Octopus Apollo VCT Octopus Apollo VCT Prospectus The issue by Octopus Apollo VCT plc of Scheme Shares in connection with the acquisition of the assets and liabilities of Octopus Eclipse VCT plc. Offer for Subscription by Octopus Apollo VCT plc, for the tax years 2016/2017 and 2017/2018, to raise up to £20 million by way of an issue of Offer Shares. 4 November 2016
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Octopus Apollo VCT Prospectus - EQ Investors · Octopus Apollo VCT Octopus Apollo VCT Prospectus The issue by Octopus Apollo VCT plc of Scheme Shares in connection with the acquisition
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Octopus Apollo VCT
Octopus Apollo VCT ProspectusThe issue by Octopus Apollo VCT plc of Scheme Shares in connection with the acquisition of the assets and liabilities of Octopus Eclipse VCT plc.
Offer for Subscription by Octopus Apollo VCT plc, for the tax years 2016/2017 and 2017/2018, to raise up to £20 million by way of an issue of Offer Shares.
If youare in anydoubt about the action tobe taken, you should immediately consult yourbankmanager,stockbroker, solicitor, accountant or financial adviser authorised pursuant to the Financial Services andMarketsAct2000(FSMA).This document, which comprises a prospectus relating to Octopus Apollo VCT plc (the “Company”) dated 4November2016,hasbeenpreparedinaccordancewiththeprospectusrulesmadeunderPartVIofFSMA,andhas been approved for publication by the Financial Conduct Authority as a prospectus under the ProspectusRuleson4November2016.The Company, the Directors and the Proposed Director, whose names appear on pages 30 to 31 of thisdocument, accept responsibility for the information contained herein. To the best of the knowledge of theCompany,theDirectorsandtheProposedDirector(whohavetakenallreasonablecaretoensurethatsuchisthe case), the information contained in this document is in accordance with the facts and does not omitanythinglikelytoaffecttheimportofsuchinformation.Persons receiving this document shouldnote thatHowardKennedy,which is authorisedand regulated in theUnitedKingdombytheFinancialConductAuthority,isactingassponsorfortheCompanyandno-oneelseandwill not, subject to the responsibilities and liabilities imposed by FSMA or the regulatory regime establishedthereunder,beresponsibletoanyotherpersonforprovidingtheprotectionsaffordedtocustomersofHowardKennedyorprovidingadviceinconnectionwithanymattersreferredtoherein.
TheordinarysharesoftheCompanyinissueatthedateofthisdocumentarelistedonthepremiumsegmentoftheOfficialListof theUKListingAuthorityandtradedontheLondonStockExchange’smainmarket for listedsecurities.ApplicationhasbeenmadetotheUKListingAuthority foralloftheNewSharestobe listedonthepremiumsegmentof theOfficialListandapplicationwillbemadeto theLondonStockExchange for theNewSharestobeadmittedtotradingonitsmainmarketforlistedsecurities.Itisexpectedthatsuchadmissionwillbecomeeffectiveandthattradingwillcommenceon20December2016withregardstotheSchemeSharesandwithin10businessdaysof theirallotmentwith regards to theOfferShares.TheNewShareswillbe issued inregisteredformandwillbefreelytransferableinbothcertificatedanduncertificatedform.TheNewShareswillrank pari passu in all respects with the existing Shares. The Offer is conditional on the passing by theShareholdersofResolution2attheGeneralMeeting.TheOfferisnotbeingmade,directlyorindirectly,inorintotheUnitedStates,Canada,Australia,NewZealand,JapanortheRepublicofSouthAfricaortheirrespectiveterritoriesorpossessions,anddocumentsshouldnotbedistributed,forwardedortransmittedinorintosuchterritories.TheNewShareshavenotbeenandwillnotberegistered under the United States Securities Act of 1933 (as amended) and may not be offered, sold ordelivered, directly or indirectly, in or into the United States, Canada, Australia, New Zealand, Japan or theRepublicofSouthAfrica.
A.1 Warning Thissummaryshouldbereadasan introductiontotheProspectus.Anydecisionto invest inthesecuritiesshouldbebasedonconsiderationoftheProspectusasawholebytheinvestor.Where a claim relating to the information contained in the Prospectus is brought before acourt, the plaintiff investormight, under the national legislation of the EEA States, have tobear the costsof translating theProspectusbefore the legalproceedingsare initiated. Civilliability attaches only to those persons who have tabled the summary, including anytranslation thereof, but only if the summary ismisleading, inaccurate or inconsistentwhenread together with the other parts of the Prospectus or it does not provide, when readtogetherwithotherpartsof theProspectus, key information inorder toaid investorswhenconsideringwhethertoinvestinsuchsecurities.
TheCompanyandtheDirectorsconsenttotheuseoftheProspectus,andacceptresponsibilityfor the content of the Prospectus, with respect to subsequent resale or final placement ofsecuritiesby financial intermediaries, from thedateof theProspectusuntil the closeof theOffer.TheOfferisexpectedtocloseonorbefore3November2017.TheMergerisexpectedtocompleteon19December2016.Therearenoconditionsattachingtothisconsent.FinancialintermediariesmustgiveinvestorsinformationonthetermsandconditionsoftheOfferatthetimetheyintroducetheOffertoinvestors.
TheCompanyisnotawareofanypersonorpersonswhohave,orwhofollowingtheOfferandtheMergerwillorcouldhave,directlyorindirectly,votingrightsrepresenting3%ormoreofthe issued share capital of the Company orwho can, or could, following theOffer and theMerger,directlyorindirectlyexercisecontrolovertheCompany.TherearenodifferentvotingrightsforanyShareholder.
B.7 Selectedfinancial
Selected historical financial information relating to the Company,which has been extractedfromtheauditedandunauditedfinancialstatementsreferencedinthefollowingtables,isset
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information outbelow: YearEnded
31January2014
(audited)
YearEnded31January
2015(audited)
YearEnded31January
2016(audited)
Sixmonthsended31July2015
(unaudited)
Sixmonthsended31July2016
(unaudited)
Net assets(£’000)
63,905 119,563 127,741 134,238 152,139
Net assetvalue perShare (p)(Ordinary, COrdinary, DOrdinary)
86.8,N/A,N/A
84.8,98.2,N/A
82.3,N/A,93.7
83.6,98.0,N/A
83.0,N/A,92.3
Revenuereturnafter
expensesandtaxation(£’000)
1,599 1,630 1,689 1,182 1,052
NAVpluscumulativedividendspaid(p)
(Ordinary,COrdinary*,DOrdinary**)
109.3,N/A,N/A
112.3,105.0,N/A
114.8,N/A,98.7
113.6,105.0,N/A
115.5,N/A,97.3
DividendpaidperShareduringtheperiod(p)
(Ordinary,COrdinary*,DOrdinary**)
5.0,N/A,N/A
5.0,N/A,N/A
5.0,N/A,N/A
2.5,N/A,N/A
2.5,N/A,N/A
TotalExpenses(£’000)
2,174 3,551 4,405 2,086 2,163
Asapercentageof
averageShareholders’
funds
3.4% 3.0% 3.4% 1.6% 1.4%
EarningsperShare(p)
2.5 3.3 2.0 1.0 0.8
* This includes dividends paid to shareholders formerly inOctopus VCT Plc prior tomergerwiththeCompanyon28November2014.**ThisincludesdividendspaidtoshareholdersformerlyinOctopusVCT2PlcpriortomergerwiththeCompanyon27January2016.On28November2014theCompanymergedwithOctopusVCTplcwithatotalof52,035,840Cordinarysharesof1penceeachbeingissuedtoformershareholdersofOctopusVCTplc.
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Netproceedsof£23.4million,£3.9millionand£26.7millionand£39.5millionwereraisedbytheCompanyunderoffersforsubscriptionwhichopenedon1October2012,1December2013,24October2014and2November2015respectively.On21August2015apaymentof98.0pperCsharewaspaidinrespectofthoseCsharesthatdidnotconverttoShares,reducingtheNAVoftheCompanybyapproximately£34million.On27January2016theCompanymergedwithOctopusVCT2plcwithatotalof19,082,726Dordinarysharesof1penceeachbeingissuedtoformershareholdersofOctopusVCT2plc.On4August2016apaymentof92.3pperDsharewaspaidinrespectofthoseDsharesthatdidnotconverttoShares,reducingtheNAVoftheCompanybyapproximately£14.4million.Saveinrespectofthesematters,bothduringthefinancialperiodsreferredtoaboveandsince31 July 2016 there has been no significant change in the financial condition or operatingresultsoftheCompany.
Theunauditedpro forma statementof earningshasbeenprepared for illustrativepurposesonly and, becauseof its nature, addresses ahypothetical situation anddoesnot, therefore,representApollo’sactualfinancialpositionorresultsnorisitindicativeoftheresultsthatmayormaynotbeexpectedtobeachievedinthefuture.
material adjustment from the unaudited half-yearly report of the Company for the sixmonthsended31July2016.
Adjustments
2. The earnings of Eclipse for the sixmonths ended 31March 2016 have been extractedwithoutmaterialadjustment fromtheunauditedhalf-yearly reportofEclipse for thesixmonthsended31March2016.Thisadjustment isexpectedtohaveacontinuing impactontheearningsoftheCompany.
3. An adjustment has been made to reflect the transaction costs relating to the Merger
whicharetobeexpensed.ThecommissiononthegrossproceedsoftheOfferwillbesetoffagainstthesharepremiumaccountwithinShareholder'sequity.Noaccounthasbeentaken of any potential irrecoverable VAT. This adjustment will not have a continuingimpactontheearningsoftheCompany.
taken to achieve those synergies, thatmay have arisen had theMerger occurred on 1February2016andthatmaysubsequentlyhaveaffectedtheresultsoftheCompanyinthesixmonthsended31July2016.
Theunauditedproformastatementofnetassetshasbeenpreparedforillustrativepurposesonly and, becauseof its nature, addresses ahypothetical situation anddoesnot, therefore,representApollo’sactualfinancialpositionorresults.
TheunauditedproformastatementofnetassetsisbasedonthenetassetsofApolloasat31July2016,as setout in theunauditedhalf-yearly reportof theCompany for the sixmonthsended31July2016andhasbeenpreparedinamannerconsistentwiththeaccountingpoliciesadoptedbyApolloinpreparingsuchinformationandonthebasissetoutinthenotessetoutbelow.
Unauditedproformastatementofnetassets
OctopusApolloVCT
Plc
OctopusEclipseVCT
PlcFund
raisingPro
forma
(Note1) (Note2) (Note3) total
£'000 £'000 £'000 £’000
115,435 26,234 - 141,669
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Fixedassetinvestments
Currentassets:
Moneymarketfunds - 2,046 - 2,046
Debtors 5,248 286 - 5,534
Cashatbank 35,632 4,261 18,500 58,393
40,880 6,593 18,500 65,973
Creditors (4,176) (213) - (4,389)
Netcurrentassets 36,704 6,380 18,500 61,584
Netassets 152,139 32,614 18,500 203,253Notes1. The net assets of Apollo as at 31 July 2016 have been extracted without material
adjustment from the unaudited half-yearly report of the Company for the six monthsended31July2016.
Adjustments
2. The net assets of Eclipse as at 31 March 2016 have been extracted without materialadjustmentfromtheunauditedhalf-yearlyreportofEclipseforthesixmonthsended31March2016.
Not applicable. The Company is of the opinion that the working capital available to theCompany is sufficient for theCompany’spresent requirements (that is, forat least thenexttwelvemonthsfromthedateofthisdocument).
InvestmentPolicyTheCompany’sinvestmentpolicyisdesignedtoenabletheCompanytocomplywiththeVCTqualifyingconditions.Itisintendedthatthelong-termdispositionoftheCompany’sassetswillbenot less than80% inaportfolioofunquoted investmentsandup to20% incashornearcash investments to provide a reserve of liquidity which will maximise the Company’sflexibility as to the timing of investment acquisitions and disposals, dividend payments andsharebuybacks.Investments are structured using various unquoted investment instruments, includingordinary and preference shares, loan stocks and convertible securities, to achieve anappropriate balance of income and capital growth, having regard to the venture capitallegislation.Theportfolioisdiversifiedbyinvestinginabroadrangeofindustrysectorsandbyholdinginvestmentsincompaniesatvariousstagesofmaturityinthecorporatedevelopment
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cycle,thoughinvestmentsarenotgenerallymadeinearlystagecompanieswhichhaveyettoachieveprofitabilityandcashgeneration.Thenormal investmentperiodis intherangefromfivetosevenyears.Anyuninvestedfundsaretypicallyheldincashandmoneymarketfunds.Riskisspreadbyinvestinginanumberofdifferentbusinesseswithindifferentindustrysectorsusingavarietyofsecurities.Themaximumamountinvestedinanyonecompanyislimitedtoany HMRC annual investment limits and, generally, no more than 15% of the Company’sassets,atcost,areinvestedinthesamecompany.The value of individual investments is expected to increase over time as a result of tradingprogress and a continuous assessment is made of investments’ suitability for sale. TheCompany’s VCT qualifying investments are heldwith a view to long-term capital growth aswell as income and will often have limited marketability; as a result it is possible thatindividualholdingsmaygrowinvaluetothepointwheretheyrepresentasignificantlyhigherproportionof totalassetsprior toa realisationopportunitybeingavailable. Investmentsarenormallymadeusingshareholders’fundsanditisnotintendedthattheCompanywilltakeonanylong-termborrowings.
B.35 Borrowinglimits The Articles restrict borrowings to 50% of the adjusted capital andreserves.The currentpolicy, however, is that investments will normally be made using the shareholders’ fundsand it is not intended that the Companywill take on any long-termborrowings. As at thedate of this document the Company has noborrowings.
B.37 Typicalinvestor A typical investor forwhomtheCompany isdesigned isaUK taxpayerover18yearsofagewith an investment range of between £5,000 and £200,000who, having regard to the riskfactorssetoutinSectionDofthisSummary,considerstheInvestmentPolicytobeattractive.Thismayincluderetail,institutionalandsophisticatedinvestorsandhighnetworthindividualswhoalreadyhaveaportfolioofnon-VCTinvestments.
Notapplicable. TheCompanywill not investmore than40% ina singleunderlyingassetorinvestmentcompany.
B.40 Applicant’sserviceproviders
Octopusreceivesanannualinvestmentmanagementfeeofanamountequal to 2% of thenet assets of the Company. Octopus also receives an annual administration andaccounting feeequalto0.3%ofthenetassetsoftheCompanyandacompanysecretarialfee of £20,000. Theannualadministrationandaccounting feearrangementswill continueto apply to the Enlarged Company, spread across the enlarged net assets. The annualinvestmentmanagementfeewillcontinuetoapplyinrespectoftheEnlargedCompany.Octopus is entitled to an annual performance related incentive fee in each accountingperiod, subjecttotheNAVpluscumulativedividendspaidbeingatleast100pattheendoftherelevantperiod.Theamountofthefeewillbeequalto20%oftheamountbywhichtheNAVpluscumulativedividendspaidattheendoftherelevantperiodexceedsthehigherofthe:
TheNAVofaShareiscalculatedinaccordancewiththeCompany’saccountingpoliciesandispublishedatleasteverysixmonthsthroughaRegulatoryInformationService.The calculationof theNAVper Sharewouldonlybe suspended in circumstanceswhere theunderlying data necessary to value the investments of the Company could not readily, orwithout undue expenditure, be obtained. Details of any suspension in making suchcalculationswillbeannouncedthroughaRegulatoryInformationService.
Notapplicable.TheCompanyisnotanumbrellacollectiveinvestmentundertakingandassuchthere is no cross liability between classes of Shares or investment in another collectiveinvestmentundertaking.
B.45 Portfolio TheCompany’sinvestmentportfoliocomprisespredominantlyUKunquotedcompaniesacrossvarious sectors including software, engineering, telecommunications, distribution amdmanufacturing.TheCompany’sportfolioof investmentswasvaluedat£115.4millionasat31July2016(thedatetowhichthemostrecentunauditedfinancialinformationhasbeendrawnup).Sincethisdate, the Company’s has sold it’s holdings in CSL DualCom Holdings Limited and AtlanticScreenInternationalLimited,bringingthevalueoftheportfoliodownto£103million.
ThemaximumnumberofOfferSharestobeissuedpursuanttotheOfferis23,474,178OfferShares assuming a full subscription and an Offer Price of 85.2p. The number of Scheme
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issued Shares to be issued pursuant to the Schemewill be determined at the Scheme CalculationDatebyreferencetotheMergerValueandtheRoll-OverValue.
AsRegardsIncome:TheholdersoftheSharesshallbeentitledtoreceivesuchdividendsastheDirectorsresolvetopayinrespectoftheShares.AsRegardsCapital:Onareturnofcapitalonawindinguporanyotherreturnofcapital(otherthanonapurchaseby the Company of its shares) the surplus capital and assets shall be divided amongst theholders of Shares pro rata according to the nominal capital paid up on their respectiveholdingsofShares.AsRegardsVotingandGeneralMeetings:Subject to disenfranchisement in the event of non-compliance with a statutory noticerequiringdisclosureastobeneficialownership,eachholderofSharespresentinpersonorbyproxyshallonapollhaveonevoteforeachShareofwhichheistheholder.AsRegardsRedemption:TheSharesarenotredeemable.
• Shareholders may be adversely affected by the performance of the investments,whichmay restrict the ability of the Company to distribute any capital gains andrevenuereceivedontheinvestments.
• TheCompany’sinvestmentsmaybedifficult,andtaketime,torealise.• Investment in unquoted companies, which comprise most of the Company’s
portfolio of companies, by its nature, involves a higher degree of risk thaninvestmentincompanieslistedontheOfficialList.
• The Company will only pay dividends on its Shares to the extent that it hasdistributable reserves and cash available for that purpose. The Finance Act 2014amendedtheVCTRulesinrespectofVCTsharesissuedonorafter6April2014,suchthatVCTstatuswillbewithdrawn if, inrespectofshares issuedonorafter6April2014, a dividend is paid (or other forms of distribution or payments aremade toinvestors) from capital within three years of the end of the accounting period inwhichshareswereissuedtoinvestors.ThismayreducetheamountofdistributablereservesavailabletotheCompanytofunddividendsandsharebuybacks.
• AlthoughtheexistingShareshavebeen(anditisanticipatedthattheNewShareswillbe)admittedtothepremiumsegmentoftheOfficialListandare(orwillbe)tradedon the LondonStockExchange’smarket for listed securities, the secondarymarketfor VCT shares is generally illiquid and Shareholdersmay find it difficult to realisetheirinvestment.
SectionE—OfferElement Disclosure
requirementDisclosure
E.1 NetproceedsandexpensesoftheIssue
The Merger will not result in any proceeds being raised by the Company. The aggregateanticipatedcostsofundertakingtheMergerareapproximately£331,000.The aggregate net proceeds of the Offer, assuming a £20 million subscription and themaximum initial charge, will be £18.5 million. The costs and expenses (excluding VAT butincluding initial intermediary commission) relating to the Offer for the Company and theexpenseschargedtoan investor,eitherdirectlyor indirectly,willbeupto7.5%ofthegrossfundsraisedbytheCompany.
TheCompany’ssuccesstodatehashighlightedthatthemodelusedbyOctopusisonethatcanlead to good returns. TheBoardbelieves that theCompany’s portfolio iswell positioned tocontinuethistrend,deliveringregularincometothoseinvestorsabletotakealong-termviewtoinvestinginwell-run,VCTqualifyingUKcompanies.TheBoardalsobelievesthatthefundinggapcreatedbythebanks’reluctancetofundsmallercompanies,meansthatthereareplentyofstronginvestmentopportunitiesthatcanbeaccessed. ThefundsraisedundertheOfferwillbeinvestedinaccordancewiththeCompany’sinvestmentpolicy.SomeofthefundsraisedwillbeusedtoinvestintonewportfoliocompaniesandsomemaybeusedtofurthersupporttheCompany’s existing portfolio. The net proceeds of the Offer, assuming a £20 millionsubscriptionandthemaximuminitialcharge,willbe£18.5million.
• themostrecentlyannouncedNAVperShareoftheCompany,dividedby0.945The Company announces its NAV on a six monthly basis. Where the share price for theCompany has been declared ex-dividend on the London Stock Exchange, the NAV used fordeterminingtheOfferPricefortheCompanywillbeex-dividend. InrespectoftheOffer,theNAVperOfferSharewillberoundeduptoonedecimalplaceandthenumberofOfferSharestobeissuedwillberoundeddowntothenearestwholenumber(fractionsofOfferShareswillnot be allotted). Where there is a surplus of application funds, these will be returned toapplicantswithoutinterest,exceptwheretheamountislessthantheOfferPriceofoneOfferShareinwhichcaseitwillbedonatedtocharity.TheOfferwillbeclosedonfullsubscription,i.e.oncethefull£20millionhasbeenraised.TheBoardreservestherighttoclosetheOfferearlierandtoacceptapplicationsand issueOfferSharesatanytimepriortothecloseoftheOffer.OfferSharesissuedwillrankparipassuwiththeexistingSharesfromthedateofissue.The Offer is conditional upon the passing by Shareholders of Resolution 2 at the GeneralMeeting.
Not applicable. No person or entity is offering to sell the security as part of theOffer andtherearenolock-upagreements.
E.6 Amount andpercentage ofdilution
TheexistingissuedSharesintheCompanywillrepresent73.7%oftheenlargedordinarysharecapital of the Company immediately following completion of the Scheme and the Offer,assuming that (i) theOffer is fully subscribed at anOffer Price of 85.2p and (ii) 38,899,060SchemeSharesareissuedpursuanttotheMergerandonthatbasisShareholderswhodonotreceiveOfferSharesorSchemeShareswill,therefore,bedilutedby26.3%.TheexistingissuedSharesintheCompanywillrepresent81.8%oftheenlargedordinarysharecapital of the Company immediately following completion of the Scheme, assuming (i) theOfferdoesnotproceedand(ii)38,899,060SchemeSharesareissuedpursuanttotheMerger,andonthatbasisShareholderswhodonotreceiveSchemeShareswill,therefore,bedilutedby18.2%.TheexistingissuedSharesintheCompanywillrepresent88.2%oftheenlargedordinarysharecapitaloftheCompanyimmediatelyfollowingcompletionoftheOffer,assuming(i)theOfferisfullysubscribedatanOfferPriceof85.2pand(ii)theSchemedoesnotproceed,andonthatbasisShareholderswhodonotreceiveOfferShareswill,thereforebedilutedby11.8%.
E.7 Expensescharged to theinvestor
The anticipated cost of undertaking theMerger is approximately £331,000, including VAT,legalandprofessional fees,stampdutyandthecostsofwindingupEclipse.ThecostsoftheMergerwillbesplitproportionatelybetweentheCompanyandEclipsebyreferenceto theirrespectiveNAVsattheSchemeCalculationDate.In respect of the Offer, for all investors, the Offer Price will be determined by a formulareflecting theNAVper Share adjusted for an allowance for themajority of the costs of theOffer.Theformulais:themostrecentlyannouncedNAVperShare,dividedby0.945.AmoredetailedexplanationissetoutatE3above.InconsiderationforthepromotionandinvestmentmanagementthatOctopusprovidestotheCompany, theCompanywill pay an initial chargeof 3.0%of the gross sums invested in theOffertoOctopus.ThisispayableinthesamewayonallsubscriptionstotheOffer.FromthissumOctopuswilldischargeallexternalcostsofadviceandtheirowncosts inrespectof theOffer.Inaddition,therearethenfouroptions,whicharedeterminedbythecircumstancesofeach investor and their explicit instructions, in respect of which payments can bemade toadvisersandotherintermediaries.Theseareasfollows:1) Adirectinvestment
Investorswho have not invested theirmoney through a financial intermediary/adviserandhaveinvesteddirectlyintotheCompany.In consideration for the promotion, investment management and secretarial servicesthatOctopusprovidestotheCompany,ifanapplicationismadedirectly(notthroughanintermediary)thentheCompanywillpayOctopusanadditionalinitialchargeof2.5%ofthe investment amount and an additional annual ongoing charge of 0.5% of theinvestmentamount’slatestNAVforuptonineyears,providedtheinvestorcontinuestoholdtheShares.
2) An advised investmentwhere advice is received for an upfront feewith an ongoingadviserchargeInvestorswho have invested in theOffer through a financial intermediary/adviser andhavereceivedupfrontadviceandwillreceiveongoingadvice.The Company can facilitate a payment on behalf of an investor to anintermediary/adviser (an ‘initial adviser charge’) of up to 2.5% of the investment
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amount. If the investor has agreed with his/her intermediary/adviser to pay a lowerinitialadvisercharge,thebalance(uptoamaximumof2.5%)willbeusedfortheissueandallotmentofOfferShares for the investor, issuedat themost recentlyannouncedNAVperShare,dividedby0.945asdescribedabove.TheCompanycanalso facilitateannualpayments toan intermediary/adviser (‘ongoingadviser charges’) in respect of ongoing advisory services provided by theintermediary/adviser to the investor of up to 0.5% per annum of the investmentamount’s latest NAV for up to nine years, whilst the investor continues to hold theShares. If the investor chooses to pay their adviser less than 0.5% annually, theremainingamountwillbeusedfortheissueandallotmentofadditionalOfferSharesfortheinvestor,atthemostrecentlyannouncedNAVperShare.Anyresidualamount lessthanthecostofanOfferSharewillbedonatedtocharity.If the investor terminates his relationship with the intermediary/adviser then theCompany will not make any further payments of ongoing adviser charges to thatintermediary/adviser.TheCompanywillfacilitateongoingadviserchargesifaninvestorchangestheiradviserandconsentstotheongoingadvisercharge.
3) An advised investmentwhere advice is received for an upfront feewith no ongoingadviserchargeInvestorswho have invested in theOffer through a financial intermediary/adviser andhave received upfront advice, including investors who are investing throughintermediaries/advisersusingfinancialplatforms.Whereaninvestoragreedanupfrontfeeonly,theCompanycanfacilitateapaymentofaninitialadviserchargeofupto4.5%oftheinvestmentamount.Iftheinvestorchoosesto pay their intermediary/adviser less than the maximum initial adviser charge, theremainingamountwillbeusedfortheissueandallotmentofadditionalOfferSharesfortheinvestor,issuedatthemostrecentlyannouncedNAVperShare,dividedby0.945asdescribedabove.InthesecircumstancestheCompanywillnotfacilitateongoingannualpayments.
Inbothcases(2)or(3),shouldtheinvestorchoosetopaytheadvisermorethan2.5%or4.5%respectively, the excess amount will have to be settled by the investor directly with theadviser.4) ANon-advisedinvestmentusinganintermediary
Investorswhohaveinvestedtheirmoneythroughafinancialintermediaryandhavenotreceivedadvice.An initial commission of 2.5% of the investment will be paid by the Company to theintermediary.Anannualongoingchargeof0.5%oftheinvestmentamount’slatestNAVwillbepaidbytheCompanytotheintermediary.SuchcommissionwillbeavailableforuptonineyearsprovidedthattheintermediarycontinuestoactfortheinvestorandtheinvestorcontinuestobethebeneficialowneroftheShares.
Thesechargesmay,accordingtotheproportionofAdvisedInvestorswhereadviceisreceivedfor an upfront fee only, create some limited reduction of the NAV per Share immediatelysubsequent to subscriptions in the Offer being made. This effect will be mitigated, and isultimatelyexpectedtobemorethancompensated,forcontinuinginvestors,bytheexpectedbenefitsderivedfromalargerpoolofinvestablefundsandthefinancialbenefitinsubsequentperiodsoftheabsenceofongoingadviserchargesinrespectofsuchinvestments.
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RISKFACTORSProspective investors should consider carefully the following risk factors in addition to the other informationpresentedinthisdocument.Ifanyoftherisksdescribedbelowweretooccur,itcouldhaveamaterialeffectontheCompany’sbusiness,financialconditionorresultsofoperations.TherisksanduncertaintiesdescribedbelowaretheonlyknownmaterialriskstheCompanyortheShareholderswillface.AnydecisiontoinvestundertheOffershouldbebasedonconsiderationofthisdocumentasawhole.SchemerelatedriskfactorsCompletionof theScheme isdependentuponanumberof conditionsprecedentbeing fulfilled, including theapprovalofShareholdersandEclipseShareholders.IftheSchemeisnotapprovedand/oreffected,theexpectedbenefitsoftheSchemewillnotberealisedandtheCompanywillberesponsibleforthecostsoftheProposalsrelatingtotheScheme.Shareholdersmaybeadverselyaffectedbytheperformanceoftheinvestments,whetheracquiredfromEclipseormadebytheCompany.TheperformanceoftheinvestmentsacquiredfromEclipse,aswellastheinvestmentsof the Company,may restrict the Company’s ability following theMerger to distribute any capital gains andrevenuereceivedontheinvestmentstransferredfromEclipsetotheCompany(aswellastheinvestmentsoftheCompany).Anygains(orlosses)madeontheinvestmentsoftheCompanywill,followingtheScheme,besharedprorataamongstallShareholders.OfferrelatedriskfactorsTheOfferisconditionalontheapprovalbyShareholdersofresolution2 tobeproposedattheGeneralMeeting.IfResolution2 isnotapproved,theOfferwillbewithdrawnandtheexpectedbenefitsoftheOfferwillnotberealisedandtheCompanywillberesponsibleforthecostsoftheProposalsrelatingtotheOffer.The FinanceAct 2014 restricts income tax relief on subscription to a VCT after 5 April 2014,where,within 6months,whetherbeforeorafterthesubscription,theinvestorhaddisposedofsharesinthatVCToraVCTwhichatanytimemergeswiththatVCT.AreceiptofSchemeSharespursuanttotheMerger isnotasubscriptiontotheCompanyforthesepurposes,butShareholdersandEclipseShareholderswhohavesubscribedforsharesintheCompanyandEclipsesince5April2014shouldnotethis.RiskfactorsrelatingtotheCompanyThe past performance of the Company and/or Octopus is no indication of future performance. The returnreceivedbyShareholderswillbedependentontheperformanceoftheunderlyinginvestmentsoftheCompany.The value of such investments, and the interest income and dividends they generate,may fall and adverselyaffecttheperformanceoftheCompany.TheCompany’sinvestmentsmaybedifficult,andtaketime,torealise.Theremayalsobeconstraintsimposedonthe realisation of investments in order to maintain the VCT tax status of the Company. Both of these mayadverselyaffecttheperformanceoftheCompany.Itcantakeanumberofyearsfortheunderlyingvalueorqualityofthebusinessesofsmallercompanies,suchasthoseinwhichtheCompanyinvests,tobefullyreflectedintheirmarketvaluesandtheirmarketvaluesareoftenalsomaterially affectedby generalmarket sentiment,which canbenegative for prolongedperiods. ThismayadverselyaffecttheperformanceoftheCompany.Investmentinunquotedcompanies,byitsnature,involvesahigherdegreeofriskthaninvestmentincompanieslistedon theOfficial List. Inparticular, small companiesoftenhave limitedproduct lines,marketsor financialresourcesandmaybedependentfortheirmanagementonasmallnumberofkeyindividualsandmaybemoresusceptible to political, exchange rate, taxation and other regulatory changes. In addition, the market forsecuritiesinsmallercompaniesisusuallylessliquidthanthatforsecuritiesinlargercompanies,bringingwithitpotentialdifficultiesinacquiring,valuinganddisposingofsuchsecurities.Investmentreturnswill,therefore,beuncertainandinvolveahigherdegreeofriskthaninvestmentinacompanylistedontheOfficialList.
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WhilstitistheintentionoftheBoardthattheCompanywillcontinuetobemanagedsoastoqualifyasaVCT,there can be no guarantee that such status will be maintained. Failure to continue to meet the qualifyingrequirementscouldresultintheShareholderslosingthetaxreliefsavailableforVCTshares,resultinginadversetaxconsequencesincluding, iftheholdinghasnotbeenheldfortherelevantholdingperiod,arequirementtorepaythetaxreliefsobtained.Furthermore,shouldtheCompanyloseitsVCTstatus,dividendsandgainsarisingon thedisposal of shares in theCompanywouldbecome subject to tax and theCompanywouldalso lose itsexemptionfromcorporationtaxoncapitalgains.IfaShareholderdisposesofhisorherShareswithinfiveyearsofissue,heorshewillbesubjecttoclawbackbyHMRCofanyincometaxreliefsoriginallyclaimed.Thetaxrules,ortheir interpretation, inrelationtoaninvestment intheCompanyand/ortheratesoftaxmaychangeduringthelifeoftheCompanyandmayapplyretrospectively,whichmayadverselyaffectaninvestmentintheCompany.AnypurchaserofexistingSharesinthesecondarymarketwillnotqualifyforthethen(ifany)availabletaxreliefsaffordedonlytosubscribersofOfferSharesontheamountinvested.TheCompanywillonlypaydividendsonSharestotheextentthatithasdistributablereservesandcashavailablefor that purpose.A reduction in income from theCompany’s investmentsmay adversely affect thedividendspayable to Shareholders. Such a reduction could arise, for example, from lower dividends or lower rates ofinterestpaidontheCompany’sinvestments,orlowerbankinterestratesthanarecurrentlyavailable.TheFinanceAct2014amendedtheVCTRulesinrespectofVCTsharesissuedonorafter6April2014,suchthatVCTstatuswillbewithdrawnif,inrespectofsharesissuedonorafter6April2014,adividendispaid(orotherformsofdistributionorpaymentsaremadetoinvestors)fromsharecapitalorreservesarisingfromtheissueofshareswithinthreeyearsoftheendoftheaccountingperiodinwhichshareswereissuedtoinvestors.ThismayreducetheamountofdistributablereservesavailabletotheCompanytofunddividendsandsharebuybacks.RiskfactorsrelatingtotheSharesThe value of the Sharesmay go down aswell as up and Shareholdersmay not receive back the full amountinvested.ThevalueofSharescanfluctuateandinvestorsmaynotgetbacktheamounttheyinvested.Inaddition,thereisnocertaintythatthemarketpriceofShareswillfullyreflecttheirunderlyingNAVorthatanydividendswillbepaid,norshouldShareholdersrelyuponanySharebuybackpolicytoofferanycertaintyofsellingtheirSharesatpricesthatreflecttheunderlyingNAV.AlthoughtheexistingShareshavebeen(anditisanticipatedthattheNewShareswillbe)admittedtotheOfficialListandare(orwillbe)tradedontheLondonStockExchange’smarketforlistedsecurities,thesecondarymarketforVCTsharesisgenerallyilliquid.Therefore,theremaynotbealiquidmarket(whichmaybepartlyattributabletothefactthatinitialtaxreliefsarenotavailableforVCTsharesgenerallyboughtinthesecondarymarketandbecauseVCT shares usually trade at a discount toNAV) and Shareholdersmay find it difficult to realise theirinvestment.AninvestmentintheCompanyshould,therefore,beconsideredasalong-terminvestment.TaxreliefonsubscriptionsforsharesinaVCTisrestrictedwhere,withinsixmonths,whetherbeforeorafterthesubscription,theinvestorhaddisposedofsharesinthesameVCToraVCTwhichatanytimemergeswiththatVCT. Shareholders shouldbeaware that the saleofexistingShareswithin theseperiods could, therefore,puttheirincometaxreliefrelatingtotheOfferatrisk.
DearInvestor,Withnetassetsof£152.1millionat31July2016,OctopusApolloVCTplcisoneofthelargestVCTsintheUK,bringingnumerousbenefitstobothourshareholdersandthesmallercompaniesweback.TheCompanyaimstoprovideinvestorswithregulartax-freedividendsthroughitsportfolioofestablishedUKsmallercompaniesandbymakingnewinvestmentsinyoungercompanieswithaprovencommercialtrackrecord.An investment under the Offer will provide individuals with exposure to a diversified portfolio of unquotedsmallercompanieswiththeaimofgeneratingaregularstreamoftaxfreedividends.Newinvestorswillbenefitfromimmediateexposuretoalarge,establishedVCTwithanexistingportfolioofaround33investmentsacrossarangeofsectors.OverthetwodecadessinceVCTswereintroduced,successivegovernmentshaveshowncontinuedsupportforthescheme,buthaveadjustedtherulessurroundingVCTinvestmenttoensurethatVCTmoneycontinuestobedirectedwhereitisneededthemost.Asinvestorswillbeaware,overthelast18months,theGovernmenthasenactedsignificantchangestotherulessurroundingVCTinvestments.FortheCompanythechangeswillhavenoimpactontheexistingportfolio,howevernew investmentswillhavetobemade intocompanies thatare lessthan seven years old from their first commercial sale, which is typically younger than has been the casepreviously.TheCompanyhasalsohistoricallybenefittedfromtheManager'sexpertiseintheenergysector,withcurrent energy generating assets of approximately £23.7 million in the portfolio today. Since April 2016, nofurtherinvestmentsinenergygenerationhavebeenpermitted.
Whilst these new rules create more complexity for the Manager to deal with, we remain confident in theinvestment team's ability to find suitable companies for the Company’smandate,with attractive positions intheirmarketsandagoodcommercialtrackrecord.ItisagainstthisbackdropthattheBoardhasannouncedthatitintendstoraiseafurther£20millionunderanewshareoffer.TheManagerintendstocontinueinvestingviaacombinationofbothdebtandequitytoensurethattheCompanyreceivesaregularincomefromloaninterestand repayments that enable the Company to pay investors regular tax-free dividends. By investing in acompany’s debt, aswell as its shares, there is a greater chance that the Companywill get some or all of itsmoneyback ifabusinessdoesn’tsucceed.TheequityholdingalsoallowstheCompanytobenefitfromcapitalgrowthiftheunderlyingcompaniesperformwell.AllVCTs invest insmaller,unquotedcompaniesthatcarryagreaterriskof losingmoneythantheir largerbluechip counterparts. Within the bounds of VCT legislation, the Company aims to invest in more established,profitableVCTqualifyingcompanieswiththeaimofprovidingaregularstreamoftaxfreedividendstoinvestors.
At the point of investmentmost of the companies the Company supports are already generating profits butrequirefundingtounlockfurthergrowth.SowhilsttheCompanyisprovidingmuchneededdevelopmentfinancetothesecompanies,thereislesspotentialforvolatilitythantheremightbeinearlierstagecompanieswhichareyettodevelopadiversecustomerbaseorpredictablerevenuestreams.Theinvestmentteamhasaproactiveapproachtowardsseekingnewopportunitiesviadesk-basedresearchandthroughcontactsintheaccountancy,privateequityandcorporatefinancecommunity.Theyseealargevolumeofpotential transactionswhichtheyevaluatetosee if theymaysuit theCompany’s investmentmandate.Theinvestment team uses a rigorous screening and due diligence process, including commissioning independentadvisory firms to supplement the researchundertakenby the team. Investments also require theapprovalofvariousindependentcommitteeswithinOctopus,aswellastheBoard.Aswellasproducinginvestmentreturns,theCompany'sportfolioisalsoactivelyaidingthegrowthofUKsmallercompanies,akeyfactorintheGovernment’scontinuedsupportoftheventurecapitaltrustindustry.TheBoardbelieves that the portfolio iswell positioned to continue delivering a regular stream of tax free dividends tothoseinvestorsabletotakealong-termviewoninvestinginwell-runUKsmallercompanies.TheMergerOctopusEclipseVCTplcwaslaunchedinMarch2004andovertimehasevolvedtoasimilarinvestmentmandatetothatoftheCompany.Whenlaunched, itmadesensetohaveseveralseparateVCTs investingalongsideoneanother due to the VCT rules in force at the time. Today, the rationale for having multiple small VCTs hasdisappeared and changes to Merger Regulations in September 2004 subsequently allowed VCTs to mergewithoutaffectingtheirVCTstatus.Sincethen,anumberofVCTshavetakenadvantageofthenewregulationstocreatelarger,moreefficientVCTs,aswhenOctopusApollo1,2,3&4mergedintothecurrentOctopusApolloVCTplc.Incommonwithmostcompanies,VCTshaveanumberoffixedcoststhattheyhavetoincuraspartoftheirdaytodayactivities.Aspubliccompanies,VCTsaresubjecttolistingcosts,registrarcosts,auditcostsaswellasthecostsoftheirnon-executivedirectors,allofwhichwouldbemoreefficientbeingsplitacrossalargerassetbase.Inadditiontothecostsavings,havingalargerVCTwithamorediversesetofholdingsgivestheManagermoreflexibility on how it manages the portfolio within the VCT Rules as well being able to maximise investmentopportunitiesandfacilitatebetterliquiditymanagementforShareholders.With the above inmind, on 27 September 2016, the Board and the Eclipse Board announced that they hadenteredintodiscussionstoconsideramergeroftheCompaniestocreateasingle,largerVCTwiththeintentionofimprovingShareholdervalue.TheMergerisexpectedtodeliveranumberofadditionalbenefitstoShareholdersincluding:
one of the biggest VCTs in the UK. Post-merger, the Enlarged Company is targeting an annual tax-free 5%dividendyield.Taxfreespecialdividendsmayalsobepayableifinvestmentsaresoldforasignificantprofitfromtheportfolio.PerformanceThe diverse portfolio of investee companies continues to perform well and the Company has a strong trackrecordof converting investmentperformance into tax-freedividends for investors. Since31 January2016, theManagerhasdeliveredonanumberofstrongexits,returningaround£26.8millionbacktotheCompany.TheseincludeCallstream,ProjectTristar,SCMWorld,CSLDualcomandAtlanticScreenInternationalandhaveenabledtheCompanytoannounceaspecialdividendof16.5pperShare,inadditiontotheregulardividendof2.5pperShare,tobepaidon2December2016.Thefullfiveyearperformancehistoryisshownbelow: Yearto
31July2016Yearto
31July2015Yearto
31July2014Yearto
31July2013Yearto
31July2012
Performance(Totalreturnincludingdividends)
Company 2.3% 2.0% 5.3% 0.9% 6.7%
Eclipse 0.9% -4.1% 24.3% 1.6% -8.2%
TheperformanceinformationaboveshowsthetotalreturnoftheCompanyandEclipseforthelastfiveyearsto31 July. The annual total return is calculated from themovement in NAV over the year to 31 July, with anydividendspaidoverthatyearthenaddedback.TherevisedfigureisdividedbytheNAVatthestartofthatyeartogettheannualtotalreturn.Performanceshownisnetofallfeesandcosts.Pastperformanceisnotareliableindicatoroffutureresultsandmaynotberepeated.Pleasenote,theNAVperSharemaybehigherthantheShareprice,whichisthepriceyoumaygetfortheSharesinthesecondarymarket.DividendsanddividendPolicyFollowing payment of the special and regular dividendon 2December 2016, it is expected that theNAVpershareoftheVCTwill fallby19p.TheintentionoftheBoard istocontinuetargetingpaymentofanannual5%dividendyieldashasbeenthecasesincethemergerofthefourApolloVCTsinSeptember2012.BasedoffthereducedNAVpershareweexpecta5%dividendyieldtoequatetoapaymentofroughly3pperyear,distributedto shareholders through two 1.5p dividends. This is a reduction from the current 5p per share per year, butremainsconsistentwithourhistoricdividendpayments,preservingthetargeted5%yield.TheOfferTheOfferisintendedforinvestorslookingforaVCTthataimstoprovidearegularstreamoftaxfreedividendsbyinvestinginprofitableVCTqualifyingsmallercompaniesthroughacombinationofdebtandequity.InvestorswillbenefitfromimmediateexposuretoanestablishedVCTwithaportfolioofaround33investments.The Company is seeking to raise up to £20million under theOfferwhich is conditional upon the passing byShareholdersofResolution2attheGeneralMeetingtobeheldat2.30pmon12December2016at33Holborn,LondonEC1N2HT.Iwould like to thankallofourexistingShareholders for theirenduring supportof theCompanyand theUK'ssmallbusinesses.IlookforwardtomeetingyouattheGeneralMeetinginDecember.
• Eclipse will be placed into members’ voluntary liquidation pursuant to a scheme of reconstructionunderSection110IA1986;and
• all of the assets and liabilities of Eclipsewill be transferred to the Company in consideration for theissueofSchemeShares.
The Scheme will be completed on a relative unaudited NAV basis, adjusted for the anticipated costs of theScheme,rollingintotheSchemeSharesattheRoll-OverValue.TheMergerValueandtheRoll-OverValuewillbebasedon the latest unaudited valuations of theCompanies' investments. An accounting firmwill review thelatest unaudited NAVs of the Companies and valuations of the Companies’ investments prior to the SchemeEffectiveDateandwillconfirmthattheyhavebeenpreparedinaccordancewithsimilarprinciplesaswouldhavebeenused inproducingyearendaccounts.TheeffectoftheSchemewillbethattheEclipseShareholderswillreceiveShareswiththesametotalnetassetvalueasattheSchemeCalculationDateastheirEclipseShares.TheSchemeisconditionalupontheapprovalbytheShareholdersofResolution1tobeproposedattheGeneralMeetingandbytheEclipseShareholdersoftheResolutionstobeproposedattheEclipseGeneralMeetings,aswellastheotherconditionssetoutbelow.AstheCompanyandEclipsehaveasimilarinvestmentobjectiveandpolicy,thesameinvestmentmanagerandother common advisers, theMerger should be achievablewithoutmajor additional cost or disruption to theCompanyandEclipseandtheircombinedportfolioofinvestments.TheaggregateanticipatedcostofundertakingtheMerger isapproximately£331,000, includingVAT, legalandprofessionalfees,stampdutyandthecostsofwindingupEclipse.TheLiquidatorsfeesincludedinthisfigureareexpectedtobeupto£15,000.ThecostsoftheMergerwillbesplitproportionatelybetweentheCompanyandEclipsebyreferencetotheirrespectiveNAVsattheSchemeCalculationDate.
As is required by CA 2006, prior to the allotment of the Scheme Shares, the Company will be sending toShareholders and Eclipse Shareholders at their registered addresses and uploading on to Octopus’ website areportontheMergerwhichwillbepreparedbyScott-Moncrieff.TheportfolioofassetswhichwillbetransferredfromEclipsetotheCompanyaspartoftheSchemeareallconsideredtobeinkeepingwiththeCompany’sinvestmentpolicy,particularlyasanumberofthesearecommon across the respective portfolios of the Company and Eclipse. The extent of the liabilities (ifany)whichwillbetransferredfromEclipsetotheCompanyaspartoftheSchemewillbethosewhichare incurred in theordinarycourseofbusinessandmergercostswhich remainunpaidat thetimeoftransfer.Anysuchliabilitiesareexpectedtobenominalincomparisontothevalueoftheassets.Eclipse Shareholders who do not vote in favour of the resolution to be proposed at the Eclipse FirstGeneralMeetingareentitledtodissentandhavetheirshareholdingpurchasedbytheLiquidatorsataprice agreed between the dissenting Eclipse Shareholders and the Liquidators (or by arbitration),whichwouldbeexpectedtobeatasignificantdiscounttothenetassetvalueofanEclipseShare.Iftheconditions of the Scheme are not satisfied, the Companies will continue in their current form and the
Further informationregardingthetermsoftheSchemeissetout inPartOneofthisdocument.DetailsoftherisksrelatingtotheSchemeandthosegenerallyassociatedwith investing inaVCTaresetoutonpages15to16ofthisdocument.FollowingthetransferoftheassetsandliabilitiesbyEclipsetotheCompany,thelistingoftheEclipseShareswillbecancelledandEclipsewillbewoundup.ConditionsoftheSchemeTheSchemeisconditionalupon:
Subjecttotheabove,theSchemewillbecomeeffectiveimmediatelyafterthepassingofthespecialResolutionforthewindingupofEclipsetobeproposedattheEclipseSecondGeneralMeeting.Ifitbecomeseffective,theSchemewillbebindingontheShareholdersandEclipseShareholders(includingdissentingEclipseShareholders)andallpersonsclaimingthroughorunderthem.TermsoftheSchemeOn the Scheme Effective Date, the Liquidators will receive all the cash, undertakings and other assets andliabilitiesofEclipseandwilldelivertotheCompany:
On the Scheme Effective Date, the Company and the Liquidators (on behalf of Eclipse) will enter into theTransferAgreementpursuanttowhichtheLiquidatorswillprocurethetransferofalloftheassetsandliabilitiesof Eclipse to the Company in exchange for the issue of Scheme Shares (credited as fully paid) to the EclipseShareholdersonthebasissetoutbelow.In furtherconsiderationof such transferofassetsand liabilitiesofEclipse to theCompany, theCompanywill,pursuanttotheTransferAgreement,undertaketopayallliabilitiesincurredbytheLiquidatorsincluding,butnotlimited to, the implementation of the Scheme, the winding up of Eclipse and the purchase for cash of anyholdingsofdissentingEclipseShareholders.Except asotherwiseprovided for in the Scheme terms, for thepurposesof calculating theMergerValue, theRoll-Over Value and the number of Scheme Shares to be issued, in order that the Eclipse Shareholders willreceiveShareswiththesametotalnetassetvalueasattheSchemeCalculationDateastheirEclipseShares,thefollowingprovisionswillapply:MergerCalculationsRoll-OverValueTheRoll-OverValuewillbecalculatedas:
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A–(B+C)Dwhere:A = theunauditednet assets of Eclipse as at the SchemeCalculationDate (taken from the Eclipse unauditedmanagementaccountstothatdate),plusorminusanyadjustmentthatboththeBoardandtheEclipseBoardconsiderappropriatetoreflectanyotheractualorcontingentbenefitorliabilityofEclipse;B=thecostsoftheSchemetobeapportionedtoEclipse(byreferencetotheRoll-OverValueandtheMergerValue,butignoringmergercosts),plus£1,000(representinganamountofcontingencytocoveranyunforeseenadditionalcostsattributabletoEclipseincurredbytheCompany,whichwillindemnifytheLiquidatorsinrespectofallcostsofEclipsefollowingthetransferontheSchemeEffectiveDate);C = the amount estimated to be required to purchase the holdings of Eclipse Shares from dissenting EclipseShareholders;andD=thenumberofEclipseSharesinissueasatcloseofbusinessontheSchemeRecordDate(saveforanyEclipseSharesheldbydissentingEclipseShareholders).MergerValueTheMergerValuewillbecalculatedas:E–FGwhere:E = theunauditednet assetsof theCompanyas at the SchemeCalculationDate (taken from theCompany'sunauditedmanagement accounts to that date), plusorminus any adjustment that theBoard and the EclipseBoardconsiderappropriatetoreflectanyotheractualorcontingentbenefitorliabilityoftheCompany;F= the costsof theScheme tobeapportioned to theCompany (by reference to theRoll-OverValueand theMergerValue,butignoringmergercosts);andG=thenumberofSharesinissueasatcloseofbusinessontheSchemeRecordDate.SchemeSharestobeissuedtoEclipseShareholdersThenumberofSchemeSharestobeissuedtoEclipseShareholders(saveforanydissentingEclipseShareholders)willbecalculatedasfollows:HxJIwhere:H=theRoll-OverValue;I=theMergerValue;andJ=thenumberofEclipseSharesinissueasatcloseofbusinessontheSchemeRecordDate(saveforanyEclipseSharesheldbydissentingEclipseShareholders).TheSchemeShareswillbeissueddirectlytoEclipseShareholders(disregardingEclipseSharesheldbydissentingEclipseShareholders),ineachcaseproratatotheirexistingholdingsofEclipseSharesontheinstructionoftheLiquidators.
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ThemergerratiosusedtoallocatetheSchemeSharestoeachEclipseShareholderwillberoundeddowntosixdecimal places and entitlements will be rounded down to the nearest whole number and any fractionalentitlementsperEclipseShareholder(whichwillnotexceed£2)willbeaggregatedandsold,withtheproceedsretainedforthebenefitoftheEnlargedCompany.
ShareCertificates,MandatesandListingWhereEclipseShareholdersholdtheirEclipseSharesincertificatedform,theywillreceiveanewcertificateforthe Scheme Shares issued.Where Eclipse Shareholders hold their Eclipse Shares in uncertificated form, theirCRESTaccountswillbecreditedwiththeholdinginSchemeShares.TheCompanyoperatesadividendreinvestmentscheme(the“DRIS”).IfEclipseShareholdersbecomeholdersofSharesandwouldliketoparticipateintheDRIStheymaydosobycontactingCapitaAssetServices,TheRegistry,34 Beckenham Road, Beckenham, Kent BR3 4TU no later than 15 Business Days before the payment of adividendbytheCompany.TheDRISwillapplytoaShareholder’sentireholdingofSharesandparticipationintheDRIScanbecancelledatanytimewithwrittenauthorityfromtheShareholder.ThetermsandconditionsoftheDRISarealsosetoutattheendofthisdocument.AnapplicationhasbeenmadetotheUKLAfor theSchemeSharestobe issuedpursuanttotheSchemetobelisted on the premium segment of the Official List andwill bemade to the London Stock Exchange for suchSchemeSharestobeadmittedtotradingonitsmarketforlistedsecurities.Fromthedateofissue,theSchemeShareswillrankparipassuwitheachother.TaxationThefollowingparagraphsapplytotheCompanyandtopersonsholdingSharesasaninvestmentintheCompanywhoaretheabsolutebeneficialownersofsuchSharesandareresidentintheUK.Theymaynotapplytocertainclasses of persons, such as dealers in securities. The following information is based on current UK law andpractice,issubjecttochangestherein,isgivenbywayofgeneralsummaryanddoesnotconstitutelegalortaxadvice.Ifyouareinanydoubtaboutyourposition,orifyoumaybesubjecttotaxinajurisdictionotherthantheUK,youshouldconsultyourindependentfinancialadviser.TheCompanyandShareholdersTheimplementationoftheSchemeshouldnotaffecttheVCTreliefsobtainedbyShareholdersonsubscriptionforexistingShares.TheimplementationoftheSchemeshouldnotaffectthestatusoftheCompanyasaVCT.Itisthe intention of the Board to continue to comply with the requirements of ITA 2007 so that the CompanycontinuestoqualifyasaVCT.EclipseShareholdersThereceiptbyEclipseShareholdersofSchemeSharesshouldnotconstituteadisposaloftheirEclipseSharesforUK tax purposes. Eclipse Shareholders should, for UK tax purposes, effectively be able to treat the SchemeShares received as if they had been acquired at the same cost and on the same date as the original EclipseSharesfromwhichtheyderive(butallocatedproportionatelybetweensuchresultingSchemeShares).AnyinitialincometaxreliefobtainedandattachingtotheoriginalEclipseShareswillnot,therefore,besubjecttoclawbackasaresultoftheMerger,butinsteadwillthenattachtotheSchemeShares.AstheCompanyisalsoaVCT,theusualVCT tax reliefs should continue toapply.Asa result,qualifyingShareholders should continue to receivetax-free dividends and should not be subject to UK taxation on any capital gains on the disposal of SchemeSharesprovidingtheyareheldfortheusualVCTminimumholdingperiod.
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For Eclipse Shareholdersholding (togetherwith their associates)more than5%of theEclipse Shares in issue,clearancehasbeenobtainedfromHMRCintermsofSection138ofTCGA1992thatthetaxtreatmentdescribedaboveforpersonswho(togetherwiththeirassociates)ownlessthan5%oftheEclipseSharesshouldalsoapplytothem.Eclipse Shareholderswhodonot vote in favourof theResolution tobeproposedat theEclipse FirstGeneralMeeting are entitled to dissent and have their shareholding purchased by the Liquidators at a price agreedbetweenthedissentingEclipseShareholdersandtheLiquidators(orbyarbitration),whichisexpectedtobeatasignificantreductiontothenetassetvalueofanEclipseShare.Inaddition,EclipseShareholdersshouldnotethatapurchaseofEclipseSharesbytheLiquidatorsfromadissentingEclipseShareholderwillberegardedasadisposalofsuchEclipseSharesfortaxpurposes,therebytriggeringtherepaymentofanyincometaxrebateonEclipseSharessubscribedforinthefiveyearspriortopurchase.Thesalepricereceivedmaynotbesufficienttocovertheamountofpaymentdue.AlthoughtheCompanywillberequiredtopayUKstampdutyorstampdutyreservetaxonthetransfertoitofthe assets and liabilities of Eclipse (which form part of themerger costs), no UK stamp dutywill be payabledirectlybyShareholdersasaresultoftheimplementationoftheScheme.ClearancehasbeenobtainedfromHMRCinrespectoftheSchemeunderSection701ITA2007confirmingthatthereceiptofSchemeSharesshouldnot,exceptinthecaseofdealers,beregardedasanincomereceiptforthepurposesofUKtaxation.Clearance has also been requested from HMRC to confirm that the Schememeets the requirements of theMergerRegulationsandthat,assuch,thereceiptbyEclipseShareholdersofSchemeSharesshouldnotprejudicetax reliefsobtainedby thoseEclipse Shareholdersonexisting Eclipse Shares and shouldnotbe regardedas adisposal.The Finance Act 2014 restricts income tax relief on subscription to a VCT after 5 April 2014where,within 6months(beforeorafter),theinvestorhaddisposedofsharesinthatVCToraVCTwhichatanytimemergeswiththatVCT.A receiptof SchemeSharespursuant to theMerger isnota subscription to theCompany for thesepurposesbutShareholderswhohavesubscribedforsharesintheCompanyorEclipsesince5April2014shouldnotethis.
VCTs were introduced by the UK Government in 1995 to encourage individuals to invest in UK smallercompanies. According to theAssociationof InvestmentCompanies (AIC),almost£458millionwas invested inVCTsinthe2015/2016taxyear,thelargestamountforadecade.
An investment under the Offer will provide individuals with exposure to a diversified portfolio of unquotedsmallercompanieswiththeaimofgeneratingreturnsoverthemediumto long-term.ThenetproceedsoftheOfferwillbeinvestedinaccordancewiththeCompany’sinvestmentpolicy,assetoutbelow.TheCompanyisseekingtoraise£20millionundertheOffer.BothnewandexistinginvestorscanapplyforOfferShares,whichwill rankequallywith theexistingShares.As such,all investorsareaccessingawell-establishedportfolio.TheOfferPricewillbebasedonthemostrecentlypublishedNAVofaShareatthedateofallotment.Multipleapplicationsarepermitted.Theminimuminvestment is£5,000.There isnomaximuminvestment.However,potential investorsshouldbeawarethattaxreliefisonlyavailableonamaximuminvestmentof£200,000ineachtaxyear.Amarriedcouple,caninvestupto£200,000eachinanyonetaxyearwithbothindividualsbenefitingfromthetaxreliefs.TheOfferisconditionaluponthepassingbyShareholdersofResolution2attheGeneralMeeting.TermsoftheOfferThefulltermsandconditionsapplicabletotheOfferaresetoutonpages83to88.UseoffundsTheaggregatenetproceedsoftheOffer,assuminga£20 millionsubscriptionandthemaximuminitialcharge,willbe£18.5million.ThefundsraisedundertheOfferwillbeinvestedinaccordancewiththeCompany’sinvestmentpolicy.SomeofthefundsraisedwillbeusedtoinvestintonewportfoliocompaniesandsomewillbeusedtofurthersupporttheCompany’sexistingportfolio.
InvestmentPolicyTheCompany'sInvestmentPolicyisasfollows.The Company’s investment policy is designed to enable the Company to comply with the VCT qualifyingconditions. It is intendedthatthe long-termdispositionoftheCompany’sassetswillbenot lessthan80%inaportfolio of unquoted investments and up to 20% in cash or near cash investments to provide a reserve ofliquiditywhichwillmaximisetheCompany’sflexibilityastothetimingofinvestmentacquisitionsanddisposals,dividendpaymentsandsharebuybacks.Investmentsarestructuredusingvariousunquoted investment instruments, includingordinaryandpreferenceshares,loanstocksandconvertiblesecurities,toachieveanappropriatebalanceofincomeandcapitalgrowth,having regard to the venture capital legislation. The portfolio is diversified by investing in a broad range ofindustry sectors and by holding investments in companies at various stages of maturity in the corporatedevelopment cycle, though investments are not generally made in early stage companies which have yet toachieve profitability and cash generation. The normal investment period is in the range from three to sevenyears.Anyuninvestedfundsaretypicallyheldincashandmoneymarketfunds.Riskisspreadbyinvestinginanumberofdifferentbusinesseswithindifferentindustrysectorsusingavarietyofsecurities.ThemaximumamountinvestedinanyonecompanyislimitedtoanyHMRCannualinvestmentlimitsand,generally,nomorethan15%oftheCompany’sassets,atcost,areinvestedinthesamecompany.The value of individual investments is expected to increase over time as a result of trading progress and acontinuousassessment ismadeof investments’ suitability forsale.TheCompany’sVCTqualifying investmentsareheldwithaviewtolong-termcapitalgrowthaswellasincomeandwilloftenhavelimitedmarketability;asaresultit ispossiblethatindividualholdingsmaygrowinvaluetothepointwheretheyrepresentasignificantlyhigher proportion of total assets prior to a realisation opportunity being available. Investments are normallymadeusingshareholders’fundsanditisnotintendedthattheCompanywilltakeonanylong-termborrowings.TaxBenefitsforInvestorsVCTsareGovernment-led investmentvehiclesdesignedto incentivise investors forsupportingsmaller,higher-risk companies. Qualifying investors are entitled to claim a number of tax incentives on investments up to£200,000eachtaxyear(asmorefullysetoutinPartThreeofthisdocument).Theseinclude:
• Income tax relief – investors can claim30%upfront income tax relief on the amount invested, providedSharesareheldforatleastfiveyears.Forexample,withaninvestmentof£10,000,£3,000canbetakenoffyourincometaxbillalthoughtheamountofincometaxyouclaimcannotexceedtheamountofincometaxdue.
The amount of these dividends depends, amongst other things, on the level of income and capital returnsgeneratedbytheQualifying Investments, theperformanceof thenon-Qualifying Investmentsandtheamount
TheCompanyistargetingaregularannualdividendof3pperShareperannuminordertoretainitshistoric5%dividendyield.TheCompanyhasadoptedaDividendReinvestmentSchemeunderwhichShareholdersaregiventhe opportunity to reinvest future dividend payments by way of subscription for new Shares. Subject to aShareholder’spersonalcircumstances,Sharessubscribed forunder theDividendReinvestmentSchemeshouldobtaintheusualVCTtaxadvantagesassetoutabove.
Investors under the Offer may elect to participate in the Dividend Reinvestment Scheme by completing thedividend reinvestment section of theApplication Form, and should be aware that itwill apply to their entireholding of New Shares and any existing Shares. Participation in the Dividend Reinvestment Scheme by aShareholdercanbecancelledatanytimewithwrittenauthorityfromtheShareholderorbycallingOctopuson08003162295.
BuybackPolicy
The Board also intends to continue to consider repurchasingSharesfollowingthemergerofupto14.99%ofitsenlargedsharecapitalforthepurposesofthegeneral buyback policy. The Board believes that it is in thebest interests of the Company and the ShareholderstomakeoccasionalmarketpurchasesoftheShares, toallowanyShareholderswhoneed toselltheirSharestodosoandtoreducetoadegreeanydiscounttoNAVinthe current market price than might otherwise prevail. The Board will agree the discount to NAV at whichShareswillbeboughtbackand regularly reviews thebuybackpolicy.TheBoard’scurrentpolicyistobuybacksharesata5%discounttoNAV.
AnyfuturerepurchaseswillbemadeinaccordancewithguidelinesestablishedbytheBoardfromtimetotimeandwillbesubjecttohavingtheappropriateauthoritiesfromShareholdersandsufficientfundsavailableforthispurpose.AllbuybacksaresubjecttothediscretionoftheBoard.Theremay,however,beperiodsduringayearwheretheCompanywillbeprohibitedfrombuyingbackSharesandwhichmayincludetheperiodsofuptofourmonthsafter its financialyearendanduptothreemonthsafter itshalfyearend.SharebuybackswillalsobesubjecttotheListingRulesandanyapplicable lawattherelevanttime.Sharesboughtback inthemarketwillordinarilybecancelled.
TheBoard
TheBoardcomprisesfourdirectorswhoareindependentofOctopus.TheDirectorsoperateinanon-executivecapacity and are responsible for overseeing the investment strategy of the Company. The Board has wideexperienceofinvestmentinbothsmallergrowingcompaniesandlargerquotedcompanies.
MurraySteele(Chairman)
Murraywas appointed as Director and Chairman on completion of themerger of Octopus Apollo VCT 1 plc,OctopusApolloVCT2plcandOctopusApolloVCT4plcwith theCompany.Murrayhashadabroad rangeofexperienceasaDirectorofanumberof companies.Atpresenthe isChairmanof LINX– theLondon InternetExchange, SurfaceGeneration Limited, a hi-techengineering company, andanon-executivedirectorof JamesWalker Group, an international engineering groupwith revenues of £200million.Murray has Bachelor’s andMaster’sdegrees inmechanicalengineering fromtheUniversityofGlasgow,anMBAfromCranfieldSchoolofManagementandholdsanaccountingqualification.MurraywasformerlyadirectorofOctopusApolloVCT4plcwhichwasplacedintoMembersVoluntaryLiquidationon28September2012followingthemergeroftheApolloVCTsandwasdissolvedon15April2014.
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ChristopherPowles
ChriswasappointedasaDirectoron28September2012uponthemergerofOctopusApolloVCT1plc,OctopusApollo VCT 2 plc andOctopus Apollo VCT 4 plcwith the Company. Chris has extensive experience in theUKsmallercompaniessector.HewastheprincipalfounderofPiCapital,aprivateclientfundmanagementcompanythatspecialisesininvestinginsmallerunquotedcompanies.PriortosellinghisstakeinPiCapitalin2002heledthe investment ofmore than £25million into 14 companies. Subsequently hewas the finance director of anAIM-tradedcompany,aswellasanon-executivedirectorofboth listedandprivatecompanies.Currentlyhe isinvolvedinrenewableenergy,beingadirectorofthreecompaniesinthatsector.Chrisisacharteredaccountant,havingqualified atwhat is nowpart of PricewaterhouseCoopers LLP, andhas aBAHonsdegree fromOxfordUniversity.ChriswasformerlyadirectorofOctopusApolloVCT4plcwhichwasplacedintoMembersVoluntaryLiquidationon28September2012followingthemergeroftheApolloVCTsandwasdissolvedon15April2014.
JamesOtter
JameswasformerlyChairmanofOctopusVCTplcandbecameaDirectoruponthemergerofOctopusVCTplcandtheCompanyinNovember2014.JameswasalsoadirectorofHygeaVCTplc,whichspecialisesininvestingin early stagebioscience companies.Hehad led severalHygea investees as CEO.He is currentlyworkingonprojectsinthegrowingareaofhealthIT.PreviouspositionsincludebeingamainboarddirectorofSpectrisplc,workingonaturnaroundprojectinDenmark,andadirectorofGlidePharmaceuticalTechnologiesLimited.ThebulkofhiscareerwasspentininternationalcommercialroleswithZenecaAgrochemicals(formerlyICIandnowSyngenta).JameshasanMBAfromINSEADandadegreeinNaturalSciencesfromCambridge.
IanPearson
Ian was formerly Chairman of Octopus VCT 2 plc and was appointed as a Director on 27 January 2016, oncompletionofthemergerofOctopusVCT2withtheCompany.Heworksinstrategyandbusinessdevelopment.HeisaNon-ExecutiveDirectoratThamesWater,ChairmanofCodeInvestingandamemberofPwC’sAdvisoryBoard.Untilstandingdownbeforethegeneralelectionin2010,Ianhadovernineyears’experienceataseniorlevelingovernment,includingimportantrolesasMinisterforClimateChangeandtheEnvironment,MinisterforTrade,Minister for Science and Innovation and aMinister inNorthern Ireland. As Economic Secretary to theTreasury from2008 – 2010, Ianwas at the heart of theUK’s response to the global financial crisis. Amongstother things, hewas responsible for growth, enterprise andproductivity issues, the EUBudget,wherehe lednegotiations for theUK,Public/PrivatePartnerships includingPrivateFinance Initiative, and InfrastructureUK.Priortohisgovernmentalcareer, Ianwas jointchiefexecutiveofWMEBGroup,providingventureandgrowthcapitaltoSMEsandconsultancytoarangeofpublicandprivateclients.
In theeventthat theMergerproceeds,AlexHambrowill jointheBoardoncompletionof theMergerand IanPearsonwillstepdownfromtheBoardon31January2017.AlexHambroAlexhasbeenChairmanofEclipseVCTplc since1February2014havingbeenappointedasadirectorof thatcompanyon1November2012.Hewasanon-executivedirectorofOctopusEclipseVCT4plc.Alexhasspentthelast25yearsintheventurecapitalandprivateequitysector,muchofthistimeatHambrosplcandassociatedorganisations. As a director of Hambro Group Investments, he was responsible for the establishment andoperationsoftheHambroPrivateEquityGroup,whichsponsoredninefundmanagersintheUK,Europe,theUSandAustralia. Since leavingHambros in 1999, hehas assisted several venture capital organisationswith theirfundraisingandmarketingprogrammesandhasactedasaconsultanttoanumberofinvestorsontheirventurecapital investmentstrategies.Alex isChairmanof JudgesScientificPlcandBenchmarkHoldingsPlcandanon-executivedirectorofaportfolioofprivatecompanies.
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TheInvestmentTeamOctopus Investments Limited was launched in 2000 by three founders whowanted to create an investmentcompany that put its customers first. Today it hasmore than440employees and£5.8billion in assets undermanagement (Source:Octopus investmentsLimited,August2016). Ithas tensof thousandsof clientsandhasbuilt market-leading positions in tax-efficient investment, smaller company financing, renewable energy andhealthcare.OctopuslauncheditsfirstVCTin2002andisnowtheUK’slargestVCTmanager,managingover£600millionofVCTmoneyonbehalfofover25,000investors(Source:OctopusInvestmentsLimited,August2016).Members of the team are frequently appointed as non-executive directors and sit on the boards of thecompaniestheyworkwith.Thisallowsthemtoplayaprominentroleineachcompany’songoingdevelopment,and ensures the team can closely monitor the company’s progress while offering continued support to thebusiness.
TheCompany'sinvestmentteamissupportedbytheOctopusInvestmentCommittee,whichprovidesafurtherlayer of independent challenge and insight to the team’s investment decisions. The Committee is formed ofseniorinvestmentprofessionalsthatareindependentoftheCompany'sinvestmentteam.
Granthasoverelevenyearsofexperienceinprivateequityandventurecapitalinvestingacrossawiderangeofindustry sectors. He has held a variety of non-executive directorships and is currently a board observer forClifford Thames Group and Care Monitoring and Management. Grant has operational experience, havingpreviouslybeenheadofcorporatedevelopmentofaspecialist logisticsbusiness.He isacharteredaccountantandworkedinthecorporatefinanceteamatPricewaterhouseCoopersinLondon.
IanPotter,InvestmentDirector
IanjoinedOctopusin2013andisresponsibleformakingnewinvestments,monitoringportfoliocompaniesandfundraising. Ian is currently a non-executive Director for ISG, TSC and Vista Retail Support. Before joiningOctopus, Ian spent over 8 years in leveraged finance at The Royal Bank of Scotland, including experience inoriginationandstructuring,portfoliomanagementandrestructuringactivity.IanalsoworkedatErnst&YoungintheTransactionAdvisoryServicesgroupandisaqualifiedcharteredaccountant.
EdwardKeelan,InvestmentManager
EdwardjoinedOctopusin2008andisresponsibleformakingnewinvestments,monitoringportfoliocompaniesand fundraising. He has non-executive director experience in the power industry and distribution sector andcurrently sitson theboardofCountrywideHealthcareSuppliesandAngloEuropean.Prior toOctopusEdwardwaswithKorteQ,asmallbusinessconsultancyspunoutofRolls-Royce.
ClaraHansen,InvestmentAssociate
Claraisresponsiblefor identifyingandanalysinginvestmentopportunitiesaswellassupportingtheteamwithdeal execution and portfolio monitoring. She is currently a board observer for Care Monitoring andManagement. Clara has over five years of investment banking and venture capital experience across Paris,LondonandHongKong.
TheCompany's investment teamuses severaldifferentapproaches to find suitablecompanies to invest in.Aswellasconductingitsownresearch,theteamregularlytalkstocompaniesthatspecialiseinfindingorprovidingfinancingforsmallandmedium-sizedbusinesses.Thishelpstoidentifyfundinggapsincompaniesthatcouldsuitthe Company's investment mandate. Much of this work is driven by forming strong relationships, so thereputationoftheteam,andtheperformancetrackrecordoftheCompany,areimportantfactors.Investmentsareusuallystructuredaspartloanandpartequity.ThishelpstoensurethattheVCT:• Receivesa regular income from loan interestand repayments thatenable theCompany topay investors
This combinationofdebtandequity investmenthelpsensure theVCTcontinues togeneratea stable, regularincome.TheequitycomponentenablestheVCTtobenefitfurtheriftheunderlyingcompaniesperformwell.Theinvestment team uses a rigorous screening and due diligence process, including commissioning independentadvisory firms to supplement the researchundertakenby the team. Investments also require theapprovalofvariousindependentcommitteeswithinOctopus,aswellastheBoard.Tomaintain its focusonprovidinga stable, regular tax-free income,wherepossible the investment teamwillremainfocusedonfindingcompaniesthatdisplaythefollowingcharacteristics:
• Anestablishedandsuccessfulmanagementteamwithastrongtrackrecordatthecompany• Aprovencommercialtrackrecordandhistoryofgeneratinggoodannualprofits• Abroadcustomerbaseandhighlevelsofrepeatbusiness• AcompetitiveadvantageovercompetitorsthatreducestheriskoflosingcustomersPerformanceHistorySince its launch in 2006, the Company has built a strong track record of paying regular tax-free dividends,targetinganannualyieldof5%.OneofthemainbenefitsofVCTsistheirpotentialforpayingtax-freedividendstoinvestors.TheCompanypaiditsfirstdividendin2008andbyAugust2016hadpaidoutatotalof35pperSharetoinvestors.Aswell as regular tax-freedividends, theCompany's investors couldalsopotentiallybenefit fromtheir sharesincreasinginvalueovertheyears.AslongastheSharesareheldforatleastfiveyears,there’snocapitalgainstax to pay when you eventually choose to sell them. Please remember, past performance is not a reliableindicatoroffutureresultsandthevalueofSharescanfallaswellasrise.
*Duetothefinaldividendfortheyearto31January2016onlybeingpaidinAugust2016,thedividendyieldat31July2016isbelowthetargetof5%.Includingthisdividendtheannualyieldto31July2016wouldbe6.0%.TheperformanceinformationaboveshowsthetotalreturnoftheCompanyforthelastfiveyearsto31July,theVCT’s interimaccountingperiod.TheannualtotalreturnfortheCompany iscalculatedfromthemovement inNAV over the year to 31 July,with any dividends paid over that year then added back. The revised figure isdividedbytheNAVatthestartofthatyeartogettheannualtotalreturn.TheNAVisthecombinedvalueofalltheassetsownedbytheVCTafterdeductingthevalueofitsliabilities(suchasdebtsandfinancialobligations).Performanceshownisnetofallongoingfeesandcosts.TheannualdividendyieldiscalculatedbydividingthedividendspaidperyearbytheNAVatthestartoftheperiod.Pastperformanceisnotareliableindicatoroffutureresultsandmaynotberepeated.Pleasenote,theNAVpersharemaybehigherthantheShareprice,whichisthepriceyoumaygetfortheSharesontheopenmarket.
CliffordThames:enablingcarmakerstosellreplacementpartsClifford Thames is a key partner to some of the world’s leading motor manufacturers. They depend on theChelmsford-basedcompany’ssoftware,consultancyandbusinessoutsourcingexpertisetoenabledealershipstosell replacement parts. Customers include Ford,GMEurope, Jaguar Land Rover,Mercedes-Benz and Renault.GlobalexpansionhasseenCliffordThamesopenofficesintencountries.Thedataitssoftwarecapturesisusedby customers in over 160 countries. The company is an attractive investment for the Company because itsrevenuestreamsarerecurring,sotheyarelikelytobemorestableandpredictable.TheBoardisimpressedbyitsprovenmanagementteam,longtradinghistoryandexcellentcustomerservice.“Octopusfirst investedinusin2010andquicklydevelopednotonlyafirmgraspofthebusiness,butalsoaveryclose,openandhonestrelationship.WehighlyvaluethesupportandstrategicadvicethatOctopushasbroughttothecompanyandthelongtermpartnershipwehavecreated.”CalvinBarnett,chiefexecutiveofficer,CliffordThamesCountrywideHealthcareSupplies:keepingcarehomeswellstockedCountrywideHealthcareSuppliesisa‘one-stopshop’suppliertotheUK’srapidlygrowingcarehomesector.Thecompany specialises in delivering awide range of healthcare and cleaning products, aswell as furniture andbedding. From its 80,000 square foot distribution centre in South Yorkshire, Countrywide servesmanyof thebiggestnames intheUKcarehome industry.Thecompanywassetupby four formerNationalHealthServiceworkcolleaguesandnowemploysover60people.TheBoardwasattracted toCountrywideby its strongandrecurring revenues. TheBoard thinks the companyhas a good focus on customer service,with high levels ofcustomerretentioncreatingrepeatbusinessopportunities.“Itwas clear the teamatOctopus knewexactlywhatwewere looking to achieveatCountrywide, and thepotentialforgrowththatcouldberealised.Octopussharesourvision,theyunderstandthemarketandtheyareasenthusiasticandcommittedtodeliveringhighqualitycustomerserviceasweare.”AlastairKitching,managingdirector,CountrywideISGTechnology:Offeringend-to-endwirelessconnectivityforUKretailersISGdesignsandinstallswirelessnetworksystemsforlargemulti-siteretailerssuchasTesco,NextandSelfridges,aswellasotherpublicandprivatesectorcustomersacrosstheUK.Itisabletorapidlydeliverlargeandreliablesystems,providingWi-Ficonnectionsusedbyemployeesandinsystemsthatimprovethecustomerexperience
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orrecordcustomerbuyinghabits.Thesesystemsarecriticaltoabusinessandthereforemustbeinstalledwithlittleornodisruption to customers.Becauseof its strongexpertise, ISG is often contracted todo thedesign,installationandon-goingmaintenance.ThebusinesshasheadquartersinSurreyandfiveservicedeliverycentresacrosstheUK. Italsorunsatechnicalservicecentre inBulgaria.TheBoardwasattractedbythemanagementteam’simpressivetrackrecordandthehighqualityservicepropositionofthebusinessinagrowingmarket.“WeareverypleasedtohavethefinancialbackingofOctopus,andenjoyworkingwiththeteam.Wefelttheybroughtaflexibleandcreativeapproachtothefinancingofthebusiness,andwelookforwardtocontinuingtogrowthebusinesswiththem.”MikeMorrison,chiefexecutiveofficer,ISGTechnologyCMM:MonitoringsoftwareforremoteworkforcesIt’simportantforcareandfacilitymanagementcompaniestobeabletokeeptrackoftheirremoteemployees,especially if theyworkatmultiple locations.Homevisitsbycarecompanies, inparticular,arebecomingmorepopular.CustomerslikeSaga,Mitie,ServestandseveralUKcouncilsuseCMM’sremoteworkforcemanagementsoftwaretomonitorthetimeandattendanceoftheirworkersaswellastheoutcomeofthecareprovided.TheBoardisexcitedbythisinvestmentbecauseCMMisagrowingbusinesswithcontractedrecurringrevenuesinafast-growing sector. The care market is expanding rapidly to meet the increasing demands of an ageingpopulation,withmorepeople lookingforcare intheirownhomesfor longer.TheBoardbelievesCMMiswellpositionedtoexpandfurther,bothintheUKandoverseas.“Whilstwehavehadmanyotherpotential investorscontactusoverthepast fewyearstherehasonlyeverbeenonethatweseriouslyconsidered.Octopusrecognisethechallengesfacedbyowner/managersandthisisoneofthereasonswhywefelttheirexpertisewouldgetustothenextlevel.”PeterLongman,groupchiefexecutiveofficer,CMMMergerplans
Aswellasraisingnewfunds,theCompanyisalsoproposingtomergewithEclipse.TheinvestmentstrategiesoftheCompanyandEclipsehavebecomecloselyalignedovertime.Bothhaveinvestedsuccessfullyalongsideoneanother in some of the same companies, and believe combining the two VCTs is in the best interests ofShareholdersforthefollowingreasons:• Greaterportfoliodiversity-CombiningtheportfoliosoftheCompanieswouldcreatea largerportfolioof
companies, expanding the Company's current range of investments. This would instantly create amorediversifiedportfolioofaround62companiesforinvestors.
separateVCTs.Thereareanumberof fixedcoststhateveryVCTmustpay, includingregistrar fees,auditand accountancy fees and salaries for the board of directors for example. In addition, every year theCompaniesarelegallyrequiredtosendeveryShareholderandEclipseShareholderdifferentsetsofreportsandaccounts.IftheMergerisagreedtheEnlargedCompanywouldbeabletosendShareholdersonesinglereporteachtime.ForinvestorsintheCompany,spreadingthesefixedcostsoveralargermergedVCTwillbebeneficial.
After the merger, Shareholders would be invested in a well-diversified VCT portfolio featuring an expandednumber of companies from a larger number of investment sectors. They would own shares in a VCT ofsignificant size and strength, making it one of the largest VCT in the UK, according to the Association ofInvestmentCompanies(Source:AssociationofInvestmentCompanies:24October2016).The investment approach taken by Eclipse is similar to that of the Company. Both Companies target stablereturnsandpaymentofaregulardividendbyinvestinginQualifyingInvestmentsinUKsmallercompaniesthatare operating in various sectors andmaking a positive contribution to the UK economy in terms of tax andemployment.
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ConflictsofinterestOctopus has built strong relationships with many of the companies in which the Company invests, andsometimes uses different sources of funding to invest in the same companies. This can present ‘conflicts ofinterest’, as explained below. With these relationships, there’s a chance that the interests of one group ofinvestors will be at odds, or present a conflict, with the interests of another group or with the interests ofOctopus. Conflicts of interest arenot aproblem in themselves andOctopusmanages themcarefully tomakesurethatinvestorsaretreatedfairlyatalltimes.The Company's investment team will usually invest funds from the Company along with funds from otherOctopus-managed products and sometimes even Octopus itself. Through this co-investment, investors in theCompanycanhaveaccesstodealsthatmaynothavebeenpossiblewithoutbeingpartofthelargerdealwithotherOctopusinvestors.The Company often places an Octopus employee on the board of the companies it invests in, either as anobserveroradirector.ThismeanstheCompanyisabletocloselymonitortheinvestmentwe’vemadeonbehalfof the Company's investors. It does, however, mean that as company directors, those employees haveobligationstoallshareholdersofthecompany,andnotjusttheCompany'sinvestors.SometimestheCompanyisunabletoinvestasmuchmoneyasitwouldlikeduetorestraintssuchasthesizeofacompany or the number of shares available. In these instances, the amounts being invested from differentOctopus vehicles must be managed carefully. Similarly, when investments held by a number of differentinvestorscometobesold,theinterestsofallpartiesmaynotbefullyaligned.TheCompanyhasagreedpoliciesand processes in place tomake sure this is done fairly, but sometimes, investorsmay still be limited in theamountstheycaninvestorrestrictedinthetimingofanexit.OctopusmayreceivefeesfromthecompaniesthattheCompanyinvestsin(forexample,whenmakingorsellinganinvestmentinacompany,aswellasforappointingarepresentativetotheboardofdirectors).Suchfeesdonot typically exceed1.5%annuallyof the total amount investedbyallOctopusmanaged funds (including theCompany).Thistypicalfeeisbasedonaninvestmentof£5millionandaholdingperiodoffiveyears.Thecostsofall deals that donot proceed to completion are typically borneby either the company seeking funding or byOctopus.Octopushasanumberofcontrolsinplacetomanageconflictsofinterestonbehalfofinvestors:•The InvestmentCommitteemakessure investmentdecisionsare in thebest interestsof investors, includinghowpotentialconflictsofinterestaremanaged.• Incaseswheretherearea largenumberofconflictsof interestortheyareparticularlysignificant,proposalsarereviewedbytheConflictsCommittee,whichisresponsibleforensuringconflictsarehandledappropriately.• As the Company is a publicly listed company, the Board is required to act independently and representShareholders’bestinterestsatalltimes.
GeneralThefollowingparagraphsapplytotheCompanyandtoindividualsholdingSharesasaninvestmentwhoaretheabsolutebeneficialownersofsuchSharesandwhoareresidentintheUK.Theymaynotapplytocertainclassesofindividuals,suchasdealersinsecurities.ThefollowinginformationisbasedoncurrentUKlawandpractice,issubjecttochangestherein,isgivenbywayofgeneralsummaryanddoesnotconstitutelegalortaxadvice.Ifyouareinanydoubtaboutyourposition,orifyoumaybesubjecttotaxinajurisdictionotherthantheUK,youshouldconsultyourfinancialadviser.ThetaxreliefssetoutbelowrelatingtotheOfferareavailabletoindividualsaged18oroverwhoreceiveOfferSharesundertheOfferandwheretheOfferSharesacquiredarewithintheinvestor’sannual£200,000limit.Thereliefsarenotavailableforinvestmentsinexcessof£200,000pertaxyear.TheCompanyhasobtainedapprovalasaVCTunderChapter3ofPart6ITA2007.The Board considers that the Company has conducted its affairs, andwill continue to do so, to enable it toqualifyasaVCT.TheSchemeClearancehasbeenobtainedfromHMRCinrespectoftheSchemeunderSection701ITA2007confirmingthatthereceiptofSchemeSharesshouldnot,exceptinthecaseofdealers,beregardedasanincomereceiptforthepurposesofUKtaxation.ClearancehasbeenrequestedfromHMRCtoconfirmthattheSchememeetstherequirementsoftheMergerRegulationsandassuch thereceiptbyEclipseShareholdersofSchemeSharesshouldnotprejudice tax reliefsobtainedbytheEclipseShareholdersonexistingEclipseSharesandshouldnotberegardedasadisposal.TheimplementationoftheSchemeshouldnotaffecttheVCTreliefsobtainedbyShareholdersonsubscriptionforexistingShares.TheimplementationoftheSchemeshouldnotaffectthestatusoftheCompanyasaVCT.ItistheintentionoftheBoardtocontinuetocomplywiththerequirementsofITA2007soastocontinuetoqualifyasaVCT.TaxPositionofEclipse ShareholdersThereceiptbyEclipseShareholdersofSchemeSharesshouldnotconstituteadisposaloftheirEclipseSharesforUK tax purposes. Eclipse Shareholders should, for UK tax purposes, effectively be able to treat the SchemeSharesreceivedpursuanttotheSchemeasiftheyhadbeenacquiredatthesamecostandonthesamedateastheoriginalEclipseSharesfromwhichtheyderive(butallocatedproportionatelybetweensuchresultingSchemeShares).AnyinitialincometaxreliefobtainedandattachingtotheoriginalEclipseShareswillnot,therefore,besubjecttoclawback,butinsteadwillthenattachtotheSchemeShares.AstheCompanyisalsoaVCT,theusualVCTtaxreliefsshouldcontinuetoapply.Asaresult,qualifyingShareholdersshouldcontinuetoreceivetax-freedividendsandshouldnotbesubjecttoUKtaxationonanycapitalgainsonthedisposalofSchemeShares.For Eclipse Shareholdersholding (togetherwith their associates)more than5%of theEclipse Shares in issue,clearancehasbeenobtainedfromHMRCintermsofSection138ofTCGA1992thatthetaxtreatmentdescribedaboveforpersonswho(togetherwiththeirassociates)ownlessthan5%oftheEclipseSharesshouldalsoapplytothem.Eclipse Shareholderswhodonot vote in favourof theResolution tobeproposedat the Eclipse FirstGeneralMeeting are entitled to dissent and have their shareholding purchased by the Liquidators at a price agreedbetweenthedissentingEclipseShareholdersandtheLiquidators(orbyarbitration),whichisexpectedtobeatasignificantreductiontothenetassetvalueofanEclipseShare.Inaddition,EclipseShareholdersshouldnotethatapurchaseofEclipseSharesbytheLiquidatorsfromdissentingEclipseShareholderswillberegardedasadisposalofsuchEclipseSharesfortaxpurposes,therebytriggeringtherepaymentofanyincometaxrelief
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onEclipseSharessubscribedforinthefiveyearspriortopurchase.Thesalepricereceivedmaynotbesufficienttocovertheamountofpaymentdue.AlthoughtheCompanywillberequiredtopayUKstampdutyorstampdutyreservetaxonthetransfertoitofcertainoftheassetsofEclipse(whichformpartofthemergercosts),noUKstampdutywillbepayabledirectlybyShareholdersasaresultoftheimplementationoftheScheme.Eclipse ShareholdersnotresidentintheUKEclipse ShareholdersnotresidentintheUKshouldseektheirownprofessionaladviceastotheconsequencesofmakingandholdinganinvestmentintheCompany,astheymaybesubjecttotaxinotherjurisdictionsaswellasintheUK.TaxPositionofInvestorsundertheOfferThetaxreliefssetoutbelowarethosecurrentlyavailabletoindividualsaged18oroverwhosubscribeforOfferSharesundertheOfferandwillbedependentonpersonalcircumstance.Whilstthereisnospecificlimitontheamountofanindividual’sacquisitionofsharesinaVCT,taxreliefswillonlybegiventotheextentthatthetotalofanindividual’ssubscriptionsorotheracquisitionsofsharesinVCTsinanytaxyeardonotexceed£200,000.Qualifyinginvestorswhointendtoinvestmorethan£200,000inVCTsinanyonetaxyearshouldconsulttheirprofessionaladvisers.TaxBenefitsforVCTinvestors1.IncomeTax1.1InitialIncomeTaxreliefAninvestorcanacquireOfferSharesofuptoamaximumof£200,000undertheOfferineachof2016/17and2017/18taxyears.Thereliefissubjecttoanamountwhichreducestheinvestor’sincometaxliabilityforthetaxyear to nil. Each application creates an entitlement to income tax relief of 30%of the amount invested. ToretainthatrelieftheOfferShareshavetobeheldfor5years.Thetablebelowhasbeenpreparedforillustrativepurposesonlyanddoesnotformpartofthesummaryofthetaxreliefscontained inthissection.Thetableshowshowthe initial incometaxreliefavailablecanreducetheeffectivecostofaninvestmentof£10,000inaVCTtoonly£7,000,byaqualifyinginvestorsubscribingforVCTshares: Effectivecost TaxreliefInvestorunabletoclaimanytaxreliefs £10,000 NilVCTinvestorabletoclaimfull30%incometaxrelief £7,000 £3,000
Tax relief on subscriptions for shares in a VCT is restricted where, within six months (before or after) thatsubscription,theinvestorhaddisposedofsharesinthesameVCToraVCTwhichatanytimemergeswiththatVCT.ExistingShareholdersshouldbeawarethatthesaleofexistingShareswithintheseperiodscould,therefore,puttheirincometaxreliefrelatingtotheOfferatrisk.1.2DividendreliefDividendspaidonordinarysharesinaVCTarefreeofincometax.VCTstatuswillbewithdrawnif,inrespectofsharesissuedonorafter6April2014,adividendispaid(orotherformsofdistributionorpaymentsaremadetoinvestors)fromthecapitalreceivedbytheVCTfromthatissuewithinthreeyearsoftheendoftheaccountingperiodinwhichshareswereissuedtoinvestors.DividendspaidfromrealisedprofitsmaybemadewithoutlossofVCTstatus.
39
1.3WithdrawalofreliefRelief from income tax on a subscription for VCT shareswill bewithdrawn if the VCT shares are disposed of(other than between spouses) within five years of issue or if the VCT loses its approval within this period.DividendreliefisnotavailablefordividendspaidinanaccountingperiodduringwhichtheVCTlosesitsapproval.2.CapitalGainsTax2.1RelieffromcapitalgainstaxonthedisposalofVCTsharesDisposingofaVCTshareataprofitdoesnotcreateachargeablegainforthepurposesofUKCapitalGainsTax.Similarly,disposingatalossdoesnotcreateanallowablelossforUKCapitalGainsTax.3.WithdrawalofapprovalIf a companywhichhasbeengrantedapproval as aVCT subsequently fails to complywith the conditions forapprovalasaVCT,approvalmaybewithdrawnortreatedasneverhavingbeengiven. Inthesecircumstances,reliefs from income tax on the initial investment are repayable unless loss of approval occursmore than fiveyearsaftertheissueoftherelevantVCTshares.In addition, relief ceases to be available on any dividend paid in respect of profits or gains in an accountingperiodduringorafterwhichVCTstatushasbeenlost.AnygainsontheVCTsharesuptothedatefromwhichlossofVCTstatusistreatedastakingeffectwillbeexempt,butgainsthereafterwillbetaxable.4.Othertaxconsiderations4.1ObtaininginitialtaxreliefsTheCompanywillprovideeach investorwithataxcertificatewhichthe investormayusetoclaim incometaxrelief.Todothis,aninvestormusteitherobtainataxcodingadjustmentfromHMRCunderthePAYEsystem,orwaituntiltheendofthetaxyearandusetheirselfassessmenttaxreturntoclaimrelief.4.2ShareholdersnotresidentintheUKShareholdersnotresidentintheUKshouldseektheirownprofessionaladviceastotheconsequencesofmakingandholdinganinvestmentintheCompany,astheymaybesubjecttotaxinotherjurisdictionsaswellasintheUK.5.TaxPositionoftheCompanyAVCThastosatisfyanumberofteststoqualifyasaventurecapitaltrust.Asummaryofthesetestsissetoutbelow.5.1QualificationasaVCTToqualifyasaventurecapitaltrust,acompanymustbeapprovedassuchbyHMRC.Tomaintainapproval,theconditionssummarisedbelowmustcontinuetobesatisfiedthroughoutthelifeoftheVCT:
(xii) no funds received from an investment into a company can be used to acquire another existing
businessortradeorprovideareturnofcapitaltooneofitsshareholders;and(xiii) theVCTmustnotmakeanon-Qualifying Investmentotherthanthosespecified insection274 ITA
2007.“Qualifying investments” comprise shares or securities (including loans with a five year or greatermaturity period but excluding guaranteed loans and securities) issued by unquoted trading companieswhichexistwhollyormainlyforthepurposeofcarryingononeormorequalifyingtrades.Thetrademustbecarriedonby,orbeintendedtobecarriedonby,theinvesteecompanyoraqualifyingsubsidiaryatthe time of the issue of the shares or securities to the VCT (and by such company or by any othersubsidiary in which the investee company has not less than a 90% interest at all times thereafter). Acompany intending to carryon aqualifying trademustbegin to tradewithin two yearsof the issueofsharesor securities to theVCTandcontinue it thereafter. Thedefinitionof aqualifying tradeexcludesdealing in property, shares, securities, commodities or futures. It also excludes banking, insurance,receivingroyaltiesorlicencefeesincertaincircumstances,leasing,theprovisionoflegalandaccounting
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services, farming and market gardening, forestry and timber production, property development,shipbuilding, coal and steel production, operating or managing hotels or guest houses, generation ofelectricity,powerorheat,nursingandresidentialcarehomes.Thefundsraisedbytheinvestmentmustbeusedforthepurposesofthequalifyingtradewithincertaintimelimits.Aqualifying investment canalsobemade ina companywhich is aparent companyofa tradinggroupwheretheactivitiesofthegroup,takenasawhole,consistofcarryingononeormorequalifyingtrades.Investee companies must have a permanent establishment in the UK. The investee company cannotreceive more than £5 million from VCTs or other State Aid investment sources during the 12 monthperiodwhichendsonthedateoftheVCT’s investment. The investeecompany’sgrossassetsmustnotexceed £15 million immediately prior to the investment or £16 million immediately thereafter. Theinvesteecompanymusthave fewer than250employeesor500employees in thecaseofaKnowledgeIntensiveCompany.NeithertheVCTnoranyothercompanymaycontroltheinvesteecompany.Atleast10%oftheVCT’stotalinvestmentintheinvesteecompanymustbeineligibleshares,asdescribedabove.The company cannot receive more than £12 million (£20 million if the company is deemed to be aKnowledge Intensive Company) of State Aid investment (including from VCTs) over the company’slifetime.Thecompany’sfirstcommercialsalemustbenomorethan7yearsbeforetheVCT’sinvestment(10 years for aKnowledge IntensiveCompany)prior to thedateof investment, exceptwherepreviousRiskFinanceStateAidwasreceivedbythecompanywithin7yearsorwhereaturnovertestissatisfied.Funds received from an investment by a VCT cannot be used to acquire another existing business ortrade.Companies whose shares are traded on AIM are treated as unquoted companies for the purposes ofcalculatingqualifying investments.Shares inanunquotedcompanywhichsubsequentlybecomes listedmay still be regarded as a qualifying investment for a further five years following listing, provided allotherconditionsaremet.
DearSirsOctopusApolloVCTPLC(“theCompany”)ProformafinancialinformationWereportontheproformafinancialinformation(the"ProformaFinancialInformation")setoutinPartAandPartBofPartIVoftheprospectusdated4November2016(the“Prospectus”)ofOctopusApolloVCTPLC,whichhasbeenpreparedon thebasisdescribed in thenotes to theProFormaFinancial Information, for illustrativepurposesonly,toprovideinformationabouthowtheMergerandtheOffer(asdefinedintheProspectus)mighthave affected the financial information presented on the basis of the accounting policies adopted by theCompanyinpreparingthefinancialstatementsforthesixmonthsending31July2016.Thisreportisrequiredbyitem20.2ofAnnexIoftheCommissionRegulation(EC)No.809/2004(the“PDRegulation”)andisgivenforthepurposeofcomplyingwiththatitemandfornootherpurpose.Saveforanyresponsibilityarisingunderparagraph20.2ofAnnexIofAppendix3.1.1oftheProspectusRulestoanypersonasandtotheextentthereprovided,tothefullestextentpermittedby lawwedonotassumeanyresponsibilityandwillnotacceptanyliabilitytoanyotherpersonforanylosssufferedbyanysuchotherpersonasaresultof,arisingoutof,orinconnectionwiththisreportorourstatement,andgivensolelyforthepurposesof complyingwith paragraph 20.2 of Annex I of Appendix 3.1.1 of the Prospectus Rules, or consenting to itsinclusionintheProspectus.ResponsibilitiesIt is the responsibility of the directors of the Company (the “Directors”) to prepare the Pro Forma FinancialInformationinaccordancewithitem20.2ofAnnexIofthePDRegulation.Itisourresponsibilitytoformanopinion,asrequiredbyitem7ofAnnexIIofthePDRegulation,astothepropercompilationoftheProFormaFinancialInformationandtoreportthatopiniontoyou.Save foranyresponsibilityarisingunderProspectusRule5.5.3R(2)(f) toanypersonasandtotheextent thereprovided,tothefullestextentpermittedbythelawwedonotassumeanyresponsibilityandwillnotacceptanyliability toanyotherperson forany loss sufferedbyanysuchotherpersonasa resultof,arisingoutof,or inconnectionwith this report or our statement,which are included, in the formand context inwhich they are
43
included,withourconsentandwithourhavingauthorisedthecontentsofthisPartFour,requiredbyandgivensolelyforthepurposesofcomplyingwithitem23.1ofannex1ofthePDRegulation.Inprovidingthisopinionwearenotupdatingorrefreshinganyreportsoropinionspreviouslymadebyusonanyfinancial information used in the compilation of the Pro Forma Financial Information, nor do we acceptresponsibilityforsuchreportsoropinionsbeyondthatowedtothosetowhomthosereportsoropinionswereaddressedbyusatthedatesoftheirissue.BasisofopinionWe conducted our work in accordance with the Standards for Investment Reporting issued by the FinancialReportingCouncil in theUnitedKingdom.Theworkthatweperformedfor thepurposeofmakingthis report,whichinvolvednoindependentexaminationofanyoftheunderlyingfinancial information,consistedprimarilyof comparing the unadjusted financial information with the source documents, considering the evidencesupporting the adjustments and discussing the Pro Forma Financial Information with the directors of theCompany.Weplannedandperformedourworksoastoobtaintheinformationandexplanationsweconsiderednecessaryinorder toprovideuswith reasonableassurance that theProFormaFinancial InformationhasbeenproperlycompiledonthebasisstatedandthatsuchbasisisconsistentwiththeaccountingpoliciesoftheCompany.Our work has not been carried out in accordance with auditing or other standards and practices generallyaccepted inany jurisdictionsotherthantheUnitedKingdomandaccordinglyshouldnotberelieduponas if ithadbeencarriedoutinaccordancewiththoseotherstandardsandpractices.OpinionInouropinion:• theProFormaFinancialInformationhasbeenproperlycompiledonthebasisstated;and• suchbasisisconsistentwiththeaccountingpoliciesoftheCompany.DeclarationForthepurposesofProspectusRule5.5.3R(2)(f)weareresponsibleforthisreportaspartoftheProspectusanddeclarethatwehavetakenallreasonablecaretoensurethattheinformationcontainedinthisreportis,tothebest of our knowledge, in accordancewith the facts and containsnoomission likely to affect its import. Thisdeclaration is included in the Prospectus in compliancewith item1.2 ofAnnex I and item1.2 ofAnnex III ofAppendix3.1.1oftheProspectusRules.
The following unaudited pro forma statement of earnings of the Enlarged Company has been prepared toillustratetheeffectoftheMergerandtheOfferontheearningsofApolloforthesixmonthsended31July2016asiftheMergerandtheOfferhadoccurredatthestartoftheperiod,1February2016.ThesixmonthearningsforEclipsearefortheperiodended31March2016.
TheunauditedproformastatementofearningsisbasedontheearningsofApolloforthesixmonthsended31July2016,assetoutintheunauditedhalf-yearlyreportoftheCompanyforthesixmonthsended31July2016whichisincorporatedbyreferenceinPartFiveofthisdocumentandhasbeenpreparedinamannerconsistentwith theaccountingpolicies adoptedbyApollo inpreparing such informationandon thebasis setout in thenotessetoutbelow.
1. TheearningsofApolloforthesixmonthsended31July2016havebeenextractedwithoutmaterialadjustment from the unaudited half-yearly report of the Company for the sixmonths ended 31 July2016whichisincorporatedbyreferenceinPartFiveofthisdocument.
4. No account has been taken of the effects of any synergies, and of the costs formeasures taken toachieve thosesynergies, thatmayhavearisenhadtheMergeroccurredon1February2016andthatmaysubsequentlyhaveaffectedtheresultsoftheCompanyinthesixmonthsended31July2016.
5. No account has been taken of the trading performance of Apollo since 31 July 2016 or the trading
The following unaudited pro forma statement of net assets of the Enlarged Company has been prepared toillustrate theeffecton thenetassetsofApolloas if theMergerand theOfferhad takenplaceon1February2016.TheunauditednetassetsofEclipsearestatedasat31March2016.
Theunauditedproformastatementofnetassetshasbeenpreparedforillustrativepurposesonlyand,becauseof its nature, addresses a hypothetical situation and does not, therefore, represent Apollo’s actual financialpositionorresults.
TheunauditedproformastatementofnetassetsisbasedonthenetassetsofApolloasat31July2016,assetout in the unaudited half-yearly report of the Company for the six months ended 31 July 2016 which isincorporatedbyreferenceinPartFiveofthisdocumentandhasbeenpreparedinamannerconsistentwiththeaccountingpoliciesadoptedbyApolloinpreparingsuchinformationandonthebasissetoutinthenotessetoutbelow.
1. The net assets of Apollo as at 31 July 2016 have been extractedwithoutmaterial adjustment from theunauditedhalf-yearlyreportoftheCompanyforthesixmonthsended31July2016whichisincorporatedbyreferenceinPartFiveofthisdocument.
AuditedfinancialinformationrelatingtotheCompanyispublishedintheannualreportsfortheyearsended31January2014,31January2015and31January2016andunauditedinformationinthehalf-yearreportsforthesix month periods ended 31 July 2015 and 31 July 2016. Audited financial information relating to Eclipse ispublishedintheannualreportsfortheyearsended30September2013,30September2014and30September2015andunauditedinformationinthehalf-yearreportsforthesixmonthperiodsended31March2015and31March2016.TheannualreportsreferredtoaboverelatingtotheCompanywereauditedbyGrantThorntonUKLLPof3140RowanPlace, JohnSmithDrive,OxfordBusinessParkSouth,OxfordOX42WB.Theannual reports referred toabove relating to Eclipse were audited by BDO LLP of 55 Baker Street, London W1U 7EU. All reports werewithoutqualificationandcontainednostatementsundersection498(2)or(3)oftheCA2006.Allreportswereprepared inaccordancewithFinancialReportingStandard102withtheexceptionoftheannualreportfortheCompanyfortheyearended31January2014andtheannualreportforEclipsefortheyearended30September2013 which were prepared in accordance with the United Kingdom Accounting Standards (United KingdomGenerally Accepted Accounting Practice), the fair value rules of the CA 2006 and the Statement ofRecommended Practice ‘Financial Statements of Investment Trust Companies’. The annual reports contain adescription of the Company’s and Eclipse’s financial condition, changes in financial condition and results ofoperationforeachrelevantfinancialyearandthepagesofthesereferredtobelow,togetherwiththehalf-yearreportsreferredtoabove,arebeingincorporatedbyreferenceandcanbeaccessedatthefollowingwebsite:
www.octopusinvestments.comWherethesedocumentsmakereferencetootherdocuments,suchotherdocuments,togetherwiththosepagesof the annual andhalf-year reports that arenot referred tobelow, arenot relevant to investors and are notincorporatedintoanddonotformpartofthisdocument.Suchinformationincludesthefollowing:Apollo 31January
201431January
201531January
201631July2015 31July2016
Description AnnualReport
AnnualReport
AnnualReport
HalfYearReport
HalfYearReport
BalanceSheet
Page49
Page56 Page51
Page23
Page21
IncomeStatement(orequivalent)
Page46
Page52
Page48
Page18
Page13
Statementshowingallchangesinequity(orequivalent
Page48
Page59
Page54
Page21
Page16
48
note)CashFlowStatement
Page50
Page63
Page57
Page26
Page21
AccountingPoliciesandNotes
Page52
Page64
Page58
Page28
Page25
Auditor’sReport
Page42
Page48
Page43
N/a N/a
TheCompanyandtheDirectors confirmthattheCompany’smostrecenttwoyears’ financial informationhasbeenpresentedandprepared ina formwhich isconsistentwiththatwhichwillbeadopted intheCompany’snextpublishedannualfinancialstatements.
The Company and theDirectors confirm that Eclipse’smost recent two years’ financial information has beenpresentedandprepared ina formwhich is consistentwith thatwhichwillbeadopted in theCompany’snextpublishedannualfinancialstatements.
Asat31March2016, thedate towhich themost recentunaudited financial informationonEclipsehasbeendrawn up, the unaudited NAV per Eclipse Share was 32.5p. A dividend of 1.0p per Eclipse Share wassubsequentlypaidon24June2016.
The investment portfolio of Eclipse as at the date of this document is as follows (the valuations being theunauditedvaluationsasat31March2016andrepresentingUKcompaniesand71%oftheNAVofEclipseasat31March2016):
with registerednumber3942880asaprivate company limitedby shares.Theaddressand telephonenumberofOctopus’registeredoffice isat33Holborn,LondonEC1N2HTand itstelephonenumber is08003162295.TheprincipallegislationunderwhichOctopusoperatesistheActsandregulationsmadethereunder.OctopusisauthorisedandregulatedbytheFinancialConductAuthority.
authorised inaccordancewithSection551of theCA2006 toallotSharesup toanaggregatenominalamount of £7,000,000 (representing 55.7% of the issued Shares at 30 October 2015), for a periodexpiring18monthsfromthepassingoftheresolution(unlesspreviouslyrenewed,variedorrevokedbytheCompany ingeneralmeeting)anddisapplied thepre-emptionprovisionsof Section561of theCA2006inrespectofanysuchallotment,foraperiodexpiring18monthsfromthepassingoftheresolution(unlesspreviouslyrenewed,variedorrevokedbytheCompanyingeneralmeeting).
1.1 theacquisitionof theassets and liabilitiesof Eclipseon the terms setout in theCircularbeandherebyisapproved;and
1.2 thedirectorsoftheCompanybeandherebyaregenerallyandunconditionallyauthorisedinaccordancewithSection551of theCompaniesAct2006 (the “Act”) toexerciseall thepowersoftheCompanytoallotSharesuptoanaggregatenominalamountof£5 millioninconnection with the Scheme (representing 28.5% of the issued share capital of theCompanyasat3November2016,thisbeingthelatestpracticabledatepriorto thedateof this notice), provided that the authority conferred by this paragraph 1.2 shall expireon the date falling 18 months from the date of the passing of this Resolution (unlessrenewed,variedorrevokedbytheCompanyingeneralmeeting).
2.1 the directors of the Company be and hereby are generally and unconditionally authorised inaccordancewithSection551oftheActtoexerciseallthepowersoftheCompanytoallotSharesandtograntrightstosubscribeforortoconvertanysecurity intoSharesuptoanaggregatenominalamountof£4million(representing22.8 %of the issuedsharecapitalof the Company as at 3 November 2016, this being the latest practicable date prior tothe date of this notice), provided that the authority conferred by this paragraph 2.1shallexpireonthedate falling18months fromthedateof thepassingof thisResolution(unless renewed, varied or revoked by the Company in generalmeeting) but so that thisauthority shall allow the Company to make before the expiry of this authority offers oragreements which would or might require Shares to be allotted or rights to be grantedaftersuchexpiry;
2.2 thedirectorsoftheCompanybeandherebyareempoweredpursuanttoSections570and573 of the Act to allot or make offers or agreements to allot equity securities (whichexpression shall have the meaning ascribed to it in Section 560(1) of the Act) for cashpursuanttotheauthoritygivenpursuanttoparagraph2.1ofthisresolutionorbywayofasale of treasury shares, as if Section 561(1) of the Act did not apply to such allotment,providedthatthepowerprovidedbythisparagraph2.2shallexpireonthedatefalling18monthsfromthedateofthepassingofthisResolution(unlessrenewed,variedorrevokedbytheCompanyingeneralmeeting)andprovidedfurtherthatthispowershallbelimitedto:
(a) the allotment and issue of Shares up to an aggregate nominal value of £4 millionpursuanttooffer(s)forsubscription;and
3.1 the directors of the Company be and hereby are generally and unconditionally authorised inaccordancewithSection551oftheActtoexerciseallthepowersoftheCompanytoallotSharesup to an aggregate nominal amount of £1 million in connection with the Company’s dividendreinvestment scheme (representing 5.7% of the issued share capital of the Company as at 3November 2016,thisbeingthe latestpracticabledatepriortothedateofthisnotice),providedthattheauthorityconferredbythisparagraph3.1shallexpireonthedatefalling18monthsfromthedateofthepassingofthisResolution(unlessrenewed,variedorrevokedbytheCompanyingeneralmeeting)butsothatthisauthorityshallallowtheCompanytomakebeforetheexpiryofthisauthorityoffersoragreementswhichwouldormightrequireSharestobeallottedaftersuchexpiry;
3.2 thedirectorsoftheCompanybeandherebyareempoweredpursuanttoSections570and573ofthe Act to allot ormake offers or agreements to allot equity securities (which expression shallhavethemeaningascribedto it inSection560(1)of theAct) forcashpursuant to theauthoritygivenpursuant to paragraph3.1 of this Resolutionor bywayof a sale of treasury shares, as ifSection561(1)of theActdidnotapply tosuchallotment,providedthat thepowerprovidedbythisparagraph3.2shallexpireonthedatefalling18monthsfromthedateofthepassingofthisResolution(unlessrenewed,variedorrevokedbytheCompanyingeneralmeeting)andprovidedfurtherthatthispowershallbe limitedtotheallotmentand issueofSharesuptoanaggregatenominalvalueof£1millioninconnectionwiththeCompany’sdividendreinvestmentscheme.
4. THAT , the articles of association produced to the meeting, and for the purpose ofidentification initialed by the Chairman, be adopted as the articles of association of theCompany.
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5. THAT theCompanybeandhereby isempowered tomakeoneormoremarketpurchaseswithin themeaningofSection693(4)of theActof itsownShares (either forcancellationorfortheretentionastreasurysharesforfuturere-issueortransfer)providedthat:
(a) the aggregate number of Shares which may be purchased shall not exceed26,259,520 Shares;
(c) themaximumpricewhichmay be paid per Share is an amount equal to the higher of (i)105%of theaverageof themiddlemarketquotationperShareof therelevantclass takenfrom the London Stock Exchange daily official list for the five business days immediatelyprecedingthedayonwhichsuchShareistobepurchasedand(ii)theamountstipulatedbyArticle5(6)oftheMarketAbuseRegulation;
For the purposes of these Resolutions, words and expressions defined in the Circular shall have thesamemeaningsinthisnotice,savewherethecontextrequiresotherwise.
theOffer is fully subscribed, (ii) that theOfferPrice is either85.2por52.1pand (iii) that38,899,060SchemeSharesareissuedpursuanttotheMerger)willbeasfollows:
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Classofshares Nominalvalue
Issued(fullypaid)(0fferPrice=85.2p)
Issued(fullypaid)(OfferPrice=52.1p)
£ Number £NumberOrdinaryShares £0.10 23,755,350 237,553,504 25,246,704 252,467,041
16September2016 3,777,225 84.80*SharesallottedtothoseshareholdersparticipatingintheDRIS**SharesallottedtoformerCOrdinaryshareholderswhoconvertedtheirCshareholdingintoOrdinarysharesataratioof1.17506OrdinarysharesperCOrdinaryshare.***SharesallottedtoformerDOrdinaryshareholderswhoconvertedtheirDshareholdingintoOrdinarysharesataratioof1.11205OrdinarysharesperDOrdinaryshare.The Company allotted 15,620,519 deferred shares on 5 August 2016 at nil consideration inrespectoftheDordinaryshareholderswhoelectedtoreceivetheDsharedividend.
of the CA 2006) confer on shareholders certain rights of pre-emption in respect of the allotment ofequitysecurities(asdefinedinSection560(1)oftheCA2006)whichare,oraretobe,paidupincashandwill apply to theCompany, except to the extent disappliedby theCompany in generalmeeting.Subject tocertain limitedexceptions,unless theapprovalof theShareholders inageneralmeeting isobtained,theCompanymustnormallyoffersharestobeissuedforcashtoholdersonaproratabasis.
3.10 NosharesoftheCompanyarecurrently in issuewithafixeddateonwhichentitlementtoadividend
arises and there areno arrangements in forcewhereby futuredividends arewaivedor agreed tobewaived.
3.11 No share or loan capital of the Company is under option or has been agreed, conditionally or
Shares, no commissions, discounts, brokerages or other special terms have been granted by theCompany in connection with the issue or sale of any share or loan capital of the Company since 1February2013.
3.13 Other than pursuant to the Offer and the Scheme, none of the New Shares have been sold or are
the issue of definitive certificates, transfers will be certified against the register. It is expected thatdefinitivesharecertificatesfortheNewSharesnottobeheldthroughCRESTwillbepostedtoallotteesassoonaspracticablefollowingallotmentoftherelevantshares.NewSharestobeheldthroughCRESTwillbecreditedtoCRESTaccountsonAdmission.CRESTisapaperlesssettlementprocedureenablingsecuritiestobeevidencedotherwisethanbyacertificateandotherwisethanbyawritteninstrument.TheArticlesoftheCompanypermittheholdingofsharesinCREST.
or which are or were significant to the business of the Company and which were effected by theCompanyinthecurrentorimmediatelyprecedingfinancialyearorwhichwereeffectedduringanearlierfinancialyearandwhichremaininanyrespectoutstandingorunperformed.
MurraySteeleandChristopherPowleswereappointedasDirectorson28September2012,JamesOtterwasappointedasaDirectoron28November2014and IanPearsonwasappointedasaDirectoron27January2016.TheDirectors’appointmentsareterminableonthreemonths’noticeandnoarrangementshave been entered into by the Company entitling theDirectors to compensation for loss of office norhave amounts been set aside to provide pension, retirement or similar benefits. Murray Steele, asChairmanoftheCompany,isentitledtoannualremunerationof£30,000,andChrisPowles,asChairmanoftheAuditCommittee,isentitledtoannualremunderationof£25,000,whiletheannualremunerationreceivable by the other Directors is £22,500. None of the Directors has a service contract with theCompanyandnosuchcontractisproposed.Inrespectoftheyearended31January2016,MurraySteelereceived £25,000, Christopher Powles received £20,000, James Otter received £20,000, Ian Pearsonreceived£231andMattCooper,whoresignedasadirectoron27January2016,received£20,000.
In the event that the Merger proceeds, Alex Hambro will join the Board and will receive an annual
An agreement dated 4 November 2016, between the Company (1), the Directors (2), Octopus (3) andHoward Kennedy (4) pursuant towhichHoward Kennedy agreed to act as sponsor to the Company inrespect of the Offer and the Scheme and Octopus agreed to use reasonable endeavours to procuresubscribersforOfferSharesundertheOffer.UndertheagreementOctopusispaid,aninitialfeeofupto5.5%of the funds receivedunder theOffer and anongoing feeof 0.5%per annumof theNAVof theinvestment amounts received from investors under the Offer who have invested directly into theCompanyandnotthroughafinancial intermediary,foruptonineyearsandhasagreedtodischargeallexternal costs of advice and their own costs in respect of the Offer. Under this agreement certainwarranties have been given by the Company, the Directors and Octopus to the other parties. TheCompanyhasalsoagreedtoindemnifyHowardKennedyinrespectofitsroleassponsor.Thewarrantiesand indemnity are in usual form for a contract of this type. The agreement can be terminated if anystatementintheProspectusisuntrue,anymaterialomissionfromtheProspectusarisesoranybreachofwarrantyoccurs.
whichhavebeenenteredintobytheCompanyinthetwoyears immediatelyprecedingthedateofthisdocument or which are expected to be entered into prior to Admission and which are, or may be,materialorwhichhavebeenenteredintoatanytimebytheCompanyandwhichcontainanyprovisionunder which the Company has any obligation or entitlement which is, or may be, material to theCompanyasatthedateofthisdocument:
andHowardKennedy(4)pursuanttowhichHowardKennedyagreedtoactassponsortotheCompanyinrespectoftheofferforsubscriptionthatwaslaunchedon2November2015(the"2015Offer")andthemergerbetweentheCompanyandOVCT2andOctopusagreedtousereasonableendeavourstoprocuresubscribersforSharesunderthe2015Offer.UndertheagreementOctopuswaspaidaninitialfeeofupto5.0%ofthefundsreceivedunderthe2015Offerandanongoingfeeof0.5%perannumoftheNAVoftheinvestment amounts received from investors under the 2015 Offer who invested directly into theCompany and not through a financial intermediary, for up to nine years and agreed to discharge allexternalcostsofadviceandtheirowncosts inrespectofthe2015Offer.Underthisagreementcertainwarrantiesweregivenby theCompany, theDirectorsandOctopus to theotherparties. TheCompanyalsoagreedtoindemnifyHowardKennedyinrespectofitsroleassponsor.Thewarrantiesandindemnityareinusualformforacontractofthistype.
Howard Kennedy (4) pursuant towhichHoward Kennedy agreed to act as sponsor to the Company inrespectof theoffer forsubscription thatwas launchedon24October2014 (the“2014Offer”)and themergerbetweentheCompanyandOVCTandOctopusagreedtousereasonableendeavourstoprocuresubscribersforSharesunderthe2014Offer.UndertheagreementOctopuswaspaidaninitialfeeofupto5.0%ofthefundsreceivedunderthe2014Offerandanongoingfeeof0.5%perannumoftheNAVofthe
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investment amounts received from investors under the 2014 Offer who invested directly into theCompany and not through a financial intermediary for up to nine years and agreed to discharge allexternalcostsofadviceandtheirowncosts inrespectofthe2014Offer.Underthisagreementcertainwarrantiesweregivenby theCompany, theDirectorsandOctopus to theotherparties. TheCompanyalso agreed to indemnify Howard Kennedy in respect of its role as sponsor to the 2014 Offer. Thewarrantiesandindemnityareinusualformforacontractofthistype.
8.4 ThelettersofappointmentoftheDirectors,detailsofwhicharesetoutinparagraph5above.8.5 An investment management agreement dated 27 July 2006,asvariedbydeedsofvariationdated16
August2012,28April2014,24October2014and2November2015(the“IMA”)between the Company(1) and Octopus (2) pursuant to which Octopus provides discretionary investment managementand administrationservicestotheCompany.TheappointmentofOctopus is terminablebyeitherpartyon not less than 12months’ notice in writingandmayalsobeterminatedincircumstancesofmaterialbreachbyeitheroftheseparties.Octopus receives an annualmanagement fee of an amount equal to2%ofthenetassetsofthe Company, calculatedonadailybasisfrom31Januaryand payable quarterlyin arrears, together with any applicable VAT thereon in respect of investment management services.Octopusalsoreceivesanannualadministrationandaccountingfeeofanamountequalto0.3%ofthe netassets of the Company, calculated at annual intervals as at 31 January and payablequarterly (plusVAT) and an annual company secretarial fee of £20,000 per annumpayableannuallyorquarterly.
Pursuant to the IMA, Octopus is entitled to an annual performance related incentive fee in eachaccounting period, subjecttothetotalreturnbeing100pattheendoftherelevantperiod.Theamountofthefeewillbeequalto20%oftheamountbywhichthetotalreturnasattheendoftherelevantperiodexceedsthetotalreturnasat31January2012pluscumulativeBankofEnglandbaserateor,ifgreater,thehighest total return as at the end of the accounting period commencing on 1 February 2012or anysubsequentaccountingperiod.ThenormalannualexpensesoftheCompanyundertheIMAarecappedeachyearatanamount agreedbetween the Company and Octopus. For the current year the normal annualexpensesarecappedatan amount equal to 3.3% of the Company’s net assets, this being the amount set on launch of theCompany.Any excessover this amountwill bebornebyOctopus.Normal annual expenses means theannual expenses of the Company incurred in its ordinarycourse of business and includes the annualinvestment management, administration, and secretarial fees, directors’ remuneration, normal feespayabletotheCompany’sregistrars, stockbroker,auditors,solicitorsandVCTstatusadvisers.Itdoes notincludeanyexceptionalitems,annualtrailcommissionorirrecoverableVATthereon.
Octopus has the right to charge transaction, directors’, monitoring, consultancy, corporate finance,introductory, syndication fees,commissionsand refundsofcommissions in respectof themanagementof the Company’s investment portfolio. Such fees do not typically exceed 1.5% of the total amountinvestedbyallOctopusmanagedfunds(includingtheCompany)perannum,assuminganinvestmentof£5millionandaholdingperiodoffiveyears.ThecostsofalldealsthatdonotproceedtocompletionwillbebornebyOctopus.Theagreement includes indemnities givenby theCompany toOctopuswhichareusualforthistypeofagreement.
The following contracts will be entered into subject, inter alia, to the approval by Shareholders of
9 RELATEDPARTYTRANSACTIONS Save for the fees paid to the Directors as detailed in paragraph 5 above, the fees paid under the
investmentmanagementagreementdetailedinparagraph8.5above,thepromoter’sfeeof£0.14million paidtoOctopusinrespectoftheCompany'stop-upofferlaunchedon2December2013,thepromoter’sfeeof£0.3millionpaidtoOctopusinrespectoftheCompany’sofferforsubscriptionthatwaslaunchedon24October2014,thepromoter’sfeeof£0.7millionpaidtoOctopusinrespectoftheCompany’sofferforsubscriptionthatwaslaunchedon2November2015andthepromoter’sfeepayableinrespectoftheOfferAgreement,therewerenootherrelatedpartytransactionsorfeespaidbytheCompanyduringtheyearsended31 January2014,31 January2015and31 January2016or for theperiod from31 January2016tothedateofthisdocument.
10. WORKINGCAPITALThe Company is of the opinion that theworking capital available to the Company is sufficient for theCompany’spresentrequirements,thatis,foratleasttheperiodoftwelvemonthsfromthedateofthisdocument.
Since 31 July 2016, a dividend totalling £14.4millionwas paid to investors and additional allotmentshave occurred as detailed in 3.6 above. Save in respect of thesematters there has been nomaterialchangetothecapitalisationsince31July2016.
12.1.3 to review the appropriateness of the Company’s accounting policies, to considermatters ofcorporate governance as may generally be applicable to the Company and to makerecommendationstotheBoardinconnectiontherewithasappropriate.
NominationandRemunerationCommittees12.1.4 A nomination committee consisting of James Otter and Christopher Powles has been
established to consider recommendations for the re-election of Directors. To date noremuneration committee has been established andmatters relating to remuneration of theDirectorsareconsideredbytheBoardandanyDirectorisexcludedfrommeetingsthepurposeofwhichisthesettingofhisownremuneration.
Subjecttoanydisenfranchisementasprovidedinparagraph14.1.4belowtheSharesshallcarrytherighttoreceivenoticeofortoattendorvoteatanygeneralmeetingoftheCompanyandonashowofhandseveryholderof Sharespresent inperson (orbeing a corporation, presentby authorisedrepresentative)shallhaveonevoteand,onapoll,everyholderofShareswhoispresentinpersonorbyproxyshallhaveonevote foreveryShareofwhichhe is theholder.TheSharesshall rankparipassuastorightstoattendandvoteatanygeneralmeetingoftheCompany.
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14.1.2 TransferofSharesThe Shares are in registered form andwill be freely transferable free of all liens. All transfers ofSharesmustbeeffectedbyatransferinwritinginanyusualformoranyotherformapprovedbytheDirectors.TheinstrumentoftransferofaShareshallbeexecutedbyoronbehalfofthetransferorand,inthecaseofapartlypaidShare,byoronbehalfofthetransferee.TheDirectorsmayrefusetoregister any transfer of a partly paid Share, provided that such refusal does not prevent dealingstakingplaceonanopenandproperbasisandmayalsorefusetoregisteranyinstrumentoftransferunless:
(ii) itisinrespectofonlyoneclassofshare;and(iii)thetransfereesdonotexceedfourinnumber.DividendsThe Company may in general meeting by ordinary resolution declare dividends to be paid tomembersinaccordancewiththeArticles,providedthatnodividendshallbepayableinexcessoftheamountrecommendedbytheDirectors.TheDirectorsmaypaysuchhalf-yeardividendsasappeartothemtobejustified.Nodividendorothermoniespayableinrespectofashareshallbearinterestas against the Company. There are no fixed dates onwhich entitlement to a dividend arises. AlldividendsunclaimedforaperiodoftwelveyearsafterbeingdeclaredorbecomingdueforpaymentshallbeforfeitedandshallreverttotheCompany.TheSharesshallentitletheirholderstoreceivesuchdividendsastheDirectorsmayresolvetopayout of the net assets attributable to the Shares and from income received and accruedwhich isattributabletotheShares.The Directors may, with the prior sanction of an ordinary resolution of the Company, offerShareholders the right to elect to receive in respect of all or part of their holding of Shares,additionalSharescreditedasfullypaid insteadofcash inrespectofallorpartofsuchdividendordividendsand(subjectashereinafterprovided)uponsuchtermsandconditionsandinsuchmannerasmaybespecifiedinsuchordinaryresolution.TheordinaryresolutionshallconferthesaidpowerontheDirectorsinrespectofallorpartofaparticulardividendorinrespectofalloranydividends(oranypartofsuchdividends)declaredorpaidwithinaspecifiedperiodbutsuchperiodmaynotend later than the date of the annual general meeting next following the date of the generalmeetingatwhichsuchordinaryresolutionispassed.
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14.1.4 DisclosureofInterestinSharesIf any Shareholder or other person appearing tobe interested in Shares is in default in supplyingwithin14daysafterthedateofserviceofanoticerequiringsuchmemberorotherpersontosupplytotheCompanyinwritingalloranysuchinformationasisreferredtoinSection793oftheCA2006,the Directors may, for such period as the default shall continue, impose restrictions upon therelevantShares.Therestrictionsavailablearethesuspensionofvotingorotherrightsconferredbymembership inrelationtomeetingsoftheCompanyinrespectoftherelevantSharesandadditionallyinthecaseofaShareholderrepresentingat least0.25%bynominalvalueofanyclassofSharesoftheCompanytheninissue,thewithholdingofpaymentofanydividendson,andtherestrictionoftransferof,therelevantShares.
(i) Without prejudice to any rights attaching to any existing shares, any share may beissued with such rights or restrictions as the Company may by ordinary resolutiondetermine or in the absence of such determination, as the Directorsmay determine.SubjecttotheCA2006,theCompanymay issueshares,whichare,orattheoptionoftheCompanyortheholderare,liabletoberedeemed.
(ii) The Company may by ordinary resolution increase its share capital, consolidate anddividealloranyofitssharecapitalintosharesoflargeramount,sub-divideitssharesoranyof them intosharesofsmalleramounts,orcancelor reducethenominalvalueofanyshareswhichhavenotbeentakenoragreedtobetakenbyanypersonanddiminishthe amount of its share capital by the amount so cancelled or the amount of thereduction.
VariationofRightsWheneverthecapitaloftheCompanyisdividedintodifferentclassesofshares,therightsattachedto any class may (unless otherwise provided by the terms of issue of that class) be varied orabrogated eitherwith the consent inwriting of the holders of not less than three-fourths of thenominalamountof the issuedsharesof theclassorwith the sanctionofa resolutionpassedataseparatemeetingofsuchholders.
14.1.8 DirectorsUnless anduntil otherwisedeterminedby anordinary resolutionof theCompany, thenumberofDirectors shall not be fewer than two nor more than ten. The continuing Directors may actnotwithstandinganyvacancy in theirbody,provided that if thenumberof theDirectorsbe fewerthan the prescribed minimum the remaining Director or Directors shall forthwith appoint anadditional Director or additional Directors tomake up suchminimum or shall convene a generalmeetingoftheCompanyforthepurposeofmakingsuchappointment.AnyDirectormayinwritingunderhishandappoint(a)anyotherDirector,or(b)anyotherpersonwho is approvedby theBoardashereinafterprovided, tobehisalternate.ADirectormayatanytimerevoketheappointmentofanalternateappointedbyhim.EverypersonactingasanalternateDirectoroftheCompanyshallbeanofficeroftheCompany,andshallaloneberesponsibletotheCompanyforhisownactsanddefaults,andheshallnotbedeemedtobetheagentofor for theDirectorappointinghim.Subject to theprovisionsof theStatutes (asdefined in theCompany’sarticlesofassociation), theDirectorsmayfromtimetotimeappointoneormoreoftheirbodytobemanagingdirectororjointmanaging directors of the Company or to hold such other executive office in relation to themanagementofthebusinessoftheCompanyastheymaydecide.
A Directormay continue to be or become a director or other officer, servant ormember of anycompanypromotedbytheCompanyorinwhichtheymaybeinterestedasavendor,shareholder,orotherwise,andnosuchDirectorshallbeaccountableforanyremunerationorotherbenefitsderivedasDirectororotherofficer,servantormemberofsuchcompany.The Directors may from time to time appoint a chairman of the Company (who need not be aDirectoroftheCompany)andmaydeterminehisdutiesandremunerationandtheperiodforwhichheistoholdoffice.TheDirectorsmayfromtimetotimeprovideforthemanagementandtransactionoftheaffairsoftheCompanyinanyspecifiedlocality,whetherathomeorabroad,insuchmannerastheythinkfit.
14.1.9 Directors’Interests
14.1.9.1 A Director who is in any way, directly or indirectly, interested in a transaction orarrangement with the Company shall, at a meeting of the Directors, declare, inaccordancewiththeCA2006,thenatureofhisinterest.
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14.1.9.2. Provided that he has declared his interest in accordance with paragraph 14.1.9.1, aDirectormaybeaparty toorotherwise interested inany transactionorarrangementwith the Company or in which the Company is otherwise interested and may be adirectororotherofficerorotherwiseinterestedinanybodycorporatepromotedbytheCompanyor inwhich theCompany is otherwise interested.NoDirector so interestedshallbeaccountabletotheCompany,byreasonofhisbeingaDirector,foranybenefitthathederivesfromsuchofficeorinterestoranysuchtransactionorarrangement.
14.1.9.3 ADirectorshallnotvotenorbecountedinthequorumatameetingoftheDirectorsinrespectofamatterinwhichhehasanymaterialinterestotherwisethanbyvirtueofhisinterest in shares, debentures or other securities of, or otherwise in or through theCompany,unlesshisinterestarisesonlybecausethecasefallswithinoneormoreofthefollowingparagraphs:
(c) anyproposalconcerningthesubscriptionbyhimofshares,debenturesorothersecuritiesoftheCompanyoranyofitssubsidiaryundertakingsorbyvirtueofhis participating in the underwriting or sub-underwriting of an offer of suchshares,debenturesorothersecurities;
(d) anyproposalconcerninganyothercompanyinwhichheisinterested,directlyorindirectly,whetherasanofficerorshareholderorotherwise,providedthathe and any persons connected with him do not to his knowledge hold aninterest in shares representing 1% or more of any class of the equity sharecapital of such company or of the voting rights available tomembers of therelevantcompany;
(e)(f)
anyproposal relating to an arrangement for thebenefit of the employeesofthe Company or any subsidiary undertaking which does not award to anyDirector as such any privilege or advantage not generally awarded to theemployeestowhomsucharrangementrelates;andanyarrangementforpurchasingormaintainingforanyofficerorauditoroftheCompany or any of its subsidiaries insurance against any liability which byvirtue of any rule of law would otherwise attach to him in respect of anynegligence, breach of duty or breach of trust for which hemay be guilty inrelation to the Company or any of its subsidiaries of which he is a Director,officerorauditor.
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14.1.9.4 Whenproposalsareunder consideration concerning theappointmentof twoormoreDirectors to offices or employment with the Company or any company in which theCompanyisinterestedtheproposalsmaybedividedandconsideredinrelationtoeachDirectorseparatelyand (ifnototherwiseprecluded fromvoting)eachof theDirectorsconcerned shall be entitled to vote andbe counted in thequorum in respect of eachresolutionexceptthatconcerninghisownappointment.
14.1.10 RemunerationofDirectors
14.1.10.1 TheordinaryremunerationoftheDirectorsshallbesuchamountastheDirectorsshallfromtimetotimedetermine(providedthatunlessotherwiseapprovedbytheCompanyin general meeting the aggregate ordinary remuneration of such Directors, includingfees,shallnotexceed£100,000peryear)tobedividedamongtheminsuchproportionandmannerastheDirectorsmaydetermine.SubjecttothepassingofResolution4atthe GeneralMeeting, the Articles shall be amended to provide that unless otherwiseapprovedbytheCompany ingeneralmeetingtheaggregateordinaryremunerationofsuchDirectors,includingfees,shallnotexceed£150,000peryear.
14.1.10.2 Any Director who, by request of the Directors, performs special services for anypurposes of the Company may be paid such reasonable extra remuneration as theDirectorsmaydetermine.
AttheannualgeneralmeetingoftheCompanynextfollowingtheappointmentofaDirectorheshallretire from office. A Director shall also retire from office at or before the third annual generalmeetingfollowingtheannualgeneralmeetingatwhichhelastretiredandwasre-elected.AretiringDirector shall be eligible for re-election. A Director shall be capable of being appointed or re-appointeddespitehavingattainedanyparticularageandshallnotberequiredtoretirebyreasonofhishavingattainedanyparticularage,subjecttotheprovisionsoftheCA2006.
14.1.12 BorrowingPowers
Subject as provided below, theDirectorsmay exercise all the powers of the Company to borrowmoneyandtomortgageorchargeitsundertaking,propertyanduncalledcapital.
TheCompany’sarticlespermitborrowingsofamountsupto50%oftheaggregateof(i)theamountpaidup(orcreditedaspaidup)ontheallottedorissuedsharecapitaloftheCompanyand(ii)theamount standing to the credit of the reserves, whether or not distributable, after adding ordeductinganybalancestandingtothecreditordebitoftheprofitandlossaccount,asadjustedinaccordancewiththeCompany’sarticlesofassociation.
14.1.13 DistributionofRealisedCapitalProfits
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At any time when the Company has given notice in the prescribed form (which has not beenrevoked) to the Registrar of Companies of its intention to carry on business as an investmentcompany(“aRelevantPeriod”)thedistributionoftheCompany’scapitalprofitsshallbeprohibited.The Board shall establish a reserve to be called the capital reserve. During a Relevant Period, allsurplusesarisingfromtherealisationorrevaluationofinvestmentsandallothermoniesrealisedonor derived from the realisation, payment or other dealingwith any capital asset in excess of thebookvaluethereofandallothermonieswhichareconsideredbytheBoardtobeinthenatureofaccretiontocapitalshallbecreditedtothecapitalreserve.SubjecttotheCA2006,theBoardmaydeterminewhetheranyamountreceivedbytheCompanyistobedealtwithasincomeorcapitalorpartlyonewayandpartlytheother.DuringaRelevantPeriod,anylossrealisedontherealisationorpaymentorotherdealingwithinvestments,orothercapitallosses,and,subjecttotheCA2006,anyexpenses, lossor liability (orprovision therefore)which theBoard considers to relate to a capitalitemorwhichtheBoardotherwiseconsidersappropriatetobedebitedtothecapitalreserveshallbecarriedtothedebitofthecapitalreserve.DuringaRelevantPeriod,allsumscarriedandstandingtothecreditofthecapitalreservemaybeappliedforanyofthepurposesforwhichsumsstandingtoanyrevenuereserveareapplicableexceptandprovidedthatduringaRelevantPeriodnopartofthecapitalreserveoranyothermoneyinthenatureofaccretiontocapitalshallbetransferredtotherevenuereservesoftheCompanyorberegardedortreatedasprofitsoftheCompanyavailablefordistributionorappliedinpayingdividendsonanysharesintheCompany.InperiodsotherthanaRelevantPeriod,anyamountstandingtothecreditofthecapitalreservemaybetransferredtotherevenuereservesoftheCompanyorberegardedortreatedasprofitsoftheCompanyavailablefordistributionorappliedinpayingdividendsonanysharesintheCompany.
thereafteratfiveyearlyintervals)anordinaryresolutionwillbeproposedtotheeffectthattheCompanyshallcontinueinbeing. Ifsuchresolution isnotpassedtheboardshallwithinfour months of thatmeeting convene a generalmeeting to propose either or both of thefollowing:(a) aspecialresolutionforthereorganisationorreconstructionoftheCompany;or(b) aspecialresolutiontowinduptheCompanyvoluntarily.
(ii) Onany voluntarywinding-up of theCompany, the liquidatormay,with the sanction of an
specialresolutionandanyothersanctionsrequiredbylaw,divideamongstthemembers inspecie the whole or any part of the assets of the Company in such manner as he maydetermine.
14.1.15 GeneralMeetings
TheDirectorsmay,whenever they think fit, conveneageneralmeetingof theCompany. Ifwithin
fifteenminutes (or such longer timenotexceedingonehouras thechairmanof themeetingmaydecide towait) fromthe timeappointed for themeetingaquorum isnotpresent, themeeting, ifconvened on the requisition of members, shall be dissolved and, in any other case, shall standadjournedtosuchday(beingnotlessthantencleardays)andatsuchtimeandplaceastheBoardmaydetermine. Ifatanysuchadjournedmeetingaquorumisnotpresentwithin fifteenminutesfromthetimeappointedforthemeeting,amemberpresentinpersonorbyproxyandentitledtovoteshallbeaquorum.The chairman may, with the consent of the meeting (and shall, if so directed by the meeting)
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adjournanymeetingfromtimetotimeandfromplacetoplace.Nobusinessshallbetransactedatany adjourned meeting other than the business left unfinished at the meeting from which theadjournmenttookplace.
14.2 CREST
CREST is a paperless settlement procedure enabling securities to be evidenced otherwise than by acertificate and transferred otherwise than by a written instrument. The Company’s articles ofassociationareconsistentwithCRESTmembershipandallowfortheholdingandtransferofsharesinuncertificated form subject to the Uncertificated Securities Regulations 2001. The New Shares havebeenmadeeligibleforsettlementinCREST.
15.1 Octopus intends to use the proceeds of the Offer in accordance with the Company’s objective of
spreading investment riskand inaccordancewith theCompany’s InvestmentPolicy. This InvestmentPolicyisinlinewiththeVCTRulesandtheCompanywillnotdeviatefromthem.Further,inaccordancewith theVCTRules, theCompanywill invest in ordinary shares, in some cases in a small numberofpreferenceshareswhereapplicable,andalwaysinaccordancewithsuchrules.
Three of this document. The Company has appointed PricewaterhouseCoopers of 1 EmbankmentPlace,LondonWC2N6RH(“PwC”)asitsVCTstatusmonitor.PwCwillreporttotheCompanyasapartof itsannualreportingobligations. InrespectofanybreachoftheVCTRules,theCompany,togetherwithPwC,willreportdirectlyandimmediatelytoHMRCtorectifythebreachandannouncethesameimmediatelytotheShareholdersviaaRegulatoryInformationServiceprovider.
15.4 TheCompanywillnot investmore than15%of itsgrossassets inany single company, inaccordance
15.6 TheBoardmustbeable todemonstrate that itwill act independentlyofOctopus. Amajorityof theBoard (including the Chairman)must not be directors, employees, partners, officers, or professionaladvisers of or to,Octopus or any company inOctopus’s groupor any other investment entitywhichtheymanage.
sixmonthlybasis.15.11 TheNAV of the Company’s investmentswill be determined byOctopus at least every sixmonths in
accordance with the British Venture Capital Association’s recommendations as set out in the BVCAnotesofguidance. Thevalueof investmentswillbedeterminedona fairvaluebasis. In thecaseofquotedsecurities,fairvalueisestablishedbyreferencetotheclosingbidpriceontherelevantdateorthelasttradedprice,dependingonconventionoftheexchangeonwhichtheinvestmentisquoted.Inthecaseofunquotedinvestments,fairvalueisestablishedbyusingmeasuresofvaluesuchasthepriceof recent transactions, earningsmultiple and net assets. This is consistentwith International PrivateEquity and Venture Capital valuation guidelines. The NAV of the Companywill be communicated toShareholdersviaaRegulatoryInformationServiceatthesamefrequencyasthedeterminations.
15.12 The calculation of the NAV of the Company’s investments will only be suspended in circumstances
where the underlying data necessary to value the investments of the Company cannot readily, orwithout undue expenditure, be obtained. Details of any suspension will be communicated toShareholdersthroughaRegulatoryInformationServiceprovider.
16. CORPORATEGOVERNANCE
TheUKCorporateGovernanceCodepublishedbytheFinancialReportingCouncil inSeptember2014(the “Code”) applies to the Company. The Directors acknowledge the section headed “Comply orExplain” in the preamble to the Code which acknowledges that some provisions may have lessrelevancefor investmentcompaniesand, inparticular,considersomeareas inappropriateduetothesizeandnatureofthebusinessoftheCompany.Accordingly,theprovisionsoftheCodearecompliedwithsavethat(i)theCompanydoesnothaveachiefexecutiveofficeroraseniorindependentdirector(the Board does not consider this necessary for the size of the Company), (ii) newDirectors do notreceiveafull,formalandtailoredinductiononjoiningtheBoardandsuchmattersareaddressedonanindividualbasisastheyarise(iii)theCompanyconductsaformalreviewastowhetherthereisaneedforaninternalauditfunction,howevertheDirectorsdonotconsiderthataninternalauditwouldbeanappropriatecontrolforaVCT(iv)theCompanydoesnothavearemunerationcommitteegiventhesizeoftheCompanyandassuchtheBoardasawholedealswithanymattersofthisnatureand(v)astheCompanyhasnomajorshareholders,theShareholdersarenotgiventheopportunitytomeetanynon-executiveDirectorsataspecificmeetingotherthantheannualgeneralmeeting.
17. TAKEOVERSANDMERGERS
17.1 MandatorytakeoverbidsThe City Code on Takeovers andMergers (the “Takeover Code”) applies to all takeover andmergertransactions in relation to the Company, and operates principally to ensure that shareholders aretreated fairly and are not denied an opportunity to decide on the merits of a takeover, and thatshareholders of the same class are afforded equivalent treatment. The Takeover Code provides anorderlyframeworkwithinwhichtakeoversareconductedandthePanelonTakeoversandMergers(the
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“Panel”)hasnowbeenplacedonastatutoryfooting.TheTakeoversDirectivewasimplementedintheUK in May 2006 and since 6 April 2007 has effect through the CA 2006. The Directive applies totakeovers of companies registered in an EU member state and admitted to trading on a regulatedmarketintheEUorEEA.TheTakeoverCode isbaseduponanumberofGeneralPrincipleswhichareessentiallystatementsofstandards of commercial behaviour. General PrincipleOne states that all holders of securities of anofferee company of the same classmust be afforded equivalent treatment and if a person acquirescontrolofacompanytheotherholdersofsecuritiesmustbeprotected.ThisisreinforcedbyRule9ofthe Takeover Codewhich requires a person, togetherwith persons acting in concert with him, whoacquires shares carrying voting rightswhich amount to 30% ormore of the voting rights tomake ageneraloffer. “Votingrights”forthesepurposesmeansall thevotingrightsattributabletothesharecapitalofacompanywhicharecurrentlyexercisableatageneralmeeting.Ageneralofferwillalsoberequiredwhere apersonwho, togetherwithpersons acting in concertwithhim, holdsnot less than30% but not more than 50% of the voting rights, acquires additional shares which increase hispercentage of the voting rights. Unless the Panel consents, the offer must be made to all othershareholders,beincash(orhaveacashalternative)andcannotbeconditionalonanythingotherthanthe securing of acceptances which will result in the offeror and persons acting in concert with himholdingsharescarryingmorethan50%ofthevotingrights.TherearenotinexistenceanycurrentmandatorytakeoverbidsinrelationtotheCompany.
17.2 Squeezeout
Section979of theCA2006provides that if,withincertain time limits,anoffer ismade for thesharecapitaloftheCompany,theofferorisentitledtoacquirecompulsorilyanyremainingsharesifithas,byvirtueofacceptancesoftheoffer,acquiredorunconditionallycontractedtoacquirenotlessthan90%in value of the shares towhich the offer relates and in a casewhere the shares towhich the offerrelatesarevoting shares,not less than90%of thevoting rights carriedby thoseshares. Theofferorwouldeffectthecompulsoryacquisitionbysendinganoticetooutstandingshareholderstellingthemthat itwillcompulsorilyacquiretheirsharesandthen,sixweeksfromthedateofthenotice,paytheconsiderationforthesharestotherelevantCompanytoholdontrustfortheoutstandingshareholders.TheconsiderationofferedtoshareholderswhosesharesarecompulsorilyacquiredundertheCA2006must,ingeneral,bethesameastheconsiderationavailableunderthetakeoveroffer.
Theprovisionsofdisclosureguidanceandtransparencyrule5("DGTR5")willapplytotheCompanyandits Shareholders. DGTR 5 sets out the notification requirements for Shareholders and the CompanywherethevotingrightsofaShareholderexceed,reachorfallbelowthethresholdof3%andeach1%thereafter up to 100%. DGTR 5 provides that disclosure by a Shareholder to the Companymust be
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madewithintwotradingdaysoftheeventgivingrisetothenotificationrequirementandtheCompanymust release details to a regulatory information service as soon as possible following receipt of anotificationandbynolaterthantheendofthetradingdayfollowingsuchreceipt.
AdvisedInvestors,andallchoosingtopaytheiradvisorsa2.5%upfrontfee,payablebytheCompanyisestimated to amount to approximately £1.1 million in aggregate. On the above assumptions, theaggregatetotalnetproceedsoftheOffer,afterallfees,isexpectedtobeapproximately£18.9million.TheMergerwill not result in anyproceedsbeing raisedby theCompany. The aggregate anticipatedcostsofundertakingtheMergerareapproximately£331,000.
Park South, Oxford OX4 2WB have been the auditor of the Company since its incorporation. GrantThorntonUKLLPhavegivenunqualifiedauditreportsonthestatutoryaccountsoftheCompanyforallofthefinancialyearssetoutinPartFivewithinthemeaningofSection495oftheCA2006.Noneofthose reports contained any statements under Section 237(2) or (3) of the CA 2006. The statutoryaccountssetoutinPartFivehavebeendeliveredtotheRegistrarofCompaniesinEnglandandWalespursuanttoSection242oftheCA2006.
19.4 Howard Kennedy’s office address is at 1 London Bridge, London SE1 9BG. Howard Kennedy is
regulatedbytheFinancialConductAuthorityandisactinginthecapacityasSponsortotheCompany. 19.5 HowardKennedyhasgivenandhasnotwithdrawn itswritten consent to the issueof thisdocument
whichtheyappearwiththeconsentandauthorisationofOctopus.Octopusacceptsresponsibility forthose statements and to the best of the knowledge and belief of Octopus, which has taken allreasonablecaretoensurethatsuchisthecase,thosestatementsareinaccordancewiththefactsanddonotomitanythinglikelytoaffecttheimportofsuchinformation.
contracts or new manufacturing processes which are material to the Company’s business orprofitability.
19.8 TheCompanydoesnotassumeresponsibilityforthewithholdingoftaxatsource.19.9 Therehasbeennosignificant change in the financialor tradingpositionof theCompany since31 July
19.10 Therehavebeennosignificant factors,whethergovernmental,economic, fiscal,monetaryorpolitical,including unusual or infrequent events or new developments nor any known trends, uncertainties,demands, commitments or events that are reasonably likely to have an effect on the Company’s
III:4.11
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prospects or which have materially affected the Company’s income from operations so far as theCompanyandtheDirectorsareaware.
19.12 TheCompany’scapitalresourcesarerestrictedinsofarastheymaybeusedonlyinputtingintoeffectthe Company’s investment policy, as set out in this document. There are no firm commitments inrespectofanyof theCompany’sprincipal future investments. Asat31 July2016, theCompanyhad£35.6million of uninvested cash which has been retained for working capital and follow-on or newinvestments.
19.13 All Shareholders have the same voting rights in respect of the share capital of the Company. The
19.15 Thetypical investorforwhomtheCompanyisdesignedisaUKtaxpayerover18yearsofagewithaninvestment range of between £5,000 and £200,000who, having regard to the risk factors set out atpages15to16,considerstheInvestmentPolicytobeattractive.Thismayincluderetail,institutionalandsophisticated investors and high net worth individuals who already have a portfolio of non-VCTinvestments.
19.17 Application has beenmade for the admission of theNew Shares to be listed on theOfficial List andapplicationwillbemadefortheNewSharestobeadmittedtotradingontheLondonStockExchange’smarketfor listedsecurities.TheNewShareswillbe inregisteredform. If, following issue,recipientsofNew Shareswish to hold theirNew Shares in uncertificated form they should contact the Company’sregistrar.
19.18 AllthirdpartyinformationinthisProspectushasbeenidentifiedassuchbyreferencetoitssourceandineach instancehasbeenaccurately reproducedand, so far as theCompany is awareand is able toascertain from informationpublishedby the relevantparty,no factshavebeenomittedwhichwouldrenderthereproducedinformationinaccurateormisleading.
19.19 Octopus will provide safe custody to the Company in respect of the un-invested cash, general
investmentanddealingservicesonadiscretionarybasisandotherrelatedfacilitieswhichmayincludethe following investments: shares in investee companies, debenture stock, loan stock, bonds, units,notes, certificates of deposit, commercial paper or other debt instruments,municipal and corporateissues, depository receipts, cash term deposits, moneymarket securities, unit trusts, mutual funds,OEICs, investment funds and similar funds and schemes in theUnitedKingdomor elsewhere. Theseservicesexcludeanytransactioninrelationtofuturesandoptionsorotherderivativetypeinstrumentsorcommodity(orderivativethereof)byOctopus.
19.23 The Company, the Directors and the Proposed Director consent to the use of the Prospectus, and
accept responsibility for the content of the Prospectus, with respect to subsequent resale or finalplacementofsecuritiesby financial intermediaries, fromthedateof theProspectusuntil thecloseofthe Offer. The Offer is expected to close on or before 3 November 2017. There are no conditionsattachingtothisconsent.FinancialintermediariesmayusetheProspectusonlyintheUK.
19.24 Information on the terms and conditions of the Offer will be given to investors by financial
intermediariesatthetimethattheOfferisintroducedtoinvestors.Anyfinancialintermediaryusingthe Prospectus must state on its website that it is using the Prospectus in accordance with theconsentsetoutinparagraph19.23above.
20. DOCUMENTSAVAILABLEFORINSPECTION
Copiesofthefollowingdocumentswillbeavailableforinspectionduringnormalbusinesshoursonanyweekday (Saturdays and public holidays excepted) at the registered offices of the Company andHowardKennedywhilsttheOfferremainsopen:
“KnowledgeIntensiveCompany” acompanysatisfyingtheconditionsinSection331(A)ofPart6ITA2007of the proposed draft legislation. These rules are subject to RoyalAssent.
“OfferAgreement” the offer agreement dated 4 November 2016 between the Company,theDirectors, theManagerandHowardKennedy,detailsofwhicharesetoutinPartSeven
‘‘Scheme’’or“Merger” theproposedmergeroftheCompanywithEclipsebymeansofplacingEclipse intomembers’voluntary liquidationpursuant toSection110ofIA 1986 and the acquisition by the Company of all of the assets andliabilitiesof Eclipse in consideration for SchemeShares, furtherdetailsofwhicharesetoutinPartOneofthisdocument
“venturecapitaltrust”or“VCTs” a companywhich is, for the timebeing,approvedasaventurecapitaltrustunderSection259oftheITA2007
“VCTRules” Part 6 ITA 2007 and every other statute (including any orders,regulationsorother subordinate legislationmadeunder them) for thetimebeinginforceconcerningVCTs
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TERMSANDCONDITIONSThe followingtermsandconditionsapply to theOffer.Thesectionheaded“ApplicationProcedure”assetoutbelowalsoformspartofthesetermsandconditionsofApplication.1. Themaximumamount tobe raisedby theCompany is£20million.TheOffer is conditionalupon the
passing by Shareholders of Resolution 2 at the GeneralMeeting. The Offer will close earlier if fullysubscribed.TheBoardreservestherighttoclosetheOfferearlierandtoacceptApplicationsandissueOfferSharesatanytimefollowingthereceiptofvalidapplications.
undertheOfferwillbeconditionalonacceptancebeinggivenbytheReceivingAgentsandadmissionoftheOffer Shares allotted in the Company subject to theOffer to theOfficial List (save as otherwiseresolvedbytheBoard).
and to retain share certificates and Application monies pending clearance of successful Applicants’chequesandbankers’drafts.TheCompanymaytreatApplicationsasvalidandbindingevenifnotmadeinall respects inaccordancewiththeprescribed instructionsandtheCompanymay,at itsdiscretion,acceptanApplicationinrespectofwhichpaymentisnotreceivedbytheCompany.IfanyApplicationisnot accepted in full or if any contract created by acceptance does not become unconditional, theApplicationmoniesor,asthecasemaybe,thebalancethereof(savewheretheamountislessthantheOfferPriceofoneSharewillbedonatedtocharity)willbereturned(withoutinterest)byreturningeachrelevantApplicant’schequeorbanker’sdraftorbycrossedchequeinfavouroftheApplicant,throughthe post at the risk of the person(s) entitled thereto. In the meantime, Application monies will beretainedbytheReceivingAgentsinaseparateaccount.
I. irrevocablyoffertosubscribeforOfferSharesintheCompanyundertheOfferinthemonetaryamountspecifiedinyourApplicationForm(orsuchlesseramountforwhichyourApplicationisaccepted),whichshallbeusedtopurchasetheOfferSharesattheOfferPrice,determinedbydividingthemostrecentlyannouncedNAVperOrdinaryShareoftheCompanyby0.945toallowforissuecosts,onthetermsofand subject to this document and subject to the memorandum and articles of association of theCompany.WheretheSharepricefortheCompanyhasbeendeclaredex-dividendontheLondonStockExchange,theNAVusedforpricingundertheOfferwillbeex-dividend.InrespectoftheOffer,theNAVperSharewillberoundeduptoonedecimalplaceandthenumberofOfferSharestobeissuedwillberoundeddowntothenearestwholenumber(fractionalOfferShareswillnotbeallotted);
II. agree that your Applicationmay not be revoked and that this paragraph shall constitute a collateralcontractbetweenyouandtheCompanywhichwillbecomebindingupondespatchbypostto,or(inthecaseofdeliverybyhand)onreceiptby,theReceivingAgentsofyourApplicationForm;
III. agreeandwarrantthatyourchequeorbanker’sdraftmaybepresentedforpaymentonreceiptandwillbehonouredon first presentation andagree that if it is not sohonoured youwill notbeentitled toreceive certificates in respect of theOffer Shares allotted to you until youmake payment in clearedfunds for suchOffer Sharesand suchpayment is acceptedby theCompany in its absolutediscretion(whichacceptanceshallbeonthebasisthatyouindemnifyitandtheReceivingAgentsagainstallcosts,damages, losses, expenses and liabilities arising out of or in connection with the failure of yourremittance to be honoured on first presentation) and you agree that, at any time prior to theunconditionalacceptancebytheCompanyofsuchlatepayment,theCompanymay(withoutprejudiceto theirother rights) rescind theagreement to subscribesuchOfferSharesandmay issuesuchOfferSharestosomeotherperson,inwhichcaseyouwillnotbeentitledtoanypaymentinrespectofsuchOffer Shares, other than the refund to you, at your risk, of the proceeds (if any) of the cheque orbanker’sdraftaccompanyingyourApplication,withoutinterest;
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IV. agreethat, inrespectofthoseOfferSharesforwhichyourApplicationisreceivedandisnotrejected,yourApplicationmaybeacceptedattheelectionoftheCompanyeitherbynotificationtotheLondonStockExchangeofthebasisofallocationandallotment,orbynotificationofacceptancethereoftotheReceivingAgents;
V. agree that anymonies refundable to you by the Companymay be retained by the Receiving Agentspendingclearanceofyourremittanceandanyverificationofidentitywhichis,orwhichtheCompanyorthe Receiving Agents may consider to be, required for the purposes of the Money LaunderingRegulations2007andthatsuchmonieswillnotbearinterest;
VI. authorisetheReceivingAgentstosendsharecertificates inrespectofthenumberofOfferSharesforwhichyourApplicationisacceptedand/oracrossedchequeforanymoniesreturnable,bypost,withoutinterest,toyouraddresssetoutintheApplicationFormandtoprocurethatyournameisplacedontheregisterofmembersoftheCompanyinrespectofsuchNewShares;
VII. agree that all Applications, acceptances of Applications and contracts resulting therefrom shall begovernedinaccordancewithEnglish law,andthatyousubmittothejurisdictionoftheEnglishcourtsand agree that nothing shall limit the right of the Company or Octopus to bring any action, suit orproceedingarisingoutof,orinconnectionwithanysuchApplications,acceptancesofApplicationsandcontractsinanyothermannerpermittedbylaworanycourtofcompetentjurisdiction;
VIII. confirmthat, inmakingsuchApplication,youarenot relyingonany informationor representation inrelation to theCompanyother than the informationcontained in thisdocumentandaccordingly youagreethatnopersonresponsiblesolelyorjointlyforthisdocument,thecovercorrespondenceoranypart thereof or involved in the preparation thereof shall have any liability for such information orrepresentation(saveforfraudulentmisrepresentationorwilfuldeceit);
IX. irrevocablyauthorisetheReceivingAgentstodoallthingsnecessarytoeffectregistrationofanyOfferSharessubscribedbyorissuedtoyouintoyournameandauthoriseanyrepresentativeoftheReceivingAgentstoexecuteanydocumentrequiredtherefore;
XI. confirmthatyouhavereviewedtherestrictionscontainedinparagraph6belowandwarrantthatyouare not a “US Person” as defined in the United States Securities Act of 1933 (“Securities Act”) (asamended),noraresidentofCanadaandthatyouarenotapplyingforanyShareswithaviewtotheiroffer,saleordeliverytoorforthebenefitofanyUSPersonoraresidentofCanada;
XII. declarethatyouareanindividualaged18orover;
XIII. agree thatalldocumentsandchequessentbypost to,byoronbehalfofeither theCompanyor the
XIV. agree, on request by the Company or Octopus, to disclose promptly in writing to Octopus, anyinformation which Octopus may reasonably request in connection with your Application including,without limitation,satisfactoryevidenceof identity toensurecompliancewiththeMoneyLaunderingRegulations and authorise the Company or Octopus to disclose any information relating to yourApplicationastheCompanyorOctopusconsiderappropriate;
XV. agree thatOctopuswillnot treatyouas itscustomerbyvirtueofyourApplicationbeingacceptedoroweyouanydutiesorresponsibilitiesconcerningthepriceoftheOfferSharessubjecttotheOfferorthesuitabilityforyouofaninvestmentinOfferSharessubjecttotheOfferorberesponsibletoyouforprovidingtheprotectionsaffordedtoitscustomers;
XVI. whereapplicable,authorisetheCompanytomakeonyourbehalfanyclaimtorelieffromincometaxinrespectofanydividendspaidbytheCompany;
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XVII. declarethattheApplicationFormhasbeencompletedtothebestofyourknowledge;
XVIII. undertake that you will notify the Company if you are not or cease to be either a VCT qualifying
subscriberorbeneficiallyentitledtotheOfferShares;
XIX. declarethata loanhasnotbeenmadetoyouoranyassociate,whichwouldnothavebeenmadeorwouldnothavebeenmadeonthesameterms,butforyouofferingtosubscribefor,oracquiring,OfferShares under the Offer and that such Offer Shares are being acquired for bona fide commercialpurposesandnotaspartofaschemeorarrangement,themainpurposeofwhichistheavoidanceoftax;and
XX. agree that information provided on the Application Form may be provided to the registrars andReceivingAgentstoprocessshareholdingsdetailsandsendnotificationstoyou.
territoryotherthantheUK,maytreatthesameasconstitutinganinvitationoroffertohim,norshouldhe inanyeventusesuchApplicationFormunless, intherelevantterritory,suchan invitationoroffercouldlawfullybemadetohimorsuchApplicationFormcouldlawfullybeusedwithoutcontraventionofanyregulationsorotherlegalrequirements.ItistheresponsibilityofanypersonoutsidetheUKwishingtomakeanApplicationtosatisfyhimselfasto fullobservanceof the lawsofanyrelevantterritory inconnectiontherewith,includingobtaininganyrequisitegovernmentalorotherconsents,observinganyotherformalitiesrequiringtobeobservedinsuchterritoryandpayinganyissue,transferorothertaxesrequiredtobepaidbysuchterritory.
6. TheOffer Shares have not been andwill not be registered under theUnited States SecuritiesAct of
1933, as amended, andmaynotbeofferedor sold in theUnited StatesofAmerica, its territoriesorpossessionsorotherareassubjecttoitsjurisdiction(the“USA”).Inaddition,theOfferShareshavenotbeenandwillnotberegisteredundertheUnitedStatesInvestmentCompanyActof1940,asamended.OctopuswillnotberegisteredundertheUnitedStatesInvestmentAdvisersActof1940,asamended.NoApplicationwillbeacceptedifitbearsanaddressintheUSA.
7. Thebasisof allocationwill bedeterminedby theCompany (after consultationwithOctopus) in their
absolute discretion. The right is reserved by the Board to reject inwhole or in part and scale downand/orballotanyApplicationoranypartthereofincluding,withoutlimitation,Applicationsinrespectofwhich any verification of identity which the Company or Octopus considermay be required for thepurposesof theMoneyLaunderingRegulationshasnotbeensatisfactorily supplied.Dealingsprior tothe issue of certificates for Offer Shares will be at the risk of Applicants. A person so dealingmustrecognisetheriskthatanApplicationmaynothavebeenacceptedtotheextentanticipatedoratall.
Under the Money Laundering Regulations, Octopus is required to check the identity of clients whoinvest over £10,000 or who invest using third party cheques. Octopus may therefore undertake anelectronic search for thepurposesof verifyingyour identity.Todo soOctopusmaycheck thedetailsyou supply against your particulars on any database (public or other) to which Octopus has access.Octopusmayalsouseyourdetails inthefuturetoassistothercompaniesforverificationpurposes.Arecord of this searchwill be retained. IfOctopus cannot verify your identity itmay ask for a recent,originalutilitybillandanoriginalHMRCTaxNotificationoracopyofyourpassportcertifiedbyabank,solicitororaccountantfromyouoraClientVerificationCertificatefromyourIFA.
Yourchequeorbankers’draftmustbedrawninsterlingonanaccountatabranch(whichmustbeintheUnitedKingdom,theChannelIslandsortheIsleofMan)ofabankwhichiseitheramemberoftheChequeandCreditClearingCompanyLimitedortheCHAPSClearingCompanyLimited,amemberoftheScottish Clearing Banks Committee or the Belfast Clearing Committee or which has arranged for itscheques or bankers’ drafts to be cleared through facilities provided for bymembers of any of thosecompaniesorassociationsandmustbeartheappropriatesortingcodeinthetoprighthandcorner.TherightisreservedtorejectanyApplicationForminrespectofwhichthechequeorbankers’drafthasnotbeenclearedonfirstpresentation.
9. CostsoftheOffer
Forallinvestors,theOfferPriceperSharewillbedeterminedbyaformulareflectingtheNAVperShareadjustedforanallowanceforthemajorityofthecostsoftheOffer.Theformula is:themostrecentlyannounced NAV per Share, divided by 0.945. Investors who are existing, or who were previously,shareholdersofanyOctopusVCTwillbenefitfromthecostsoftheOfferbeingreducedby0.5%.
InconsiderationforthepromotionandinvestmentmanagementservicesthatOctopusprovidestotheCompany, the Company will pay an initial charge of 3% of the gross sums invested in the Offer toOctopus.ThisispayableinthesamewayonallsubscriptionstotheOffer.FromthissumOctopuswilldischargeallexternalcostsofadviceandtheirowncostsinrespectoftheOffer.Inaddition,therearethenfourcategoriesofoptions,whicharedeterminedbythecircumstancesofeachinvestorandtheirexplicit instructions, inrespectofwhichpaymentscanbemadetoadvisersandother intermediaries.Theseareasfollows:
1) Adirectinvestment
Investors who have not invested their money through a financial intermediary/adviser andhaveinvesteddirectlyintotheCompany.In consideration for the promotion, investment management and secretarial services thatOctopus provides to the Company, if an application is made directly (not through anintermediary) then theCompanywill payOctopusanadditional initial chargeof 2.5%of theinvestment amount and an additional annual ongoing charge of 0.5% of the investmentamount’slatestNAVforuptonineyears,providedtheinvestorcontinuestoholdtheShares.
Investorswho have invested in theOffer through a financial intermediary/adviser and havereceivedupfrontadviceandwillreceiveongoingadvice.
TheCompanycanfacilitateapaymentonbehalfofaninvestortoanintermediary/adviser(an‘initialadvisercharge’)ofupto2.5%oftheinvestmentamount.Iftheinvestorhasagreedwithhis/her intermediary/adviser to pay a lower initial adviser charge, the balance (up to amaximumof2.5%)will beused for the issueandallotmentofOffer Shares for the investor,issuedat themost recentlyannouncedNAVperShare,dividedby0.945asdescribed inPartTwo.
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TheCompanycanalsofacilitateannualpaymentstoanintermediary/adviser(‘ongoingadvisercharges’) inrespectofongoingadvisoryservicesprovidedbythe intermediary/adviser totheinvestorofupto0.5%perannumoftheinvestmentamount’slatestNAVforuptonineyearswhilst the investor continues to hold the Offer Shares. If the investor chooses to pay theiradviserlessthan0.5%annually,theremainingamountwillbeusedfortheissueandallotmentof additional Offer Shares for the investor, at the then most recently announced NAV perShare.AnyresidualamountlessthanthecostofanOfferSharewillbedonatedtocharity.
If the investor terminates their relationshipwith the intermediary/adviser thentheCompanywillnotmakeanyfurtherpaymentsofongoingadviserchargestothatintermediary/adviser.
Investorswho have invested in theOffer through a financial intermediary/adviser and havereceivedupfrontadviceincludinginvestorswhoareinvestingthroughintermediaries/advisersusingfinancialplatforms.
Whereaninvestoragreedtoanupfrontfeeonly,theCompanycanfacilitateapaymentofaninitialadviserchargeofupto4.5%of the investmentamount. If the investorchoosestopaytheirintermediary/adviserlessthanthemaximuminitialadvisercharge,theremainingamountwillbeused for the issueandallotmentofadditionalOfferShares for the investor, issuedatthemost recently announcedNAVper Share, divided by0.945 as described above. In thesecircumstancestheCompanywillnotfacilitateongoingannualpayments.
In both cases (2) or (3), should the investor choose to pay the adviser more than 2.5% or 4.5%respectively,theexcessamountwillhavetobesettledbytheinvestordirectlywiththeadviser.
4) Anon-advisedinvestmentusinganintermediary
Investors who have invested their money through a financial intermediary and have notreceivedadvice.
An initial commission of 2.5% of the investment will be paid by the Company to theintermediary.Anannualongoingchargeof0.5%oftheinvestmentamount’slatestNAVwillbepaid by the Company to the intermediary. Such commissionwill be available for up to nineyears provided that the intermediary continues to act for the investor and the investorcontinuestobethebeneficialowneroftheOfferShares.
Thesechargesmay,accordingtotheproportionofAdvised Investorswhereadvice is receivedforanupfront fee only, create some limited reduction of the NAV per Share immediately subsequent tosubscriptions in theOfferbeingmade. This effectwill bemitigatedand is ultimately expected tobemorethancompensated,forcontinuinginvestors,bytheexpectedbenefitsderivedfromalargerpoolof investablefundsandthefinancialbenefit insubsequentperiodsoftheabsenceofongoingadviserchargesinrespectofsuchinvestments.
The reinvestment arrangements relating to ongoing adviser charges which are described abovewillonlyoperateforsolongasaninvestorremainstheholderoftheOfferShares.Anypurchaserofthoseshareswillnotbenefit fromthereinvestmentarrangementssetoutaboveirrespectiveoftheadviserchargeswhichtheyhaveagreedwiththeiradviser.ThisthereforemeansthatanypurchaserofOffer
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Shares will not benefit from the issue or allotment of any additional Offer Shares under thearrangementssetoutabove.
On the assumption that an investor does not receive any advice in respect of their Application, anillustrationofthepricingformulaforanaggregateinvestmentof£10,000undertheOffer(usingthemost recentlypublishedunauditedNAVof theCompanyasat thedateof thisdocument) is setoutbelow:
TheOfferPricemayvarybetweenallotmentsbasedon themovement in thepublishedNAVof theShares.ThecostoftheOfferiscappedat7.5%.OctopushasagreedtoindemnifytheCompanyagainstthecostsoftheOfferinexcessofthisamount.
1. Elections to participate in the DRIS should be addressed to the DRIS Administrator, Capita AssetServices (“DRIS Administrator”) in accordance with condition 11 and will only be effective fordividendstobepaid15daysfollowingreceiptoftheelectionbytheDRISAdministrator.
2. (a) TheCompany,actingthroughtheDRISAdministrator,shallhaveabsolutediscretiontoacceptorrejectelections.AnapplicantshallbecomeamemberoftheDRISuponacceptanceofhisorherelection by the DRIS Administrator on the Company’s behalf (“Participants”). The DRISAdministrator will provide written notification if an election is rejected. Only registeredshareholdersoftheCompany(“Shareholders”)mayjointheDRIS.
(b) The Company shall apply dividends to be paid to Participants on ordinary shares of 10p each(“Shares”) in theCompany in respect ofwhich an electionhas beenmade in the allotment offurther Shares. TheDRISAdministrator shall nothave thediscretion, andParticipantsmaynotinstruct the DRIS Administrator, to apply those dividends (“funds”) towards any investmentsotherthaninvestmentinSharesassetoutinthiscondition2(b).
(d) By joiningtheDRIS,Participants instruct theDRISAdministrator that themandatewillapply tothefullnumberofSharesheldbytheminrespectofwhichtheelectionismade,asenteredontotheshareregisteroftheCompanyfromtimetotime.
3. (a) OnorassoonaspracticableafteradayonwhichadividendontheSharesisduetobepaidtoaParticipantor, if suchday is not adealingdayon the LondonStockExchange, thedealingdaythereafter (“Payment Date”), the Participant’s funds held by the Company shall, subject toconditions9,10and19overleafandtheCompanyhavingtherequisiteshareholderauthoritiestoallotShares,beappliedonbehalfof thatParticipant to subscribe for themaximumnumberofwholenewShareswhichcanbeallottedwiththefunds.
(b) ThenumberofShares tobeallotted toaParticipantpursuant tocondition3(a)aboveshallbecalculated by dividing the Participant’s funds by the greater of (i) the last published net assetvalueperexistingShareor (ii) themidmarketpriceper Shareasquotedon the LondonStockExchangeat thecloseofbusinesson the10thbusinessdaypreceding thedateof issueof suchShares.Shareswillnotbeallottedatlessthantheirnominalvalue.
(d) The Company shall not be obliged to allot Shares under the DRIS to the extent that the totalnumber of Shares allotted by the Company pursuant to the DRIS in any financial year wouldexceed10%oftheaggregatenumberofSharesonthefirstdayofsuchfinancialyear.
ListandtotradingonthepremiumsegmentofthemainmarketoftheLondonStockExchange,providedthat,atthetimeofsuchsubscription,theexistingSharesinissuearesoadmittedtotheOfficial List and to trading on the premium segment of themainmarket of the London StockExchange.
4. TheDRISAdministratorshallassoonaspracticableaftertheallotmentofShares inaccordancewithcondition3procure (i) that theParticipantsareenteredontotheShareRegisterof theCompanyasthe registered holders of those Shares (ii) that share certificates (unless such Shares are to beuncertified)and,whereapplicable, incometaxvouchers(“TaxVouchers”)aresenttoParticipantsattheirownriskand(iii)thatParticipantsreceiveastatementdetailing:
6. Each Participant warrants to the DRIS Administrator that all information set out in the applicationformonwhichtheelectiontoparticipateintheDRISiscontainediscorrectandtotheextentanyoftheinformationchangesheorshewillnotifythechangestotheDRISAdministratorandthatduringthe continuanceofhisorherparticipation in theDRISheor shewill complywith theprovisionsofcondition7below.
7. The right toparticipate in theDRISwill notbeavailable to anypersonwho is a citizen, residentornationalof,orwhohasaregisteredaddressin,anyjurisdictionoutsidetheUKunlesssuchrightcouldproperlybemadeavailabletosuchperson.NosuchpersonreceivingacopyoftheDRISdocumentsmaytreatthemasofferingsucharightunlessanoffercouldproperlybemadetosuchperson.It isthe responsibilityofanyShareholderwishing toparticipate in theDRIS tobe satisfiedas to the fullobservanceofthelawsoftherelevantjurisdiction(s)inconnectiontherewith,includingobtaininganygovernmentalorotherconsentswhichmayberequiredandobservinganyotherformalitiesneedingtobeobservedinanysuchjurisdiction(s).
8. Participants acknowledge that theDRIS Administrator is not providing a discretionarymanagementservice.NeithertheDRISAdministratornortheCompanyshallberesponsibleforanylossordamageto Participants as a result of their participation in the DRIS unless due to the negligence or wilfuldefaultoftheDRISAdministratorortheCompanyortheirrespectiveemployeesandagents.
9. Participantsmay:
(a) at any time by notice to the DRIS Administrator terminate their participation in the DRIS andwithdrawanyfundsheldbytheCompanyontheirbehalf;and
Such notices shall not be effective in respect of the next forthcoming Payment Date unless it isreceivedbytheDRISAdministratoratleast15dayspriortosuchPaymentDate.Inrespectofnoticesunder(a)above,suchnoticewillbedeemedtohavebeenservedwheretheParticipantceasestoholdanyShares.Uponreceiptofnoticeoftermination,allfundsheldbytheCompanyontheParticipant’sbehalf shallbe returned to theParticipantas soonas reasonablypractical at theaddress setout in
ParticipantswhowishtoparticipateintheDRISandwhoalreadyhaveSharesissuedtothemheldincertificatedform,i.e.notinCREST,shouldcompleteandsignaMandateFormandreturnitnolaterthan15dayspriortothedividendpaymentdatetoCapitaAssetServices,TheRegistry,34BeckenhamRoad,Beckenham,KentBR34TU. PersonalisedMandate Forms canbeobtained fromCapitaAssetServices at the address above or by telephoning +44 (0) 371 664 0324. Calls are charged at thestandardgeographicrateandwillvarybyprovider.CallsoutsidetheUnitedKingdomwillbechargedattheapplicableinternationalrate.CapitaAssetServicesareopenbetween9am–5.30pm,MondaytoFridayexcludingpublicholidaysinEnglandandWales.
ParticipantswhowishtoparticipateintheDRISandwhoalreadyhaveSharesissuedtothemheldinuncertificatedforminCREST(andwereinuncertificatedformasattherelevantrecorddate),canonlyelecttoreceiveadividendintheformofnewSharesbymeansoftheCRESTproceduretoeffectsuchanelection. NoothermethodofelectionwillbepermittedundertheDRISandwillberejected. Bydoingso,suchShareholdersconfirmtheirelectiontoparticipateintheDRISandtheiracceptanceoftheDRIS terms and conditions. If a Participant is a CREST sponsoredmember, they should consulttheirCRESTsponsor,whowillbeabletotakeappropriateactionontheirbehalf. AllelectionsmadeviatheCRESTsystemshouldbesubmittedusingtheDividendElection InputMessage inaccordancewiththeproceduresasstatedintheCRESTReferenceManual.TheDividendElectionInputMessagesubmittedmustcontain thenumberofSharesonwhich theelection isbeingmade. If the relevantfield is left blank or completed with zero, the election will be rejected. If a Participant enters anumber of Shares greater than the holder in CREST on the relevant record date for dividend thesystemwillautomaticallyamendthenumberdowntotherecorddateholding. When inputtingtheelection, a ‘singledrip’ election shouldbe selected (theCorporationActionNumber for this canbefoundontheCRESTGUI).Evergreenelectionswillnotbepermitted.ParticipantswhowishtoreceivenewShares insteadofcash inrespectof futuredividends,mustcompleteaDividendElectionInputMessageoneachoccasionotherwisetheywillreceivethedividendincash.ElectionsviaCRESTshouldbereceivedbyCRESTnolaterthan5.00pmonsuchdatethatisatleast15daysbeforethedividendpaymentdate for therelevantdividend inrespectofwhichyouwishtomakeanelection. OnceanelectionismadeusingtheCRESTDividendElectionInputMessageitcannotbeamended.Therefore,if a CREST Shareholder wishes to change their election, the previous election would have to becancelled.
15. Elections by individuals for Shares should attract applicable VCT tax reliefs (depending on theparticularcircumstancesofan individual) forthetaxyear inwhichtheSharesareallottedprovidedthattheissueofSharesundertheDRIS iswithintheinvestor’sannual£200,000limit. Participantsandbeneficialownersareresponsibleforascertainingtheirowntaxstatusandliabilitiesandneitherthe DRIS Administrator nor the Company accepts any liability in the event that tax reliefs are notobtained.Beneficialownersofsharesheldthroughnomineesshouldobtaintaxadvice inrelationtotheirownparticularcircumstances. TheTaxVouchercanbeused toclaimany relevant incometaxrelief either by obtaining from the HM Revenue& Customs an adjustment to the Participant’s taxcodingunderthePAYEsystemorbywaitinguntiltheendoftheyearandusingtheSelfAssessmentTaxReturn.
16. The Company will subject to conditions 9, 10 and 19, issue Shares in respect of the whole of anydividend payable (for the avoidance of doubt irrespective of whether the amount of allotment isgreaterthananymaximumlimitsimposedfromtimetotimetobeabletobenefitfromanyapplicableVCTtaxreliefs)unlesstheDRISAdministratorhasbeennotifiedtothecontraryinwritingatleast15daysbeforeaPaymentDate.
(b) forged or fraudulent instructions and will be entitled to assume that instructions receivedpurportingtobefromanShareholder(or,whererelevant,anominee)aregenuine;or
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(c) losses,costs,damagesorexpensessustainedorincurredbyanShareholder(or,whererelevant,anominee)byreasonofindustrialactionoranycausebeyondthecontroloftheCompanyortheDRIS Administrator, including (without limitation) any failure, interruption or delay inperformanceoftheobligationspursuanttotheseDRISTermsandConditionsresultingfromthebreakdown,failureormalfunctionofanytelecommunicationsorcomputerserviceorelectronicpaymentsystemorCREST;or
(d) anyindirectorconsequentialloss.
21. TheseDRIS Terms andConditions are for thebenefit of a Participant only and shall not confer anybenefitson,orbeenforceableby,athirdpartyandtherightsand/orbenefitsathirdpartymayhavepursuanttotheContracts(RightsofThirdParties)Act1999areexcludedtothefullestpossibleextent.
23. TheseDRISTermsandConditionsshallbegovernedby,andconstruedinaccordancewith,Englishlawand each Participant submits to the jurisdiction of the English courts and agrees that nothing shalllimittherightoftheCompanytobringanyaction,suitorproceedingarisingoutoforinconnectionwiththeDRISinanyothermannerpermittedbylaworinanycourtofcompetentjurisdiction.
If you wish to participate in the dividend reinvestment scheme (the “Scheme”) in respect of yourholdingofSharesinOctopusApolloVCTplc,pleasesignandreturnthisformto,CapitaAssetServices(“Capita”or “theSchemeAdministrator”), TheRegistry,34BeckenhamRoad,Beckenham,KentBR34TUnolaterthan15BusinessDaysbeforethepaymentofadividendbytheCompany.Allenquiriesconcerning this form should be made to Capita Asset Services, New Issues, The Registry, 34Beckenham Road, Beckenham, Kent BR3 4TU or by telephoning +44 (0) 371 664 0324. Calls arechargedatthestandardgeographicrateandwillvarybyprovider.CallsoutsidetheUnitedKingdomwillbechargedattheapplicable internationalrate. CapitaAssetServicesareopenbetween9am–5.30pm,MondaytoFridayexcludingpublicholidaysinEnglandandWales.If your Shares are held in more than one account you must complete a separate form for eachaccount.YoumayobtainfurthercopiesofthisformfromtheSchemeAdministrator.If youdecide toparticipate in the Schemeyouwill bedeemed tohaveagreed that anymandatewhichyouhavegiven for thepaymentofcashdividendsdirectly toyourBankorBuildingSocietyaccountshallbesuspendedforsolongasyouremainaparticipantintheScheme.Shareholders in any doubt about the tax position should consult their independent professionaladviser.Inthecaseofjointholdersallholdersmustsign.Inthecaseofacorporation/nomineecompanythisform must be executed under its common seal or be signed by a duly authorised official, whosecapacityshouldbestatedinaccordancewithSection44oftheCompaniesAct2006.IfthisformisnotcompletedtothesatisfactionoftheDRISAdministratoritwillnotbeprocessedandwillbereturnedtoyouforcompletion.YoucanalsoregistertoreinvestdividendsinOctopusApolloVCTplcbycallingOctopuson08003162295whowillbehappytosendyouanApplicationForm,bywritingtorequestacopyfromOctopusInvestments Limited, 33 Holborn, London, EC1N 2HT or by visiting the Investor/Document LibrarysectionoftheOctopuswebsiteat:www.octopusinvestments.comYouwillneedtosendyourdividendreinvestmentinstructionstoCapitaat least15dayspriortothedividendpaymentdatetobeabletoparticipateandreinvestyourdividendonthedividendpaymentdate.You can revoke a dividend reinvestment election inOctopusApollo VCT plc by contacting theDRISAdministrator.
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To:theDRISAdministratorandtheCompanyI/We,theundersigned,confirmthatI/wehavereadandunderstoodthetermsandconditionsoftheDRIS and that I/wewish to participate in that DRIS for each future dividend paid on the Shares ofOctopusApolloVCTplcindicatedbelowandtowhichtheschemeisapplied.I/WeagreethatfuturedividendspaidonShareswillbereinvestedinShares.TickHeretoreinvestOctopusApolloVCTplc
How to complete this application formPlease make sure you answer all the questions marked with an ‘*’.Leave boxes blank where they don’t apply to you.Please remember to send us your payment.Once completed please send to:
Octopus Investments Limited PO Box 10847 Chelmsford CM99 2BU
1234
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09Before completing this Offer Application Form, you should read the prospectus dated 4 November 2016, which includes the Terms and Conditions of the Offer. The Offer will close at 12 noon on 3 November 2017 unless closed earlier.
Please note that HM Revenue & Customs (HMRC) places restrictions on buying and selling VCT shares in the same VCT within a six-month period. This means that if you have sold, or will sell, existing shares in Octopus Apollo VCT or Octopus Eclipse VCT within the six months before or after this investment, you will not be able to claim any upfront tax relief.
Section 1 – About the investor* Title
(Mr/Mrs/Miss/Ms/Other)
* First name(s)
* Last name
* Are you an existing Octopus client? Yes No
* Country of birth
* Country(ies) of citizenship
* Date of birthDD MM YYYY
* National Insurance number
* Telephone numbers Country code Telephone number
Primary:
Secondary:
* Email address
* Address line 1
Address line 2
* Town/City
County
* Country
* Postcode * Information from
Octopus Octopus may occasionally send you information that we believe to be of interest to you, e.g. newsletters. If you would not like to receive such information, please tick the box.
The printing and postage costs of sending out the Octopus Apollo VCT annual and interim reports are paid for by the VCT itself. Therefore, to reduce waste and help to cut costs, we will default to sending these to you electronically via the email address provided above. Please tick the box if you would prefer to receive these by post. You can update your preference at any time by calling us on 0800 316 2295.
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Section 2 – About the investment* How much are
you investing?You can choose to invest in the current tax year (2016/17), the next tax year (2017/18), or both. Please indicate the amount(s) in the relevant box(es). The minimum investment is £5,000 and the maximum investment still qualifying for tax relief is £200,000 in each of these tax years.
2016/17 £ 2017/18 £
If your investment is for the following tax year, we will hold your investment in cash until that time.
* Payment Options Cheque/banker’s draftPlease enclose a cheque from your personal account, made payable to ‘Octopus Apollo VCT – Applications’. We do not accept cheques from business accounts, third parties (including your spouse) or post-dated cheques. Banker’s drafts and building society cheques must specifically mention the investor’s name.
Bank transfer Please transfer your funds to the following account after first sending in your completed application form, making sure that you reference the payment with your surname and initials:
Payments need to come from your personal account. (We do not accept payments from business accounts or third parties, including your spouse.)
Section 3 – Dividend reinvestment or payment* Dividend reinvestment
or payment? Any dividends paid by the VCT can be reinvested in additional VCT shares, or received as cash payments into your bank account. Please select your preferred option. If you select the dividend payment option, please complete the bank details section as well.
(You must select one of the two options)
Reinvest dividends
By completing this section, you confirm that you’ve read and understood the Terms and Conditions of the Dividend Reinvestment Scheme as set out in Annex 1 of the prospectus or in the circular.
Please note that reinvesting dividends counts towards your £200,000 annual VCT allowance – the amount on which you can claim tax relief each year.
Pay out dividends
Please provide details of the bank account you would like future dividends to be paid into (bank account must be in your name).Sort code
Account number
Account holder name
If you are an existing Octopus Apollo VCT or Octopus Eclipse VCT shareholder, your instruction to reinvest or pay out dividends here overrides any previous dividend instructions you have given us on your existing Octopus Apollo or Eclipse VCT investments.
If you are a direct investor, please go straight to Section 5.1.
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Section 4 – Adviser/intermediary details (to be completed by your adviser/intermediary)
Company
Title (Mr/Mrs/Miss/Ms/Other)
First name(s)
Last name
Telephone
* Email address
* Address line 1
Address line 2
* Town/City
County
* Country
* Postcode
FCA number Are you part of a
network/service provider? No Yes – please give us the network/service provider name
Section 5 – Adviser/intermediary payment
* What type of investment is this?
(Complete one section only)
All Octopus fees and charges are outlined in both the prospectus and the brochure. The VCT can also facilitate payments to your financial adviser/intermediary. Please complete either section 5.1, 5.2, 5.3 or 5.4. Failure to complete this section correctly could result in delays to your investment. If you have any questions please call us on 0800 316 2295.
5.1 This is a direct investment with no adviser or intermediary involved Please go straight to Section 6 – Tax Residency Status.
5.2 This is an advised investment with an initial adviser charge and/or an ongoing adviser chargePlease indicate the level of initial charges and/or ongoing charges you have agreed with your adviser. If you have agreed with your adviser that you are not paying the maximum available adviser charge, the remaining amount will be rebated to you as additional shares as outlined in the prospectus.
To my adviser
Initial: % (maximum available charge of 2.5%)
Ongoing: % (maximum available charge of 0.5%)
5.3 This is an advised investment with an initial adviser charge and no ongoing adviser chargePlease indicate the level of initial adviser charge you have agreed with your adviser. If you have agreed with your adviser that you are not paying the maximum available adviser charge, the remaining amount will be rebated to you as additional shares as outlined in the prospectus.
To my adviser
Initial: % (maximum available charge of 4.5%)
5.4 This is a non-advised investment through an intermediary and you have not received financial advice
Initial Commission % Ongoing Commission % Standard terms will apply if left blank. Commission should not exceed our standard terms (given in the Octopus Apollo VCT prospectus and brochure), otherwise this form may be rejected. If your execution-only intermediary chooses not to take any upfront commission, this amount will instead be used to buy additional VCT shares for you.
Special instructions
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Section 6 – Tax residency status* 6.1 We are legally required to collect information about the tax residency and classifications of each investor
which may be shared with HM Revenue & Customs. For further information, please visit octopusinvestments.com/reportingforms.Are you tax resident, or do you complete tax returns, in any country other than the UK?
No – please go straight to Section 7. Yes – please complete the table below.
6.2 Please list the country(ies), other than the UK, in which you are resident for tax purposes. Please provide the Taxpayer Identification Number (TIN) or functional equivalent for each country(ies), or tick the relevant box if the country does not provide a TIN.
Country(ies) Taxpayer Identification Number (TIN) TIN not available
Section 7 – Investor declarationBy signing this form, I HEREBY DECLARE THAT:1. My decision to invest has been made on the basis of the information contained in the Octopus Apollo VCT
prospectus. 2. I have provided accurate information, to the best of my knowledge.3. I consent to Octopus facilitating my adviser’s fees and charges as set out in Section 5.
* Investor name
* Investor signature
* Date signedDD MM YYYY
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What happens next?We’ll let you know when we’ve received your funds and application form and if we need any further information from you.
After that, we will allot your VCT shares at the next available date. These dates are usually listed on our website. This process can take several months, but we always aim for shares to be allotted in the same tax year as the application was made.
We’ll write to let you know when your shares have been allotted and enclose your share and income tax certificates.
After that, as a shareholder, you’ll receive annual and half-yearly reports containing the full financial statements for your VCT: these include updates from the Chairman and Octopus, the fund manager.
Before sending us your application, please review the quick checklist below to help us process your application as quickly as possible:
You have arranged for a payment as per Section 2.
You’ve signed and dated where indicated in Section 7.
Once complete please send your completed application form to:
Octopus Investments Limited PO Box 10847 Chelmsford CM99 2BU
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Got a question?
We don’t offer financial or tax advice, which is why we always recommend talking to a qualified financial adviser before making any investment decisions. However, if you have any other questions about Octopus Apollo VCT, please call us on 0800 316 2295. We’re always happy to hear from you.
CAM04286-1609 Octopus Investments Limited is authorised and regulated by the Financial Conduct Authority