly below, the proxy appointment will remain valid.
(g) Completion and return of a Form of Proxy will not preclude a member of the Company from attending and voting in person. If a
member appoints a proxy and that member attends the Annual General Meeting in person, the proxy appointment will
automatically be terminated.
(h) Copies of the directors’ Letters of Appointment, the Register of Directors’ Interests in the ordinary shares of the Company, a copy
of the amended articles of association (marked up to show the changes) and a copy of the current articles of association of the
Company will be available for inspection at the registered office of the Company during usual business hours on any weekday
(weekends and public holidays excluded) from the date of this Notice, until the end of the Annual General Meeting and at the
Annual General Meeting venue itself for at least 15 minutes prior to and during the meeting.
(i) Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company has specified that only those holders of
the Company’s shares registered on the Register of Members of the Company as at close of business on 8 May 2017 or, in the
event that the Annual General Meeting is adjourned, on the Register of Members at close of business on the day two days before
the time of any adjourned meeting, shall be entitled to attend and vote at the said Annual General Meeting in respect of such
shares registered in their name at the relevant time. Changes to entries on the Register of Members after close of business on 8
May 2017 or, in the event that the Annual General Meeting is adjourned, on the Register of Members less than 48 hours before the
time of any adjourned meeting, shall be disregarded in determining the right of any person to attend and vote at the Annual
General Meeting.
(j) As at 21 March 2017, the Company’s issued share capital comprised 100,761,545 ordinary shares of 10 pence each with a further
2,545,746 shares held in treasury. Those treasury shares represented 2.5 per cent of the total issued share capital (including
treasury shares) at the aforementioned date. Each ordinary share carries one voting right at the Annual General Meeting of the
Company and so the total number of voting rights in the Company as at 21 March 2017 was 100,761,545. The website referred to
above will include information on the number of ordinary shares and voting rights.
(k) If you are a person who has been nominated under section 146 of the Companies Act 2006 to enjoy information rights (“Nominated
Person”):
• You may have a right under an agreement between you and the member of the Company who has nominated you to have
information rights (“Relevant Member”) to be appointed or to have someone else appointed as a proxy for the Annual General
Meeting;
• If you either do not have such a right or if you have such a right but do not wish to exercise it, you may have a right under an
agreement between you and the Relevant Member to give instructions to the Relevant Member as to the exercise of voting
rights;
• Your main point of contact in terms of your investment in the Company remains the Relevant Member (or, perhaps your
custodian or broker) and you should continue to contact them (and not the Company) regarding any changes or queries
relating to your personal details and your interest in the Company (including any administrative matters). The only exception
to this is where the Company expressly requests a response from you. Annual General Meeting
Annual Report and Accounts for the year ended 31 December 2016
79
(l) A corporation which is a member can appoint one or more corporate representatives who may exercise, on its behalf, all its
powers as a member provided that no more than one corporate representative exercises powers over the same share.
(m) In the case of joint members, any one of them may sign the Form of Proxy. The vote of the person whose name stands first in the
register of members of the Company will be accepted to the exclusion of the votes of the other joint holders.
(n) A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the
resolution. If no voting indication is given on the Form of Proxy, the proxy will vote or abstain from voting at his or her discretion.
The proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter which is put before the Annual
General Meeting.
(o) Members may not use any electronic address provided either in this Notice of Annual General Meeting, or any related documents
(including the Chairman’s letter and Form of Proxy), to communicate with the Company for any purposes other than those
expressly stated.
(p) CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by
using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those
CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who
will be able to take the appropriate action on their behalf. In order for a proxy appointment or instruction made using the CREST
service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance
with Euroclear UK & Ireland’s specifications, and must contain the information required for such instruction, as described in the
CREST Manual (available via www.euroclear.com/CREST). The message, regardless of whether it constitutes the appointment of a
proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to
be received by the issuer’s agent (ID RA10) not less than 48 hours (excluding weekends and public holidays) before the time of the
Annual General Meeting. For this purpose, the time of receipt will be taken to be the time (as determined by the time stamp
applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to
CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should
be communicated to the appointee through other means. BRITISH SMALLER COMPANIES VCT2 PLC
80 Section Title
Annual Report and Accounts for the year ended 31 December 2016
81
Annual General Meeting
BRITISH SMALLER COMPANIES VCT2 PLC
Form of Proxy
To be used at the Annual General Meeting of the Company
to be held at 33 St James Square, London, SW1Y 4JS on 10 May 2017 at 12:00 noon
I/We _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _being a member/members of the above named
Company entitled to attend and vote at the Annual General Meeting of the Company hereby appoint the Chairman of the Annual General
Meeting or (see notes (2) and (3) and (4)) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _of
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 
as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held on 10 May 2017 at 12:00
noon and at any adjournment thereof.
Number of ordinary shares proxy is appointed over
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
Please tick here if this proxy is one of multiple proxy appointments being made (see note 2) n n
My/our proxy is to vote on the resolutions as indicated below. Please indicate with an “x” how you wish your vote to be cast. If no voting
indication is given, your proxy will vote or abstain from voting on the resolutions at their discretion.
FOR AGAINST WITHHELD
Ordinary Resolutions
1. To receive the annual report and accounts n n n n n n
2. To approve a final dividend of 1.5 pence per ordinary share n n n n n n
3. To approve the Directors’ Remuneration Report n n n n n n
4. To approve the Directors’ Remuneration Policy n n n n n n
5. To re-elect Mr P C Waller as a director n n n n n n
6. To re-elect Mr R M Pettigrew as a director n n n n n n
7. To re-elect Mr R Last as a director n n n n n n
8. To appoint BDO LLP as auditor n n n n n n
9 To authorise the directors to allot shares. n n n n n n
Special Resolutions
10 To waive pre-emption rights in respect of the allotment of shares. n n n n n n
11 To amend the Articles of Association of the Company to increase the limit on the 
aggregate remuneration of the non-executive directors from £75,000 to £100,000 
per annum. n n n n n n
12 To cancel, subject to the sanction of the High Court, the share premium account. n n n n n n
Signature Dated 2017
Please refer to notes overleaf.
Please complete, sign and date, detach and return the Form of Proxy in the pre-paid envelope provided.
If you would like to submit your form of proxy using the web-based voting facility go to www.capitashareportal.com. You will be asked to
enter your investor code, surname and postcode to be able to lodge your vote. Your investor code can be found on your share certificate
or recent tax voucher.
# BRITISH SMALLER COMPANIES VCT2 PLC
82
BRITISH SMALLER COMPANIES VCT2 PLC
Form of Proxy
To be used at the Annual General Meeting of the Company
to be held at 33 St James Square, London, SW1Y 4JS on 10 May 2017 at 12:00 noon
NOTES
1. The Notice of the Annual General Meeting is set out on pages 76 to 79 of the annual report.
2. Any member of the Company entitled to attend and vote at the Annual General Meeting is also entitled to appoint one or more
proxies to attend, speak and vote instead of that member. Any such appointment can only be made using the procedures set out in
these notes and set out in the Notice of the Annual General Meeting. A member may appoint more than one proxy in relation to the
Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by
that member. A proxy may demand, or join in demanding, a poll. A proxy need not be a member of the Company but must attend
the Annual General Meeting in order to represent his appointer. A member entitled to attend and vote at the Annual General
Meeting may appoint the Chairman or another person as his proxy although the Chairman will not speak for the member. 
A member who wishes his proxy to speak for him should appoint his own choice of proxy (not the Chairman) and give instructions
directly to that person.
3. If you wish to appoint a proxy of your own choice delete the words “the Chairman of the General Meeting” and insert the name 
and address of the person whom you wish to appoint in the space provided. 
4. To be valid, a Form of Proxy and the power of attorney or other written authority, if any, under which it is signed or an office or
notarially certified copy or a copy certified in accordance with the Powers of Attorney Act 1971 of such power and written authority,
must be delivered to Capita Asset Services, PXS1, 34 Beckenham Road, Beckenham, BR3 4ZF not less than 48 hours (excluding
weekends and public holidays) before the time appointed for holding the Annual General Meeting or adjourned meeting at which
the person named in the Form of Proxy proposes to vote. In the case of a poll taken more than 48 hours (excluding weekends and
public holidays) after it is demanded, the document(s) must be delivered as aforesaid not less than 24 hours (excluding weekends
and public holidays) before the time appointed for taking the poll, or where the poll is taken not more than 48 hours (excluding
weekends and public holidays) after it was demanded, be delivered at (and prior to the commencement of) the meeting at which
the demand is made. If you would like to submit your form of proxy using the web-based voting facility go to
www.capitashareportal.com. You will be asked to enter your investor code, surname and postcode to be able to lodge your vote.
Your investor code can be found on your share certificate or recent tax voucher.
5. Any alterations to the Form of Proxy must be initialled by the person who has signed the Form of Proxy.
6. In order to revoke a proxy instruction a member will need to inform the Company by sending a signed hard copy notice clearly
stating the intention to revoke the proxy appointment to Capita Asset Services, PXS1, 34 Beckenham Road, Beckenham BR3 4ZF. In
the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf
by an officer of the company or an attorney for the company. Any power of attorney or any other authority under which the
revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation notice. The
revocation notice must be received by Capita Registrars Limited before the Annual General Meeting or the holding of a poll
subsequently thereto. If a member attempts to revoke his or her proxy appointment but the revocation is received after the time
specified then, subject to Note 9 below, the proxy appointment will remain valid.
7. In the case of a corporation, this Form of Proxy must be executed under its common seal or signed on its behalf by its attorney 
or a duly authorised officer of the corporation.
8. In the case of joint shareholders, any one of them may sign. The vote of the person whose name stands first in the register of
members will be accepted to the exclusion of the votes of the other joint holders.
9. Completion and return of a Form of Proxy will not preclude a member of the Company from attending and voting in person. 
If a member appoints a proxy and that member attends the Annual General Meeting in person, the proxy appointment will
automatically be terminated.
10. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the
resolution. If no voting indication is given, the proxy will vote or abstain from voting at his or her discretion on any other matter
which is put before the Annual General Meeting.
11. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by
using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those
CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who
will be able to take the appropriate action on their behalf. 
Please complete, sign and date, detach and return the Form of Proxy in the pre-paid envelope provided. Investment Adviser
YFM Private Equity Limited
5th Floor, Valiant Building
14 South Parade
Leeds
LS1 5QS
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Solicitors
Howard Kennedy LLP
1 London Bridge
London
SE1 9BG
Stockbrokers
Panmure Gordon (UK) Limited
One New Change
London
EC4M 9AF
Independent Auditor
BDO LLP
55 Baker Street
London
W1U 7EU
VCT Status Adviser
Philip Hare & Associates LLP
Suite C, First Floor
4-6 Staple Inn
Holborn
London
WC1V 7QH
Bankers
Santander UK plc
44 Merrion Street
Leeds
LS2 8JQ
Company Secretary
The City Partnership (UK) Limited
110 George Street
Edinburgh
EH2 4LH
ADVISERS TO THE COMPANY
Annual Report and Accounts for the year ended 31 December 2016
83 British Smaller Companies VCT2 plc
Transforming small businesses bscfunds.com
5th Floor, Valiant Building
14 South Parade
Leeds LS1 5QS
Telephone 0113 244 1000
Email info@yfmep.com